Vietnam Investment Guide

Capital Markets
 2 Vietnam Investment Guide Capital Markets

The capital market (a) the issuer must have, at the time of registration of the
offer, minimum paid-up charter capital of VND 10 billion;
1. The securities trading market (b) business operations in the year immediately preceding the
In Vietnam, there are two centralised securities markets, the Ho year of registration of the offer must have been profitable,
Chi Minh City Stock Exchange (“HOSE”) and the Hanoi Stock the issuer must have no accrued losses up to the year of
Exchange (“HNX”). registration of the offer, and there must be no outstanding
debt that is payable and overdue for more than one year;
The listing requirements applicable to companies wishing to (c) there must be an issuance plan and a plan for utilisation
list on HOSE and HNX are different. For instance, a company of and repayment of the proceeds earned from the offer,
wishing to list on the HOSE must have conducted a profitable approved by the board of management or the members’
business operation for the two consecutive years immediately council or the company owner (if the issuer is a sole
preceding the year of registration. However, a company member limited liability company); and
wishing to list on the HNX need only have profitable business (d) there must be an undertaking from the issuing organization
operations for the year immediately preceding the year of to discharge its obligations to investors with respect to the
registration. conditions of the issue, the conditions for payment, ensuring
the lawful rights and interests of investors and certain other
Vietnamese law recognises the following major types of conditions relating to the issue.
securities: shares, bonds and fund certificates (which are issued
by securities investment funds). 1 Public offer of fund certificates
Under Vietnamese law, securities investment funds comprise of
2. Offers of securities public funds and members’ funds.
A public fund is a fund which makes a public offer of certificates
2.1 Public offers 2 in the fund which includes:
(i) Open-ended funds: a public fund whose fund certificates
Par value and denomination offered to the public must be redeemed at the request of
Securities offered to the public in Vietnam must be investors. 3
denominated in VND. The par value of shares and investment (ii) Closed-ended funds: a public fund whose fund
fund certificates in an initial public offer is set at ten thousand certificates are offered to the public but investors do
(10,000) VND. The par value of bonds in a public offer is set not have the right to request redemption of the fund
at one hundred thousand (100,000) VND and integral multiples certificate. 4
thereof. A members’ fund is a fund with no more than thirty (30) capital
contributing members, all of which must be legal entities. 5
Public offers of shares
In order to launch a public offer of shares in Vietnam: Conditions for public offering of fund certificates:
(a) the issuer must have minimum paid-up charter capital of Public funds: The conditions for a public offer of fund
VND 10 billion in order to register the offer with the State certificates (public closed-ended and open-ended funds) in
Securities Commission (“SSC”); Vietnam are, amongst others:
(b) business operations in the year immediately preceding (a) the total value of the fund certificates registered for the
the year the offer is registered must have been profitable, offer must be valued at a minimum of VND50 billion; and
and there cannot be accumulated losses up to the year of (b) there must be an issue plan and a plan for investment
registration of the offer; of the funds earned from the offer consistent with the
(c) there must be an issuance plan and a plan for utilisation applicable laws and regulations.
of the proceeds earned from the offer, approved by a A members’ fund is a closed-ended securities investment fund
shareholders’ general meeting; and established by capital-contributing members on the basis of a
(d) an issuer must provide an undertaking, approved by written agreement with respect to capital contribution and the
a shareholders’ general meeting to trade its shares on fund charter.
a stock exchange within one year from the date of Members’ funds are not required to comply with provisions
completion of a public offer. governing the investment activities of securities investment
funds and which regulate a public offering of fund certificates. 6
Public offer of bonds The establishment of a members’ fund must be reported to the
The general conditions for the issuance of bonds to the public SSC and satisfy, amongst others, the following conditions: 7
in Vietnam are as follows: (i) A contributed capital of at least VND 50 billion;
1 This is a type of security which certifies an investor’s ownership over a portion of contributed capital of a public fund.
2 A public offering of securities means the public offering of securities for sale by mass media to 100 investors or more (excluding professional securities investors (i.e.
securities investment fund, securities company etc.)), or to an unspecified number of investors.
3 Article 6.30 of the Securities Law.
4 Article 6.31 of the Securities Law.
5 Article 6.29 of the Securities Law.
6 Article 21.1.c of Circular 224 of the Ministry of Finance dated 26 December 2012 guiding the establishment and management of closed investment fund and

member’s fund (“Circular 224”).

