Vu Thi Chan Phuong, SSC’s Vice Chairwoman, addresses a seminar in Hanoi on November 7 to discuss the Draft Law on Securities (revised). (Photo: VNA) Hanoi (VNS/VNA) - The new amended draft law on securities wasrevised based on the inheritance of the current Securities Law, broadening thescope of regulation and adopting a new approach more suited to market conditionand overcoming the remaining limitations of the current law.
This is an opinion raised at a seminar in Hanoi on November 7 to discuss theDraft Law on Securities (revised), which is supposed to be submitted to theGovernment in the second quarter of 2019 and submitted to the National Assemblyfor consideration and approval in the fourth quarter of 2019.
The 2006 Securities Law was introduced in the context of the small-scaled securitiesmarket. The law has created the legal corridor to enable the stock market togrow over the past 11 years, said Deputy Minister of Finance Huynh Quang Hai.
“The law has contributed to boost the development of Vietnam’s stock market,making it become a medium and long-term capital mobilisation channel of theeconomy,” Hai said.
By the end of October this year, the number of listed companies has increasedmore than seven times compared to 2016, with over 1,537 listed companies withmarket capitalisation reaching around 3.8 trillion VND (162 million USD),equivalent to 77 percent of GDP, much higher than the 2016’s figure of 22 percent.
“The stock market has also efficiently supported the equitisation process ofState-owned enterprises (SOEs), making the process more open and transparent,contributing to speeding up the restructuring of SOEs,” Hai said.
However, according to Hai, after more than 11 years of implementation, the Lawon Securities is also gradually exposing shortcomings along with its rapidexpansion.
“Some provisions in the original law are no longer reasonable or consistentwith the relevant provisions of other newly amended legal documents,” Hai said,insisting on the formation of an update on the securities law which meetsdemand for a more sophisticated securities market, giving a boost to thedevelopment of the securities market as well as the broader financial sector.
In 2018, the State Securities Commission (SSC) is tasked with building therevised Securities Law.
According to Vu Thi Chan Phuong, SSC’s Vice Chairwoman, the update on thesecurities law at the current time is necessary given that a number of laws (oninvestment, inspection, civil code and handling of administrative violations)were revised and promulgated which relate to the implementation of the Law onSecurities such as the ownership of foreign investors, corporate governance,inspection authority and administrative sanctions.
The amendment of the securities law will demonstrate the policies andguidelines of the Government in restructuring financial markets, State-ownedenterprises, creating favourable investment environment for all investors andenhance transparency for businesses, Phương said.
The SSC is collecting consultation from ministries and market players for therevised law.
One of the much concerned issues that the draft law amended is the conditionsfor the initial public offering (IPO) of shares.
It requires that the issuing organisation must have the paid-up charter capitalof at least 30 billion VND at the time of registration of the offering, higherthan the previous required amount of 10 billion VND as stipulated in thecurrent law.
According to Phuong, since 2005, the size of listed enterprises has increased16.35 times. Therefore, the required charter capital of 10 billion VND for abusiness to conduct an IPO is considered low compared to the current scale offirms and regulations of other countries.
Issuing organisations must also be profitable in the two nearest consecutiveyears before the registration year of the offer, instead of one year as said inthe current law.
The new law also said at least 20 percent of the charter capital of an issuingorganisation must be sold to at least 100 non-shareholder investors owning 1percent of the charter capital of the issuing organisation or more.
With regard to the foreign ownership ratio of a public company, the foreignownership ratio in a public company is determined to be 100 percent, except incases where there is an international treaty in which Vietnam is a contractingparty, or the specialised law specifies a lower level of ownership of foreigninvestors.
In cases where a public company operating in different branches and trades hasdifferent provisions on the foreign ownership ratio, the foreign ownershipratio shall not exceed the lowest level in branches and trades specified in theforeign ownership ratio.-VNS/VNA
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