A bank may need to acquire treasury stocks for a variety of reasons, such as to adjust firm leverage levels or to deliver financial compensation to shareholders. One concern, though, is the situation where the bank wishes to repurchase its shares from the market while its foreign shareholding ratio has already reached the threshold under the law.
In general, the foreign shareholding ratio in a joint stock commercial bank in Vietnam must not exceed 15%, in respect of organisational foreign shareholders, or five percent, in respect of individual foreign shareholders, of its charter capital. If the foreign organisational shareholder is a strategic shareholder, it may hold up to 20%. The shareholding ratio of a foreign investor and its affiliates must not exceed 20%, and the total foreign shareholding ratio must not exceed 30%, of its charter capital. Any ratio in excess of these must be approved by the prime minister.
To ascertain the shareholding ratio, the determination of the charter capital is essential. Under the law, the charter capital of a joint stock company is the total aggregate par value of shares of all classes which have been sold (those offered for sale and paid in full). When a bank repurchases its issued shares, such shares are considered as treasury shares, and are deemed as unsold shares (those offered for sale but not paid for). The issue is whether the charter capital will be re-calculated after acquisition of treasury shares by the bank.
If the purpose of the repurchase is not to reduce the charter capital, the treasury shares will be kept for a period of time and the charter capital recorded on the enterprise registration certificate is maintained. As treasury shares are unissued shares, the voting rights will be re-calculated based on the total outstanding shares which do not include the treasury shares. As a result, the foreign shareholder will have more voting rights after the acquisition of treasury shares. There is a view that if the charter capital of the bank in the financial statement is the same after the acquisition of treasury shares, the shareholding ratio of shareholders, including the foreign shareholding ratio, should not be impacted by this acquisition. However, this understanding is not entirely in line with the definition of charter capital. In this situation, the bank may need to obtain clarification from the relevant state authorities to avoid any violation of the threshold by the foreign shareholder(s) and the bank itself.
|Vu Le Bang||Nguyen Van Trang|
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