7 Article 21.2 of Circular 224.

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 Vietnam Investment Guide Capital Markets 3

(ii) A minimum of thirty (30) capital-contributing members (all issuing organisation) or the transaction involves 1% or more of
of which must be legal entities). Organizations contributing the total shareholding of the company.
capital for the establishment of a member fund may Private placements of shares by all public companies including
only use their own capital, (excluding trusted capital for public credit institutions and public insurance companies are
investment and capital owed to other organizations and administered by the SSC.
individuals).
Private companies
Procedure and order of registration for public offers of Shareholding companies are permitted to issue shares in order
securities to mobilise capital. In such cases, the following approvals and
A public offer of securities in Vietnam must be registered with notifications are, amongst others, required:
the SSC, except where the public offer falls under the following (i) any acquisition of 5 per cent or more of the total shares
categories: of a shareholding company must be reported to the
(a) an offer of bonds by the Government; licensing authority and, with respect to the founding
(b) an offer of an international financial institution’s bonds shareholder, recorded in the business licence issued by
approved by the Government; the licensing authority;
(c) a public offer of shares by a State-owned enterprise (ii) any acquisition of shares in a shareholding company by
during the process of conversion to a shareholding foreign investors must be carried out through a “capital
company (equitisation); contribution share purchase account in Vietnamese
(d) the sale of securities pursuant to a verdict or decision of a dong,” which needs to be opened in a commercial bank
court, or the sale of securities by the manager or receiver in Vietnam.
of assets in the case of bankruptcy or insolvency.
After completion of the public offering, the issuer is required to 3. Public companies
report to the SSC on the result of the offering. A public company means a shareholding company that also
Registration of a public offering of securities requires the falls under at least one of the following three categories:
submission of a registration dossier. The registration dossier for (a) a company which has already made a public offer of
a public offering of shares must include (amongst other things) shares;
a prospectus and a decision of the shareholders’ general (b) a company which has shares listed on a Stock Exchange;
meeting adopting the issuance plan, whereas a registration (c) a company which has shares owned by at least
dossier for a public offering of bonds needs to include (amongst 100 investors (an investor is defined under the law
other things) a prospectus and a decision of the board of to include Vietnamese or foreign organisations or
management, the members’ council or the company’s owner individuals participating in investments on the securities
adopting the issuance plan. market), excluding professional securities investors
A recent regulation8 now provides more detailed provisions (professional securities investors refer to commercial
on the conditions and procedures for various public offering banks, financial institutions, finance leasing companies,
scenarios, (these reflect recent market practice but were not insurance business organisations or securities business
covered by the existing regulations). organisations), and which has a paid-up charter capital of
These scenarios include public offers of, amongst other things: VND 10 billion or more.
n existing shares by major shareholders; The securities of a public company must be centrally registered
n convertible bonds; and deposited at the Vietnam Securities Depository (“VSD”).
n shares for the purpose of merger or consolidation of
enterprises; Disclosure by major shareholders
n shares for exchange of shares in another company; (a) Any investor that becomes a major shareholder of a
n dividend shares and bonus shares; and public company (i.e. who directly or indirectly owns at
n foreign stock options for Vietnamese employees of foreign least 5 per cent or more of voting shares of the relevant
organisations in Vietnam. public company) must report such stock ownership to:
The recent regulation also further clarifies the commencement the public company; the SSC; and the relevant stock
date and completion date of a public offer tranche. exchange on which the shares of such public company
are listed. This must be done within seven days from
2.2 Private offers the date of becoming a major shareholder.9 The report
is required by law to contain certain relevant information
Public companies including: the name and address of the major shareholder
Public companies are permitted to make private placements of (major shareholders that are organisations are required
shares. Public companies are bound by reporting requirements to include details regarding their business lines) and the
as set out in the Law on Securities for transactions where a number and percentage of shares owned by the major
shareholder becomes a majority shareholder (i.e. directly or shareholder in relation to the total number of shares
indirectly owning at least 5% or more of the voting shares of an outstanding.

