Under the Securities Law 2019, regarding a public joint stock company (the target company), those entities who fall into tender offer triggering circumstances do not have to conduct a tender offer in some specific circumstances. In particular:

· Circumstance 1: Purchasing of newly issued shares, which results in the ownership reaching the tender offer triggering limits, in accordance with the issuance plan approved by the target company’s General Shareholder Meeting.

· Circumstance 2: Receiving the transfer of the outstanding voting shares, which results in the ownership reaching the tender offer triggering limits, as approved by the target company’s General Shareholder Meeting. In such circumstances, the General Shareholder Meeting must clearly identify the transferor and the transferee.

· Circumstance 3: The transfer of shares between companies operating in form of group of companies including economic groups, corporations, parent companies, subsidiaries which does not result in cross ownership under the Enterprise Law 2014.

· Circumstance 4: Organizations, individuals owning shares in auction of public offering shares, State capital offering or offering of the State-owned-enterprises capital invested in other enterprises.

· Circumstance 5: Organizations, individuals owning shares from division, separation, consolidation, [or] merger of enterprises.

· Circumstance 6: Gifting [or] inheriting shares.

· Circumstance 7: The transfer of shares in accordance with a judgement, decision of the Court which is in effect, [or] an arbitral decision.

Regarding the above circumstances, the following comments can be made:

· In Circumstance 2, the Securities Law 2019 prescribes an additional obligation for the General Shareholder Meeting to clearly identify the transferor and the transferee while Circumstance 1 is silent about this. Accordingly, it could be interpreted that for Circumstance 1 exemption, identity of the investor is not required to be specified in the approved plan.

· Regarding Circumstance 3, under the Securities Law 2006, the transfer of shares between companies in enterprises organized in form of parent companies and subsidiaries is entitled to tender offer exemption. Under the Securities Law 2019, the applicable entities are extended to include companies operating in form of group of companies (nhóm công ty) including economic groups, corporations, parent companies, and subsidiaries. In addition, the new law provides another condition for the exemption which is the transfer does not result in cross ownership in accordance with the Enterprise Law.

· Under Circumstance 4, it is not clear if the exemptions applies to (1) the investor who is obtaining or has obtained shares from the relevant events, or (2) the shares obtained from such described events. Interpretation (2) is more reasonable. Since if (1) applies, the relevant investor could argue that after the described events, it can still buy additional shares in the target company without having to comply with the tender offer requirements.

· Circumstance 5 is a new circumstance which does not exists under the Securities Law 2010.

· Regarding Circumstance 7, the exemption is (i) clarified to only apply to court decisions/judgements which are “in effect” and (ii) extended to apply to arbitral tribunal decisions.

· The Ministry of Finance is no longer granted the right to govern additional exemptions for tender offer under the new Securities Law.

· It remains unclear whether the selling shareholder and its related persons or a shareholder being the investor itself or the investor’s related persons can vote on the approval of such tender offer exemption in Circumstance 1 and Circumstance 2.

This post is written by Tran Thuy Tien and Le Thanh Nhat and edited by Nguyen Quang Vu.

Vietnam Business Law