New points in latest proposed amendments to the Securities Law 2006

In the latest draft amendment to the Securities Law 2006, compared with the earlier draft, the following new points , among others, are introduced :

·        “Indirect ownership” of securities is defined to mean holding securities through a “related person” or an entrustment arrangement.

·        The criteria of a professional investor is reduced. A company with a paid-up charter capital of VND 100 billion (about US$ 4.5 million) instead of VND 1,000 billion  can now qualify as a professional investor. An individual with a portfolio of VND 2 billion (instead of a trading volume of VND 2 billion per month) or annual taxable income  of VND 1 billion can now qualify as a  professional investor.  Qualifying as a professional investor is important since only a professional investor or a strategic investor could participate in a private placement of shares by a public company.

·        Major customers or counterparties are no longer considered as a related person of a public company.

·        The latest draft amendment seems to allow for issuance of shares at a price below par value if the current trading price of the issuer is lower than par value.

·        The issuer of an IPO only needs to maintain a free float of 15% of the total outstanding shares which should be held by at least 100 shareholders who are not major shareholders. In the earlier draft, the free float requirement is 20% of the total outstanding shares which must be held by at least 100 shareholders who own no more than 1% of the total outstanding shares.

·        The issuer in an IPO must list or register their shares for trading within 30 days the IPO is completed. The issuer of a public bond offering must also list their bonds as soon as the offering is completed.

·        The issuer of a public bond offering only needs to have a paid-up capital of VND 30 billion instead of VND 300 billion.

·        An auditor of a public company must report to the SSC about the public company’s operation if (1) there is a request by the SSC or (2) there is any material violation of the law or accounting practice  of the public company . This seems to be a major change to the role of an auditor for a public company in Vietnam.

·        A mortgage, pledge, or security interest relating to securities must register in accordance with the Securities Law. It is not clear if this is a new registration requirement or this refers to the registration with the National Registration Agency of Secured Transactions.