Initial stock offering process

Initial stock offering (IPO) is the process by which a joint stock company issues shares to the public. In Vietnam, initial stock offering comply with the Law on Securities and guiding documents of the State Securities Commission. The process includes preparing documents, determining the offering price, registering with regulators, and distributing shares to investors. This article will provide detailed instructions on the steps to carry out the initial public offering of shares.

Overview of initial stock offering

Pursuant to the provisions of Clause 2, Article 4 of the Law on Securities 2019, stock is a type of security that confirms the legal rights and interests of the owner of a part of the equity capital of the issuing organization.

A public offering of securities is an offering of securities by one of the following methods:

• Offering for sale through mass media;
• Offering to 100 or more investors, not including professional securities investors;
• Offering to unidentified investors.

Legal basis: Clause 19, Article 4 of the Law on Securities 2019.

Conditions for a joint stock company to make an publicly initial stock offering (IPO)

The conditions for implementing an initial stock offering are to ensure that the enterprise has sufficient financial and operational capacity to become a public company. Include:

• Minimum contributed charter capital is 30 billion VND at the time of registration for offering calculated according to the value recorded in the accounting books;
• Business activities for 02 consecutive years immediately preceding the year of registration for offering must be profitable, with no accumulated losses up to the year of registration for offering;
• There is an issuance plan and a plan for using capital obtained from the stock 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 issuing organization is VND 1,000 billion or more, the minimum ratio is 10% of the voting shares of the issuing organization;
• Major shareholders before the initial public offering of shares of the issuing organization must commit to holding at least 20% of the issuing organization’s charter capital for at least 01 year from the date of completion of the tranche. offer for sale;
• The issuing organization is not under criminal prosecution or has been convicted of one of the crimes of violating the economic management order but has not had its criminal record erased;
• There is a securities company that advises on registration documents to offer shares to the public, except in cases where the issuing organization is a securities company;
• Have a commitment and must list or register to trade shares on the stock exchange system after the end of the offering;
• The issuing organization must open an escrow account to receive money to buy shares in the offering.

Enterprises need to prepare carefully to meet the above conditions before submitting the application to register for the initial public offering of shares. Consulting with financial and legal experts will help businesses better prepare for the IPO process.

Legal basis: Clause 1, Article 15 of the Law on Securities 2019.

Steps in the initial stock offering process

Documents need to be prepared

Based on the content of Article 11 of Decree 155/2020/ND-CP dated December 31, 2020 of the Government detailing the implementation of a number of articles of the Law on Securities, Article 18 of the Law on Securities 2019, documents need to be prepared. Initial stock offering includes:

• Registration form for initial public offering of shares according to form No. 03, appendix issued with Decree 155/2020/ND-CP
• Prospectus;
• Decision of the General Meeting of Shareholders approving the issuance plan, plan for using capital obtained from the offering and written commitment to list or register to trade shares on the stock exchange system;
• The issuing organization’s financial statements for the most recent 02 years meet the regulations in Article 20 of the Securities Law 2019
• Consulting contract on public stock offering registration documents with a securities company, unless the issuing organization is a securities company.
• Underwriting commitment (if any)
• Decision of the Board of Directors approving the registration file to offer shares to the public;
• Written commitment of the Board of Directors to list or register to trade shares on the stock exchange system
• Written confirmation from the bank or foreign bank branch on opening a blocked account to receive money to buy shares in the offering;
• Document of agreement between the shareholder who owns the shares being offered for sale and the company on the offering plan and offering price in case of offering shares owned by the shareholder.
• Underwriting commitment (if any).
• Charter of the issuing organization\
• Written commitment to meet the provisions of Points d and e, Clause 1, Article 15 of the Law on Securities 2019
• Written commitment of major shareholders before the initial public offering of shares of the issuing organization to jointly hold at least 20% of the issuing organization’s charter capital for at least 01 year from from the closing date of the offering
• Written confirmation from the bank or foreign bank branch on opening a blocked account to receive money to buy shares in the offering

Implementation process

Step 1: Submit application:

• 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 the offering are obliged to amend and supplement the public securities offering registration dossier according to the provisions of Article 22 of the Law on Securities.

Step 2: Complete procedures for issuance of Certificate of registration for public securities offering:

• Within 07 working days from the date of receiving notice from the State Securities Commission regarding the request to complete procedures for issuance of a Certificate of registration for public securities offering, the issuing organization and shareholders register for offering and send to the State Securities Commission 06 official prospectus to complete the procedure for granting a Certificate of registration for public offering of securities.
• The State Securities Commission issues a Certificate of registration for public offering of securities or refuses according to the provisions of Article 25 of the Law on Securities.

Step 3: Announce information about the offering

• Within 07 working days from the effective date of the Certificate of registration for public securities offering, the issuing organization and shareholders registering for the offering must publish the Notice of issuance in 01 electronic newspaper. electronic or printed newspaper in 03 consecutive issues as prescribed in Clause 3, Article 25 of the Law on Securities and publish information on the website of the issuing organization, the shareholder registering for the offering is an organization (if any), and the Stock Exchange.
• The official prospectus must be simultaneously posted on the website of the issuing organization, the shareholder registering for the offering as an organization (if any), and the Stock Exchange.

Step 4: Securities distribution:

• Issuing organizations and shareholders registering for the offering shall distribute securities in accordance with the provisions of Article 26 of the Law on Securities.

Step 5: Report offering results

• Within 10 days from the end of the offering, the issuing organization or underwriting organization or shareholder registering for the offering must send a Report on the results of the offering with confirmation from the bank or branch. The foreign bank branch where the account is opened blocks the proceeds from the offering to the State Securities Commission according to the provisions of Clause 5, Article 26 of the Law on Securities.
• Announce information on the website of the issuing organization, shareholders registering for the offering as organizations (if any), and the Stock Exchange about the results of the offering.
• Within 03 working days from the date of receiving complete and valid documents reporting the results of the offering, the State Securities Commission is responsible for notifying in writing the issuing organization and registered shareholders. sign the offering on receipt of a report on the results of the offering or a decision to cancel the public offering of securities in accordance with the provisions of the Securities Law. At the same time, send it to the Stock Exchange and Vietnam Securities Depository and Clearing Corporation;

Step 6: Post information about receiving the results report of the offering or the decision to cancel the public offering of securities on the website of the State Securities Commission.

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.

Legal basis: Article 41 of Decree 155/2020/ND-CP

Consulting services on the initial stock offering process at Long Phan

Long Phan provides professional consulting services on the initial stock offering process in Vietnam. Our team of experts has extensive experience in corporate finance and the stock market. Long Phan is ready to support customers throughout the entire process, from preparation to completion of initial stock offering. Our services include:

• Evaluate the possibility of initial stock offering;
• Planning and roadmap for initial stock offering;
• Prepare initial stock offering documents;
• Stock valuation;
• Support in the registration process with regulatory agencies;
• Manage the offering process;
• Post-initial stock offering consulting;

Long Phan provides high quality initial stock offering consulting services, meeting the specific needs of each customer. With experience and reputation in the field of corporate finance consulting, we are a reliable partner for businesses that successfully conduct IPOs in Vietnam.

The initial public offering process requires strict compliance with legal regulations. Businesses need to carefully prepare financial, legal and business strategies. Support from investment banks and professional consultants at Long Phan is key to a successful IPO. Contact Long Phan via Hotline 0906.735.386 today for detailed advice.