Decree 126/2017 replacing Decree 59/2011 on equitisation of State-owned enterprises introduces various new requirements for a strategic investor who invests during the equitisation of a State-owned enterprise (equitised SOE). These new requirements (especially the pricing requirement) are more difficult for a strategic investor to satisfy. In particular,
- The equitized SOE must decide to select the strategic investor and the strategic investor must commit to invest before publication of the public offering document for the public auction. Under Decree 59/2011, the strategic investor may decide to invest either before or after the public auction;
- Despite being required to commit to invest before the public auction, in most cases, the strategic investor must pay a price not lower than the average bidding price at the public auction. Under Decree 59/2011, there is no such requirement and the minimum price is the lowest successful bidding price. This requirement under Decree 126/201 seems to repeat the mistake under Decree 109/2007. There is unlikely any sensible investor who will commit to invest without knowing the price that it has to pay first;
- A strategic investor now must have at least two years of profitable track record. There is no such requirement under Decree 59/2011;
- A strategic investor must undertake to maintain the core business of the equitized SOE for at least three years;
- A strategic investor’s shares are subject to a three year lock-up period without exception. Under Decree 59/2011, a strategic investor’s shares are subject to a five-year lock-up which can be exempted by the Shareholders’ Meeting;
- Only equitised SOEs where the Government will hold at least 50% shares after equitisation may sell shares to a strategic investor. Combined with the requirement that at least 20% shares in an equitized SOE must be sold through public auction, a strategic investor cannot acquire more than 30% of the shares in such an equitized SOE. Under Decree 59/2011, the Prime Minister may decide on the number shares sold to a strategic investor if the equitized SOE has a charter capital of VND 500 billion and operates in certain sectors. It is not clear if this requirement under Decree 126/2017 means that an investor acquiring more than 30% of the shares in the equitized SOE is not a strategic investor; and
- A strategic investor must make a deposit of 20% of the sale price at the starting share sale price. Under Decree 59/2011, the deposit is only 10%.
Dinh Thi Khanh Linh, a legal intern, contributes this post in part.