The New Vietnamese Securities Law 2019 will come into effect from 1 January 2021 with many notable changes such as: The limit of foreign ownership in public companies; New regulations on private placement; Requirements for being public companies:
Requirements for being public companies
Under Article 32 of the Securities Law 2019, a joint-stock company is a public company when it meets one of the following two conditions:
- The company has a paid-up charter capital of VND 30 billion or more, and at least 10% of its voting shares is owned by at least 100 or more investors who are not major shareholders in such company; or
- The company has successfully conducted an initial public offering (“IPO”) in accordance with the law.
Comparing with the Securities Law 2006, a condition that the company has shares listed on a stock exchange or a securities trading center is removed in the Vietnamese Securities Law 2019.
New regulations on public offering
The fundamental changes in public offering under the Vietnamese Securities Law 2019 compared to the Securities Law 2006 is the clarification and separation of the conditions for the initial public offering of joint-stock company and subsequent public offering of the public company. In detail, Article 15 Securities Law 2019 states:
- The enterprise must have, at the time of registration of the offer, a minimum amount of paid-up charter capital of 30 billion VND (as compared to VND 10 billion under the Securities Law 2006); and
- Business operations in the two years preceding the year of registration of the offer must have been profitable (as compared to one year under the Securities Law 2006); and
- Undertaking to sell at least 15% of the voting shares to 100 investors or more other than the major shareholders (this ratio is 10% if the charter capital of the issuer is VND1,000 billion or more); and
- The major shareholders committing to hold at least 20% of the charter capital of the issuer at least one year from the closing of the offering; and
- The company is not being criminally prosecuted and does not have an un-expunged criminal record on violation of economic management order; and
- The company shall be consulted on the dossiers for IPO registration by a securities consultancy company unless the company who initiates the IPO is a securities consultancy company; and
- The company shall commit and conduct the listing or registration of stock transactions on the securities trading system after the end of the IPO (as compared to the time limit of one year in the Securities Law 2006); and
- The company shall open an escrow account to receive money from the IPO; and
- The company shall have plans for the IPO and the capital gained from the IPO which was approved by the General Meeting of Shareholders.
While the point (ix) is retained, those in (i), (ii) and (vii) are tightened compared to regulations in the Securities Law 2006. Additionally, the Securities Law 2019 adds new conditions as the remaining ones.
New regulations on private placement
One of the most important changes under the Vietnamese Securities Law 2019 is the amendment and supplement of regulations on the private placement.
Firstly, the definition of a private offering of securities under Clause 20, Article 4 stipulates:
“Private placement of securities is offering of securities which is not in the case specified in point a clause 19 of this Article and by one of the following methods:
a) To less than 100 investors not including professional securities investors; or
b) To only professional securities investors.”
Accordingly, the “without using the mass media or the internet” content is removed from the definition and a circumstance is added compared to the definition of private placement in the Securities Law 2006.
Secondly, the conditions for offering private shares, private convertible bonds of public companies, an important additional condition is that the condition for the participants in the private placement of the public companies only includes strategic investors and professional securities investors (Article 31).
Thirdly, The Vietnamese Securities Law 2019 also amends and supplements the time limit for transferring private shares and private convertible bonds ò public companies: the transfer restriction period will be at least 3 years for strategic investors and at least 1 year for professional securities investors, except for cases of transfer between professional securities investors and transfer under decisions of courts, arbitration or inheritance under the provisions of law.
The limit of foreign ownership in public companies
One of the expectations of the amendment of the Securities Law 2006 was to attract foreign investment. In order to achieve this goal, the Securities Law 2019 stipulates that the foreign investors and foreign-invested economic organizations, when participating in the investment or operating on the Vietnamese stock market, must comply with the regulations on foreign ownership ratio, investment conditions and procedures in accordance with the law and securities market. The new Vietnamese Securities Law 2019 also stipulates that the Government will release further specific guidance on this regulation. These changes are made in order to implement the market opening for the foreign investors, step by step following the roadmap, ensuring the economic ground for the Ministries in negotiating and signing international agreement.
Vietnam Stock Exchange
The Vietnamese Securities Law 2019 provides that only Vietnam Stock Exchange and its subsidiaries have right to organize a stock exchange market to ensure the consistency in management. According to Article 43 of the Securities Law 2019, Vietnam Stock Exchange is a company established and operated pursuant to the Securities Law 2019 and Law on Enterprise of which more than 50% of charter capital or total of voting shares are owned by the States.
License for establishment and operation of securities business
Another important change of the Securities Law 2019 is the regulation on the registration of the License of securities business. Specifically, the Vietnamese Securities Law 2019 stipulates that after being licensed by the State Securities Commission for securities trading activities, the securities business organization must register for the enterprise business registration at the business registration agency in accordance with the Law on Enterprise.
This Article’s ABB Law – a Law firm in Vietnam