CIRCULAR No CIRCULAR No. 01/1998/TT-UBCK OF OCTOBER 13, 1998 GUIDING DECREE No. 48/1998/ND-CP OF JULY 11, 1998 WITH REGARD TO THE ISSUANCE OF SHARES AND BONDS TO THE PUBLIC In furtherance of Decree No. 48/1998/ND-CP of July 11, 1998 of the Government on securities and securities market, the State Securities Commission hereby provides the following guidances on matters concerning the issuance of shares and bonds to the public for posting up at the Central Trading Market: I. GENERAL PROVISIONS 1. In this Circular, the following terms shall be construed as follows: 1.1. Share is a type of securities issued in the form of certificates or book entries certifying the ownership and legitimate interests of the share owners over the assets or capital of a joint stock company. 1.2. Bond is a type of securities issued in the form of certificates or book entries certifying the bond-issuing organization�s obligation to pay debts (including principals and interests) to the bond owners. 1.3. Registered share or bond is a type of share or bond with the owner�s name being written thereon. 1.4. Bearer share or bond is a type of share or bond without the owner�s name. 1.5. The right to buy shares means the right reserved for the current shareholders of a joint-stock company to buy a quantity of shares in a new share issuance corresponding to their respective capital contribution ratios. 1.6. Convertible bond is a type of bonds which can be converted into the ordinary share of the same issuing organization under predetermined conditions. 1.7. Issuance underwriting means the issuance-underwriting organization assists the issuing organization in carrying out the procedures for elaboration and submission of the dossiers of application for the issuing license before making the securities sale offer, undertakes to buy securities from the issuing organization for resale or to buy the remaining securities which have not been distributed. The issuance underwriting only means that the issuance underwriter undertakes to sell securities for the issuing organization without indicating the idea that the issuance underwriter fulfils the obligations towards the investors instead of the issuing organization. 1.8. Distributing organization is an organization that sell securities through the issuance underwriter or the distribution agents. 1.9. Distribution agents include securities firms, commercial banks, investment banks and finance companies that undertake to sell securities for the issuing organizations on the basis of agreements. 1.10. Recognized auditing organization is an organization licensed to practise auditing and accepted by the State Securities Commission as the auditing organization for the issuing organization. 1.11. The equitized enterprises are State enterprises or other forms of enterprises, which have been equitized. 2. The par value of a share or bond shall be written in Vietnam Dong. The share has the uniform par value of 10,000 dong. The bond has the minimum par value of 100,000 dong or the multiple of 100,000 dong. Bonds of the same term issued in the same campaign by the issuing organization must bear the same par value. 3. Shares and bonds issued to the public for transaction at the Central Trading Market shall be registered at the securities trading centers or the stock exchanges. 4. The certificate of a share or bond issued to the public must contain the following main contents: 4.1. The name and head-office of the issuing organization; 4.2. The serial numbers and issuing dates of the establishment permit and the business registration certificate; 4.3. Type, par value and serial number; 4.4. The quantity of shares to be issued (for shares); 4.5. The interest rate, interest payment schedules, the bond term (for bonds); 4.6. The owner�s name (for registered shares and bonds); 4.7. The date of issuance; 4.8. Seal and signature of the chairman of the Managing Board of the issuing organization. 5. Where shares and/or bonds are issued in the form of book entries, the buyers thereof shall be granted the ownership certificates. 6. Shares and bonds shall be sold to the following objects: 6.1. Economic organizations, social organizations and citizens of Vietnam; overseas Vietnamese. 6.2. Foreign organizations and individuals. 7. The percentage of shares and/or bonds held by foreign organizations and individuals in an issuing organization shall comply with the Prime Minister�s decision. II. CONDITIONS FOR SHARE ISSUANCE 1. The conditions for share issuance according to the provisions of Article 6 of Decree No. 48/1998/ND-CP of July 11, 1998 of the Government on securities and securities market, to be met by an issuing organization that makes the initial issuance of shares, include: 1.1. Being a joint-stock company or an equitised enterprise; 1.2. Having had the actual minimum legal capital of 10 billion dong by the time of applying for issuance; 1.3. With profitable production and/or business operations for the two latest consecutive years by the time of applying for the issuing license, with healthy financial situation and bright prospect for development. For an equitised enterprise, the above-said two-year period shall cover the pre-equitization duration; 1.4. Having a feasible plan for the use of capital mobilized from the issuance campaign, which has been adopted by the shareholders� congress; 1.5. Members of the Managing Board and the Director (General Director) having experiences in business management; 1.6. Having at least 20% of the issuing organization�s share capital sold to more than 100 investors outside the issuing organization; in cases where the issuing organization has a share capital of 100 billion dong or more, such minimum percentage shall be 15%; 1.7. The founding shareholders having to hold at least 20% of the share capital of the issuing organization by the time the issuance campaign ends and having to maintain such level for at least three years from the end of the issuance campaign; 1.8. Where the total par value of the issued shares exceeds 10 billion dong, the issuance underwriting organization is required. 2. An issuing organization that additionally issues shares to the public to increase capital shall, apart from meeting the conditions prescribed in Points 1.1, 1.2, 1.3, 1.4, 1.5, 1.6 and 1.8 of Section II of this Circular, have to satisfy the following conditions: 2.1. The additional issuance must be at least one year after the previous one, counting from the date the issuing license is granted. 2.2. The value of the additionally issued shares shall not be bigger than the total value of the current shares. 