Conditions for share repurchase by a public company in Vietnam

Conditions for share repurchase by a public company in Vietnam (Internet image)

1. What is a public company?

According to Clause 1, Article 32 of the Law on Securities 2019, a joint-stock company will become a public company in one of the following cases:

- The company has a contributed charter capital of at least 30 billion VND and at least 10% of the voting shares are being held by at least 100 non-major shareholders;

- The company has successfully made its IPO by registration with SSC as prescribed in Clause 1 Article 16 of the Law on Securities 2019.

2. Conditions for share repurchase by a public company in Vietnam

According to Clause 1, Article 36 of the Law on Securities 2019, in order to repurchase its own shares, a public company shall satisfy the following requirements:

- There is a decision of the General Meeting of Shareholders to approve the share repurchase to reduce its charter capital and a repurchase plan which specifies the repurchase quantity, time and price;

- The company has sufficient funds to repurchase its shares from the following sources: share premium, development investment funds, undistributed post-tax profits, other equity funds used for charter capital increase as prescribed by law;

- A securities company is assigned to carry out the transaction, unless the repurchasing company is a member of VSE;

- All conditions are satisfied if the public company has conditional business lines;

- A public company must not repurchase its own shares in the following cases:

+ The company has overdue debts according to the latest audited annual financial statement. In case the expected repurchase date is later than 06 months from the end of the fiscal year, overdue debts will be identified according to the latest audited or examined biannual financial statement, except for the case in Point c Clause 2 of this Article;

+ Shares are being offered or issued to raise additional capital, except for the cases specified in Point c Clause 2 of this Article;

+ The company’s shares are being offered in a tender offer, except for the cases specified in Clause 2 of this Article;

+ There was a share repurchase or an additional share issuance to increase capital over the last 06 months, except for the cases in Clause 2 of this Article.

3. Rights and obligations of public companies in Vietnam

The rights and obligations of a public company under Article 34 of the Law on Securities 2019 are as follows:

- After SSC confirms the public company registration, the public company shall have the following rights and obligations:

+ Disclose information in accordance with the Law on Securities 2019;

+ Comply with regulations on company administration in the Law on Securities 2019;

+ Apply for share registration at VSDCC  as prescribed in Clause 1 Article 61 of the Law on Securities 2019;

+ The public company mentioned in Point a Clause 1 Article 32 of this Law shall apply for trading shares on the trading system for unlisted securities within 30 days from the day on which SSC confirms the public company registration.

After 02 years from the first day of trading on the trading system for unlisted securities, the public company may apply for listing if whenever all listing requirements are satisfied;

+ The public company mentioned in Point b Clause 1 Article 32 of the Law on Securities 2019 shall have its shares listed or registered within 30 days from the ending date of the public offering.

- Apart from the rights and obligations specified in Clause 1 of Article 34 of the Law on Securities 2019, a public company also has the rights and obligations specified in the Law on Enterprises and relevant laws.

Quoc Dat

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