Vietnam: The underwriting organization must purchase all the shares that fail to be sold out

15:12, 26/09/2018

On April 04, 2018, the Ministry of Finance of Vietnam issued Circular No. 40/2018/TT-BTC, which provides guidelines for initial share offering and management and use of proceeds from the equitization of state-owned enterprises and single-member limited liability companies with 100% charter capital invested by state-owned enterprises.

According to Circular No. 40/2018/TT-BTC of the Ministry of Finance of Vietnam, the issuance underwriting is specified as follows:

- Within 20 days from the day on which the equitization plan is approved by competent authorities, the steering committee shall negotiate with the underwriting organization for the number of shares, price for underwriting and send a report to the representative authority for them to approve or authorize the steering committee to approve within 10 days from the day on which the written notification of the steering committee is received. The underwriting price must not be lower than the reserve price offered in the share auction. For the case in which the share is sold in the form of underwriting after being sold at the public auction, the underwriting price must not be lower than the average successful bid in such public auction.

- The steering committee shall sign a contract with the underwriting organization within 5 working days from the day receiving the approval or authorization from the representative authority.

- The underwriting organization shall distribute and sell the number of shares underwritten as agreed in the underwriting contract. If the shares fail to be sold out, the underwriting organization is required to purchase all remaining shares at the underwriting price agreed in the underwriting contract.

- The underwriting organization may earn an underwriting fee under the agreement with the steering committee but not exceed the maximum fee prescribed in the regulations on underwriting fees issued by the Ministry of Finance. The underwriting fee must be stipulated in the underwriting contract and count towards the equitization expenses.

- The underwriting price is prescribed in the underwriting contract and paid in Vietnam Dong.

Details of the direct negotiation can be found in Circular No. 40/2018/TT-BTC of the Ministry of Finance of Vietnam, which takes effect from June 18, 2018 and replaces Circular No. 115/2016/TT-BTC.

- Thanh Lam -

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