Issue 210825 – Share offering (forms, conditions, and procedures for each form) in a joint stock company

Dear Valued Client,

Share offering is a key method for joint stock companies to raise capital, enabling business expansion and strengthening competitiveness.

According to Article 122 of the Law on Enterprises 2020, as amended by the Laws on Enterprises 2022 and 2025 (the “Law on Enterprises”), a share offering means an increase in the number and type of shares authorized for offering in order to raise charter capital. For joint stock companies that are not public companies, share offerings are regulated under the Law on Enterprises. For public companies, this activity is governed by the Law on Securities 2019, as amended by the Law on Securities 2024 (the “Law on Securities”), in the form of a share issuance.

In this article, we provide an overview of the three main forms of share offerings, together with the relevant conditions and procedural steps for each.

1. Forms of share offering

Under Article 123 of the Law on Enterprises, joint stock companies (both public and non-public) may conduct share offerings in the following forms:

a. Offering shares to existing shareholders;

b. Private placement of shares;

c. Public offering of shares (for non-public companies, subject to compliance with securities law requirements).

2. Offering shares to existing shareholders

This form involves the company increasing the number and/or classes of shares eligible for sale, and selling all such shares to existing shareholders in proportion to their current ownership in the company. The purpose of this method is to raise capital while protecting shareholders’ rights, avoiding dilution of ownership ratios, and maintaining consensus within the company.

a. For non-public joint stock companies

Since the company is not a public company, any change in charter capital or ownership is treated as an internal matter and only needs to be notified to the competent state authority, without the requirement of prior reporting or registration.

The process of offering shares in the company is relatively streamlined and is set out in Article 124 of the Law on Enterprises, specifically as follows:

(i) The General Meeting of Shareholders prepares and approves the private placement plan and passes a resolution to offer shares to existing shareholders.

(ii) The company sends a written notice and a share subscription form to each shareholder at the contact address recorded in the register of shareholders, ensuring delivery at least 15 days before the subscription deadline. A shareholder is deemed to have waived their pre-emptive right if they fail to return the registration form within the prescribed time limit. In addition, shareholders may transfer their pre-emptive right to purchase shares to another person.

(iii) If a shareholder fails to exercise the pre-emptive right within the prescribed period, the remaining shares may be offered to others, provided that the terms shall not be more favorable than those offered to existing shareholders. A purchaser shall become a shareholder only upon full payment and registration in the shareholder register pursuant to Article 122.2 of the Law on Enterprises.

b. For public joint stock companies

An offering to existing shareholders is deemed a public offering and must therefore comply with the strict requirements under securities law, including information disclosure and registration with the State Securities Commission pursuant to Articles 15 and 16 of the Law on Securities and Decree 155/2020/ND-CP. We will address this in more detail in Section 4 of this article.

3. Private placement of shares

A private placement of shares refers to the issuance of new shares offered to a limited group of identified investors, without using public media or broad solicitation. This method enables a joint stock company to raise capital from non-shareholders, thereby differentiating it from a rights offering. It is particularly valuable for non-public joint stock companies as it allows them to access external funding, attract strategic partners, and bring in new shareholders.

a. For non-public joint stock companies

Under Article 125.1 of the Law on Enterprises, a private placement must satisfy two conditions: it may not be conducted through public communication channels; and it must be offered to fewer than 100 investors (excluding professional securities investors) or solely to professional securities investors.

The procedure largely mirrors that of a rights offering and includes: (i) preparation and approval of the placement plan; (ii) notification to the identified investors and existing shareholders; (iii) allocation of any unsubscribed shares; and (iv) payment and entry of ownership in the shareholder register.

b. For public joinstock companies

A private placement of shares must satisfy the conditions set out in Article 31.1 of the Law on Securities. Key requirements include:

(i) Eligible investors: Only strategic investors or professional securities investors may participate. These are investors with financial capacity, expertise, and a commitment to long-term cooperation.

(ii) Transfer restrictions: Privately placed shares are subject to lock-up periods—at least 3 years for strategic investors and 1 year for professional securities investors—except for transfers pursuant to a court judgment, arbitral award, or inheritance.

(iii) Placement interval: Each offering must be at least six months apart from the preceding one.

