The National Assembly has passed Law No. 54/2019/QH14 on Securities on November 26, 2019 (the “New Securities Law”).  The New Securities Law took effect as of January 1, 2021.  Key changes brought by the New Securities Law are as follows:
 
1.   Public Company 

Pursuant to the New Securities Law, a Vietnamese joint-stock company is considered a public company if it falls into one of the following categories:

1. Type 1: having minimum paid-up charter capital of VND 30 billion (approx. USD 1.3 million), and at least 10% of the number of voting shares held by at least 100 investors who are not a major shareholder—i.e., a shareholder holding 5% or more of the total voting shares (“Major Shareholder”); or

2. Type 2: having successfully carried out an initial public offering through registration with the State Securities Commission of Vietnam (the “SSC”).

2.   Public Offering 

2.1.    Initial Public Offering 

The New Securities Law provides stricter conditions for an initial public offering of shares (“IPO”).  An issuer has to meet the following conditions to proceed with an IPO:

1. It has paid up charter capital of at least VND 30 billion (approximately equivalent to USD 1.3 million).

2. Its business operation in the two previous years is profitable and it does not have accumulated losses in the year of registration for IPO.

3. Its General Meeting of Shareholders has approved the plans for IPO and the usage of proceeds from the IPO.

4. At least 15% of its voting shares are offered to at least 100 shareholders who are not a Major Shareholder; in case the charter capital of the issuer is VND 1,000 billion (approximately equivalent to USD 43.5 million) or more, at least 10% of its voting shares are offered to at least 100 shareholders who are not a Major Shareholder.

5. The Majors Shareholders of the issuer prior to the IPO commit to hold together at least 20% of the charter capital of the issuer for at least one year from the completion of the IPO.

6. The issuer is not under criminal investigation or prosecution and has no criminal record on violation of economic management order.

7. The issuer has engaged a securities company to consult it in preparing the IPO registration dossier, unless the issuer is a securities company.

8. The issuer commits to list or register its shares for trading in the securities trading system after the completion of the IPO.

9. The issuer opens an escrow account to receive the proceeds from the IPO.

Note that the conditions stated in (iv) to (vii) and (ix) above are newly introduced by the New Securities Law.

2.2.   Subsequent Public Offering 

Under the New Securities Law the following conditions need to be met for a subsequent public offering (the “SPO”) of shares of an issuer:

1. Conditions provided in (i), (iii), (vi), (vii), (viii) and (ix) above for an IPO.

2. Its business operation in the previous year is profitable, and it does not have accumulated losses in the year of registration for the SPO.

3. Total par value of the newly issued shares under the SPO does not exceed the total par value of its existing issued shares, unless the issuer (a) obtains an underwriting commitment for acquiring either all of issued shares for reselling or all remaining issued shares which have not been successfully distributed by the issuer, (b) issues shares for increasing its charter capital by using the owner’s equity, or (c) issues shares for share swap, merger or consolidation of enterprises.

4. If the issuer issues new shares to raise capital for its investment project, the total number of shares issued to its investors has to reach at least 70% of the total number of shares intended to be issued.  Further, the issuer shall have a plan to make up for the capital shortage in case the proceeds generated by the offering is inadequate.

3.   Tender Offer

An investor and its related persons (collectively the “Acquirers”) have to undertake procedures for a tender offer, including registration with the SSC, (the “Tender Offer”) in order to acquire shares in a public company or a securities investment fund (the “Target”) if such acquisition falls into one of the following cases.  Pursuant to the New Securities Law, a Vietnamese joint-stock company is considered a public company if it falls into one of the following categories:

1. The Acquirers intend to, directly or indirectly, acquire or subscribe for 25% or more voting shares/outstanding closed-end fund units of the Target (the “Target Securities”).

2. The Acquirers already hold at least 25% of the Target Securities, and their subsequent acquisition/subscription results in their aggregate holding of 35%, 45%, 55%, 65% or 75% (respectively) or more voting shares/outstanding fund units.

3. Unless a previous tender offer by the Acquirers has covered 100% of the Target Securities, if the Acquirers already hold 80% or more of the Target Securities, the Acquirers will be required to acquire all remaining Target Securities from the existing holders of the Target Securities on the same terms and conditions as in the previous tender offer within 30 days of such previous tender offer.

The Acquirers will be exempted from the Tender Offer requirement if, among other things, their acquisition/subscription has been approved by the General Meeting of Shareholders/fund representative committee of the Target.

4.   Private Placement 

Pursuant to the New Securities Law, only professional securities investors and strategic investors are entitled to participate in the private placement of equity-related securities (including shares, convertible bonds and bonds with warrants) issued by a public company.  A professional investor is defined under the New Securities Law as an investor with strong financial or technical capacity in the securities sector, such as banks, securities companies, securities investment funds,  and companies with contributed capital of more than VND 100 billion (approx. USD 4.35 million), or individuals having securities practice license.  Strategic investors are investors who have been selected by the General Meeting of Shareholders for their financial and technical capacity and who have agreed to a lock-up period of at least three years.

Except in certain cases, equity-related securities issued under a private placement will be subject to three-year and one-year lock up periods applicable to strategic investors and professional securities investors, respectively.

The New Securities Law requires that there must be a cooling-off period of at least six months between the two consecutive issuance tranches of equity-related securities.

5.   Re-Organization of the Stock Market 

Pursuant to the New Securities Law, the Vietnam Securities Stock Exchanges and its subsidiaries are required to organize the trading market for listed stocks in replacement of the Securities Trading Centre and Securities Stock Exchanges.  The Vietnam Securities Depository and Clearing Corporation will be soon established to succeed the Vietnam Securities Depository as provided under the old law.  Each of the Vietnam Securities Stock Exchanges and the Vietnam Securities Depository and Clearing Corporation will be organized as an enterprise operating under the governance of the New Securities Law and Law on Enterprises, having 50% charter capital or total voting shares held by the State and fully put into operation within two years from the effective date of the New Securities Law—i.e., by January 1, 2023.

[Korean version]