Under Decree 155/2020, from 1 January 2022, a listed company will be delisted if the financial statements of such company for three consecutive years are qualified by the company’s auditor. This is a new de-listing ground. Recently, the Ho Chi Minh City Stock Exchange (HSX) has decided to delist a company whose audited financial statements of 2019, 2020, and 2021 which are subject to qualifications by its auditors. The de-listing decision of HSX gives rise to several issues. In particular,

Decree 155/2020 is not clear whether regarding the three financial statements of the three- year periods described in the de-listing ground, (1) all three statements need to be all completed after 1 January 2022, (2) only the last statement need to be completed after 1 January 2022, or (3) all three statements need not to be completed after 1 January 2022.
Interpretation (1) will affect the least number of listed companies since the authority can only apply this de-listing test from 2025 when audited financial statements of 2022, 2023, and 2024 are available. Interpretation (3) will affect the most number of listed companies since any company with three qualified financial statements in the past could be delisted. It appears that in the above case, HSX applies interpretation (2). But it is not clear whether the authorities will not apply interpretation (3).
By applying interpretation (2), the HSX has imposed additional adverse liability to a company for their activities before the effective date of Decree 155/2020. This is contrary to the Law on Laws which prohibits a law which retroactively increases liability for activities occurring before the effective date of such law. However, the HSX may argue that they are applying the listing rules, which are not a law under the Law on Laws.

This post is written by Nguyen Quang Vu.

Vietnam Business Law