Cases of offering shares for a company

Offering shares is the legal process a company carries out to mobilize capital from investors. This process can take place in the form of a private or public offering, depending on the business’s strategy. When offering different types of shares, caution is required to ensure the benefits of both the company and investors. This article will analyze cases where companies are allowed to offer shares according to Vietnamese law.

Cases in which a company is offered shares

The company can offer shares in many different situations depending on its needs and development strategy. Clause 2, Article 123 of the Law on Enterprises 2020 stipulates the forms of offering shares of joint stock companies as follows:

• The first case is the public offering of shares. This is a form of initial stock issuance to mobilize capital from the investing public. A company offering shares to the public must meet the conditions on charter capital, business operations, and information disclosure according to the provisions of securities law;
• The second case is the private offering of shares. This form applies when the company offers shares to less than 100 investors, excluding professional securities investors. Private offerings are often used to raise capital from strategic partners or large investors. The company must comply with regulations on transfer restrictions and information disclosure when conducting a private offering;
• The third case is offering shares to existing shareholders. This is a form of issuing additional shares to shareholders who own shares of the company in a certain proportion. Existing shareholders have the right to buy new shares in proportion to the number of shares currently held. This form helps the company mobilize capital from internal sources and maintain a stable shareholder structure.

In addition, the company can also offer shares under the employee option program (ESOP). This is a form of issuing preferential shares to company officials and employees to motivate and connect workers with the business. ESOPs often apply preferential prices and have conditions on stock holding periods.

Procedures for offering shares in joint stock companies

According to the provisions of Article 41 of Decree 155/2020/ND-CP, procedures for offering securities to the public are carried out as follows:

• Issuing organizations and shareholders registering for public offerings submit registration documents for public securities offerings to the State Securities Commission;
• Issuing organizations and shareholders registering for public offering shall send to the State Securities Commission 06 official prospectus to complete procedures for issuance of Certificate of registration for public offering of securities within 07 working days from the date of issuance. from receipt of notification from the Commission;
• The State Securities Commission issues a Certificate of registration for public offering of securities;
• Issuing organizations and shareholders registering for the offering must publish the Notice of issuance on legal media within 07 working days from the date of the Certificate of registration for public offering of securities. validity;
• Issuing organizations and shareholders registering for the offering shall distribute securities in accordance with the provisions of Article 26 of the Securities Law;
• The issuing organization or underwriting organization and shareholders registering for the offering must send a report on the results of the offering with bank confirmation to the State Securities Commission and disclose information about the results of the offering. sell within 10 days from the end of the offering;
• After receiving notice of the State Securities Commission’s report on the results of the offering, the issuer and shareholders registering for the offering are required to stop blocking the proceeds from the offering.

According to the provisions of Clause 2, Article 125 of the Law on Enterprises 2020, procedures for private share offerings are carried out as follows:

• The company decides on a plan to offer private shares according to regulations. Accordingly, the Board of Directors decides the time, method and price of selling shares. The selling price of shares must not be lower than the market price at the time of sale or the value recorded in the books of shares at the most recent time, except in the case of selling shares for the first time to people who are not founding shareholders. and sold to existing shareholders of the company;
• Shareholders of the company exercise the priority right to buy shares according to the provisions of Clause 2, Article 124 of the Law on Enterprises 2020, except in cases of merger or consolidation of the company;
• In case the shareholder and the transferee of the priority right to buy do not buy all of the shares, the remaining shares will be sold to others according to the private share offering plan with conditions no more favorable than the conditions offered to the shareholders. shareholders, unless otherwise approved by the General Meeting of Shareholders.

According to the provisions of Clauses 2, 3, 4, Article 125 of the Law on Enterprises 2020, procedures for offering shares to existing shareholders are carried out as follows:

• The company must notify shareholders in writing (with complete information as required by law) in a manner that ensures it reaches their contact address in the shareholder register no later than 15 days before the closing date. Deadline for registering to buy shares. The notice must be accompanied by a registration form to buy shares issued by the company;
• In case the share purchase registration form is not sent to the company on time according to the notice, the shareholder will be considered to have not received the priority right to buy;
• Shareholders have the right to transfer their priority rights to buy shares to others;
• In case the number of shares expected to be offered for sale is not fully subscribed by shareholders and transferees of priority purchase rights, the Board of Directors has the right to sell the remaining shares authorized to be offered for sale to the company’s shareholders and others with conditions less favorable than those offered to shareholders, unless otherwise approved by the General Meeting of Shareholders or otherwise stipulated by the law on securities;
• The buyer of shares becomes a shareholder of the company from the moment the shares have been paid in full and information about the buyer is fully recorded in the shareholder register;
• After the shares are fully paid, the company issues and delivers the shares to the buyer.

Restrictions and conditions when offering shares

Transfer restrictions on privately offered shares of public companies

Privately offered shares of public companies are subject to transfer restrictions. This regulation is intended to ensure the stability of the shareholder structure and prevent short-term speculative transactions. Transfer restrictions apply for a certain period of time after completion of the offering.

According to Point c, Clause 1, Article 31 of the Law on Securities 2019, privately offered shares of public companies are restricted from transfer for a minimum period of 03 years for strategic investors and a minimum of 01 year for strategic investors. professional securities investors from the date of completion of the offering.

Conditions on time between offerings of public companies

The law regulates the time conditions between share offerings. This regulation is intended to ensure market stability and avoid the situation where companies continuously issue shares, affecting stock prices. The time between offerings depends on the form and object of the offering.

For private share offerings, public companies must ensure a minimum gap of 6 months between two consecutive offerings as prescribed in Point d, Clause 1, Article 31 of the Law on Securities 2019. This regulation does not apply. for offering shares under the employee option program or offering shares for business swaps or mergers.

Consulting services on offering shares for businesses

Offering shares is an important process for a joint stock company. The law regulates cases, procedures and restrictions when issuing shares. Investors need to pay attention to the company’s conditions on quantity, time and repurchase rights. In particular, shares offered individually have transfer limits.

To ensure that the issuance and offering of shares must comply with the provisions of law, customers can refer to some of Long Phan’s services in this activity such as:

• Evaluate the current status and analyze the actual situation of the enterprise;
• Consulting on preparing share offering plans according to regulations;
• Prepare documents and support in implementing procedures to request repurchase of capital contributions;
• Support the process of negotiating the terms of the share offering with investors and signing related contracts
• Consulting on related issues after completing share offering procedures

To ensure regulatory compliance and optimize benefits, customers should consult with legal experts like Long Phan before offering or investing in shares. If you need legal advice on business law and other related issues, contact Long Phan immediately via hotline: 0906.735.386 for support.