Conditions for public companies to make follow-on offering at lower prices than face value in Vietnam

According to the Decree No. 155/2020/NĐ-CP of the Vietnam Government, share offering below par value can be done through both public offering and private offering.

According to the Decree No. 155/2020/NĐ-CP, in order to make follow-on offering at lower prices than face value, a public company (the issuer) shall satisfy the following requirements:

- The share price at which the issuer trade on the securities trading system is lower than the face value. The share price is the average reference price of 60 consecutive trading days before the list of shareholders is closed for survey or the GMS is held to approve the issuance plan;

- The share premium is adequate according to the latest audited annual financial statement, which is enough to cover the deficit caused by the offering at lower price that value;

- The contributed charter capital is at least 30 billion VND on the offering date according to the accounting books;

- There is a plan for issuance and use of capital generated by the offering ratified by the General Meeting of Shareholders;

- The issuer is not undergoing criminal prosecution and does not have any unspent conviction for economic crimes;

- The offering is consulted by a securities company, unless the issuer is already a securities company;

- The issuer has a commitment to have its shares listed or registered on the securities trading system after the end of the offering;

- The company has profit in the preceding year and has no accumulated loss on the offering date;

- The value of the new shares does not exceed the total value of shares outstanding at their face value, unless there is a commitment to buy all of the shares of the issuer for reselling or to buy all of the unsold shares of the issuer, shares issued to raise more capital from equity, shares issued for swapping, consolidation or acquisition of enterprises;

- If the public offering is meant to raise capital to execute a project of the issuer, at least 70% of the offered shares must be sold to the investors. The issuer shall have a plan to make up for the shortage in case the capital generated by the offering is inadequate.

Thus, in addition to the conditions for ordinary stock offering, the Decree No. 155/2020/NĐ-CP of the Vietnam Government also adds conditions on price and share premium to ensure that the enterprise has enough capital surplus to compensate offset the negative surplus due to the issuance of shares below par value in order to ensure the interests of existing shareholders to avoid taking advantage of the issuance of shares below par value to declare undervalued charter capital and not contribute the full amount of charter capital as registered.

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