Amending the Law on Securities: the Charter capital under 30 billion dong is not participated IPO

The draft Law on Securities (amended) consists of 10 chapters and 137 articles. Photo: Internet.

Raise the condition on charter capital in the Initial Public Offering

On the sale of securities (Chapter II), the project amended and separated the conditions for the initial public offering (IPO), and the conditions for offering additional shares to the public, at the same time, the amendment is tighter.

Raise the condition of paid-up charter capital for issuers at the time of registration to 30 billion dong or more (stipulated 10 billion in the current law), the business activities of 02 consecutive years before the registration year of the offer must be profitable (as stipulated one year in advance in the current law)…

The particular condition of initial public offering is publicity, with at least 20% of the charter capital of an issuing organization must be sold to at least 100 non-shareholder investors owning one per cent (1%) of the charter capital of the issuing organization or more; In cases where the charter capital of an issuing organization is 100 billion VND or more, the minimum percentage shall be 15% of the charter capital; In cases where the charter capital of the issuing organization is 1,000 billion VND or more, the minimum percentage shall be 10% of the charter capital.

For private stock offerings, the draft law regulates on the private offering conditions more closely, in line with international practices, avoiding the misuse of private offerings rather than offering to the public.

For private offering of convertible shares and bonds of public companies, subjects participating only include professional securities investors and strategic investors. The transfer of convertible shares and private bond offerings is restricted to at least three years for strategic investors and at least one year for professional securities investors from the date of offering completion, except for the securities transfer case among the professional securities investors, or under court or arbitration decisions or inheritance in accordance with the provisions of the law (currently, the subject is not limited and limit transfer time has been only 01 year).

A public company must have capital of over 30 billion VND

About the public company (Chapter III), the draft law on raising the conditions of public companies in terms of charter capital (the charter capital to be contributed is 30 billion dong and more - the current law is 10 billion or more) and revising, supplementing the conditions on the number and structure of shareholders (at least 20% of the charter capital contributed by at least one hundred (100) non- shareholders investors owning 1% of the shares or more holding the voting rights. This is also in line with international practice. The public companies in other countries usually have the size and number of major shareholders.

In the US, a company with total assets of more than US$ 10 million (equivalent to 220 billion VND) and at least 500 shareholders is considered as a public company. In Japan, a public company must have chartered capital of 500 million yen (equivalent to 100 billion dong). In Singapore, Hong Kong, the condition of a public company is to have a minimum of 50 shareholders.

With regard to the foreign ownership ratio of a public company, the foreign ownership ratio is the voting share of all foreign investors and the economic organizations, with foreign investors holding 51% or more of the charter capital on the total voting shares of the public company.

The foreign ownership ratio in a public company is determined to be 100%, except in cases where there is an international treaty in which Vietnam is a contracting party, or the specialized law specifies a lower level of ownership of foreign investors.

In cases where a public company operating in different branches and trades has different provisions on the foreign ownership ratio, the foreign ownership ratio shall not exceed the lowest level in branches and trades specified in the foreign ownership ratio. Expansion of this limit will create favorable conditions for many Vietnamese companies for meeting the conditions to participate in the MSC index of the emerging markets.