Emission of BONDS

BOND ISSUE

In the following lines, we will briefly introduce you to the issues and legal regulations in the area of ​​issuing and subscribing to corporate bonds. You will learn what they are good for, but we will also tell you what documentation and legal support you will need if you wish to issue bonds, and how we can help you with this.

In most detail, this article will deal with the issue and subscription of corporate bonds in the form of a non-public offer, i.e. bonds that are not intended for trading on regulated exchanges. These bonds can be offered to a maximum of 149 investors.

Such bonds are not subject to supervision or approval by the Czech National Bank, and their issuance and subscription will therefore be both cheaper and faster for you than other options. Individual parts of the process can change depending on the requirements and needs of a specific client – we will always prepare a tailor-made solution for you.

What is a bonds

A bond is a credit security that represents a long-term commitment of the issuer (borrower) to the owner of this security. The debtor issues the bonds to obtain the funds he needs for his activities. The person who acquires the security becomes its owner (investor) and is entitled to the declared interest payments and to the return of the nominal value of the bond at maturity for the entire period of ownership of the bond.

Bonds are issued by the state, territorial self-governing unit or business corporation. Together with shares, it is the most common investment instrument on the financial markets. It can be said with exaggeration that it is a kind of opposite of shares – while shares are famous for dynamic value development and certain risk, bonds, especially government ones, are often referred to as a relatively safe investment instrument, for example, next to gold.

For experienced investors who are diversifying their investment portfolio, they provide space, for example, so that they can afford to invest part of their funds in other assets, which, unlike bonds, are highly risky (cryptocurrencies, NFTs, etc.).

Bond issue

Although state bonds or bonds of territorial self-governing units may be interesting for investors from the point of view of the degree of investment security, it is precisely corporate bonds that usually offer investors the most favorable conditions in terms of potential return on investment.

In order to issue a corporate bond in the Czech Republic, it is necessary to comply with the legal requirements, according to Act No. 190/2004 Coll., the Act on Bonds, as amended. Such requirements generally include:

• designation “bond”;
• indication of the type of bond;
• data on the issuer (debtor);
• nominal value as the amount owed;
• bond yield, or information on how to determine the return or that it is no return;
• due date;
• data on the owner of the bond (if it is not a book-entry bond);
• signature of the issuer;
• numerical designation of the bond;
• date of issue;
• identification mark of the bond according to the international numbering system for the identification of securities.

The issue of bonds can be issued within the subscription period either all at once or gradually in parts. Issuance or issuance of bonds is ensured by the issuer or a person authorized by him. The first option is suitable for issuers who already have extensive experience in issuing bonds, or at least have a specialist in bond issues within their corporate structure.

Otherwise, it is better to entrust the issuance of bonds to professionals who will ensure that all the requirements of this procedure are met.

WHY IS IT WORTH ITS OWN BOND ISSUE?

You may be surprised, but the issue of corporate bonds is not the domain of large companies only. Thanks to their advantages, they are often used by smaller business entities as well. So why consider issuing your own bonds?

• You will get more funds than if you want to get them with a classic loan. Due to the provision of financing, which is highly important for banks, you usually do not get the originally requested volume of financing.
• Thanks to the low interest rates of bank savings products, investors’ expectations for the issuer of corporate bonds are also very favorable. Often, the costs of issuing bonds are at the level of the costs of a regular loan.
• You will get more freedom of handling the obtained finances. You may encounter various restrictions on the part of creditors for normally obtained finances, e.g. from a loan.

Use the services of Parker & Hill for the issuance of your bonds!s

It probably won’t surprise you that bonds can be a valuable helper for your business if you manage their entire life cycle correctly. That’s why we offer you services, thanks to which you will get a quality basis for investors to expand their portfolio with your bonds.

• Personal consultation
• Setting emission parameters
• Processing of issue conditions and preparation of deed bonds
• Legal support for issue approval within the issuer’s corporation
• Preparation of contracts and list of bond owners
• Setting up the system for offering and subscribing bonds to end investors
• Possible legal custody of bonds

Bond issue-related costs

• Bond printing including all necessary protective elements
• Any notarized record (decision of the general meeting, etc.)

 Conclusion

All information contained in this material is for informational.If necessary, do not hesitate to contact us and our legal department will advise you on how to issue corporate bonds and on setting up a suitable procedure according to your needs and possibilities.