Insider Trading – Selective Disclosure

The Securities Law prohibits the use of inside information to purchase or trade in shares of public companies. Failure to comply with the insider trading rules may result in administrative penalty and the transaction may be held invalid. The broad definition of inside information, in theory, may include certain information obtained by a potential strategic investor in the course of due diligence into a Public Joint Stock Company (Public JSC) in advance of a potential private acquisition. Therefore, theoretically, if a proposed strategic investment is predicated on the use of inside information relating to a Public JSC in the course of due diligence, the proposed investment might be subject to insider trading restrictions under the Securities Law. This may also give rise to insider trading liabilities for the relevant potential investor, who relies on non-public due diligence information to make an investment in a Public JSC.

The issue of selective disclosure in the context of a private acquisition in a Public JSC appears to have not been considered when the Securities Law was drafted. Thus, the restriction appears to be one of omission rather than a specific intention to prohibit or regulate. Unfortunately, a resolution of this issue, which will create an environment of greater regulatory certainty for potential strategic and institutional investors, will likely take many years in Vietnam.

That being said, the securities regulations allow certain “inside shareholders” in a Public JSC who have or are deemed to have inside information to trade shares in Public JSC provided that certain public disclosures are made before and after the proposed trade. It is not clear if potential investors in a Public JSC may make public disclosures in the same manner as an inside shareholders do to avoid potential insider trading liabilities.

 
Vietnam Business Law Blog

Collective action mechanism among bondholders is one of the common features in terms and conditions of a corporate bond.  Two important features of collective action mechanism are:

·        the use of a bond trustee to act for the benefit of bondholders; and

·        the use of bondholders’ meeting to allow a decision of a majority (or super-majority) of bondholder regarding the bond (e.g. changing the terms of the bond) to bind minority bondholders who disagree with such decision.

Arguably, if the provisions of bondholders’ meeting are included in the terms of the bond and a bondholder agrees to such term then the provisions on a civil transaction under Civil Code 2015 may allow the use of bondholders’ meeting in Vietnam. However, the validity of a decision of a bondholders’ meeting which is not approved by all bondholders is still questionable under Vietnamese law. This is because:

Under the Law on E-Transactions, an e-signature (chữ ký điện tử) is defined as being created in the form of words, script, numerals, symbols, sounds or in other forms by electronic means, logically attached or associated with a data message, and being capable of identifying the person who has signed the data message, and being capable of identifying the consent of that signatory to the contents of the signed data message.

According to Article 24.1 of the Law on E-Transactions, an e-signature of an individual affixed to a data message will be legally equivalent to the signature of such individual affixed to a written document if:

·        the method of creating the e-signature permits to identify the signatory and to indicate his/her approval of the contents of the data message; and

·        such method is sufficiently reliable and appropriate to the purpose for which the data message was originated and sent.

Accordingly, if an user being an individual of an e-commerce website, who can be identified by his/her username, password, and other means of verification (e.g., OTP code), clicks on a confirmation button of an online order then such action can be regarded as creating and affixing an e-signature to the online order by the individual user. This is because:

On 28 December 2018, the State Bank of Vietnam (SBV) issued Circular 42 amending current foreign currency borrowing regulations (in Circular 24 of the SBV dated 8 December 2015, as amended from time to time (Circular 24/2015)) (Circular 42/2018). Circular 42/2018 will take effect from 1 January 2019.

Changes to permitted lending purpose

Vietnamese banks only lend in foreign currency for a few limited purposes. Circular 42/2018 has following changes to these purposes:

On 20 June 2018, the Ministry of Justice issued Circular 8 on the registration and provision of information on security interest and contracts (Circular 8/2018). Circular 8/2018 will replace Circular 5/2011 on the same subject from 4 August 2018.

Name of the object of the registration

The object of registration under Circular 5/2011 is secured transactions (giao dịch bảo đảm), which is in line with the Civil Code 2005. However, the term “secured transaction” is almost removed from the Civil Code 2015 and the registration is now the registration of security interest (biện pháp bảo đảm). Circular 8/2018 adopts such approach and determined the object of registration is security interest to be consistent with the new Civil Code 2015.