In the FLC and Van Thinh Phat cases, the authorities have accused the controlling shareholders of FLC and Van Thinh Phat of various crimes including crimes relating to public issuance of securities, stock manipulation or private issuance of bonds. In an apparent attempt to prevent these crimes to be recommitted, in December 2024, the National Assembly passes some important amendments to the Securities Law 2019 (2024 Amendment). The Amendment takes effect from 1 January 2025 and could impose significant risks to public companies and their shareholders in Vietnam.

Sweeping changes to the liability regime for public companies, their shareholders and advisors

Under the 2024 Amendment, organization or individuals participating in the process of preparing applicable files or reporting documents relating to securities activities and securities market (hoạt động chứng khoán và thị trường chứng khoán) will be responsible for ensuring that:

such application files and reporting documents are legal, accurate, true and complete; and
such application files and reporting documents have clear and not misleading information and contain all material content which affect decision of the authorities, organisations and investors.

Advisors, who provide advice on the application files and reporting documents relating to securities activities and securities market, must be honest and prudent and must ensure that all analysis is reasonable and prudent.

Before the 2024 Amendment, the Securities Law 2019 only imposes liabilities to issuers, underwriters, auditors and “certifying organisations” when they conduct a public offering of securities or register their securities for listing or trading. However, by referring to all securities activities and securities market, the 2024 Amendment appears to expand the liability regimes to apply to all activities in the market including those which are normally not subject to such liability such as (1) private offering of securities, (3) public disclosures by a public companies or their shareholders, (4) secondary trading of securities by investors, and (4) advisors who are involved in these activities.

In practice, it would be very difficult for public companies and their shareholders and advisors to ensure that all of the documents and information relating to their public disclosures and securities trading activities do not contain misleading information and contain all material information, which affect decision by not only investors but also the authorities and other organisations.

Other important changes

The 2024 Amendment also introduces the following important changes:

Individual professional investors can only purchase bonds which are rated and are secured by assets or underwritten. However, the 2024 Amendment does not close the loophole which allows bonds issued privately to be sold to more than 100 investors.
The issuer of an IPO must submit an audited report regarding its paid up charter capital at the time of registration. This requirement seems to deal with the method that the founder of FLC employed before conducting an IPO of one of its subsidiary.
The SSC may cancel a public offering of securities after the offering is completed and before the relevant securities are listed. However, if the relevant securities are already listed then cancellation of the public offering is not possible.
In a private placement of shares, the shareholders of a public company must now decide on the number of shares, price of shares or method to determine the price of shares.
The SSC now has the authority to suspend or cancel a private placement of securities if the registration file of the private placement contains misleading information or omits material information affecting decision by investors.
A public company could lose its status as a public company if (1) it fails to publish its audited financial statements or annual shareholder meeting resolutions, in each case, for two consecutive years, or (2) it fails to register its shares with the Vietnam Securities Depository And Clearing Corporation, or (3) it fails to register its shares for listing.
This post is written by Nguyen Quang Vu.

Vietnam Business Law