“Listing” is an splendid but painful milestone for the enterprises to achieve, when the legal framework is increasingly tight and strict. Law on Securities 2019 which has taken effect as of January 2021 amends a series of requirements for the public offering of shares and corporate bonds. For overcoming news challenges that need to be conquered, the enterprises wishing to carry out “listing” shall firmly aware of such changes.

Initial public offering of shares and bonds

Whether initial public offering of shares or bonds, the laws request new requirements:

• Charter capital must be at least 30 billion (instead of 10 billion as before), without accumulated losses. This requirement aims at ensuring that the issuing enterprise has large scale and more abundant resources.
• There is securities company advising the offering application for the issuing company. This requirement wishes to remedy the situation that many enterprises have offered by themselves although lack of understandings and experiences. Such situation might cause risks to the investors and affect the market.
• The issuing company shall open bank account to receive money to buy shares and corporate bonds which then is frozen. This requirement will keep the investment resources intact and be appropriately used during and after the offering.
• There are no legal investigations, prosecution acts, trial proceedings or sentences without expungement of criminal record trespassing the economic management order in Criminal Code 2015.
• This requirement eliminates the enterprises having “black backgrounds” and hence avoids risks for the investors.
• The issuing company shall promise and carry out listing on the stock exchanges upon the offering completion, for the purpose of transparence.

Regarding shares offering, Law on Securities 2019 supplements new specific requirements:

• The shares shall be put into stock transactions after the offering completion (instead of within one year as before).
• The issuing company shall be profitable within the preceding two years (instead of one year), which proves the stable growth and good financial capacity.
• The issuing company shall commit to sell at least 15% of offering shares with voting rights (or 10% ratio if the issuing company has chartered capital at least of VND1,000 billion or more) to at least 100 investors not major shareholders. This requirement is ensuring the liquidity of shares, in accordance with international practices.
• The major shareholders must commit to hold at least 20% of charter capital within 01 year after the offering completion, in order to limit them from selling too early which may adversely affect the enterprise and small shareholders’ interest.

Regarding corporate bonds, in addition to the ancient requirements which is almost maintained, the new specific requirements are requests of overdue debts and credit rating results proving better financial reputation. In particular:

• The issuing company shall not have overdue debts for more than one year
• The issuing company shall be assessed and rated by credit rating agency which is licensed by the Ministry of Finance, if (i) the total value of mobilized bonds (as par value) in each 12 months is greater than VND500 billion (approximately US$21-21.5 million) and 50% of equity or (ii) total outstanding bond balance (as par value) is greater than equity, according to the most recent financial statements (however, this requirement is applicable only from January 1st, 2023).

How to carry out follow-on offering of shares?

The ancient regulations do not distinguish the requirements for the initial offering and follow-on offering. Therefore, Law on Securities 2019 specifies and supplements such requirements. Accordingly, the requirements of (1) charter capital, (2) issuance and use plan, (3) “clean criminal record”, (4) advising on offering application, (5) commitment and listing/registering for transaction on the exchanges, and (6) opening frozen account shall be applied for follow-on offering as the alikes of the initial offering.

However, the “specialties” of the follow-on offering are:

• The issuing company shall be profitable in the previous year and has no accumulated losses.
• The value of follow-on offering shall be not greater than the total value of the outstanding shares, save for some exceptions (capital increase from equity, reorganization of enterprise, etc.). This requirement aims at preventing the enterprise from too quick capital increase while corporate governance does not keep up.
• For follow-on offering to implement project, the offering is successful only if at minimum 70% of the shares are sold, and the enterprise must consider the plan to compensate the deficit.

All requirements demand the enterprises to mobilize associated with using of capital, to responsibly offer, and to protect minority shareholders. Therefore, in this competitive game played by real strength and prestige, the enterprises definitely need to carefully prepare, with the support of legal and financial experts. It is sufficient to break through and find opportunities for successful offering.