Accordingly, Vietnam’s stock market today is an effective capital mobilization channel for the country’s economy; as a result, IPO became popular among enterprises that operate in Vietnam. However, in order to carry out IPO, businesses must fulfill the conditions as the law. So, what are the conditions for IPO under Vietnamese Law? Let’s find out with LSX!
- 2020 Enterprise Law
- 2019 Securities Law
- Decree 155/2020/ND-CP
- Decree 71/2017/ND-CP
- Circular 69/2020/TT-BTC
What is IPO?
Thus, IPO stands for the English phrase Initial Public Offering, which means the initial public offering of securities. The concept of securities under Vietnamese law includes many forms, but when it comes to the concept of IPO; it is automatically an initial public offering of shares. After companies successfully issue shares to the public, that company becomes a public company. That is, there are at least 100 shareholders who simultaneously own the charter capital of the company. The initial listing of shares of enterprises in Vietnam is relatively complicated and must meet many conditions and go through complicated procedures.
In order to offer shares to the public for the first time; JSC must carry out registration procedures to have their shares listed by the Stock Exchanges on the exchanges. Currently, securities trading and trading activities in Vietnam must follow the HOSE floor of the Ho Chi Minh Stock Exchange, and the HNX of the Hanoi Stock Exchange.
Conditions for IPO
Correspondingly, to get IPO; an enterprise must fully meet the following conditions:
- Enterprises have a charter capital calculated according to the value recorded in the accounting books at the time of registration of the offering from 10 billion VND or more.
- Business activities of the year preceding the year of IPO registration must be profitable and up to the date of IPO registration must not have a loss.
- There is a plan to issue and use the capital obtained from the IPO; approved by the General Meeting of Shareholders.
Besides, with some other types of enterprises, along with the above conditions; in order to IPO, enterprises need to meet other separate conditions; specifically as follows:
- For enterprises with 100% state capital converted into joint stock companies:
- In order to IPO, it is necessary to convert from a state company into a joint stock company
- For foreign-invested enterprises converted into joint stock enterprises:
- Having an IPO plan and using the capital obtained from the IPO approved by the owner of the enterprise with 100% foreign capital or the Board of Directors of the joint venture enterprise.
- Having a securities company to advise on the preparation of IPO documents
- For foreign-invested enterprises that have converted into a joint stock company:
- There must be a securities company to advise on the preparation of IPO documents.
- For new businesses in the field of infrastructure:
- Being an enterprise acting as an investor in construction of works under socio-economic development projects of ministries, branches and provinces and cities directly under the Central Government.
- Investment projects approved by competent authorities
- Commitment to joint responsibility of the Board of Directors, otherwise founding shareholders for the IPO plan and the use of capital obtained from the IPO
- There is an organization to underwrite the IPO
- Having a bank to supervise the use of capital obtained from the IPO
Dossier of registration for implementation of IPO
Hence the regulations in 2019 Securities Law; in order to conduct an I.P.O (initial public offering), the company must prepare an IPO registration dossier including the following documents:
- IPO registration certificate
- Charter of the company
- Decision of the General Meeting of Shareholders approving the issuance plan; the plan to use the capital obtained from the offering and the written commitment to list or register for trading of shares on the securities trading system
- The written commitment meets the following conditions:
- A minimum of 15% of the voting shares of the issuer must be sold to at least 100 investors who are not major shareholders; in case the charter capital of the issuer is VND 1,000 billion or more, the minimum ratio is 10% of the voting shares of the issuer
- The issuer is not being examined for penal liability or has been convicted of one of the crimes of infringing upon the economic management order but has not yet been cleared of the criminal record
- Written commitment of major shareholders before the IPO of the issuer to jointly hold at least 20% of the company’s charter capital at least is 01 year from the closing date of the offering
- Consulting contract IPO registration file with a securities company
- The written certification of the bank or foreign bank branch on the opening of an escrow account to receive money to buy shares of the offering
- Underwriting commitment (if any)
According to the provisions of the Enterprise Law 2020, only a joint-stock company is the only type of enterprise that has the right to offer shares to the public.
Common stock is a certificate certifying shareholders’ ownership of the company and confirming that it allows shareholders to enjoy ordinary rights in the company.
Based on securities law, the form of initial public offering (IPO) will be allowed through the following methods:
– Mass media, including newspapers, radio, Internet, etc.
– Dutch auction.
– Commitment guarantee.
– Service with the highest responsibility.
– Buy wholesale and resell.