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New points in the revised Securities Law

12:15 | 29/11/2019

VCN - On November 26, the National Assembly adopted the Securities Law (revised). Customs Newspaper has noted some new points in this law.

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The Securities Law (revised) has been officially adopted by the National Assembly.

Expand the definitions

The Securities Law has expanded the definition of securities to include depositary receipts (DR), and non-voting depository receipts (NVDR) stipulated in the Enterprise Law.

Voting for ordinary shares that has been used as the underlying asset to issue non-voting depository receipts shall complies with regulations of company and issuing organisation. Shareholders who are issuers of non-voting depository receipts are allowed to allocate their voting rights to other shareholders in proportion to their shareholding percentage.

The law has expanded the definition of professional investors, including individual investors with total value of securities portfolio of VND 2 billion or more or the latest taxable income of at least VND 1 billion. Professional investors may also be organisations with charter capital of VND 100 billion or more.

The revised Securities Law also added a definition of strategic investors related to private enterprises.

According to the revised Securities Law, a private securities offering is the offering of securities to less than 100 investors, excluding professional securities investors or only for professional securities investors and strategic investors.

The new law also expands the definition of insiders or affiliated persons. The professional social organisation on securities issues a code of professional ethics and prohibit

Specific conditions for an Initial Public Offering

The revised Securities Law distinguishes the conditions and procedures for initial public offering (IPO) and secondary offering. Accordingly, the condition on charter capital for public offering has increased to VND 30 billion (formerly VND 10 billion, mainly due to the increase in conditions of public companies). Majority shareholders must commit to hold more than 20 percent of charter capital of the issuing organisation for at least a year after the end of the offering.

According to this law, the public offering should be conducted through a securities company (consultancy), except when the issuing company is a securities company. Securities must be listed within 30 days after the offering

In addition, the volume of additionally issued shares is not greater than the total number of outstanding shares, except for underwriting. The issuer may offer shares at less than par value (VND 10,000), if shares are traded below par value.

The new law stipulates that the public offering to mobilise capital to execute the project shall be cancelled if the issuance rate is below 70 percent.

Regarding conditions for the individual bond offering, the company must have financial statements of the preceding year of the issuance year, which was audited by the auditing agency. Individual offerings must be at least six months apart.

Only professional securities investors or strategic investors are allowed to participate in an individual offering (both bonds and securities).

Charter capital of public companies increased by VND 20 billion compared to the current law

The amended Securities Law stipulates that public companies must have minimum charter capital of VND 30 billion (currently VND 10 billion), with at least 100 shareholders (excluding major shareholders) holding at least 10 percent of shares.

Firms that become public companies (not subject to the initial public offering) must register for share trading on UPCoM within 30 days from the date the State Securities Commission confirms the completion of public company registration. After two years from the first day of trading on the UPCoM system, the public company can apply for listing registration.

A public company that repurchases its own shares must follow procedures for reducing its charter capital. Public offering is clearly stated at 25 percent, 35 percent, 45 percent, 55 percent, 65 percent and 75 percent of voting shares.

The government will provide guidance on foreign ownership regulations to public companies and improve regulations on the current information disclosure in the decree and the circular into law.

Specific provisions on members of fund management companies and funds

The new law stipulates the number of members of a member fund (from two to 99 investors, instead of 30 investors as the current regulation) and only includes professional investors. At the same time, separating the establishment license of the Securities Commission and the certificate of enterprise registration (within a year from the effective date of the law, the enterprise must be registered).

The law also adds the right to change the charter capital, change the operation duration of the investors' congress of securities investment funds, amend limitations to public fund. There are no longer regulations on prohibiting investment in fund certificates of another investment fund. It is forbidden to invest in securities of an issuing organisation exceeding 10 percent of the total value of outstanding securities, except for government bonds.

The revised Securities Law supplements the case that the fund management company was allowed to borrow to finance the operation of the fund in the case of payment of depository receipts transactions with investors. Along with that, the law removes the allowed deviation limitations (15 percent) compared to investment limitations and removes a cause of deviations (execution of orders of investors).

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However, the law also states that investment limitations for specific types of funds will be stipulated by the Ministry of Finance. Therefore, detailed regulations still have to wait for guiding documents of the Ministry of Finance.

By Thuy Linh/ Huyen Trang