Choosing debt or equity to finance your business in Vietnam (Part 3)

Today, I describe types of debt financing that companies incorporated in Vietnam may choose to use.

Types of debt financing

Loan

Companies can use debt financing in the formof a loan from bank or financial institution, other organization or individual.

Enterprise other than financial institution shall use cheque, bank transfer and other lawful non-cash payment methods when performing borrowing, lending and repayment transactions (Article 4, Circular 09/2015/TT- BTC dated January 29, 2015).

The rate of interest for a loan agreed by the parties may not exceed 20% per year, unless otherwise prescribed by law(Article 478, the Civil Code 91/2015/QH13 dated November 24, 2015).

Interest on loan for business operation taking from entities other than financial institutions exceeds 150% of the base rate announced by the State bank of Vietnam at the time of taking the loan, shall not be considered a tax-deductible expense for corporate income tax purpose (Article 4, Circular 96/2015/TT-BTC, dated June 22, 2015).

Bond

Joint stock companies, limited liability companies incorporated in Vietnam may issue enterprise bond in the form of separate issuance in the territory of Vietnam and on the international market (Article 1, 2, Decree No. 163/2018/NĐ-CP, dated December 04, 2018).

Enterprise bond means a type of debit securities with term of 01 year or more  issued by enterprises acknowledging their obligation to pay both bond principals and interests and other obligations (if any) to bondholders.

Separate issuance means enterprise bond issued for less than 100 investors, not include security professional investors and not use public media or internet (Article 4, Decree No. 163/2018/NĐ-CP, dated December 04, 2018).

Companies that meet conditions mentioned at poitnt 2, Article 12, Law on Securities No.70/2006/QH11 dated June 29, 2006 may make a public offer of bonds.

Public offer of bonds means an offer for sale of bonds via one of the following methods:

- Via the mass media, including the internet;

- An offer for sale of bonds to 100 or more investors excluding professional securities investors;

- An offer for sale to a number of undefined investors (Article 12, Law on Securities No.70/2006/QH11 dated June 29, 2006).

I hope the above information is helpful. Next time, I am going to describe about types of equity financing that companies in Vietnam may use. Are you interesting in? Thanks for reading./.

Choosing debt or equity to finance your business in Vietnam (Part 3)