Private placements capped at five times equity

Private placements capped at five times equity

One of the most notable changes is the stipulation that the debt-to-equity ratio for companies issuing private bonds must not exceed five times their equity.

In 2024, 13 companies had debt levels exceeding five times their equity at the time of private placements. — Photo cand.com.vn

he National Assembly convened on Tuesday to discuss significant amendments to the Business Law, with particular focus on private bond issuance regulations.

One of the most notable changes is the stipulation that the debt-to-equity ratio for companies issuing private bonds must not exceed five times their equity.

This amendment aims to enhance financial stability and transparency within the corporate sector.

The new regulations are designed to tighten conditions surrounding private placement, ensuring that companies do not over-leverage their financial positions.

The Ministry of Finance’s draft amendment reflects feedback from various stakeholders, including government ministries and market participants.

The decision to limit the debt-to-equity ratio to five times is based on comprehensive analysis and discussions aimed at safeguarding the economic environment while allowing firms to raise necessary capital.

The ministry asserts that this cap will not significantly hinder capital-raising efforts for businesses.

Historical data from the Hà Nội Stock Exchange (HNX) showed that in 2024, 13 companies had debt levels exceeding five times their equity at the time of private placements.

This regulation is expected to affect a limited number of firms within the private bond market.

Additionally, local authorities will bear the responsibility for monitoring and supervising compliance with these new regulations.

The draft law outlines the roles of various ministries and provincial governments in ensuring effective implementation and information sharing with the National Business Registration Database. 

Bizhub