Conditions for a Public Company to Publicly Offer Convertible Bonds

What is a public company? Conditions for a public company to publicly offer convertible bonds under the law.

1. What is a public company?

Under Clause 1, Article 32 of the Securities Law 2019 (as amended and supplemented by Law No. 56/2024/QH15), a public company is a joint stock company falling into one of the following two cases:

– A company with contributed charter capital of VND 30 billion or more and at least 10% of the voting shares held by at least 100 investors who are not major shareholders;

– A company that has successfully conducted its initial public offering of shares through registration with the State Securities Commission.

2. What are the conditions for a public company to publicly offer convertible bonds?

Under Article 21 of Decree No. 155/2020/ND-CP, the conditions for a public company to publicly offer convertible bonds or bonds with warrants are:

– Having an issuance plan and a plan for using the proceeds from the offering of convertible bonds or bonds with warrants, as approved by the General Meeting of Shareholders.

– Having a securities company advising on the dossier for registration of the public offering of convertible bonds or bonds with warrants, except where the issuer is a securities company.

– Having a commitment to list the bonds on the securities trading system after the offering ends, and implementing it.

– The issuer must open a blocked account to receive the purchase proceeds for the convertible bonds or bonds with warrants of the offering.

– The total value of convertible bonds or bonds with warrants at par value must not exceed the total value of outstanding shares at par value, except where there is an underwriting guarantee with a commitment to purchase all the convertible bonds or bonds with warrants for resale or to purchase the remaining unallocated convertible bonds or bonds with warrants.

– For a public offering aimed at raising capital to implement the issuer’s projects, the number of convertible bonds or bonds with warrants sold must reach at least 70% of the convertible bonds or bonds with warrants planned for offering to implement the projects. The issuer must have a plan to cover the shortfall of the capital planned to be raised from the offering to implement the projects.

– The contributed charter capital at the time of offering registration must be VND 30 billion or more as recorded in the accounting books.

– The issuer must not be under criminal prosecution or have been convicted of an offense against the economic management order that has not been expunged.

– Business operations in the year immediately preceding the offering registration year must be profitable, and there must be no accumulated losses as of the offering registration year.

– Having a commitment to fulfill the issuer’s obligations to investors regarding issuance conditions, payment, safeguarding the lawful rights and interests of investors, and other conditions.

3. What does the dossier for a public company to register a public bond offering include?

Under Article 22 of Decree No. 155/2020/ND-CP, the dossier for registration of a public offering of convertible bonds or bonds with warrants by a public company includes:

– The offering registration application.

– The decision of the General Meeting of Shareholders approving the issuance plan, the plan for using the proceeds from the offering, and the listing of the bonds on the securities trading system, in which:

+ The issuance plan must clearly state:

(1) The type of bonds;

(2) The quantity of each type of bond; the interest rate or the principle for determining the bond interest rate;

(3) The bond term;

(4) The bond conversion plan (conditions, time limit, conversion ratio or method of calculating the conversion price, repayment of principal where bonds are not converted, approval or authorization of the Board of Directors to approve the plan ensuring that the issuance of shares for conversion complies with foreign ownership ratio regulations, other terms);

(5) The plan for exercising warrant rights (conditions, time limit, exercise ratio; price or method of calculating the issuance price; repayment of principal; approval or authorization of the Board of Directors to approve the plan ensuring that the issuance of shares for exercising rights complies with foreign ownership ratio regulations; other terms).

Note: Where the conversion price or the issuance price of shares for exercising rights is lower than the par value, conversion or exercise of rights may only be carried out when the issuer has sufficient share premium to cover the negative surplus arising from issuing shares below par value;

+ The plan for using the proceeds from the offering of convertible bonds or bonds with warrants; the planned use of proceeds from the issuance of shares for exercising warrant rights. The plan for using the proceeds from the bond offering must clearly determine that the successful offering ratio for project implementation purposes is at least 70% of the total bonds offered to implement the projects. The capital use plan must include contents on the plan to cover the shortfall of the capital planned to be raised from the offering to implement the projects.

– The consultancy contract for the dossier for registration of the public offering of convertible bonds or bonds with warrants with a securities company, except where the issuer is a securities company.

– Other documents relating to conversion into shares (if any).

– The written commitment of the Board of Directors on implementing the listing of the bonds on the securities trading system after the offering ends.

– The decision of the Board of Directors approving the offering registration dossier. For a public offering of convertible bonds or bonds with warrants by a credit institution, the dossier must include the written approval of the State Bank of Vietnam on the public bond issuance plan in accordance with the law on credit institutions.

– The charter of the issuer;

– The written confirmation of the bank or foreign bank branch on the opening of the blocked account to receive the share purchase proceeds of the offering;

– The report on the use of proceeds from the most recent offering audited within 02 years up to the time of dossier submission, except where the audited financial statements already contain a detailed explanation of the use of proceeds from the most recent offering.

– The commitment to fulfill the issuer’s obligations to investors regarding issuance conditions, payment, safeguarding the lawful rights and interests of investors, and other conditions;

– The prospectus.

– The financial statements of the issuer for the 02 most recent years.

– The underwriting commitment (if any).

– The written commitment that the issuer is not under criminal prosecution or has not been convicted of an offense against the economic management order that has not been expunged.

Accordingly, for a public company to publicly offer bonds, it must satisfy the offering conditions and prepare all documents to complete the dossier for registration of the public bond offering.