Under Vietnam securities regulations, the legal requirement on tender offer in acquisition of shares in a public joint stock company (the target company) will be triggered in one of the following circumstances:
a. Circumstance 1: An offer to purchase voting shares which results in the ownership of 25% or more of the outstanding voting shares of the target company;
b. Circumstance 2: Any organization or individual together with its related persons holding 25% or more of the voting shares in the target company purchasing further (mua tiếp) 10% or more of the outstanding voting shares of the target company;
c. Circumstance 3: Any organization or individual together with its related person holding 25% or more of the voting shares in the target company purchasing further 5% to less than 10% of the outstanding voting shares of the target company within 1 year from the completion of the previous tender offer; and
d. Circumstance 4: Any organization or individual having intention to conduct a tender offer.
The drafting of the tender offer provisions under Vietnamese securities regulations is not clear and can be interpreted in several ways. For example,
a. The triggering action of each Circumstances are different and it is not why the law contemplate such difference. In particular, Circumstance 1 is triggered by “an offer to purchase”, Circumstances 2 and 3 are triggered by “the act of purchase” and Circumstance 4 is triggered by “having an intention”;
b. Each Circumstance seems to regulate different group of persons. While Circumstances 2 and 3 regulate both the acquirer and its related persons, Circumstances 1 and 4 do not expressly cover action of a related person of an acquirer;
c. By looking only at the achievable ownership interests of the buyer upon completion of an acquisition and ignoring the starting ownership interest of the buyer (whether it is below or above 25%), one may argue that Circumstance 1 already cover Circumstances 2 and 3;
d. Circumstance 2 generally refers to “purchasing further of 10% or more shares” without specifying whether the 10% threshold is computed against a single purchase or a series of purchases since the acquirer exceeds the 25% holding threshold. Therefore, a prudent interpretation is that the 10% threshold should be computed against all and any acquisition(s) made further upon the potential buyer has already obtained 25% or more shares of the target. This interpretation may be established to prevent false transaction (giao dịch giả tạo) under which some below-ten-percent purchases are made only one or several months separate from each other to circumvent the tender offer rules;
e. It is not clear if Circumstance 3 could be triggered if the within one year the acquirer conducts certain purchase which is subject to tender offer regulations but is exempted (e.g. by a shareholder waiver of the target company);
f. A mere reference to the “intention to conduct a tender offer” under Circumstance 4 may be interpreted as addressing a voluntary performance of tender offer at the free will of the person making the offer. However, Decree 58/2012 provides that an organization or individual participating in a public auction of securities for sale is not required to implement the provisions on tender offer if it intends to purchase shares with share ownership levels at or exceeding those prescribed in the Securities Law 2006. The interpretation of Circumstance 4 in light of Decree 58/2012 may suggest that the “intention to conduct a tender offer” under Circumstance 4 may essentially be the “intention to purchase shares with ownership levels triggering compulsory tender offer rule under Article 32.1 of the Securities Law 2006”; and
g. Under the Securities Law 2006, among others, exemption of tender offer rules will be applied for the purchase of voting shares leading to the ownership of 25% or more of the voting shares in a public joint stock company as approved by the Shareholder Meeting of such company. However, it is not clear if this exemption intended to address Circumstance 1 only or to all other circumstances.
This post is contributed in part by Tran Thi Thu Thao, a VILAF associate.