Vietnam: What is the time limit for the Steering Committee on Equitization to reach agreement with the underwriter on the number of shares and the underwriting price?
- What is the underwriting method in Vietnam?
- Can equitized enterprises in Vietnam apply the underwriting method upon initial offering of shares?
- What is the time limit for the Steering Committee on Equitization in Vietnam to reach agreement with the underwriter on the number of shares and the underwriting price?
What is the underwriting method in Vietnam?
Pursuant to Article 35 of Decree 126/2017/ND-CP stipulating the underwriting method in Vietnam as follows:
Underwriting
1. Underwriting means a guarantee provided by an underwriter that the number of offered shares approved by a competent authority will be distributed.
The underwriting services provided for foreign investors shall ensure conformity with regulations of law on the rights to purchase or contribute capital of foreign investors in Vietnamese enterprises.
If the shares are not completely sold, the underwriter shall purchase the remaining shares at the agreed price under the underwriting agreement provided that it is over or equal to the starting price.
2. Rights and obligations of the underwriter shall be fulfilled according to regulations of law on securities and stock market and underwriting agreement concluded between the underwriter and a competent representative of the equitized enterprise.
Thus, the underwriting method means a guarantee provided by an underwriter that the number of offered shares approved by a competent authority will be distributed.
Can equitized enterprises in Vietnam apply the underwriting method upon initial offering of shares?
Pursuant to Article 5 of Circular 32/2021/TT-BTC stipulating the initial share sale for equitized enterprises as follows:
Article 5. Initial share sale
1. Based on the equitization plan approved by the competent authority (according to Appendix 1 to this Circular, including the English version), the Steering Committee on Equitization directs the equitized enterprise to implement the plan for initial sale of shares according to the methods approved in the equitization plan as follows:
a) Auctioning approach shall be applied in the following cases:
- Holding the initial public auction of shares, including the number of shares that employees, trade unions in enterprises refuse to buy and all of shares offered for sale according to the approved equitization plan that strategic investors do not subscribe for;
- Shares shall be offered at auction to strategic investors in the event that there are two (02) strategic investors who meet the criteria for selection of investors subscribing for shares and total number of shares for which strategic investors subscribe is greater than the number of shares expected to be sold to strategic investors according to the approved equitization plan.
b) Direct agreement approach shall be applied in the following cases:
- Shares shall be sold to strategic investors in the event that there are only one (01) strategic investor who subscribes for shares; or strategic investors subscribe for the number of shares equal to or smaller than the number of shares expected to be sold to strategic investors according to the approved equitization plan;
- Selling investors the number of shares not yet sold out as prescribed in clause 4, Article 37 in the Decree No. 126/2017/ND-CP, clause 19, Article 1 in the Decree No. 140/2020/ND-CP;
- Selling shares to employees and trade unions
c) The underwriting method shall be applied when conducting the initial sale of shares of equitized enterprises;
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Accordingly, equitized enterprises can apply the underwriting method upon initial offering of shares.
What is the time limit for the Steering Committee on Equitization in Vietnam to reach agreement with the underwriter on the number of shares and the underwriting price?
Pursuant to Article 7 of Circular 32/2021/TT-BTC on agreement with the underwriter as follows:
Approach or method of underwriting of issuance of shares
1. Within twenty (20) days from the date on which the equitization plan is approved by the competent authority, the Steering Committee on Equitization shall reach agreement with the underwriter on the number of shares and the underwriting price to report to the owner's representative agency for approval within a maximum of ten (10) days from the date of receipt of the report of the Steering Committee on Equitization.
2. The legal representative of the equitized enterprise shall sign a contract with the underwriter within a maximum period of five (05) working days from the date of approval by the owner’s representative agency.
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Thus, within twenty (20) days from the date on which the equitization plan is approved by the competent authority, the Steering Committee on Equitization shall reach agreement with the underwriter on the number of shares and the underwriting price to report to the owner's representative agency for approval within a maximum of ten (10) days from the date of receipt of the report of the Steering Committee on Equitization.
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