On June 17, 2025, Vietnam's National Assembly overwhelmingly approved significant amendments to the Enterprise Law, with more than 95% of delegates voting in favor. The new law, set to take effect on July 1, 2025, introduces pivotal changes aimed at enhancing corporate transparency, tightening financial regulations, and protecting investors in the private bond market.
One of the most notable amendments requires non-public companies issuing private corporate bonds to ensure that their total debt—including the value of bonds to be issued—does not exceed five times their owner’s equity, as reported in the audited financial statements of the year preceding the issuance. This debt-to-equity ratio cap is designed to reduce financial risks and prevent reckless borrowing practices that have previously led to defaults and state intervention.
However, the law carves out specific exemptions from this debt limit. State-owned enterprises, companies issuing bonds for real estate projects, credit institutions, insurance companies, reinsurance firms, insurance brokers, securities companies, and securities investment fund management companies are not subject to this restriction. This exemption acknowledges the unique financial structures and regulatory frameworks governing these entities.
During a National Assembly Standing Committee meeting on June 9, 2025, Mr. Phan Van Mai, Chairman of the Economic and Financial Committee, urged the Government to carefully consider the conditions related to private bond issuance, particularly noting that many past problems stemmed from real estate businesses, which are exempt from the new debt ratio rule. This exemption remains intact in the final law, reflecting a balance between risk management and sector-specific realities.
Minister of Finance Nguyen Van Thang, speaking on behalf of the Prime Minister, explained that the tightening of private bond issuance rules aims to weed out dishonest and profiteering enterprises. He emphasized that transparent and well-managed companies should still be able to raise medium- and long-term capital through bond issuance. According to Mr. Thang, many countries impose similar debt-to-equity limits for unlisted firms, typically ranging from three to five times owner’s equity. Vietnam’s choice of a five-times cap aligns with these international norms and current market conditions.
Statistics from the Hanoi Stock Exchange in 2024 revealed that only 13 non-bank companies had debt exceeding five times their owner’s equity at the time of bond offering, suggesting that the new regulation will not significantly disrupt the broader private bond market.
To ease the transition, the Government introduced a clause allowing private bond offerings that had already submitted disclosure information to the stock exchange before the law's effective date to continue under the previous regulations. This transitional provision prevents abrupt disruptions for ongoing bond issuances.
Beyond financial restrictions, the amended Enterprise Law also enhances corporate governance and transparency. It adds a new clause requiring companies to collect, update, and maintain information on their beneficial owners—the individuals who ultimately control or profit from the company—and to provide this information to competent state authorities upon request. This aligns with Vietnam’s broader anti-money laundering efforts and international standards.
Legal representatives of companies now bear personal responsibility for damages caused by violations of their duties. The law tightens rules against fraudulent or inaccurate declarations in business registration documents, including false capital declarations through insufficient capital contributions or deliberate overvaluation of contributed assets.
Moreover, the law clarifies restrictions on who may establish, contribute capital to, or manage companies. Generally, civil servants and public employees are prohibited from such activities unless explicitly permitted by laws related to science, technology, innovation, and national digital transformation. Individuals facing criminal prosecution, detention, imprisonment, or court bans from holding positions or practicing certain professions are also barred from business management roles.
Minister Thang highlighted that these governance reforms reflect feedback from National Assembly delegates and aim to harmonize the Enterprise Law with related legislation, including laws on cadres, civil servants, science, and innovation.
Regarding the collection of beneficial owner information, the Government decided against imposing a strict deadline for existing companies to submit this data. Instead, companies established before the law’s effective date must provide such information when they next update their business registration. This approach avoids adding administrative burdens and costs while respecting the legal principle of non-retroactivity. Notably, about 35% of companies annually update their registration details, allowing authorities to gradually build a comprehensive database over time.
The law also clarifies the role of provincial People’s Committees in overseeing business registration. They are tasked with establishing transparent inspection procedures that shift from pre-approval to post-approval checks, in line with Resolution 68-NQ/TW and the Law on the Organization of Local Government. This change aims to simplify administrative processes and foster a more business-friendly environment.
Market watchers have noted that the new debt-to-equity ratio requirement is a crucial step toward mitigating financial risks in Vietnam’s corporate bond market, especially following several high-profile defaults that shook investor confidence. By setting a clear ceiling on leverage, the law seeks to protect both issuers and investors from the fallout of excessive borrowing.
In summary, Vietnam’s amended Enterprise Law introduces comprehensive reforms that balance financial prudence, corporate transparency, and administrative efficiency. By imposing a five-times debt-to-equity limit on private bond issuers, enhancing governance standards, and clarifying the responsibilities of business managers and state authorities, the law aims to foster a healthier, more trustworthy business environment as the country continues its economic development journey.