(iv) Foreign ownership: Where foreign investors are involved, the offering must comply with ownership limits under investment law.

Private placements by public companies are strictly regulated by the State Securities Commission (SSC). The procedure is set out in Article 48 of Decree 155/2020/ND-CP, and includes the following key steps:

(i) Approval of the issuance by the General Meeting of Shareholders (GMS) and opening of an escrow account to receive subscription proceeds;

(ii) Submission of an application for approval to the SSC;

(iii) Within 90 days of approval, completion of the share sale and deposit of proceeds into the escrow account;

(iv) Within 10 days after completion, submission of a results report to the SSC and public disclosure of information;

(v) Upon SSC’s confirmation of receipt, the company may release the escrowed funds.

4. Public offering of shares

A public offering of shares is the issuance of new shares to a large number of investors or through mass media. Public offerings are not specifically regulated under the Law on Enterprises, but are governed directly under the Law on Securities as public offerings of shares.

A key feature of a public offering is that it is no longer an internal matter; the entire issuance process is supervised by the State Securities Commission (SSC) and is subject to strict requirements on capital, business performance, distribution ratios, and shareholding commitments. There are two types of public offerings: an initial public offering (IPO), applicable to joint stock companies that are not yet public companies, and an additional offering, applicable to public companies.

a. For a non-public joint-stock company

The conditions for an IPO are set out in Article 15.1 of the Law on Securities, including:

(i) A minimum charter capital of VND 30 billion;

(ii) Profitable financial statements for the two preceding years, with no accumulated losses;

(iii) Approval of the issuance and capital utilization plan by the General Meeting of Shareholders;

(iv) At least 15% of the shares (or 10% if charter capital exceeds VND 1,000 billion) must be allocated to at least 100 minority shareholders;

(v) Major shareholders must retain at least 20% of the company’s charter capital for a minimum of one year;

(vi) An advisory securities company must be engaged (except where the issuer itself is a securities company);

(vii) A commitment to list or register the shares for trading after the offering; and

(viii) Opening of an escrow account to receive subscription proceeds.

To conduct an initial public offering (IPO), a company must follow the procedures under Article 41 of Decree 155/2020/ND-CP, including:

(i) Applying for the Certificate of Public Offering of Securities with the SSC. The application dossier must include all documents required under Article 11 of Decree 155/2020/ND-CP.

(ii) Publishing the Offering Announcement within seven (07) days from the effective date of the Certificate, in one electronic or printed newspaper (for three consecutive issues), and posting the official prospectus on the company’s website and the Stock Exchange’s website.

(iii) Distributing the shares in accordance with the approved plan and securities laws.

(iv) Submitting the Report on the Offering Results to the SSC and disclosing the information to the public.

(v) Upon SSC’s confirmation of receipt of the report, requesting the release of the proceeds from the offering’s escrow account.

Once these steps are completed, the company will be considered a public company and will be subject to the regulations applicable to public companies.

b. For public jointstock companies

An additional public offering of shares must meet the conditions set out in Article 15.2 of the Law on Securities and Article 17 of Decree 155/2020/ND-CP, including:

– Compliance with the requirements under Points a, c, e, g, h and i of Article 15.1 of the Law on Securities;

– The company must have recorded a profit in the fiscal year immediately preceding the year of registration, with no accumulated losses as of such year;

– The total par value of the newly issued shares may not exceed the total par value of outstanding shares, except in the following cases:

+ There is an underwriting commitment to purchase all shares for resale or to acquire the unsubscribed portion;

+ The issuance is made from equity capital;

+ The issuance is made for purposes of swap, merger, or consolidation;

–  In a public offering conducted to raise capital for a company project, at least 70% of the shares must be successfully subscribed. The company must also have a plan to cover any shortfall in capital not raised through the offering.

An additional public offering must be registered with the State Securities Commission (SSC). The application dossier is prescribed in Article 12 of Decree 155/2020/ND-CP. Following registration, the company shall proceed with the offering, report the results to the SSC, and release funds from the escrow account.

This article provides an overview of the regulations on share offerings for both public and non-public joint-stock companies. As always, we hope our Clients find this article useful and we look forward to working with you in the near future.

Sincerely,
ENT LAW LLC