NA endorses proposed debt cap for private bond issuers

NA endorses proposed debt cap for private bond issuers

A major point of discussion on the Law on Enterprises concerned the proposed requirement that non-public companies issuing private bonds must maintain a debt-to-equity ratio not exceeding five, including the bond value.

People outside a courthouse in District 1, HCM City, during a private bond issuer's trial. VNA/VNS Photo Thanh Vũ

The National Assembly (NA) Standing Committee has endorsed a proposal that non-public companies issuing private bonds must maintain a debt-to-equity ratio of no more than five, including the value of the bonds to be issued.

The topic came up during the NA Standing Committee's 46th session this week in Hà Nội, when committee members discussed feedback and revisions to a draft law amending and supplementing several provisions of the Law on Enterprises.

Finance Minister Nguyễn Văn Thắng said that regarding beneficial ownership, the NA Standing Committee and lawmakers agreed to a broadly defined principle-based approach in the draft law, aligning it with the Law on Anti-Money Laundering.

The Government has adopted technical feedback from lawmakers, including provisions on responsibilities for collecting, storing and providing information on beneficial owners, as well as the criteria for identification and penalties for non-compliance, to be specified in Government regulations, according to the minister.

Addressing suggestions to set a specific deadline for enterprises to disclose beneficial ownership, Thắng said that the revised draft stipulates: "For enterprises established before the law takes effect, the disclosure of beneficial ownership information (if any) shall be made concurrently when the enterprise submits the most recent registration change or notification thereof, or at the enterprise’s initiative."

He said that the draft does not impose a mandatory deadline for previously established companies to provide such information, to avoid creating a standalone administrative procedure that would increase the regulatory burden. This would go against the Government’s ongoing efforts to streamline administrative processes and reduce costs.

Furthermore, imposing a blanket deadline for all existing companies to disclose beneficial ownership is not considered an optimal solution, as such information can be produced upon request. In addition, about 35 per cent of enterprises annually update their business registration, during which beneficial ownership information can be included.

A major point of discussion concerned the proposed requirement that non-public companies issuing private bonds must maintain a debt-to-equity ratio not exceeding five, including the bond value.

Minister Thắng emphasised that this condition helps build issuers' financial capacity and reduce risks for businesses and investors. He said the mandatory threshold should not significantly affect companies’ ability to raise capital for business operations or growth.

Chairman of the NA's Committee for Economic and Financial Affairs Phan Văn Mãi noted that many NA deputies had raised concerns about including a fixed debt ratio in the law, warning that it may limit flexibility in regulatory responses. Similar provisions in other sectors are usually defined in sub-law regulations. He called for further clarification on the proposal’s alignment with Party Resolution 66-NQ/TW and Conclusion 119-KL/TW.

As a result, the committee proposed an alternative approach: allow the Government to set the debt-to-equity ratio for private bond issuance through regulations tailored to different industries, sectors and business compliance levels. NA Chairman Trần Thanh Mẫn has previously said he supported the Government's stance on the private bond issuance requirements.

Minister Thắng added that the Government held consultations with businesses and relevant agencies on this matter for over a year. He noted that international practices vary, with most countries applying a maximum debt-to-equity ratio between three to five times for unlisted corporate bond issuers.

He reiterated that the rule helps build financially sound and transparent companies, excluding businesses that exploit policy loopholes.

“In the current context, requiring a debt ratio cap is necessary. Only when the entire issuance process is fully digitised and transparent can we consider alternative regulatory approaches,” Thắng said. He recommended that this provision be included in the law, rather than in a guiding decree, to ensure immediate implementation.

The amended Law on Enterprises is scheduled for a vote next Tuesday. 

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