On January 1 2007 the Law on Financial Instruments came into force. It is the first piece of Vietnamese legislation governing public securities issues (PSI). It covers equity, debt securities and some derivatives.
More recently, decree no 14/2007/ND-CP of January 19 2007 set out the rules for the listing of companies on the Vietnamese Financial Markets. These are the Ho Chi Minh City Stock Exchange (HCMC Exchange) and the Hanoi Securities Trading Center (Hanoi Exchange). According to the Law on Financial Instruments, shares issued can either be those admitted for trading on a regulated market or those to be sold over-the-counter (unlisted shares). The State Securities Commission (SSC) regulates both the companies issuing shares, and the PSI itself.
Rules and regulations
Article 25 of the Law on Financial Instruments stipulates that a company making a PSI must satisfy a number of conditions. It must be a joint stock company. It must have already issued shares to the public, listed shares on one of the Exchanges, or its capital must be owned by at least 100 shareholders excluding institutional investors. It should be in possession of paid up capital of at least VND 10 billion, at the time of registering the PSI.
To issue shares to the public, the company must also comply with a number of rules. It should have made a profit in the financial year preceding the year of registration of the PSI, and must not have accumulated losses in the year before that. It should submit a share issue scheme and a plan of how the capital that the PSI will raise, is to be used; shareholders will need to approve this plan in a general meeting. If foreigners own the capital, the company must seek the assistance of an investment service provider to advise it on the structuring of its application. The form of a PSI can be directed to an indefinite number of investors, to the public via the mass media, or to at least 100 identified investors, excluding institutional investors.
A company's shares may be listed on one of the Exchanges if it complies with the requirements of the Law on Financial Instruments and Decree 14. These are as follows: it must, at the time its shares are admitted to trading, have a paid up capital of at least VND 10 billion for listing on the Hanoi Exchange, or VND 80 billion for listing on the HCMC Exchange. It must have made a profit in the financial year (Hanoi Exchange) or the two financial years (HCMC Exchange) before the year of registration. It must not have any debts outstanding for more than a year, and it must have honoured all its financial obligations to the State (Hanoi Exchange). Companies listing on the HCMC Exchange cannot have accumulated losses up to the admission to trading. At the Hanoi Exchange, the company must have at least 100 shareholders owning voting shares. At the HCMC Exchange, at least 20% of the voting shares of the company must be owned by at least 100 shareholders. For both Exchanges, shareholders that are members of the board of managing (board of directors) or supervisory board, as well as the general director, deputy general director and chief accountant of the company must promise to retain all of their shares in the company for at least six months from the date of floatation, and 50% of these shares for six months thereafter. The company must not have any outstanding debts at the HCMC Exchange, without having the reserves required by law; any debts owed by the company to a director or a major shareholder must be made public.
If these conditions are satisfied, the company can apply for its shares to be admitted to trading on one of the two Exchanges. The application must include the share-listing registration application, the shareholders' resolution approving the listing of the company and the company's up-to-date shareholders' register. It must also contain the public share issue prospectus, an undertaking of the Directors of the company to retain their shares in the company as stated above, the consultation agreement that the company has signed with regard to the flotation, and a certificate issued by the custodian bank confirming the registration by the company of the deposit of its shares.
The government will issue the decision within 30 days from the date when the full and valid application is filed.