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IPO and stock listing?

First of all, it is important to understand whether listing a company on the stock exchange and an initial public offering of shares or commonly known as an IPO are the same or not?

Listing securities means putting securities that are eligible for listing on the trading system for listed securities in Vietnam.

Initial public offering of shares is usually done for the purpose of raising more capital for the issuer or becoming a public company through a change of ownership structure without increasing the charter capital of the issuer. Notarized initial public offering of shares is also a mandatory procedure before listing the company on the stock exchange.

Steps to list a company on the stock exchange

Currently, Vietnam has two main listed stock exchanges, namely Ho Chi Minh City Stock Exchange (HOSE) and Hanoi Stock Exchange (HNX) to list companies on stock exchanges. This contract is normally made as follows:

Step 1: Register a public company

Step 2: Register for a public offering of securities with the State Securities Commission

Step 3: Register to list shares at the Stock Exchange

* Note: For steps 1 and 2, businesses can still register for notarized security offering first and register a public company afterward according to regulations.

Conditions for listing the company on the stock exchange

To list on the stock exchange, enterprises must satisfy all the different conditions at the mentioned 3 steps, specifically:

1. Register a public company

Public company is a joint-stock company which meets in one of the following two cases:

(i) The company has contributed charter capital of VND 30 billion or more and has at least 10% of the voting shares held by at least 100 investors who are not major shareholders; or

(ii) The Company has successfully conducted the initial public offering of shares through registration with the State Securities Commission in accordance with regulations.

When one of these two conditions is satisfied, the company needs to submit a public company registration file to the State Securities Commission within 90 days as prescribed.

The State Securities Commission is responsible for certifying the completion of the registration of a public company, and at the same time announcing the name and business contents and other information related to the public company on the information disclosure media of the State Securities Commission after the enterprise meets the statutory requirements.

2. Public offering of securities

A joint-stock company that plans to issue securities for the first time to the public must meet all of the following conditions:

• The amount of charter capital contributed at the time of registration of the offering is from VND 30 billion or more calculated according to the value recorded in the accounting books;
• Business operations of 02 consecutive years preceding the year of registration of the offering must be profitable and at the same time have no accumulated losses by the year of registration of the offering;
• There is an issue plan and a plan to use capital obtained from the share offering approved by the General Meeting of Shareholders;
• A minimum of 15% of the voting shares of the issuer must be sold to at least 100 investors who are not major shareholders; in case the charter capital of the issuer is VND 1,000 billion or more, the minimum ratio is 10% of the voting shares of the issuer;
• Major shareholders before the time of initial public offering of shares of the issuer must commit to jointly hold at least 20% of the charter capital of the issuer at least 01 year from the closing date of the offering;
• The issuer is not being examined for penal liability or has been convicted of any of the crimes of infringing upon economic management order but has not yet had its criminal record cleared;
• Having a securities company to advise on the application for registration of a public offering of shares, unless the issuer is a securities company;
• Having commitment and having to list or register for trading of shares on the securities trading system after the end of the offering;
• The issuer must open an escrow account to receive money to buy shares of the offering.

Before offering securities to the public, a joint-stock company must register with the State Securities Commission and receive approval.

*Note: When submitting the application for registration of the public offering of securities to the State Securities Commission, the enterprise must also submit the application for registration for listing or registration for securities trading as prescribed.

3. Listing of securities

In order to list corporate securities, the following conditions must be met:

• Being a joint-stock company with charter capital contributed at the time of registration for a listing of VND 30 billion or more based on the most recent audited financial statement, and at the same time, the market capitalization is at least VND 30 billion, calculated on the weighted average of the payment price of shares in the latest public offering in accordance with regulations or the reference price of shares traded on the Upcom trading system on average in the last 30 sessions before the time of submitting the application for listing;
• The listing has been approved by the General Meeting of Shareholdersafter being traded on the Upcom trading system for at least 02 years, unless the organization registering for listing has offered to sell shares to the public;
• The ratio of profit after tax to equity (ROE) in the year preceding the year of listing registration is at least 5% and the business operation of 02 consecutive years before the year of listing registration must be profitable; there are no debts overdue for more than 01 year by the time of listing registration; no accumulated loss based on the most recent audited financial statements or reviewed semi-annual financial statements in case of listing registration after the end of the semi-annual financial statement period;
• Organizations registering for listing must have at least 15% of the voting shares held by at least 100 shareholders who are not major shareholders; in case the charter capital of the organization registering for listing is VND 1,000 billion or more, the minimum ratio is 10% of the voting shares;
• Shareholder being an individual or an organization whose ownership representative is the Chairman of the Board of Directors, a member of the Board of Directors, the Head of the Supervisory Board and a member of the Supervisory Board (Controller), the General Director (Director), the Deputy General Director (Deputy Director), the Chief Accountant, the Chief Financial Officer and equivalent managerial positions elected by the General Meeting of Shareholders or appointed by the Board of Directors and major shareholders who are related persons of the above subjects must commit to continue holding 100% of the shares they own within 06 months from the first trading date of shares on the Stock Exchange and 50% of these shares within the next 06 months;
• The company and its legal representative has not been handled for violations within 02 years from the time of listing registration due to the performance of prohibited acts in securities and securities market activities according to regulations;
• Having a securities company to advise on the application for listing registration, unless the organization registering for listing is a securities company.

The classification and arrangement of listed shares are based on the criteria specified in the listing regulations of the Vietnam Stock Exchange, including: charter capital, capitalization value, operating time, status financial model, structure of non-major shareholders, corporate governance.

After receiving a complete and valid application for listing registration, the Stock Exchange will issue a decision to approve the listing and within 90 days from the date of approval for listing, the listing registration organization must put securities into trading according to regulations.

Conclusion

It can be seen that in order for a company to be listed on the stock exchange, businesses have to go through complicated procedures along with strict conditions and high transparency requirements about the company’s operations.

We hope that this article has helped you to have an overview of the necessary legal conditions and procedures to list your company on the stock exchange in Vietnam.