The Ministry of Finance has released a latest draft amendment to the Securities Law 2006 (https://tinyurl.com/ydc44zyd), which is scheduled to be passed in the second half of 2019. It looks like that any major law in Vietnam will need to undergo major changes in every 10 years whether or not the changes are necessary. The draft amendments include the following major changes regarding capital raising process:
· Private placement of shares or bonds can now only be made to less than 100 “professional investors” or “strategic investors”. There is no definition of “strategic investor”. The definition of “professional investors” is revised to include (1) listed companies with a charter capital of VND 1,000 billion or more and (2) high net-worth individuals with experiences or qualification in securities trading.
· Strategic investors in a private placement of shares are subject to three years lock-up (up from one year under the Securities Law 2006).
· Only professional investors can subscribe and trade convertible bonds which are privately issued by an issuer.
· Definition of “related persons” (người liên quan) is extended to include “major counterparties and customers” of a public company. This amendment seems to substantially and unreasonably expand the concept of related persons. This is because the concept of related persons is used to determine whether a group of persons should be treated as one for tender offer requirement or major shareholder reporting requirement;
· An initial public offering (IPO) of shares is now required to satisfy certain free float requirements. In particular, a company with a charter capital of VND 1000 billion must ensure that after the IPO, at least 10% of its charter capital will be owned by at least 100 investors who hold less than 1% shares in the company.
· The “major shareholders” of an issuer in an IPO must undertake to hold at least 20% of the charter capital for at least one year.
· A subsequent public offering of shares must be at least one year after the last public offering of shares.
· In a subsequent public offering of shares, the issuer must ensure that at least 70% of the proposed number of shares to be issued will be subscribed.
· An issuer cannot conduct a subsequent public offering of shares which size is equal to the charter capital of the issuer unless there is a underwriter who undertakes to purchase all unsold shares.
· An issuer in a public offering of bonds must have a charter capital of VND 300 billion (up from VND 10 billion).
· All issuers in a public offering of bonds or shares must undertake to list the bonds or shares after completion of the offering. The proposed amendments however still have separate requirements for listing of shares and bonds. As such, to comply with this requirement, an issuer should satisfy conditions for both offering and listing of securities.
One can see that many of the above changes, if passed, will limit the ability to raise capital by Vietnamese issuers via capital market.