|Nguyen Hoang Ly|
Public offering or private placement
The public offering of securities by an offshore issuer in Vietnam is regulated by government decree 58/2012/ND-CP dated July 20 2012. There is no Vietnamese law regulating the offering of securities by an offshore issuer in Vietnam by way of private placement.
Opening of a Vietnamese Dong (VND) securities account
Under decree 70/2014/ND-CP, if an offshore issuer wishes to offer securities in Vietnam, it needs to open a VND securities issuing capital account. No further guidance on how to open and maintain this account was provided until the issuance of circular 40/2015/TT-NHNN (which took effect from March 1 2016).
Fund proceeds from the offering
Decree 58 provides that the proceeds from the offering must be invested in the offshore issuer's investment project in Vietnam. However, investing the proceeds in the offshore issuer's project is an issue in Vietnam. Under state bank of Vietnam circular 12/2014/TT-NHNN, an offshore issuer may not be allowed to use the VND offering proceeds to make available a loan to a subsidiary that is implementing its investment project in Vietnam unless approved by the state bank's governor. However, the offering proceeds can be used by the offshore issuer as owner's equity to contribute to the charter capital of its subsidiary in Vietnam. Capital contribution would be subject to time-consuming licensing procedures, as the subsidiary needs to amend its enterprise registration certificate and investment registration certificate to increase the charter capital.
Purchase by Vietnamese entities may be characterised as offshore investment
It is also unclear under Vietnamese law as to whether the purchase of securities offered by the offshore issuer in Vietnam by Vietnamese organisations or individuals would be characterised as offshore investment. In the event it was treated as an offshore investment and the offering took the form of an offering of bonds or shares (except for shares issued under an employee stock ownership plan), this would preclude Vietnamese individuals from investing in the securities. Under decree 135/2015/ND-CP on indirect offshore investment, institutional investors in Vietnam would be able to purchase the bonds via a Vietnamese fund manager by way of investment entrustment, on the condition that the offshore issuer had been rated by an international credit rating organisation such as Standard & Poor's, Moody's Investors Service or Fitch Ratings.
If the offering took the form of an offering of shares and shares were purchased by Vietnamese organisations or individuals by way of the purchasers taking part in the direct management of the issuer, then the purchase would be considered offshore direct investment under decree 83/2015/ND-CP. In such circumstances, the potential investors would need to obtain an offshore investment registration certificate in connection with their offshore direct investment activities from the Vietnam authorities.
Since many legal restrictions and requirements apply to an offering of securities by an offshore issuer in Vietnam (from the perspective of both the issuer and the purchaser of the securities), in addition to commercial and economic matters, it appears that no securities issues by offshore issuers have occurred in Vietnam. It is hoped that existing regulations will be amended or new regulations issued in the near future, based on which an offshore organisation could actually issue securities in Vietnam as a method of mobilising funds for use in its investment projects in Vietnam.
Nguyen Hoang Ly
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