After The Storm - New Amendments to the Securities Law 2019

In the FLC and Van Thinh Phat cases, the authorities have accused the controlling shareholders of FLC and Van Thinh Phat of various crimes including crimes relating to public issuance of securities, stock manipulation or private issuance of bonds. In an apparent attempt to prevent these crimes to be recommitted, in December 2024, the National Assembly passes some important amendments to the Securities Law 2019 (2024 Amendment). The Amendment takes effect from 1 January 2025 and could impose significant risks to public companies and their shareholders in Vietnam.

Sweeping changes to the liability regime for public companies, their shareholders and advisors

Under the 2024 Amendment, organization or individuals participating in the process of preparing applicable files or reporting documents relating to securities activities and securities market (hoạt động chứng khoán và thị trường chứng khoán) will be responsible for ensuring that:

  • such application files and reporting documents are legal, accurate, true and complete; and

  • such application files and reporting documents have clear and not misleading information and contain all material content which affect decision of the authorities, organisations and investors.

Advisors, who provide advice on the application files and reporting documents relating to securities activities and securities market, must be honest and prudent and must ensure that all analysis is reasonable and prudent.

Before the 2024 Amendment, the Securities Law 2019 only imposes liabilities to issuers, underwriters, auditors and “certifying organisations” when they conduct a public offering of securities or register their securities for listing or trading. However, by referring to all securities activities and securities market, the 2024 Amendment appears to expand the liability regimes to apply to all activities in the market including those which are normally not subject to such liability such as (1) private offering of securities, (3) public disclosures by a public companies or their shareholders, (4) secondary trading of securities by investors, and (4) advisors who are involved in these activities.

In practice, it would be very difficult for public companies and their shareholders and advisors to ensure that all of the documents and information relating to their public disclosures and securities trading activities do not contain misleading information and contain all material information, which affect decision by not only investors but also the authorities and other organisations.

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Written by Nguyen Quang Vu On In ,

Rights Of Dissenting Bondholders Who Disagree With A Restructuring Proposal For Corporate Bonds Issued Before September 2022

The corporate bond crisis in Vietnam started in 2022 during which many corporate bonds issued before September 2022 under Decree 153/2020 were defaulted by the issuers (Pre-2022 Bonds). To facilitate the potential restructuring of Pre-2022 Bonds, in 2023, the Government issued Decree 8/2023 which allows for the bond issuers and the bondholders to agree to amend the terms of a Pre-2022 Bonds including the extension of the duration for the Pre-2022 Bonds to up to two years. However, the rights of a bondholder who disagrees with a restructuring proposal for a Pre-2022 Bond are not clear. 

Under Decree 8/2023, the duration and the repayment schedule of a Pre-2022 Bond could be extended if the proposed extension is approved by bondholders representing 65% or more of the total number of outstanding bonds. Decree 8/2023 further provides that for bondholders who do not agree to changes in the conditions and terms of a Pre-2022 Bond (dissenting bondholders), the issuer is required to negotiate with the dissenting bondholders. If a dissenting bondholder does not accept the proposed negotiation plan, the issuer must fully fulfill its obligations to that dissenting bondholder in accordance with the original bond issuance plan. This requirement holds even if the proposed changes have been approved by the other bondholders who hold 65% of the outstanding bonds.

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Written by Nguyen Quang Vu On In ,

Issues Relating To Private Bonds Marked As “Cancelled” On Hanoi Stock Exchange Website

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.

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Written by Nguyen Quang Vu On In , ,

Vietnam Securities Depository Center becoming Vietnam Securities Depository and Clearing Corporation and its implication

In December 2022, the Prime Minister decided to establish VSDC by converting Vietnam Securities Depository Center (VSD) being a Government agency under the State Securities Commission (SSC) into a single limited liability company under the Enterprise Law 2020. The Minister of Finance will act as representative of the State capital in VSDC.

The conversion of VSD into VSDC could have the following legal implications:

  • As an enterprise, VSDC can now be exposed to civil claims by its users if VSDC breaches its rules or contracts signed with securities companies, listed companies or other users. VSDC could also be subject to non-contractual claims by securities investors. As a Government agency, VSD is only exposed to administrative claims by its users which are more limited than civil claims.

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Written by Nguyen Quang Vu On In ,