Since 2019, Hanoi Stock Exchange (HNX) has operated a website to publish information on private corporate bonds (Private Bond Information Website). Currently, on the Private Bond Information Website, several outstanding private bonds issued under Decree 153/2020, which have reached maturity but have not been repaid by the relevant issuers, are marked as “cancelled” (bị hủy) by HNX (the Cancelled Bonds). This classification by HNX raises several issues as discussed below.

Legal status of the Cancelled Bonds

One may argue that HNX’s announcement of the Cancelled Bonds implies that the Cancelled Bonds are invalid and that bondholders can no longer claim outstanding payment from the issuer. However, Vietnamese law also contains several provisions suggesting that the Cancelled Bonds remain valid and the issuer must fulfill outstanding payments to the bondholders:

Under Decree 153/2020, the bondholder is entitled to “be paid on time by the issuer the full amount of principal and interest when they become due […] under the terms and conditions of the bond and the agreements with the issuer”. This suggests that even when the Cancelled Bonds have matured, the issuer must still fully pay the outstanding amount to the bondholders under the Bond terms & conditions (Bond T&C) and bond subscription agreement;
Under Decree 153/2020, as a condition for the new issuance of private bonds, the issuer must “have fully paid the principal and interest on the issued bonds (if any) or having fully paid out debts on maturity within three (3) years immediately preceding the issue tranche […]”. This provision suggests that the issuer must pay in full all of the debts, including outstanding bonds that have matured (e.g., Cancelled Bonds), to be eligible to issue new private bonds; and
Under Decree 65/2022, if the Cancelled Bonds have matured but the issuer has not paid the principal and interest of the Cancelled Bonds in full, the issuer is only allowed to negotiate with bondholders regarding changes of plan to pay the principal and interest of the Cancelled Bonds. If bondholders disagree with the proposed plan by the issuer, the issuer must fully comply with the Bond T&C and bond subscription agreement. At law, there is no provision allowing the issuer to terminate the validity of the Cancelled Bonds purely because they have matured.

Registration of the Cancelled Bonds with Vietnam Securities Depository and Clearing Corporation (VSDC)

It is not clear whether the Cancelled Bonds can be registered with VSDC. This is because:

Under Decree 65/2022, corporate private bonds issued under the Decree 153/2020 and still outstanding must comply with the registration and deposit requirements in VSDC and registration for trading on HNX under Article 3.3(c) of Decree 65/2022; and
However, under Circular 30/2023, private bonds that have matured will be cancelled for registration in VSDC and cancelled for registration of trading on HNX. Since the Cancelled Bonds have matured, VSDC may refuse to register the Cancelled Bonds in VSDC based on this ground.

If the Cancelled Bonds are not registered with VSDC, bondholders cannot transfer the Cancelled Bonds to other investors. This may significantly restrict the bondholders’ ability to sell the Cancelled Bonds on a secondary market.

This post is written by Trinh Phuong Thao and edited by Nguyen Quang Vu.

Vietnam Business Law