Vietnam

Screenshot 2020-11-18 at 4.43.53 PMBy Trinh Hoang Lien and Nguyen Lien Lien, bizconsult Law Firm

 

Since the first promulgation of the law on securities in 2006, Vietnam’s securities market has experienced dramatical growth (roughly twentyfold in market capitalisation). After three rounds of amendments to and supplementation of the law, on November 26, 2019, the National Assembly approved the new law on securities No. 54/2019/QH14 coming into effect on January 1, 2021 (“Law 2019”). Significant changes brought in by the new law promise to create a relevant legal framework and strong impetus to enhance market development. This article reviews some prominent issues.

Securities offering

Currently, conditions on public offerings are specifically provided for stocks, bonds and fund certificates regardless the nature, size and influence of the offering. The Law 2019 improves such provisions by distinguishing conditions applicable for initial public offerings and secondary public offerings of stocks, conditions for offering of non-convertible bonds and convertible bonds and conditions for offerings of fund certificates. Furthermore, new regulations seem to limit public offerings to well-performing, large companies and pay more attention to minority investors’ protection. Of particular note: for eligible IPO issuers, the threshold for paid-up charter increases from 10 billion VND to 30 billion VND; profitable performance history extends from one years to two years; issuers subject to criminal prosecution or having been convicted of any one of the crimes of violation of economic management order are prohibited; and it is required that at least 15 percent of the voting shares to be subscribed to more than 100 minority shareholders.

For private placements, the new law differentiates conditions applicable for the private placement of bonds and those applicable for other securities (stocks, convertible bonds and bonds with warrants). Only professional investors or strategic investors are allowed to apply in private placement. Professional investors are defined more broadly to comprise corporates with paid-in capital of more than 100 billion VND, listed companies, companies registered in the securities trading system, securities practicing certified individuals, individuals possessing a portfolio of at least 2 billion VND or having paid personal income tax in the most recent year of at least 1 billion VND besides other traditional financial institutions. The new law also regulates a private placement lock-up period to be three years for strategical investors and one year for professional investors.

Public companies

Law 2019 alters the criteria for public company classification. Paid-in charter capital of public companies increases to 30 billion VND (the current criteria is 10 billion VND) and at least 10 percent of voting shares are to be held by at least 100 minority shareholders. Companies successfully completing an IPO by registration with the State Securities Committee (“SSC”) are also classified as a public company.

Public companies shall comply with various remarkable regulations. After a successful public offering, they are obliged to register for trading on the unlisted securities trading system for unlisted securities. Share repurchase by a public company shall satisfy a number of conditions including having sufficient funds from specific sources and assigning a securities company to undertake the transaction. Numerous aspects relating to the administration of public companies are also addressed in the new law, namely shareholders’ rights and obligations, shareholder congress convention, the board of management’s structure and its rights and obligations, the nomination of members of board of management, principles for the prevention of conflict of interest, and information transparency.

Securities trading market

Under the new law, the securities market is organised and operated solely by the Vietnam Stock Exchange (“VSE”), a corporate 50 percent and more hold by the State and its subsidiaries. Another important new player in the market is Vietnam Securities Depository and Clearing Corporation (“VSD”), replacing the Securities Depository Center, which will be in charge of registration, depository, clearing and supporting services for securities transactions. Like VSE, VSD is also owned by the State for more than 50 percent of their voting shares and under the supervision of the SSC.

Other significant changes

Depository receipts: this term is defined as securities issued on the basis of securities of an organisation legally established in Vietnam. There is also a term of non-voting depository receipts under the new law on enterprise 2020. This new derivative product is designed with the aim to open up foreign room without loosening restrictions on foreign control over local companies.

Clearing bank: there currently exist three clearing banks in the market, SBV for treasury bonds, BIDV for common securities and Vietinbank for derivatives. The new law sets conditions for new players wishing to enter this niche market. Most notable conditions include having charter capital of more than 10 trillion VND, two years of profitable operation, capital adequacy ratios satisfaction and other requirements on technical infrastructure.

Harmonisation with the law on enterprise: Securities companies and fund management companies after obtaining an operation license from the SSC shall apply for an enterprise registration certificate in accordance with the law on enterprise.

Foreign room applicable for securities companies, fund management companies is opened to 100 percent for foreign institutions operating in banking, securities, insurance industries and originated from countries signing bilateral agreement with SSC. For other foreign organisations and individuals, the room is set to 49 percent.

