1. Introduction to International Convertible Bonds
International convertible bonds are complex financial instruments that allow investors to convert bonds into shares of the issuing organization under pre-established conditions. This tool is increasingly popular in global capital markets due to its flexibility and profit potential.
Characteristics and Role
- Combination of bond and stock characteristics: Provides stability (fixed interest rate) and growth potential (convertible to shares), reducing risk for investors.
- Opportunities for portfolio diversification: Flexible asset allocation, balancing between fixed income and high-profit potential, suitable for both defensive and offensive strategies.
- Flexible capital source for issuing companies: Raise capital at lower costs, reduce the pressure of stock dilution, and enhance access to international investors.
2. Legal Framework for International Bond Listings
Regulations and General Standards
The listing of international convertible bonds must strictly comply with the regulations of both the issuing country and the listing market. These standards include:
Disclosure Requirements:
Pre-listing disclosure (Articles 29-31 of Decree 153/2020; Appendices I-III of Circular 76/2024/TT-BTC):
- Disclosure before the bond offering: 1 day before the bond issuance
- Disclosure of the bond offering results: 10 days from the completion of the bond issuance
- Periodic disclosure: every 6 months and annually until the bond matures
* 6-month periodic disclosure: within 60 days from the end of the first half of the fiscal year
* Annual periodic disclosure: within 90 days from the end of the fiscal year - The disclosed information is received for aggregation, public disclosure, and reporting on the status of bond issuance on the international market
- Required disclosure information is regulated in the Forms issued with Circular 76/2024/TT-BTC
Post-listing disclosure (Article 128 of Decree 155/2020):
- Report to the State Securities Commission and disclose within 24 hours from when:
* Officially submit listing registration documents
* Receive the decision to approve or reject the listing
* The decision to cancel the listing - The company must publicly disclose information as required by both foreign and Vietnamese law.
- In case of discrepancies in disclosure regulations, a report should be submitted to the State Securities Commission.
- The disclosed information must also be made available in Vietnamese.
- If the organization is simultaneously listed in both domestic and international markets: periodic financial reports must be prepared, along with an explanation of differences between accounting standards.
Listing Process and Compliance
The international convertible bond listing process requires close coordination among multiple stakeholders and adherence to a strict procedure:
Prepare Listing Documents (Article 127 of Decree 155/2020):
- Application for listing and trading at the foreign stock exchange;
- A copy of the listing registration documents for trading at the foreign stock exchange;
- Decision on listing and trading securities at the foreign stock exchange
- Approval documents for organizations with conditional business activities;
- Documents determining the foreign ownership ratio of the company;
- Documents committing to comply with Vietnam’s foreign exchange regulations.
Submit Documents and Register Listing (Article 127 of Decree 155/2020):
- Send the Securities Commission the registration documents for listing and trading securities abroad
- Submit listing registration documents to the foreign stock exchange
- Within 30 days of receiving complete and valid documents, the Securities Commission must respond regarding the approval of the listing registration
- In case of rejection, a written response with the reasons must be provided.
Disclose Information and Listing (Article 128 of Decree 155/2020):
After approval, the issuer must publicly disclose the listing and officially listed securities.
3. Continuous Compliance Obligations (Article 128 of Decree 155/2020)
After listing, the issuer must maintain compliance with market requirements:
- Report and disclose information according to the law
- Publicly disclose information as required by both foreign and Vietnamese law. The disclosed information must also be made available in Vietnamese.
- If the organization is simultaneously listed in domestic and international markets: periodic financial reports must be prepared, along with an explanation of differences.
- Ensure that the foreign investor participation ratio is under legal regulations.
- Comply with Vietnam’s foreign exchange management regulations concerning foreign currency transactions related to the listing and trading of securities on foreign stock exchanges.
4. Risk Management and Investor Protection
The legal framework places a strong emphasis on protecting investor rights through the following mechanisms:
Regulations on Fair Conversion Ratios (Appendix II of Decree 153/2020/NĐ-CP):
- The conversion ratio must be based on market principles and independently assessed by professional organizations to ensure no harm to investors.
- This clear regulation ensures transparency and fairness for investors when exercising conversion rights.
Transaction Monitoring and Control Mechanisms (Article 1 of Decision No. 48/2015/QĐ-TTg):
- The competent authorities (in Vietnam, the State Securities Commission and the Stock Exchange) are responsible for monitoring listed companies’ activities, including compliance with information disclosure, insider trading, market manipulation, etc.
- Strict enforcement mechanisms deter fraudulent behavior and protect investor rights.
Investor Protection (Clause 2, Article 8 of Decree 153/2020/NĐ-CP (amended by Clause 6, Article 1 of Decree 65/2022/NĐ-CP); Clause 2, Article 5, Decree 153/2020/NĐ-CP (amended by Clause 2, Article 1 of Decree 65/2022/NĐ-CP)):
- Investors must fully understand information about the bonds, conditions, risks, and legal compliance before buying or trading.
- Investors bear responsibility and risk for their investments; the state does not guarantee payment from the issuing company.
- Bond transactions must comply with regulations and cannot be sold to non-professional investors.
- The purpose of issuing bonds must be clear, lawful, and fully disclosed to investors.
5. Conclusion
The legal framework for international convertible bond listings plays a crucial role in ensuring transparency and efficiency in the market. Full compliance with these regulations not only protects investors but also contributes to the sustainable development of international capital markets. For further details on specific regulations, please refer to the guidelines from the State Securities Commission and the International Capital Market Association (ICMA).
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