How does the current Vietnamese law regulate the form of a private placement of shares? What are the order and procedure? Let’s find out with Lawyer X through the article below.
Legal grounds
– Enterprise Law 2020
What are shares?
Shares are essentially property rights expressed in shares, which are the smallest division of the company’s charter capital. Charter capital is divided into equal parts called shares. Individuals or organizations that own shares are called shareholders.
– The value of each share (par value of shares) decided by the company and recorded in the shares. The par value of the shares may differ from the offering price of the shares.
– Shares are the legal basis to prove the status of shareholders of the company regardless of whether they participate in the establishment of the company or not.
Types of shares
Shares of a joint-stock company can exist under two types: common shares and preferred shares
Common shares
If your company is a joint-stock company, your company require to have ordinary shares. And the owners of common shares are called common shareholders.
Preference shares
A joint-stock company may have preferred shares. Owners of preferred shares are prefer shareholders. Preference shares include the following types:
– Dividend preference shares.
– Refundable preferred shares.
– Voting preference shares.
– Other preferred shares as prescribed in the company’s charter and the law on securities.
Types of shares offering
A share offering is an increase in the number of shares or types of shares that your company is entitled to offer to increase its charter capital.
Offerings of shares may be made in the following forms:
– Offering shares to existing shareholders.
– Then, private placement of shares.
– Besides, offering shares to the public.
Thus, at present, the law stipulates that there are three forms of the share offering. In case your company is a joint-stock company and not a public company, it must; wants to conduct a share offering in the form of a private placement of shares. So below, lawyer X will advise more specifically on the provisions of this form. Please continue to follow.
What is a private placement?
The private placement of shares is one of the mandatory steps when raising capital and receiving new shareholders. It is possible to apply the form of a private placement of shares and then increase capital or in the form of share transfer and then increase capital.
The private placement of shares by a joint-stock company that is not a public company must satisfy the following conditions:
– Do not offer for sale through mass media.
– Offered to less than 100 investors, excluding professional securities investors; or only offered to professional securities investors.
Procedures for a private placement of shares
To conduct a private placement of shares, your company must go through four steps:
Step 1
Your company must decide on the plan to offer private shares according to regulations.
Step 2
Shareholders of your company exercise the priority right to buy shares, except in the case of a merger or consolidation of the company, specifically:
1. Your company must send a written notice to shareholders. This notice must be sure to reach their contacts 15 days before the end of the subscription period. This notice includes:
– Firstly, full name, contact address, nationality, number of legal papers of the individual for shareholders being individuals; name, enterprise code or number of legal papers of the organization, address of the head office, for shareholders being organizations.
– Secondly, number of shares and the current share ownership ratio of shareholders in the company.
– Then, a total number of shares expected to offer for sale and the number of shares shareholders that entitled to buy.
– Share offering price.
– Besides, the purchase registration deadline.
– And lastly, full name and signature of the legal representative of the company.
2. Attached to the above notice in the form of the registration form to buy shares issued by your company. If your company can not receive this form on time, that shareholder considered to did not receive the right to buy priority. Shareholders have the right to transfer their priority right to buy shares to others.
3. If the number of shares expected to offer for sale not fully purchased, these shares which sold to others with conditions not more favorable than the previous conditions. Unless otherwise approved by the General Meeting of Shareholders of your company.
4. If foreign investors buy shares of your company, they must follow the procedures for buying shares according to regulations.
Step 3
After the shares are paid in full, your company must:
– Firstly, issue and deliver shares to buyers.
– In case of not handing over shares, information about shareholders must record in the register of shareholders to certify ownership of shares of that shareholder in your company.
Step 4
Your company must register to change its charter capital within 10 days from the date of completion of the share sale.
Related article:
Form of offering shares to existing shareholders in Vietnam
Changing of shareholder information as foreign investors
Frequently asked questions
The answer is yes. Conditions for a private placement of shares as a joint-stock company that is not a public company, specifically:
1. Do not offer for sale through the mass media.
2. Offering to less than 100 investors, excluding professional securities investors; or only offered to professional securities investors.
The answer is no. According to current law, ordinary shares cannot be converted into preferred shares. Currently, the law only allows preference shares that can be converted into common shares according to the resolution of the General Meeting of Shareholders.
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