Vietnam: What are outstanding shares? What is the relationship between outstanding shares and ESOP shares in a public company?

Main Content

• What are outstanding shares? What are ESOP shares?
• What is the relationship between outstanding shares and ESOP shares in a public company in Vietnam?
• What are the regulations on documents reporting the issuance of ESOP shares by a public company in Vietnam?

What are outstanding shares? What are ESOP shares?

What are outstanding shares?

According to the provisions of Clause 2 Article 3 of Decree 155/2020/ND-CP:

Shares outstanding are issued shares except those repurchased by the issuing company as treasury shares.

According to the provisions of Clauses 1 and 3 Article 3 of Decree 155/2020/ND-CP:

Issued shares are shares that have been fully paid for by investors and information about their holders has been recorded into the shareholder register.

Treasury shares are shares issued and repurchased by the same joint stock company.

What are ESOP shares?

ESOP (Employee Stock Ownership Plan) is an abbreviation for the issuance of shares under the employee stock ownership plan in a company.

ESOP shares can be understood as a type of share issued under the employee stock ownership plan in a company.

What is the relationship between outstanding shares and ESOP shares in a public company in Vietnam?

Under Article 64 of Decree 155/2020/ND-CP on conditions for a public company to issue shares under an employee stock ownership plan:

Conditions for a public company to issue shares under an employee stock ownership plan (ESOP)

1. The ESOP is approved by the GMS.

2. The total ESOP shares of every 12 months do not exceed 5% of the outstanding shares of the company.

3. There are criteria and list of employees eligible for ESOP, rules for determination of quantity of ESOP shares and execution time that are approved by the GMS (or the Board of Directors if authorized by the GMS).

4. When issuing ESOP shares, the equity must be sufficient for increasing share capital. To be specific:

...

5. When issuing ESOP shares, the total value of the sources mentioned in Clause 4 of this Article must not fall below the total increase in share capital under the plan approved by the GMS.

6. The issuer must open an escrow account to receive payment of the employees for the shares, except issuance of bonus shares to employees.

7. The issuance satisfies regulations on foreign ownership ratio in case ESOP shares are issued employees who are foreign investors.

8. The ESOP shares will be restricted from transfer for at least 01 year from the ending date of the offering.

9. The conditions specified in Clause 4 Article 60 of this Decree are satisfied.

Thus, one of the conditions for a public company to issue shares under the employee stock ownership plan is:

The total number of ESOP shares issued under the plan in every 12 months must not exceed 5% of the company's outstanding shares.

In other words, the total number of ESOP shares issued under the plan in every 12 months must not exceed 5% of the outstanding shares of a public company.

What are the regulations on documents reporting the issuance of ESOP shares by a public company in Vietnam?

Documents reporting the issuance of ESOP shares by a public company in Vietnam are specified in Article 65 of Decree 155/2020/ND-CP:

(1) Share issuance report according to Template No. 17, Appendix issued with Decree 155/2020/ND-CP.

(2) The decision of the GMS to approve the ESOP which must specify: the quantity of ESOP shares, issue price or rules for determination thereof or the authority of the Board of Directors to determine the issue price. If the ESOP does not specify the issue price, it shall be determined in accordance with the Law on Enterprises. Persons having interests relevant to the issuance must not vote.

(3) The decision of the GMS (or the Board of Directors if authorized by the GMS) to approve the criteria and list of employees eligible for ESOP, rules for determination of the quantity of ESOP shares and execution time. Persons having interests relevant to the issuance must not vote on these issues.

(4) The latest annual financial statement audited by an accredited audit organization in case of issuance of bonus shares to employees.

(5) The decision of the competent authority of the subsidiary company to approve the distribution of profits, the statements confirmed by the banks proving that profits have been transferred from the subsidiary companies to the parent company in case undistributed post-tax profit is used for issuance of bonus shares to employees and the funding source is lower than undistributed post-tax profit on the consolidated financial statement and higher than the undistributed post-tax profit on the separate financial statement of the parent company.

(6) Written confirmation by the bank or FBB of the opening of an escrow account to receive payment for the bonus shares issued to employees.

(7) The decision of the GMS or the Board of Directors (if authorized by the GMS) to approve the plan for assuring conformable foreign ownership ratio in case of issuance of shares to employees who are foreign investors.

(8) The documents specified in Clause 3, 7 Article 61 of Decree 155/2020/ND-CP.

Download the report template on the issuance of ESOP shares by a public company.