What are the conditions for converting into a public company?

Conditions for converting into a public company is an important issue for businesses that want to expand their scale and attract the attention of investors in the market. This conversion not only helps the company increase capital but also brings many sustainable development opportunities. However, to make a successful conversion, businesses need to fully meet the legal requirements and conditions prescribed by law. The article below will explain in detail the necessary conditions for a company to transform into a public company.

How are public companies regulated? Types of public companies today

According to the provisions of Clause 1, Article 32, Law on Securities 2019, a public company is defined as a joint stock company in one of the following two cases:

• Case 1: The company has a contributed charter capital of 30 billion VND or more and has at least 10% of voting shares held by at least 100 investors who are not major shareholders.
• Case 2: The company has successfully made an initial public offering of shares through registration with the State Securities Commission in accordance with regulations.

Conditions for converting into a public company

To convert into a public company, specific conditions must be met including:

• As a joint stock company: The company must be established as a joint stock company, in which the charter capital is divided into shares, and shareholders can freely transfer their shares;
• Meet the criteria for capital and shareholder structure: The company needs to have minimum charter capital as prescribed by law (minimum 30 billion). At the same time, the company must have a diverse shareholder structure, with at least 100 shareholders who are organizations or individuals outside the company. These shareholders cannot own more than 10% of the company’s shares;
• Have a transparent governance system: The company must establish a professional and transparent governance system, with a clear division of powers between the Board of Directors, the Board of Directors and shareholders. This governance system needs to ensure the company operates effectively, protects shareholders’ rights and complies with legal regulations;
• Independently audited financial statements: Public companies are required to have their annual financial statements audited by an independent auditing organization. This is to ensure transparency and accuracy of financial information, helping shareholders and investors have confidence in the company’s financial situation. These financial reports must be publicly disclosed.

Order and procedures for registering to become a public company

According to the provisions of Article 32, Article 33, Law on Securities 2019, when registering a public company, you need to follow the following steps:

Step 1: Prepare registration documents, including:

• Public company registration certificate;
• Company charter;
• Business registration certificate;
• The information disclosure of a public company includes summary information on its organizational structure, business operations, management apparatus, shareholder structure, assets, financial situation and other information;
• The most recent annual financial statements of the joint stock company are audited by an independent audit organization. In case the company increases its charter capital after the end of the most recent annual accounting period, the company must supplement the most recent audited financial statement;
• List of shareholders.

Step 2: Submit application: Submit application to the State Securities Commission within 90 days from the date the company completes capital contribution and has a shareholder structure that meets regulations.

Application form:

• Submit directly;
• Submit through the national public service portal;
• Submit via postal service.

Step 3: Document appraisal: Within 15 days from the date of receiving the complete and valid dossier of public company registration of the joint stock company or receiving the report on the completion of the offering of the joint stock company, the State Securities Commission shall be responsible for confirming the completion of the public company registration, and at the same time announcing the name, business content and other information related to the public company on the information disclosure media of the State Securities Commission.

Benefits and challenges when converting into a public company

Carrying out the registration of conversion to a public company is an opportunity to enhance your business’s reputation in the eyes of customers, demonstrating transparency in business operations, but besides that, this activity also brings some challenges to the business.

Benefit:

• Enhance corporate reputation: Listing on the stock exchange helps the company affirm its position and reputation in the industry, creating trust with customers, partners and investors. Public companies are considered transparent and financially stable, thereby attracting interest and cooperation from domestic and foreign partners;
• Easy access to capital: Public companies can raise capital through the issuance of shares or bonds, thereby increasing their financial capacity to expand production, research and development, as well as invest in large projects. Capital from investors will help the company have more potential for sustainable development;
• Increased transparency: To maintain a good reputation in the market, public companies must comply with strict requirements for public disclosure of financial information, business operations and important decisions. The publication of annual financial reports, key events and development strategies not only helps shareholders and investors closely monitor the company’s situation, but also creates long-term trust and stability for businesses in the market.

Challenge:

• High compliance costs: Public companies must fulfill many legal and regulatory obligations, including compliance with financial reporting, independent auditing, and information disclosure requirements. These costs can increase significantly, from maintaining an audit department to the cost of issuing annual financial reports and procedures related to listing on the stock exchange;
• Pressure to disclose information: Public companies must disclose a lot of information about their financial situation, business operations, development strategies, and important management decisions. Although this helps increase transparency, it also creates great pressure to keep information confidential and manage it accurately, avoid legal risks, and minimize the negative impact of incomplete or misleading information disclosure;
• Corporate governance is more complex: Public company governance requires a more professional and transparent governance system. The Board of Directors and Board of Directors face many demands from shareholders and authorities. In addition, having to maintain a balance between the interests of shareholders, investors and other stakeholders makes management more complex and requires greater flexibility and decisiveness in every decision.

Consulting on conditions for converting into a public company at Long Phan

At Long Phan, we provide professional conversion consulting services. With a team of experts with many years of experience, we will be ready to support businesses in each implementation stage.

The services we provide include:

• In-depth advice on the benefits when registering to convert into a public company;
• Support customers in drafting and preparing documents related to conversion registration activities;
• Representing customers to submit documents and work with competent authorities to carry out conversion registration;
• Answering questions about conversion conditions;
• Support customers to solve problems that arise when registering for conversion.

To achieve the highest efficiency, businesses should choose to use professional support services to ensure compliance with current regulations. If you are interested in converting into a public company, please contact Long Phan immediately via the hotline: 0906735386 for in-depth guidance and comprehensive support throughout the process. We will bring the most accurate and effective solutions to businesses.