Can a public company in Vietnam repurchase shares issued by its own company while having overdue debts?
Can a public company in Vietnam repurchase shares issued by its own company while having overdue debts?
Pursuant to Clause 3, Article 36 of the 2019 Law on Securities in Vietnam stipulating the cases in which a public company must not repurchase its own shares as follows:
Share repurchase by a public company
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3. A public company must not repurchase its own shares in the following cases:
a) The company has overdue debts according to the latest audited annual financial statement. In case the expected repurchase date is later than 06 months from the end of the fiscal year, overdue debts will be identified according to the latest audited or examined biannual financial statement, except for the case in Point c Clause 2 of this Article;
b) Shares are being offered or issued to raise additional capital, except for the cases specified in Point c Clause 2 of this Article;
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Thus, if a public company has overdue debts according to the latest audited annual financial statement, it is not allowed to repurchase its own shares.
In case the expected repurchase date is later than 06 months from the end of the fiscal year, overdue debts will be identified according to the latest audited or examined biannual financial statement, except the share repurchase is meant to fix a transaction error or is an odd lot buyback.
Can a public company in Vietnam repurchase shares issued by its own company while having overdue debts?
What is the maximum volume a public company can repurchase its own shares?
Pursuant to Clause 1, Article 8 of Circular No. 120/2020/TT-BTC stipulating the volume of shares to be purchased for public companies as follows:
Share repurchase by a public company
1. A public company that repurchases its own shares on the securities trading system must comply with the following regulations:
a) It must repurchase its own shares as prescribed in Clause 4 Article 37 of the Law on Securities.
b) Principle of determining price for repurchasing shares of the public company adopting the order matching methods or put-through method is as follows:
- Repurchase price ≤ Reference price + (Reference price x 50% of price fluctuation limit of shares).
- Volume of shares to be purchased: Within each trading date, the total volume of shares to be purchased is at least 3% but does not exceed 10% of the trading volume registered with the State Securities Commission of Vietnam (the volume of shares to be purchased excludes the volume of cancelled orders and this regulation is exempt if the remaining volume of shares to be purchased is less than 3%).
This regulation shall apply until the public company completes its share repurchase with the volume registered with the State Securities Commission of Vietnam.
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From the above regulations, within each trading date, the total volume of shares to be purchased is at least 3% but does not exceed 10% of the trading volume registered with the State Securities Commission of Vietnam.
The volume of shares to be purchased excludes the volume of cancelled orders and this regulation is exempt if the remaining volume of shares to be purchased is less than 3%.
What are the contents of a report on the share repurchase of a public company in Vietnam?
Pursuant to Article 37 of the 2019 Law on Securities in Vietnam stipulating as follows:
Reporting share repurchase, disclosing information and execution of share repurchase
1. A public company mentioned in Clause 1 Article 36 of this law, before repurchasing its own shares, shall send the following documents to the State Securities Commission of Vietnam:
a) A report on the share repurchase;
b) A decision of the General Meeting of Shareholders to approve the share repurchase and the repurchase plan;
c) The document confirming the transaction of the securities company, unless the repurchasing company is a member of Vietnam Stock Exchange;
d) A decision of the Board of Directors to approve the share repurchase plan;
dd) The latest audited financial statement;
e) Documents proving that the company has sufficient funds to repurchase shares;
g) Documents proving fulfillment of all conditions for share repurchase if the repurchasing company has conditional business lines.
2. A report on the share repurchase shall contain:
a) Purposes of the repurchase;
b) Estimated repurchase quantity;
c) Sources of funding for repurchase;
d) Method of transaction;
dd) Expected execution date;
e) Pricing method.
According to the above provisions, a report on the share repurchase of a public company must include the following contents:
- Purposes of the repurchase;
- Estimated repurchase quantity;
- Sources of funding for repurchase;
- Method of transaction;
- Expected execution date;
- Pricing method.
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