This content is from: Local Insights

Vietnam: New regulations on valuation of state-owned shares in a listed company

The mechanism for valuation of state-owned shares in a listed company in its sale (sale of shares) has been recently overhauled by Decree 32/2018/ND-CP and the Circular 59/2018/TT-BTC which have come into effect since May 1 2018 and September 1 2018, respectively.

Previously, a sale of shares was only required to be implemented in the form of order matching or put-through inside of a stock exchange, thereby, the sale price must fall within the trading band of relevant shares on the date of the transaction.

Upon the effectivity of the above laws, the sale of shares may now also be implemented outside of a stock exchange in the following priority order: public auction (comprising of ordinary auction and lot auction), competitive offer, or agreement. Regardless of the method for the sale of shares, the sale price must not be less than any of the following prices (minimum price):

  • The price appraised by an authorised price evaluation organisation (appraisal price). The appraisal price must cover the new value factor created by (a) cultural and historical accounts; and (b) rights to use leased land (either with lump sum rental payment for the entire term or with annual rental payments).
  • The average reference price for 30 consecutive trading days on the stock exchange prior to the date of disclosure of the sale of shares (average reference price).
  • The floor price of relevant shares on the transaction date, which is specified in accordance with the transaction rule of the relevant stock exchange (floor price).

Furthermore, the determination of a minimum price must comply with the principle that the maximum period from the effective date of the appraisal price certificate to the transaction date (which differs among the methods for the sale of shares) shall not exceed six months.

Less incentive for investors

Under the new laws, the minimum price will apply to all sales of shares. However, a sale of shares in certain cases, such as those involving (i) shares restricted from transfer; and, (ii) shares associated with the responsibility to provide a loan guarantee, have certain adverse conditions due to which the sale price may fall below the average reference price and the floor price (which are applicable sale of ordinary shares on the stock exchanges). To require the application of the minimum price to all the sale of shares without taking certain adverse conditions in consideration could make the sale less attractive.

Ha Hoang LocMai Thi Ngoc Anh

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