Amendment of Securities Law: Define more clearly some regulations on public offering

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Many experts have contributed to the issue of public offerings.

Not in line with the conditions for the listing

In the amended draft of the Securities Law, the regulation on the public offering has put the responsibility of enterprises of the public offering on the listing right after the offering. Specifically, the Draft stipulates: “Except for the offering of open-end fund certificates, issuers must register the public offering in accordance with the regulations. It must list securities at the Stock Exchange at the end of the offering. The compulsory listing after the public offering aims to link the offering with the listing, this is a very appropriate policy to bring the market closer to international practice.

However, according to the Vietnam Association of Securities Business (VASB), the current draft regulations have not resolved thoroughly this problem and may lead to difficulties to apply in practice.

Mr. Nguyen Thanh Ky, general secretary of the VASB, said that while the conditions for offering securities to the public have been raised in terms of conditions for capital, free float and business performance, they are not consistent with the conditions for listing shares. Therefore, in fact, there will be cases where the company meets the conditions of the offering but does not meet the listing conditions, it cannot be listed (for example, the case of 5% ROE min)

The representative of VASB also said that, raising the conditions for public offering, especially the conditions of business efficiency offered, has the positive effect of improving the quality of goods offered sold to the public. But on the other hand, it makes it difficult for the needs of publicity, transparency to maximize the efficiency of enterprises.

"There are cases where a business is not profitable but still attracts many investors due to the potential advantages of the business. And in these cases, the public offering will increase the competitiveness, so that enterprises can get the best effect in the offering,” said Mr. Ky.

The VASB also said that there is a tendency to increase the difference between publicly-funded and non-state owned public enterprises. Although the subjects of the new Securities Law do not include the divestment of State capital, the State capital withdrawal is regulated in the Law on Management and Use of state capital invested in other enterprises, and the Decree 71 and Decree 32 which provide detailed guidance.

However, when comparing the provisions of these 2 Laws, there is a big difference in the public offering. Accordingly, the divestment of state capital in a joint stock company must be auctioned (even in the case where the business is not profitable), while profit is one of the conditions for public offering of a joint stock company (according to the revised Securities Law).

Thus, there is a large difference between joint stock companies having state capital and joint stock companies without state capital, while the two types of companies in the Enterprise Law are all types of joint stock companies. That should be treated fairly.

Clarify some concepts

In order to solve the problem of public offering, the VASB proposed that the draft should identify the concept of securities offering, listing and UPCoM, instead of a regulation that must be done later. That means, conditions, order and dossier for the offer registration are also conditions and listing documents or shares on UPCoM.

The VASB representative also recommended to distinguish the public offering for listing and UPCoM. In particular, the conditions for offering for listing will be in the direction of improving the conditions to increase the quality of goods listed. UPCoM's conditions only focus on the conditions for fulfilling the obligation to disclose information fully, accurately. Such regulation will both achieve the goal of improving the quality of listed goods and achieving the goal of not raising standards that may miss the public companies which need to manage and disclose information. And in this way, it is not necessary to improve the condition of the public companies.

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Commenting on this issue, representatives of VNDirect Securities Corperation also stated that the regulation on the conditions for initial public offering mentioned in the Points d and e of Clause 1 of Article 12 of the Draft Law is not reasonable. Therefore, it is very difficult and unclear to estimate the number of investors participating in the purchase of shares which meet the demands before making plans to increase charter capital. At the same time, requesting a major shareholder to commit to hold shares for a minimum of one year is beyond the ability of the businesses. Therefore, VNDirect found that these two issues should not be included in the condition of public offering.

Representatives of VNDirect also commented, regulations on securities offering need to clarify the concept of territory. In the globalization era, financial and securities transactions can take place across borders. For example, an overseas organization issuing a public offering may offer securities for Vietnamese organizations and individuals without presence in Vietnam. In this case, there is a risk that cross-border securities offering will be out of the scope of Vietnamese law.