Procedures for private placement bond offering of joint stock companies

Private placement bond offering is a method of mobilizing capital for businesses, complying with legal regulations on securities and businesses. Joint stock companies offer bonds to selected investors. The use of capital raised from bond issuance by enterprises must ensure the correct purpose and content of information disclosure to investors. This article will analyze the conditions and procedures for implementing a private placement bond offering of a Joint Stock Company.

What are bonds?

Bonds are securities that confirm the legal rights and interests of the owner regarding a portion of the debt of the issuing organization. In other words, Bonds are debt certificates issued by businesses. Investors who buy bonds will lend money to businesses for a specified period of time. The enterprise commits to pay interest and return principal to investors upon maturity.

Corporate bonds are divided into two types: Privately offered bonds and publicly offered bonds. Individual bonds are only offered to less than 100 investors, not including professional securities investors.

Bond interest rates can be fixed, floating or a combination. The issuer must clearly announce the interest rate or method of determining the interest rate. Bonds can be asset-backed or unsecured. The transfer of individual bonds is restricted within 1 year from the date of completion of the issuance, except in some special cases.

Legal basis: Clause 3, Article 4, Article 30, Article 31 of the Law on Securities 2019; Article 128 of the Law on Enterprises 2020.

Conditions for a joint stock company to offer a private placement bond

A private placement bond offering of a joint stock company that is not a public company is an offering not through the mass media to less than 100 investors, not including professional securities investors. This process requires meeting the following conditions for individual bond buyers:

• Strategic investors in individual convertible bonds and bonds with individual warrants;
• Professional securities investor in individual convertible bonds, bonds with individual warrants and other types of individual bonds.

For joint stock companies that are not public companies offering a private placement bond, the following conditions must be met:

• The company has fully paid both principal and interest of the bonds offered and has matured or paid all debts due for 03 consecutive years before the bond offering;
• Have audited financial statements of the previous year immediately preceding the year of issuance;
• Ensuring conditions on financial safety ratio and operational safety ratio according to legal regulations;
• Other conditions as prescribed by relevant laws.

Legal basis: Article 128 of the Law on Enterprises 2020.

Private placement bond offering process in joint stock companies

On the basis of meeting the conditions for private placement bond offering, enterprises carry out bond offering procedures according to the following regulations:

Prepared documents

Joint stock companies need to fully prepare documents for private placement bond offerings. Bond offering documents include the following basic documents:

1. Bond issuance plan;
2. Documents proving full satisfaction of bond offering conditions;
3. Documents disclosing information about the bond offering according to regulations;
4. Contract signed between the issuing enterprise and service providers related to the bond offering;
5. Periodic reports on the use of proceeds from bond issuance for outstanding bonds;
6. Credit rating results for bond issuing enterprises;
7. Decision to approve and approve the bond issuance plan;
8. Written approval from a competent state management agency according to specialized laws;
9. Written confirmation from the commercial bank or foreign bank branch that the enterprise opened an account to receive money to buy non-convertible bonds;
10. For offerings of convertible bonds, bonds with warrants of public companies, securities companies, securities investment fund management companies, in addition to the documents specified in Points a, b, c , point d, point dd, point e, point g, point h and point i of this Clause, the bond offering dossier also includes:

• Registration form for offering for sale according to the form;
• Copy of Decision of the General Meeting of Shareholders/Board of Directors approving the bond offering documents;
• Commitment of the enterprise not to violate regulations on cross-ownership.

1. For secured bonds, in addition to the documents specified in point a, point b, point c, point d, point dd, point e, point g, point h, point i and point k of this Clause, the offering documents Bond sales must include documents on the legal status of the collateral, documents on the valuation of the collateral and documents on the registration of security interests, documents and information on the payment order of the bond. investors hold bonds;
2. Written confirmation of the investor purchasing the bond;
3. Document from the bidding organization, underwriter, or bond issuance agent confirming that proceeds from the bond offering have been transferred to the bond purchase payment account;
4. Other documents related to the bond offering.

Legal basis: Article 12 of Decree 153/2020/ND-CP Regulations on private offering and trading of corporate bonds in the domestic market and offering bonds to the international market.

Implementation procedures

The procedure for conducting a private placement bond offering by a joint stock company is prescribed as follows:

1. The company decides on a private placement bond offering plan;
2. The company discloses information before each offering to investors who register to buy bonds and announces the offering to the stock exchange at least 01 working day before the expected date of holding the bond offering;
3. The company discloses information about the results of the offering to investors who have purchased bonds and reports the results of the offering to the stock exchange within 10 days from the end of the bond offering. votes;
4. Privately issued bonds are transferred between investors who meet the conditions for individual bond buyers as prescribed, except in cases where it is carried out under a legally effective Court judgment or decision. The Arbitrator’s award is valid or inheritable according to the law;
5. The Government regulates in detail the types of bonds, documents, order and procedures for issuing and trading individual bonds; information disclosure; issue bonds to the international market.

Legal basis: Article 129 of the Law on Enterprises 2020; Article 31 of the Law on Securities  2019.

Issues to keep in mind when conducting private placement bond offerings

Businesses need to pay attention to a number of important issues when offering a private placement bond. Information disclosure must be complete, accurate and timely according to regulations. The company must strictly comply with the conditions on the offering object, number of investors and transfer restrictions.

The plan to use capital from bond issuance must be implemented for the announced purpose. Businesses need to have a solid financial plan to ensure the ability to pay bond principal and interest on time. Changes to the terms and conditions of bonds must comply with regulations and be approved by the bond owner.

The company must regularly evaluate risks related to bond issuance and take appropriate management measures. Commitments on guarantees and guarantees (if any) need to be seriously implemented. Businesses should consider hiring a professional consulting organization to support the bond issuance and management process.

Support and consulting services for businesses offering a private placement bond

Currently, there are stricter regulations for individual corporate bonds. When businesses want to offer bonds privately to ensure compliance with legal regulations. Long Phan provides in-depth consulting services on developing issuance plans, preparing documents and implementing procedures with regulatory agencies.

Our team of experts will help businesses evaluate issuance conditions and determine appropriate bond terms and conditions. Consulting, supporting information disclosure, searching and approaching potential investors. Long Phan advises and supports credit rating services, valuation of collateral assets and representation of bond owners. Support customers in contract drafting, legal appraisal and regulatory compliance consulting.

Private placement bond offering is an effective method of raising capital for joint stock companies. This process requires strict compliance with legal conditions, consideration of risks and business benefits. Long Phan provides professional consulting services, support in preparing complete documents and properly implementing private placement bond offering procedures. Please contact Long Phan via Hotline number 090.673.5386 for specific advice.