8 Decree 58 of the Government dated 20 July 2012 implementing the Law on Securities (as amended) (“Decree 58”).
9 Article 26.2 of Circular 52 of the Ministry of Finance dated 5 April 2012 on information disclosure in stock market (“Circular 52”).

© Clifford Chance, August 2013

 4 Vietnam Investment Guide Capital Markets

(b) any acquisition of shares from an organisation, individual the announced bid price. 13
or group of affiliated persons holding 5 per cent or more The investor is required to submit an application to register
of voting shares in a public company, which exceeds the the public offer with the SSC and the target company. Within
threshold of 1 per cent of shares of that public company, 3 days from the date of receipt of the investor’s application
must be reported to the SSC and the relevant stock for a public offer, the target company shall publish information
exchange where the shares of the public company are about the proposal of the investor through mass media or on
listed within seven days from the date of such change;10 the website of the relevant stock exchange which the target
(c) The reporting requirements are also applicable to any company is listed. Within 10 days from the date of receipt
group of affiliated persons owning 5% or more of the of the investor’s application for a public offer, the board of
voting shares in a public company.11 management of the target company shall send their written
opinion regarding the public offer to the SSC with, and notify
Acquisition of securities by public offer all shareholders of, its opinion on whether or not to accept
There are three circumstances under which a public offer must the offer for purchase. Within 7 days from the date of receipt
be conducted: of SCC approval, the investor shall publish information about
(i) the purchase of voting shares in a public company (the the public offer in 3 consecutive issues of a print or electronic
“target”) in respect of which the proposed purchase newspaper.
would result in the purchaser owning at least 25% or
more of the entire issued shares of the target; An issuance-underwriting organisation is a securities company
(ii) existing investors (whether organisations or individuals), licensed to operate in the domain of underwriting securities
together with their related parties, holding 25% or more issuance or a commercial bank licensed by the SSC to
of the voting shares of a public company acquire 10% or underwrite the issuance of bonds under the conditions
more of the issued voting shares; specified by the Ministry of France.
(iii) existing investors, together with their related parties,
holding 25% or more of the voting shares of a public 4.  oreign investment in the capital
F
company acquire from 5% to less than 10% of the issued market
voting shares of such public company for a period of less Foreign ownership limits
than 1 year from the completion of the public offering. Under Decision 55 of the Prime Minister dated 14 April 2009,
The duration for conducting a public offer is between 30 and foreign investors are allowed to own up to 49% of the shares of
60 days from the date of commencement of the public bid (i.e. any public company, up to 49% of the fund certificates of any
in the public bid application dossier to the SSC). 12 During that public securities investment fund and up to 49% of the charter
period, the organisation or individual making the public offer is capital of a public securities investment company. Except for
not permitted to: public companies, public securities investment companies
(a) other than pursuant to the public offer itself, directly or and public funds, the foreign ownership limit of 49% has been
indirectly purchase or undertake to purchase shares in the removed as from 11 January 2012 (i.e. five years from the date
target company or fund certificates in the target fund; Vietnam joined the WTO Commitments).
(b) sell or undertake to sell shares or certificates in the target
company or the target fund which such organisation or Decree 58 allows a limited number of foreign investors to
individual is seeking to acquire by way of the public offer; acquire 100% of the charter capital of an existing securities
(c) unfairly discriminate against owners of the same class of company or to set up a 100% foreign-owned securities
shares which are the subject of the public offer; company.14 Such foreign investors must be, amongst other
(d) supply discrete information to a fixed number of requirements, a foreign bank, a foreign securities company
shareholders of the target or to supply different levels of or a foreign insurance company with at least two years of
information to different shareholders of the target or to operational history.
supply information to shareholders of the target at varying One notable exception is in the banking sector, where foreign
times. This provision also applies to underwriters which investors may not hold more than a total of 30% of the shares
have underwritten the issue of shares subject to the of any bank and no single foreign investor may hold more than
public offer. If after completing a public offer, the acquirer 15% (or 20% with Prime Minister’s approval) of the shares of
holds 80% or more of the entire issued share capital of any bank. The Vietnamese government has discrection to allow
the target, the acquirer is obliged, within 30 days of such foreign ownership beyond 30% for those local banks which are
completion, to acquire stocks of the same type held by under a scheme of restructuring on a case by case basis.
other shareholders, if these shareholders so request, at

