It is undeniable that investors have to take more risks since they directly give companies the money to issue the bonds. To help investors reduce risks, as well as help companies to raise capital quickly when issuing valuable papers, even non-public companies must follow and adopt the information disclosure process and tightly issue the bonds through many stages.
In general, the information that an issuing company is required to publish often aims to transparent and publicize the status of the business when it is released, avoiding creating a "false image" for investors. Amid an information matrix launched by companies to attract capital, lawmakers should aim to avoid investors having to struggle in information verification or to blindly follow the advice of brokers and issuers.
Firstly, one of the information that investors are very interested in, is about associated businesses, which have been required to publish quite specific before issuing bonds (2). This regulation stems from a quite common situation that parent companies often push the issuance of bonds to raise capital for their subsidiaries, backyard companies. This stems from the fact that parent companies are public or listed companies that are required to disclose information very closely. Typically, real estate companies often set up subsidiaries (or project companies) to implement projects and obviously, these project companies are also entitled to issue bonds to raise funds for the corresponding project In that situation, the investor pays much attention to the prestige of the parent company, because a successful real estate project itself has the participation and participation of the investor.
In the information disclosure form prior to the issuance of bonds, in Part 2, Section II, it is required that the issuing enterprise publish a list of parent companies and subsidiaries when operating under the parent-public company model - subsidiaries or companies in which the issuing company controls or holds parts of control, or the companies that hold control of or partly dominates the issuing enterprise.
Secondly, it is the regulation of publishing information groups related to the financial situation of issuing businesses. Specifically, the basic indicators in the last three years such as equity, debt/equity ratio, profit after tax, the ratio of profit after tax/equity (ROE) and the debt situation. It is easy to see that this information helps investors to have a better overview of the financial situation before the issuance, reflecting the growth situation and the ability to run businesses, contributing to assessing the expected returns.
Thirdly, it is a group of information about bond issuance plans, including information about the types of bonds expected to be issued, allocation of the collected capital as well as payment options for bonds, rights, and obligations associated with the parties in the issuance. As it aims to mobilize capital, it is easy to understand why issuers need to disclose this information in detail and clarity, because it will help investors choose the type of bonds, issuance plans, and discount in line with the idle cash flow they intend to invest in bonds. Moreover, the benefits of investors which are shown publicly also become important bases in implementing the plan to purchase bonds.
It is still not guaranteed to reduce risks that investors have to face Decree 163/2018 / ND-CP sets out a very strict process as well as sanctions that state management agencies can apply when companies issue bonds that do not comply. However, if all requirements and conditions of compliance with the law are met, are there any risks still in the bonds that investors are and will be holding?
In fact, the targets of the issuers and the investors will be difficult to fully implement if we maintain the current simple plan when disclosing at the stock exchange, including disclosure before the issue, disclosure of release results, periodic disclosure, extraordinary disclosure, and other information. Accordingly, the Stock Exchange is merely the unit that receives information that needs to be published and posted on the website of corporate bonds at the Stock Exchange.
Currently, while the financial situation information can be checked and compared through the accompanying financial statements (audited by an independent auditing unit), and the information regarding issuance plans are mostly based on the company’s commitment and the guarantee of the underwriter organizations (if any), information about associated businesses has never reassured investors. That is because the issuing company does not need to provide a register of shareholders until the issue date, but has the option to declare information about the company that the issuing company is controlling, or partly dominating, or companies that hold control of or partly dominate the issuing company.
In addition, Decree 163 currently does not have a specific definition of control/domination, so issuing companies may be confused but may also "ignore" the disclosure of some adverse information. In the coming time, when promulgating a circular guiding Decree 163, lawmakers should consider specific guidance for this announcement, thereby helping investors understand the situation of associated enterprises of the issuers before deciding to invest their money.
In addition, one option that the stock exchange may consider is to associate with securities depository organizations, issuing advisory service organizations, bidding organizations, agents and underwriters to jointly release information for the issuance, giving investors more "channels" to verify the information published by the issuing company.
In fact, in the current market, many investors are choosing to buy bonds under the advice of the credit institutions merely without having a complete view, and also not assessing the importance of the information of the issued bonds.
Moreover, the information linkage between these organizations also helps the obligation to report on the corporate bond situation to be performed more synchronously and quickly, contributing to promoting effective management of state agencies.
In the context that there is no mechanism for checking information or credit evaluation for the disclosure of required information, the promulgation of strict laws and effective implementation is extremely necessary to protect all parties, aiming at the first objective of mobilizing an additional considerable force for the operation of the economy. Any capital market, when it wants to develop sustainably to become an effective capital channel, must be built on a solid foundation, especially based on the trust of market participants.
