Legal Expert

Jun 16, 2020

Private Placement

Private placement is governed under the law on enterprises, the law on securities, and other related specific laws. Law on enterprises regulates the private placement issued by non-public companies while the law on securities provides the so-called issued by public companies, securities companies, and fund management companies. Private placement is applied for both shares and bonds.

1. Conditions to offer a private placement

1.1 Non- public companies:
(a) Shares: resolution and private placement plan approved by the General Shareholders’ Meeting (“GSM”).

(b) Bonds:

 Non-convertible bonds or bonds without warrants:
(i) Issuer must be joint-stock companies or limited liability companies which have established & operated under Vietnamese legislation at least one year;
(ii) Financial statement of the preceding year is audited by an accredited audit organization;
(iii) The number of allowable purchasers is under 100 investors, exclusive of professional securities investors, not using mass media or internet connections; such bonds shall be transferred under 100 investors, exclusive of professional securities investors within one year after completion of an issuance, except in the case of compliance with a Court's decision or inheritance prescribed by laws;
(iv) The plan for issuance of bonds approved and accepted by competent authorities;
(v) Full payments of both principal and interest for a period of 03 consecutive years prior to the issuance of bonds (if any);
(vi) Meet the financial safety ratios and prudential ratios in accordance with specialized laws.

 Convertible bonds or warrant-linked bonds
(i) Issuer must be a joint stock company;
(ii) Meet the requirements of the issuance of non-convertible bonds mentioned above, exclusive of condition i);
(iii) Meet the regulation of foreign investors' ownership ratio in accordance with the law in case of converting bonds into shares or exercising the right to purchase of warrants;
(iv) The issuances of convertible bonds must be at least six months apart;
(v) Convertible bonds and warrants attached to bonds shall not be transferable for at least 01 year from the date of completion of the issuance, unless they are transferred to or between professional securities investors or they are otherwise prescribed by the decision of the Court or they are inherited according to the provisions of law.

1.2 Public companies, securities companies, and fund management companies:

 Shares, convertible bonds, warrant-linked bonds:(i) Resolution from GSM ratifying the plan for issuance and the plan for use of capital generated by the private placement with specific criteria and the number of allowable purchasers;
(ii) Only strategic investors and professional investors can buy those shares and bonds;
(iii) Strategic investors is limited for 03 years, professional investors is limited for 01 year to transfer such shares and bonds from the ending date of the private placement, except for transfer between professional investors, transfer under an effective court judgment or decision, arbitral decision, and transfer due to inheritance as prescribed by law;
(iv) There is an interval of at least 06 months between two private placements of shares, convertible bonds, warrant-linked bonds;
(v) The ratio of holding of shares, conversion of bonds into shares and execution of warrants by foreign investors is in line with law.

 Bonds in cases other than those specified above:
(i) Resolution from the GSM or the Board of Directors (“BOD”) to ratify the plan for issuance and the plan for use of capital generated by the private placement with specific criteria and quantity of investors;
(ii) Only professional investors can buy those bonds;
(iii) The transfer of privately placed bonds is limited among professional investors, except for transfer under an effective court judgment or decision, arbitral decision, and transfer due to inheritance as prescribed by law;
(iv) The principal and interest of the offered bonds or mature debts over the last 03 years before the private placement (if any) have been fully paid, unless bonds are offered to creditors that are pre-selected financial institutions;
(v) The financial statement of the preceding year is audited by an accredited audit organization;
(vi) The prudential ratios and operation safety ratios (if any) are maintained as prescribed by law.

2. Documents required for issuing shares

2.1 Share private placement
(i) Registration form.
(ii) Minutes of the GSM; Decision of the GSM and the BOD on approval for the plan to sell and use assets, enclosing the plan to sell and use assets, the list of target investors (if available) and the estimated amount of stocks to be sold to each investor;
(iii) Materials used for providing information about the schedule of the offering of stocks to investors (if any);
(iv) The duplicate copy of materials issued by competent authorities or equivalent ones proving that the issuing company complies with some specific regulations if the issuing company operates in the conditional investment and business industry or sector;
(v) Written commitments between the issuing company and target investors on compliance with regulations (The issuing company is not the parent company of the stock offering company; or neither of companies are subsidiary companies of a parent company).
In the events public companies would like to issue shares private placement for debt swaps, the purpose of swapping stocks for shares of joint-stock companies or contributed capital in limited liability companies, relevant public companies must meet requirements mentioned in (i), (ii),& (iii) as mentioned in Section 2.1 and other requirements for each case.
If a non-public company would like to issue shares private placement, such companies must send a notice on the private offering together with relevant resolution and private placement approved by GSM to the business registration agency within 5 working days after the company approved such private placement.

2.2 Bond private placement
(i) Bond issuance plan;
(ii) Information sheet about bond issuance;
(iii) Agreements between issuing enterprises and organizations providing services related to bond issuances (if any);
(iv) Financial statement that is made in the year preceding the issuance year and audited;
(v) Credit ratings released by credit rating organizations with respect to issuing enterprises and bond type (if any).
If a company applies for multiple issuances of bonds, in addition to the above documents, company must include projects or plans for use of borrowed funds in multiple stages; and latest updates on financial conditions of issuing enterprises, use of funds derived from the previous bond issuance if the two issuances are at least 06 months apart.

3. Authority to approve issuance plan 
Non- public company can issue share approved by BOD or GSM by notifying to the business registration agency (Department of planning and Industry or equivalent agency), for bonds issuance, not need to get approval from competent agency
Public company can issue convertible bonds or bonds with warrants, shares only after receipt of written opinions of the State Securities Commission


Hien Bui

Ms. Hien Bui started her legal career at Ho Chi Minh City Securities Corporation (HSC), one of the leading securities company in Vietnam. She is now Head of Legal and Compliance at Yuanta Securities (Vietnam). Her main practice area involves corporate, capital market, and securities.



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