10 Article 26.1 of Circular 52.

11 Article 50.3 of Decree 58.
12 Article 51, clause 1 of Decree 58.
13 Article 44.1 of Decree 58.
14 Article 71 of Decree 58.

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 Vietnam Investment Guide Capital Markets 5

Taxation issues non-convertible bonds or/and convertible bonds,

Individual investors are subject to personal income tax in depending on relevant conditions.18
respect of income earned from the trading of securities in (ii) Convertible bonds are convertible into ordinary shares
Vietnam. Personal income tax is imposed at 5% on any of the issuing company in accordance with terms and
payment of dividends (on shares or fund certificates) or interest conditions of the convertible bond offering.19
(on bonds). In relation to the transfer of securities, personal (iii) Non-convertible and convertible bonds may be
income tax would be charged in one of two ways (at the option secured or unsecured, and are issued with or without
of the investor): (i) 20% of any capital gain earned on any sale warrants, in the form of certificates, book entry or
of securities; or (ii) 0.1% of the value of the sale, irrespective of electronic data.20
whether there is any capital gain. (iv) The term of bonds must be at least 1 year.21
Corporate investors are exempt from tax on payments of
dividends but are subject to a 10% tax imposed on interest (b) Utilization of the proceeds of bonds
earnt on bonds. In relation to the transfer of securities, The issuing company can use bond proceeds for the
proceeds of such transfers received by foreign corporate following purposes: 22
investors will be taxed at the rate of 0.1%, irrespective of (i) Performing its projects (in this case, the issuing
whether there is a capital gain. company must maintain the 20:80 ratio of equity and
debt capital in respect of the relevant project); 23
Listing on foreign stock exchanges (ii) Increasing the scale of capital;
Vietnamese organisations are permitted to list securities on (iii) Restructuring debts of the issuing company (however,
foreign stock exchanges, as long as they comply with certain the issuer cannot issue international bonds to
provisions, including (but not limited to) the following:15 restructure Vietnamese Dong-denominated debts).24
(a) the issuer shall not be engaged in a business line that is
not open to foreign parties in Vietnam; (c) Conditions for the issuance of corporate bonds
(b) the decision to seek a foreign listing must be approved by Enterprises may issue non-convertible bonds if they meet
the company’s board of directors, members’ council, the the following conditions:
company’s owner or of the representative of the capital (i) the enterprise is a joint-stock company or a limited-
owner (as the case may be); liability company;
(c) the issuer shall satisfy the conditions for listing on (ii) the enterprise has operated for at least one year from
the foreign stock exchange for which a cooperation the date it officially commenced operations;
agreement exists with the SSC; (iii) the enterprise generated profits from production and
(d) the issuer, whose business line is a conditional business business activities in the year preceding the year of
line must obtain approval from the relevant competent issuance in accordance with the financial statements
authority; and audited by the State Audit Office or an independent
(e) The SSC must have approved the registration dossier. auditing organisation licensed to operate in Vietnam;25
Enterprises listed on foreign stock exchanges are obliged (iv) the capital adequacy ratio and any other conditions
to disclose information (including financial statements) in or prudential ratios relating to operational safety are
accordance with Vietnamese law and to ensure that the satisfied (for conditional business lines subject to
participation ratio of foreign investors accords with Vietnamese specialised regulations); and
law. (v) the enterprise has a bond issuance plan approved by
a competent body as specified in part (d) below.
5. Bonds In the case of the issuance of convertible bonds or bonds with
Private placement of corporate bonds 16 warrants, along with the above conditions, enterprises also
(a) Key characteristics of corporate bonds have to meet the following conditions:
(i) Bonds are classified as one of the securities under the (i) the enterprise is allowed to issue convertible bonds
Securities Law.17 A company (either a limited liability or bonds with warrants as stipulated by the current
company or shareholding company) is entitled to issue regulations (i.e., the enterprise is organised in the form
15 Article 64 of Decree 58.
16 Decree 90/2011/ND-CP of the Government dated 14 October 2011 providing guidelines on issuance of enterprise bonds, which came into effect on 01 December
2011 (“Decree 90”).
17 Article 6.1 of the Securities Law.
18 Under Article 5 of Decree 90, a shareholding company can issue both non-convertible and convertible bonds, and a limited liability company can only issue non-

