Draft Decree guides Law on Securities: The regulation on the ratio of total debt to equity should be removed

VNDirect comments on the draft Decree detailing the implementation of the Securities Law. Internet photo.

Reconsider the concept of "corporate restructuring"

According to VNDirect, this draft should consider the appropriate scope of the term "business restructuring".

If the scope is wide, the definition should include activities of "reorganizing enterprises" under the provisions of the Law on Enterprises. If the definition is narrower, the definition should only include "transforming enterprises" according to the provisions of the law. Restructuring enterprises should include enterprise transformation, debt purchase and sale to ensure consistency with the concept of "corporate restructuring" in regulations related to State enterprises.

"Currently, in legal documents (such as Decree No. 126/2017 / ND-CP, Circular 69/2018 / TT-BTC) regulating enterprise restructuring, all mention the concept of structure, which involves transforming the form of business from a responsible company to a joint stock company or buying and selling debt," VNDirect confirmed.

Explaining more about this, VNDirect Securities Company said that this restructuring concept regulates the cases of maintaining listing conditions and types of documents to issue shares to the public.

However, in reality, some firms have very large assets, but small equity and vice versa.

Currently, cases of public offering of securities after restructuring, listing maintenance conditions with companies after consolidation or mergers, including one listed company, but subject is compulsory delisting or unlisted listing, based on the change of 35% of assets after restructuring. It is not appropriate because there are still many cases that enterprises change completely in terms of ownership structure but total assets have not increased much.

Therefore, VNDirect recommends changing the regulations on the size of equity and business indicators after restructuring to consider maintaining listing conditions or issuance cases.

The regulation on the ratio of total debt should be removed

VNDirect Securities Company also commented on the conditions for registration of listing shares and fund certificates at the Stock Exchange (Article 100). Accordingly, VNDirect said that the requirement for a listed company to be an enterprise that has offered shares to the public, equitized or traded on Upcom should be reconsidered to encourage businesses to post listing and mobilizing foreign investment capital through the stock market.

In fact, a number of big enterprises have the need to list or raise capital through stock exchanges associated with listing shares on the Stock Exchange, but rarely register for transactions on Upcom because this market does not really attractforeign investors.

Therefore, it is necessary to consider expanding the condition that a listed company is not necessarily an enterprise that has traded on Upcom or has offered securities to the public.

With regard to the conditions for providing clearing and settlement services for securities transactions (Article 138), VNDirect Securities Company said that the regulation on the ratio of total debt to equity should be removed by the due date. The restriction on the ratio of total debt to equity not exceeding 5 times (under Clause 3 of Article 138) and 3 times (under Clause 1 of Article 189) will limit the operation and development of securities companies.

In fact, the securities company's business activities are under the management of the liquidity ratio (at least 180% as prescribed) to limit the leverage ratio, the additional regulation of the debt ratio leads to the overlap.

Moreover, commercial banks are also only regulated by the CAR ratio; there is no regulation on debt to equity ratios. Under the current zero reduction in transaction fees, securities companies' lending activities are the main source of income and the driving force for the company's development.

In addition, when consulting securities firms in the region, VNDirect found that there is no restriction on the ratio of total debt to equity. This rate of the majority of foreign securities companies with large capitalization is more than 3 times, especially Korean companies have a very high rate, at 6-9 times.