Vietnam: The converted public non-business unit has shares to be auctioned at least 20% of the charter capital

According to Article 31 of the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, based on the results of the announcement of the value of the state capital in the converted public non-business units and the production and business plans of the years after the transformation into a joint stock company, the agency competent to decide on the plan for transformation of the public non-business unit shall decide on the scale and structure of charter capital:

- In case the actual value of the state capital in the unit is greater than the charter capital needed for the operation of the enterprise which is not subject to the State holding controlling shares, the competent authority shall decide to approve the method of investment. The conversion project determines the adjustment of charter capital according to actual needs. The difference between the actual value of the state capital in the unit and the paid charter capital in accordance with the law on collection and use of revenues from the equitization of state-owned enterprises and conversion of non-business units public;

- In case of issuance of additional shares, the charter capital is determined by the actual value of the state capital in the unit and the value of additional shares issued according to the par value of the shares.

Thus, on the basis of the determined charter capital, the conversion decision-making body shall decide on the initial share capital structure, including:

- Shares held by the State according to the criteria for classification of converted public non-business units announced by the Prime Minister from time to time;

- Shares sold to grassroots trade unions in converted public non-business units: Grassroots trade unions may use union funds to buy shares but not exceeding 3% of charter capital. These shares are held by the trade union but cannot be transferred within 03 years from the time the public non-business unit is transformed into a joint stock company; Selling price of preferred shares to trade unions equal to par value ( VND 10.000/share).

- Shares sold to employees in public non-business units;

- Shares sold to strategic investors (if any);

- Shares of public auction, at least equal to 20% of charter capital.

Thus, according to the above regulation, a public non-business unit converted into a joint stock company shall decide on the share capital structure for the first time, including shares auctioned publicly to the public, at least equal to 20% of the charter capital; Shares held by the State according to the classification criteria of converted public non-business units announced by the Prime Minister in each period; Shares sold to grassroots trade unions; Shares sold to employees; and Shares sold to strategic investors (if any).

View more details at the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, effective from February 15, 2021.

Ty Na

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