convertible bonds without warrants.

19 Article 2.2 of Decree 90.
20 Article 5 of Decree 90.
21 Article 6 of Decree 90.
22 Article 3 of Decree 90.
23 Article 4.4 of Decree 90.
24 Article 4.3 of Decree 90.
25 In the case of an enterprise issuing bonds prior to 1 April in any year without yet having its financial statements of the immediately preceding year, there must be:
- Audited financial statements for the year prior to the immediately preceding year reflecting profitable results from its production and business activities;
- Audited financial statement (if available) for the most recent quarter reflecting profitable results from its production and business activities;
- Financial statements for the year immediately preceding the year of issuance reflecting profitable results generated from its production and business activities
approved by the board of management, Members’ Council or the company chairman in accordance with the charter of the company.

© Clifford Chance, August 2013

 6 Vietnam Investment Guide Capital Markets

of a joint-stock company); Issuance of International bonds

(ii) the enterprise must maintain the ratios for the The issuance of international bonds by Vietnamese companies
participation of foreign parties in Vietnamese is considered an activity of borrowing and repaying foreign
organisations as prescribed in the current law; and loans and is therefore governed not only by Decree 90 of the
(iii) The interval between two consecutive issuances of Government dated 14 October 2011, but also by regulations on
convertible bonds must be at least 6 months. foreign loans. As such, the value of any such international bond
(d) Approval of the bond issuance plan issuance must be confirmed by the SBV as falling within the
(i) In terms of convertible bonds and bonds with country’s foreign commercial loan limit as approved annually by
warrants, the bond issuance plan must be approved the Prime Minister.
by the shareholders’ general meeting. There are also additional requirements for an issuance of
(ii) With respect to bonds other than those stipulated international non-convertible bonds, including:
in paragraph (i), the bond issuance plan must be (i) The enterprise has operated for at least three years
approved by the shareholders’ general meeting, the from the date it officially commenced operations;
board of management or members’ council, or the (ii) The enterprise generated profits from its operations
chairman of the company depending on the corporate in the three consecutive years preceding the year
form of the issuing enterprise and subject to the of issuance in accordance with financial statements
charter thereof. audited by the State Audit Office or an independent
(iii) In addition to the approvals stipulated above, State- auditing organisation licensed to operate in Vietnam;
owned enterprises have to obtain the following (iii) The capital adequacy ratio and any other conditions
approvals in relation to their bond issuance plan: or prudential ratios relating to operational safety are
a. with respect to 100% State-owned enterprises satisfied (for conditional business lines subject to
established in accordance with a decision of the Prime specialised regulations);
Minister, the bond issuance plans must be examined and (iv) The issuing company must obtain a certification from
approved by the Ministry managing the main business line the SBV that the proposed volume of the bonds issue
of such enterprise; is within the available total limit of national commercial
b. regarding 100% State-owned enterprises established by foreign loans annually approved by the Prime Minster;
the decisions of the Ministries or the provincial People’s (v) The issuer satisfies credit rating requirements of the
Committees, the bond issuance plan must be examined international market for the issuance of international
and approved by such Ministries or provincial People’s bonds. In respect of State-owned enterprises, the
Committees; credit rating must be at least equal to the national
c. regarding State-owned enterprises established in the form credit rating;
of a joint-stock company or limited-liability company with (vi) The bond issuance plan must be approved by the
two or more members, the bond issuance plan shall be competent bodies (i.e. shareholders’ general meeting,
examined and approved by the organisation appointed as board of management or members’ council, or
representatives of the State-owned capital in such enterprises. chairman of company depending on the corporate
The issuing enterprise must inform the Ministry of Finance form of the issuing enterprise and in accordance with
(“MOF”) in writing before launching an issuance of bonds and the charter thereof); and
must report to the MOF the results of the issuance within 15 (vii) The issuer has completed dossiers for the issuance
days from the completion thereof. Annual reports throughout of international bonds as required by the regulations
the term of the bonds and a report upon the final payment of applicable to each issuance and each type of
the bonds must also be submitted to the MOF. issuance
With respect to State-owned enterprises, along with obtaining
Issuance of bonds by credit institutions the above-mentioned approvals, their bond issuance plans
In addition to the conditions for the issuance of bonds by public must ultimately be approved by the Prime Minister (in addition
offer, a credit institution is permitted to issue bonds when it to the approvals from the management bodies of such
satisfies all of the following additional conditions: enterprises, which are applicable to an onshore issuance of
(a) it complies with all regulations on prudential ratios bonds as discussed above).
and limits during its operation in accordance with the In addition to the conditions for issuance of international
applicable laws and regulations; non-convertible bonds above, if the issuing company issues
(b) it has operated for a minimum period of one year from convertible bonds or bonds attached with warrants to the
the date such credit institution officially commenced international market, the issuing company must meet the
operations; following conditions:
(c) its operational and business results for the year preceding (i) it must be a joint-stock company;
the issuing year up to the time the request to issue bonds (ii) it must maintain the foreign ownership limit as required
is made must be profitable; and by law; and
(d) it must have approval from the Governor of the SBV with (iii there must be at least a six (6) month interval between
respect to the issuance of long-term bonds for the current the two tranches of convertible bonds.
financial year of the credit institution. Once the bond issuance plan has been approved, the issuing
enterprise must obtain the certification by and registration with

