Accordingly, most enterprises in developed countries, before going into operation or after the operation, will conduct to IPO. However, in Vietnam, IPO is still an ongoing trend as the impact of this process becomes visible. So, what is the procedure for IPO under Vietnamese Law? Let’s find out in this article.
- 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.
Procedure for IPO
Hence the regulations in Securities Law, the procedure for IPO will include the following steps:
Consult the Board of Shareholders
When the company wants to issue securities to the market, the company needs to hold a general meeting of shareholders to get approval, and plan an IPO, including:
- Agree on the purpose of raising capital
- How much capital to raise?
- Quantity and type of securities
- To whom will the collected capital be distributed?
Formation of a Preparatory Committee
Then, after receiving the approval of the Board of Directors and agreeing on the purpose and other issues related to the IPO, the Board of Directors needs to set up a Preparatory Committee to apply for the IPO license. The main function of this committee is to prepare the following documents:
- Dossier of application for permission to issue securities to submit to agencies and units related to the issuance of securities
- Research and select underwriters (in case necessary)
- Contact the consulting unit, audit company to develop the issuance plan and the plan to use the capital obtained from the IPO.
The Preparatory Committee will, together with the consulting unit, the auditing company, and the underwriter (if any) conduct the valuation of the issued securities. This is one of the most difficult and complicated stages when conducting an IPO. In case the security is overvalued, selling becomes difficult; meanwhile, if the valuation is too low, the issuer will suffer a lot of damage. Therefore, the price should be reasonable, meeting the needs of both the seller and the buyer.
Verify financial statements and prepare valid documents
The certification of the financial statements in the IPO application will be done by the auditing company. In addition to certifying financial statements, the securities issuer needs to prepare all documents, procedures, and documents to submit to the Securities and Exchange Commission.
Submit a dossier to the Securities and Exchange Commission
Basically, enterprises only issue securities when they receive permission from the Securities Commission. After submitting the dossier, businesses need to wait for a period of time to receive an official answer about the IPO. In the meantime, businesses can use the content in the preliminary report to explore the market.
Announcement of securities issuance
When licensed, the securities issuer should announce in the mass media the official prospectus and the implementation of the securities distribution according to the stipulated time.
Report on the results of the release
After the end of the distribution, the securities issuer must register, store, transfer, and pay for securities. Finally, this organization must report the results of the issuance to the Securities Commission, and at the same time, it needs to register capital with the competent authorities.
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.
Service with the highest responsibility.
Buy wholesale and resell.
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
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.