On July 20 2012, the Government of Vietnam promulgated Decree 58/2012/ND-CP, implementing a number of provisions on the Law on Securities. Decree 58 took effect on September 15 2012, replacing a number of legal instruments, including Decree 14/2007/ND-CP, Decree 84/2010/ND-CP and Decree 01/2010/ND-CP.
Decree 58 has introduced significant changes to the regulation of securities in Vietnam, with some provisions affecting public companies in particular.
Decree 01 provided for deemed registration of a private placement application if no response was received from the relevant authority within 30 days of filing a valid application dossier. Such deeming mechanism no longer appears in Decree 58, with private placements now due to be registered within 15 days of filing.
Decree 58 has also dispensed with the requirement under Decree 01 for subscription monies to be deposited into an escrow account until completion of the private placement.
The Decree now confirms that Vietnamese employees may hold bonus securities issued by an offshore entity, provided that the employee complies with Vietnamese foreign exchange control regulations and the bonus securities are not traded in the Vietnamese securities market. It also provides specific conditions for a company to issue new shares in consideration for the acquisition of an interest in another company, subject to the issuer's receipt of shareholder approval, compliance with any applicable foreign ownership limits and mandatory tender offer (or takeover) requirements and appropriate documentation where the vendors are identifiable.
Under Circular 194/2009/TT-BTC, shareholders who had accepted a mandatory tender offer could withdraw their acceptance at any time during the offer period. In contrast, Decree 58 stipulates that accepting shareholders can only withdraw their acceptance if the offer conditions change or a competitive offer is made.
Under Circular 194, the offer price for a listed company could not be lower than the average reference price published by the applicable stock exchange for the 60 consecutive trading days before registration of the offer. Decree 58 now adds a pricing cap, requiring that the offer price not be lower than the highest price paid by the offeror during the preceding 60 trading days.
The new Decree also enables Vietnamese companies to issue new shares under an offshore depository receipts programme subject to the issuer's satisfaction of Vietnamese public offer regulations and applicable foreign depository receipt programme rules, compliance with any applicable foreign ownership limits and the receipt of approval of the issuance and proceeds usage plans by shareholders or directors.
Listing, delisting and deregistration
Decree 58 introduces much tougher listing conditions as shown in the table.
In addition to the cases listed in Decree 14, Decree 58 provides that securities will be delisted if: the listed company is late in lodging its annual financial statements for three consecutive years; the State Securities Commission (SSC) or applicable stock exchange discovers that the listed company provided false or misleading information in its listing application; and the listed company breached its disclosure obligations or other circumstances arose, which the applicable stock exchange or the SSC consider sufficiently serious to warrant delisting.
Decree 58 now requires voluntary delistings to be subject to approval by at least 50% of voting shareholders who are not majority shareholders, with the delisting to take effect at least two years after the date of listing.
Pursuant to Decree 58, a public company must now notify the SSC within 15 days of the date it first fails to satisfy the applicable conditions of a public company. Except in cases of consolidation, merger, bankruptcy, dissolution, a change in the form of the enterprise or acquisition by another entity, the SSC will consider deregistration one year after the date that the company first failed to satisfy such conditions. It is important to note that the company must continue to fully comply with public company regulations until the SSC announces that the company has been deregistered.