© Clifford Chance, August 2013

 Vietnam Investment Guide Capital Markets 7

the SBV of the loan borrowed under the international bond Contacts
issuance pursuant to the procedures applicable to foreign
commercial loans.
In addition to compliance with the information disclosure Clifford Chance
requirements of the relevant international market(s), the issuing Hong Kong
enterprise must inform the MOF in writing before launching 28/F Jardine House, One Connaught Place,
the bonds issuance and must report to the MOF and the SBV Central, Hong Kong
the results of the issuance within 15 days from the completion
thereof. Annual reports throughout the term of the bonds and Crawford Brickley
a report upon the final payment of the bonds must also be Partner and Head of Capital Markets, Asia Pacific
submitted periodically to the MOF and the SBV. Tel: +852 2825 8836
Email: [email protected]
6. Breach of the laws relating to
securities Singapore
Organisations and individuals which breach the provisions Marina Bay Financial Centre
of the laws concerning securities activities and the securities 25th Floor, Tower 3
market (i.e. the Securities Law and relevant implementing 12 Marina Boulevard
regulations), depending on the nature and severity of their Singapore 018982
violations, can be disciplined, administratively sanctioned or be
subject to a penal liability. If they cause damage, they are liable Raymond Tong
to pay compensation. Partner
Tel: +65 6410 2253
Penal liability, under the law, can take the form of either Email: [email protected]
administrative or criminal liability, depending on the nature
and extent of the transgression. With regard to administrative
liability, the law provides for either a warning or a fine.
Furthermore, there are other additional sanctions, such as VILAF
confiscation of the revenue earned as a result of the breach, or Hanoi
compulsory compliance with the law. Suite 603, HCO Building (Melia)
44B Ly Thuong Kiet Street
This publications states the law as at 1 July 2013 Hanoi, Vietnam

Tran Tuan Phong

Managing Partner, Hanoi
Tel: +(84-4) 3934 8530
Email: [email protected]

VILAF
Ho Chi Minh City
Suite 404 - 406, Kumho Asiana Plaza
39 Le Duan, District 1
Ho Chi Minh City, Vietnam

Vo Ha Duyen
Managing Partner, HCMC
Tel: +(84-8) 3827 7300
Email: [email protected]

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 8 Vietnam Investment Guide Capital Markets

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