On June 17, 2025, Vietnam's National Assembly decisively approved significant amendments to the Enterprise Law, with over 95% of attending delegates voting in favor. This newly amended law, set to take effect on July 1, 2025, introduces stringent regulations aimed at tightening the issuance of private corporate bonds, particularly focusing on enhancing financial transparency and reducing risks for both businesses and investors.
At the heart of the amendment lies a crucial financial safeguard: non-public companies issuing private corporate bonds must ensure that their total debt—including the value of bonds they plan to issue—does not exceed five times their owner’s equity, as reflected in the audited financial statements of the preceding year. This debt-to-equity ratio cap is designed to prevent excessive leveraging and the resulting financial instability that has plagued some sectors in recent years.
However, the law carefully carves out exemptions for certain entities. State-owned enterprises, companies issuing bonds specifically for real estate projects, credit institutions, insurance and reinsurance companies, insurance brokers, securities firms, and securities investment fund management companies are not bound by this five-times debt limit. This nuanced approach acknowledges the unique financial structures and regulatory frameworks governing these industries.
The legislative journey to this amendment was marked by extensive discussions and careful consideration. On June 9, 2025, Mr. Phan Van Mai, Chairman of the National Assembly’s Economic and Finance Committee, voiced concerns about the draft law’s exemption for real estate businesses. He urged the government to thoroughly study the specific conditions related to private bond issuance, noting that many past issues stemmed from real estate companies, which the draft law intends to exclude from the debt cap.
Minister of Finance Nguyen Van Thang, speaking on behalf of the government, emphasized that the tightening of regulations around private bond issuance is primarily aimed at weeding out dishonest businesses that exploit the system for profit. "Enterprises that operate transparently should be able to raise medium- and long-term capital through bond issuance channels," he explained. Minister Thang also highlighted that many countries impose similar debt-to-equity limits for unlisted companies issuing bonds, typically ranging from three to five times owner’s equity. Vietnam’s choice of five times is a balanced measure reflecting current market conditions and regulatory realities.
According to data from the Hanoi Stock Exchange, in 2024, thirteen companies (excluding commercial banks) had debt-to-equity ratios exceeding five times at the time they offered corporate bonds. This statistic suggests that the new regulation will not disrupt the majority of market participants but will target those with potentially risky financial practices.
To ease the transition, the government introduced a clause allowing companies that had already submitted private bond offerings to the Stock Exchange before July 1, 2025—the law’s effective date—to continue under the previous regulations. This transitional provision prevents abrupt disruptions and respects existing commitments.
Beyond financial metrics, the amended Enterprise Law also brings forward important provisions related to corporate transparency and governance. The law introduces a generalized concept of "beneficial owner of a business," aligning with Vietnam’s Anti-Money Laundering Law. The government has specified criteria for identifying beneficial owners, including direct or indirect ownership of charter capital, voting rights, or control through personnel appointments or dismissals.
For businesses established before the law’s enactment, the requirement to update beneficial owner information will coincide with their next business registration or notification of changes, thus avoiding unnecessary administrative burdens. This approach balances the need for transparency with practical considerations for companies and regulatory agencies.
The amendments also address the role of public employees in business activities. Under the new law, public employees working at public higher education institutions are permitted to contribute capital to, manage, and operate businesses established by these institutions. They may also found companies to commercialize research outcomes developed within their institutions. This policy aligns with National Assembly Resolution No. 193/2025, which seeks to foster breakthroughs in science, technology, innovation, and digital transformation nationwide.
Minister Thang further underscored the government’s commitment to improving the business registration process. The responsibilities of provincial People's Committees have been clarified to ensure transparency and efficiency, transitioning from a pre-inspection to a post-inspection model in line with Resolution 68-NQ/TW and the Law on Organization of Local Government. This shift aims to reduce bureaucratic hurdles while maintaining oversight.
The backdrop to these reforms includes recent incidents where companies issuing private corporate bonds failed to repay principal and interest on time, triggering investor complaints and necessitating state intervention. The government regards private corporate bonds as inherently risky financial products, where investors must conduct due diligence and bear responsibility based on transparent corporate disclosures.
By instituting the five-times debt-to-equity cap and enhancing transparency through beneficial ownership disclosures, the amended Enterprise Law seeks to bolster investor confidence, reduce systemic risks, and promote healthier capital markets. These measures are expected to encourage responsible borrowing and lending practices, ensuring that bond issuance remains a viable and secure channel for medium- and long-term capital mobilization.
In sum, Vietnam’s newly amended Enterprise Law represents a significant stride toward strengthening corporate governance, financial prudence, and market transparency. As the law takes effect on July 1, 2025, companies, investors, and regulators alike will navigate a more robust framework designed to support sustainable economic growth and protect stakeholder interests.