 

 

Screen Shot 2019-03-12 at 5.41.37 PM

W: www.bizconsult.vn

Hanoi:
T: (84) 0 24 3933 2129
F: (84) 0 24 3933 2130
E: info-hn@bizconsult.vn

Ho Chi Minh:
T: (84) 0 28 3910 6559
F: (84) 0 28 3910 6560
E: info-hcm@bizconsult.vn

 

Trinh Hoang Lien
E: lienth@bizconsult.vn

Nguyen Lien Lien
E: liennl@bizconsult.vn

 

 

Related Articles by Firm
Vietnam: Remarkable changes in the new Law on Enterprises
On June 17, 2020, the National Assembly officially passed a new Law on Enterprises to replace the current Law on Enterprises ...
Tightening regulations on corporate bonds issuance in Vietnam
Decree 81 is said to be an attempt to tighten and control corporate bonds issuance in Vietnam in the wake of a worrisome proliferation ...
The Law on Investment 2020
The current economic situation in Vietnam has revealed various disadvantages and loopholes in the legal framework, especially under the backbone law on investment.
Vietnam: Release of long-awaited guidance on Competition Law
The long-waited guidance on the Competition Law — the Decree 35/2020/ND-CP (Decree 35) — was issued on March 24, 2020 with effect from May 15, 2020, and casts light on certain prominent provisions of the Competition Law, such as economic concentration ...
Vietnam: Liability exemption due to the Covid-19?
On April 1, 2020, the Vietnamese prime minister issued Decision No. 447/QD-TTg to officially declare Covid-19 a nationwide epidemic. The Covid-19 pandemic, along with the application of certain preventive measures of the Vietnamese competent authorities have greatly affected most Vietnamese-based enterprises ...
Changes to investor selection for land-using projects under Vietnam’s Law on Bid
Significant amendments to the scope and process of for selection of investors of PPP projects and land-using projects.
Vietnam: New regulations on automobile transport business
After a long time in the drafting stage, the Government issued Decree No. 10/2020/ND-CP (Decree 10) on January 17, 2020, regulating automobile transport business and conditions for conducting automobile transport business ...
Vietnam: Sweeping reform to securities market
The New Law is said to be a radical improvement to securities market regulations in Vietnam and is expected to overcome those shortcomings observed for the past 10 years ...
Vietnam: New Labour Code taking effect on January 1, 2021
The participation in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the EU-Vietnam Free Trade Agreement (EVFTA) poses numerous requirements on the reform of laws, including labour laws ...
Legal issues on peer-to-peer lending business in Vietnam
Peer-to-peer (P2P) lending has been growing rapidly in Vietnam, along with the development of financial technology ...
Use of public property as payment in Vietnamese build-transfer projects
Under this new and favourable regulation, projects will attract more investor interest from across the region.
Vietnam: New guidance on forex management to FDI enterprises
Some significant improvements regarding capital transactions and M&A pertaining to foreign-invested enterprises in Vietnam ...
Vietnam: Tightened policy on import of used machineries, equipment and technological lines
From 2015, the import of used machineries and technological lines is subject to the Circular 23/2015/TT-BKHCN, which contains some inadequate points causing difficulties in import of used machineries, technological lines, especially those of more than 10 years old in fact ...
New law on competition takes effect
Vietnam’s National Assembly passed the new Law on Competition (New Competition Law) on June 12, 2018 and it will be taking effect on July 1, 2019, 14 years after the implementation of the Law on Competition 2004 ...
Encouraging foreign direct investment in Vietnam's education sector
One of the noteworthy points under Decree 86 is educational association, which is defined as twinning between Vietnamese private kindergartens ...
New electricity pricing and new sample of PPA of rooftop solar power projects
The number of solar power projects (SPP) in Vietnam has grown quickly in recent years, especially after the Prime Minister promulgated Decision ...
Reform of regulations on private issuance of corporate bonds in Vietnam
One of the most notable points under Decree 163 is that the requisite conditions for issuing corporate bonds have been significantly liberalised ...
Reform of regulations on private issuance of corporate bonds in Vietnam
The conditions for issuing corporate bonds have been significantly liberalised ...
Related Articles
Data collection and early case assessment for investigations
Data collection and analysis for investigations is very different to collection for discovery or review. This article discusses the differences; how Early Case Assessment (ECA) can assist and the benefits of using review technology ...
The rooster is on the run
The pursuit of happiness has been an inalienable right, at least in the United States, since July 4, 1776 when it originated as an “unalienable” right in the Declaration of Independence ...
The sanctity of our home offices
Often quoted in cases involving searches and seizures is the principle that “a man’s home is his castle” ...
Related Articles by Jurisdiction
Legal issues on peer-to-peer lending business in Vietnam
Peer-to-peer (P2P) lending has been growing rapidly in Vietnam, along with the development of financial technology ...
New list of state-owned enterprises to be equitised by the end of 2020
The new list includes several major SOEs, such as Agribank, Vinacomin and VNPT.
Latest Articles
Data Privacy in Malaysia
DFDL’s William Greenlee sets out the data protection regulatory framework in Malaysia and its recent developments ...
Cross-border transfer of personal financial information in China
Jingtian & Gongcheng partners Yuan Lizhi, Hu Ke and associate Wang Beining take us through the details of the regulatory framework ...
Amendments to three data privacy laws in Korea and the implications
By Kwang-Wook Lee, Helen H. Hwang, Chulgun Lim and Keun Woo Lee of Yoon & Yang ...