In the context of deepening global financial integration, listing convertible bonds on the international market is becoming an important trend for Vietnamese enterprises. This article provides a comprehensive overview of the conditions and requirements necessary for this process.

1. Overview of Convertible Bonds and International Listing

The bond market plays an increasingly important role for Vietnamese enterprises in raising capital for business operations. By the end of 2020, the corporate bond market reached approximately 16% of GDP, more than four times the size of 2016 (State Securities Commission of Vietnam, 2022). This trend is expected to continue as Vietnam’s legal framework for issuing and trading corporate bonds becomes more comprehensive.

While domestic bond issuance is being promoted, international bond issuance remains underdeveloped relative to the demand and potential of Vietnamese enterprises. According to the Hanoi Stock Exchange (2022), the total value of international bond issuance in 2021 was only USD 1.24 billion, about 0.45% of GDP, a modest figure compared to the domestic bond market.

1.1 Definition and Importance

Convertible bonds are a type of bond that holders can convert into ordinary shares. They are considered a hybrid financial instrument combining bonds and shares issued by the same company.

Benefits of international listing include:

• Access to diverse and large-scale capital sources: Companies can raise funds from international investors, expanding growth opportunities.
• Enhanced reputation and branding: Listing on international exchanges boosts credibility, builds trust with partners and customers, and enhances the global brand image.
• Increased liquidity: Convertible bonds become more liquid, attracting international investors and reducing borrowing costs for the company.

1.2 International Market Overview

Major international exchanges like the London Stock Exchange (LSE), Singapore Exchange (SGX), and Hong Kong Exchange (HKEX) are popular destinations for listing convertible bonds.

2. Basic Requirements for International Listing

2.1 Requirements for Bond Offerings (Article 25 Decree 153/2020):

• For non-convertible bonds without warrants:
  • The issuer must be a joint-stock company or limited liability company operating under Vietnamese law.
  • The bond issuance plan must be approved by competent authorities as regulated.
  • The issuer must comply with financial safety ratios and specialized legal requirements.
  • Compliance with foreign borrowing and repayment regulations and foreign exchange management laws is required.
  • Conditions for bond offerings must meet the requirements of the issuing market.
• For convertible bonds or bonds with warrants:
  • The issuer must be a joint-stock company meeting the above issuance conditions.
  • Conversion or exercise of warrants must comply with regulations on foreign ownership ratios.
  • Convertible bond or warrant bond offerings must be at least six months apart.

2.2 Financial and Listing Requirements (Article 126, Decree 155/2020):

• Not operating in prohibited sectors under foreign law.
• Ensuring foreign ownership ratios comply with foreign regulations (over 50% of charter capital).
• Registering to list and trade securities on foreign exchanges when offering securities abroad.
• Obtaining approval for listing and trading securities on foreign exchanges.
• Meeting listing and trading conditions in jurisdictions with agreements with the State Securities Commission of Vietnam or Vietnam Stock Exchange.
• Complying with Vietnam’s foreign exchange management regulations.
• Approval from specialized regulatory authorities for issuers operating in conditional business sectors.

3. Listing Documents

3.1 Legal Documents

• Documents for bond offerings (Article 27 Decree 153/2020):
  • Approved bond issuance plan.
  • Confirmation of foreign currency securities issuance accounts at authorized credit institutions.
  • Confirmation that the issuance limit is within the national commercial borrowing limit.
  • Approval decision for the bond issuance plan.
  • Financial statements.
  • Registration documents for bond offerings or legal opinions from international law firms.
• For public companies, securities firms, and fund management companies issuing bonds internationally:
  • Registration form for international bond offerings.
  • Resolutions from shareholders’ meetings, boards of directors, or equivalent approving the offering documents.

3.2 Listing Documents (Article 127 Decree 155/2020):

• Application for listing on foreign stock exchanges.
• Copies of registration documents for listing on foreign exchanges.
• Approval decision for listing and trading securities abroad.
• Approval from specialized regulatory authorities for conditional business sectors.
• Documents determining the foreign ownership ratio.
• Commitment to comply with Vietnam’s foreign exchange management regulations.

3.3 Financial Reporting and Disclosure

• Before listing (Articles 29-31 Decree 153/2020):
  • Disclosure before bond issuance: One day before issuance.
  • Disclosure of issuance results: Within 10 days after completion.
  • Periodic disclosure: Semi-annual and annual until bond maturity.
  • Semi-annual disclosure: Within 60 days of the end of the first six months of the fiscal year.
  • Annual disclosure: Within 90 days of the end of the fiscal year.
• After listing (Article 128 Decree 155/2020):
  • Report to the State Securities Commission and disclose information within 24 hours upon:
    • Official submission of listing application.
    • Receiving approval or rejection for listing.
    • Deciding to cancel the listing.
  • Disclosure following both foreign and Vietnamese regulations.

4. Registration Process and Compliance

4.1 Implementation Steps (Article 127, Decree 155/2020):

• Submit a listing application to the State Securities Commission.
• The Commission reviews and requests any necessary additions or revisions to the application.
• Approval is granted within 30 days upon receipt of a complete application.
• Upon approval, submit a registration for listing on the foreign stock exchange.

4.2 Continuous Compliance Obligations (Article 128, Decree 155/2020):

• Maintain reporting and disclosure obligations.
• Ensure compliance with both foreign and Vietnamese regulations.
• Provide financial statements with reconciliations for accounting standard differences.
• Adhere to foreign ownership limits and foreign exchange management rules.

5. Conclusion

Listing convertible bonds on international markets requires thorough preparation and long-term commitment. Understanding and meeting all conditions is key to success in this process.

For detailed advice on international convertible bond listings, enterprises can consult professional legal and financial advisors.

Harley Miller Law Firm “HMLF”

• Address: 14th floor, HM Town Building, 412 Nguyen Thi Minh Khai, Ward 05, District 3, Ho Chi Minh City.
• Phone: +84 937215585
• Website: hmlf.vn
• Email: [email protected]