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The draft Law on securities with many stricter regulations shall ensure the benefits and minimize risks for investors. Photo: ST

Raising the condition of minimum capital by 30 times

According to Nguyen Quang Viet, Director of Legal Department under the State Securities Committee, regarding the regulation on stock offering, according to the current law, the contributed charter capital of issuers at the offering registration time is VND 10 billion. This capital is too low and not in line with the current market because after 10 years, the business scale has increased by 16 times. Besides, the current law only requires one-year of profitable business. Mr. Viet said that there are enterprises which suffered from big losses from past years or have fluctuated strongly in their operation or lack stability, so this regulation is no longer appropriate.

Therefore, the draft Law on securities (amended) stipulates that for the initial public offering, the drafting committee raises conditions of contributed charter capital of the issuers at the offering registration time to VND 30 billion or more, and requires that the enterprises must have two- consecutive years of profitable business prior to the year of offering and have not suffered from accumulative losses.

Facing changes in offering conditions, the representative of Ha Do Group said that the draft Law on securities with many stricter regulations shall ensure the benefits and minimize the risks for investors with the regulation on minimum charter capital of VND 30 billion instead of VND 10 billion described in the current Law.

In addition, the draft clarifies the responsibility of enterprises which offer stock to the public in the stock listing right after offering according to clause 6 of Article 12, “except for offering of open-ended funds, the issuers register the stock offering to the public in compliance with this regulation must list the stock at Stock Exchange after finishing the offering period”. According to the Vietnam Association of Securities Business (VASB), this regulation aims to attach the offering with the listing, which is a truly appropriate policy to bring the market closer to international practices. However, the regulation in the current Law has not thoroughly dealt with this problem and may cause risks in difficult real application.

Although, the conditions of the stock offering to the public have been improved on charter capital, Free-Float and conditions of business efficiency, now these regulations are not consistent with stock listing conditions. However, enterprises which meet the offering condition but fail to meet the listing condition, are not allowed to made the listing (for example: ROE min 5%’, Mr. Nguyen Thanh Ky, Secretary General of VASB gave the example).

Enterprises find it difficult in accessing capital

Many experts shared that the raising of stock offering to the public, especially the conditions on business efficiency, on the one hand have positive effects of improving the quality of offered goods, and on the other hand causes difficulties for the requirement of publicity and transparency to maximize the efficiency of enterprises. There are non-profitable enterprises, but they still attract investors due to their potential advantages. For these enterprises, the public offering will raise the competitiveness for them to achieve the best efficiency in the offering.

Regarding this content, PhD. Vu Bang, former Chairman of the State Securities Commission, member of the Prime Minister’s Economic Advisory Group said that the condition on minimum charter capital of VND 30 billion for bond offering will cause difficulties for capital mobilization of small and medium enterprises. At present, the policy of the Government is to create conditions for enterprises to access capital. However, because they are not eligible, it requires reform steps and transparency to facilitate enterprises.

"In the market, there are cases where enterprises mobilize capital but use it for the wrong purposes, but this only accounts for a small proportion." If the regulation tightens this issue, it may limit the capital accessibility of enterprises,” Mr. Vu warned.

Regarding the private offering of publicly traded companies, according to the Draft, one of the conditions for private placement of stock, convertible bond is "the transfer of stock, convertible bonds for private offering is limited to at least 3 years for strategic investors and at least 1 year for professional securities investors". In addition, the Draft also stipulates that professional securities investors are defined as one of three cases, in which there is the case that "the company has a charter capital of more than VND 1,000 billion and listing period at Stock Exchange for at least 2 years."

According to VASB, the definition of strategic investor is currently only described in the "corridor" of the equitization of state-owned enterprises. Accordingly, Decree 126/2017 / ND-CP stipulates that strategic investors, in addition to the conditions of efficiency, must commit themselves to embrace and maintain business lines and brands for enterprises.

VASB said that in order to have a regulation on condition on time for transfer restrictions of strategic investors participating in buying privately offered stocks, there should be a definition of these investors. In addition, comparing with the condition of strategic investors in the equitization of state-owned enterprises, the current draft only stipulates the condition of transfer restrictions for strategic investors of public traded companies. Comparing with professional investors, enterprises (which are not financial investors) can completely be strategic investors in private offering and vice versa. According to current regulations, the investors will not be motivated to become strategic investors to be subject to a three-year transfer restriction instead of one year for professional investors.

There should be regulations to closely monitor the securities business VCN- The revised draft Law on Securities has changed the important provisions of the current Law on ...

VASB recommends re-defining this section in the direction of defining strategic investors in the Securities Law to distinguish between professional investors or only stipulate professional investors to avoid the transfer restrictions among private offering companies. It is also possible to amend the definition of professional investors who no longer have business capital of more than VND 1,000 billion.