3. Where shares are issued to increase capital, with the right to buy shares accompanied, the issuing organization shall have to clearly state the mode of exercising the right to buy shares in its prospectus with the following contents: 3.1. The timelimit for exercise of the right; 3.2. The conversion price, the calculation mode; 3.3. Other terms relating to the interests of the share-buying right holder (if any). III. CONDITIONS FOR BOND ISSUANCE 1. The conditions for bond issuance according to the provisions of Article 8 of Decree No. 48/1998/ND-CP of July 11, 1998b of the Government on securities and securities market, to be met by an organization issuing shares to the public, include: 1.1. Being a State enterprise, a joint-stock company or an equitised enterprise; 1.2. Having the actual minimum legal capital of 10 billion dong by the time of application for the issuing license; 1.3. With profitable production and/or business operation in the two latest consecutive years by the time of submitting the dossiers of application for issuance, with a healthy financial situation and bright prospect for development. For an equitised enterprise, the above-said two-year duration shall cover the pre-equitization period; 1.4. Having a feasible plan for the use of capital mobilized from the issuance campaign, which is approved by the Managing Board, for a joint-stock company; or by the managing agency, for a State enterprise; 1.5. Its Managing Board members, Director (General Director) having experiences in business management; 1.6. With at least 20% of the total value of the to be-issued bonds being sold to more than 100 investors; in cases where the total value of to be issued bonds reaches 100 billion dong or more, such minimum percentage shall be 15%; 1.7. There must be an issuance underwriting organization, except where the issuing organization is a credit institution; 1.8. Having committed to fulfil the obligations toward the investor(s); 1.9. Determining the representatives of bond owners. 2. Bonds issued under Point 1 above may be insecured bonds, secured bonds or convertible bonds. 3. Bonds can be secured partially or wholly by either of the following modes: 3.1. Secured with payment by the Ministry of Finance or a financial organization for State enterprises. 3.2. Secured with the security properties of the issuing organization or a third organization. 4. Where secured bonds are issued under the provisions of Point 3.2., Section II of this Circular, the issuing organization shall have to clearly state the security percentage and list in details the security properties in the dossiers of application for the issuing license and present valid documents evidencing that such security properties belong to the ownership of its own (or the third organization) and are of adequate value for bond payment. The security properties must satisfy the requirements defined in Points 6, 7 and 8, Section III of this Circular. 5. Properties used as security for issuance of secured bonds shall include: 5.1. Government bonds of various types; 5.2. Bonds of other types to be paid with both the principals and interests unconditionally by underwriting organizations; 5.3. The land use right under the land legislation; 5.4. Residential houses and constructions on the land; 5.5. Production and business establishments such as factories, hotels, shops, warehouses; instruments, equipment and machinery attached to factories, sea-going vessels, aircraft� 6. The security properties prescribed in Points 5.4. and 5.5, Section III of this Circular must be accompanied with insurance contracts. 7. Properties used as security for a bond issuance shall have to satisfy the following requirements: 7.1. The value of security properties prescribed in Points 5.1 and 5.2, Section III of this Circular must be at least equal to the total bond value; 7.2. The value of security properties prescribed in Points 5.3, 5.4 and 5.5, Section III of this Circular must be at least equal to 1.5 times the total bond value. 8. The assessment or calculation of the value of the security property must be effected as follows: 8.1. The security properties prescribed in Points 5.1 and 5.2, Section III of this Circular shall be valued according to the lowest of one of the following prices: 8.1.1. The market price 8.1.2. The par value 8.1.3. The purchase price of such security properties, including the interest or discount amount received till the application for the issuing license. 8.2. The security properties prescribed in Points 5.3, 5.4 and 5.5, Section III of this Circular must be valued by a competent property-evaluating body. This valuation shall be valid for not more than 12 months from the date the value is determined. 9. Where the convertible bonds are issued, the issuing organization shall have to clearly State the conversion terms in the dossiers of application for the issuing license, including the following main contents: 9.1. The conditions and time for conversion; 9.2. The conversion percentage and method of calculating the conversion price; 9.3. Method of loss calculation and compensation in cases where the bond-issuing organization has failed to issue shares to meet the conversion right; 9.4. Other terms (if any). IV. DOSSIERS OF APPLICATION FOR ISSUING LICENSES 1. A dossier of application for a license to issue shares to the public according to the provisions of Article 9 of Decree No. 48/1998/ND-CP of the Government on securities and securities market shall include: 1.1. The application for an issuing license; 1.2. The notarized copy of the establishment permit or the decision to transform the State enterprise into a joint-stock company; 1.3. The notarized copy of the business registration certificate; 1.4. The company�s charter; 1.5. The resolution of the shareholders� congress, approving the issuance of new shares; 1.6. The prospectus as prescribed in Section 3, Part IV of this Circular; 1.7. The list and curricula vitae of the members of the Managing Board and the Board of Directors; 1.8. The financial reports of the two latest consecutive years by the time of submitting the dossier of application for an issuing license as prescribed in Point 4, Section IV, this Circular; 1.9. The decision determining the enterprise�s value, issued by the competent body, for equitised enterprises; 1.10. Issuance underwriting commitment as prescribed in Point 5, Section IV of this Circular (if any); 2. The dossier of application for a license to issue bonds to the public shall include: 2.1. The documents prescribed in Points 1.1, 1.2, 1.3, 1.4, 1.6, 1.7, 1.8, 1.9 and 1.10 of Section IV of this Circular; 2.2. The resolution of the Managing Board on the application of a license to issue bonds to the public; where the issuing organization is a State enterprise, the approval of the establishment licensing body is required; 2.3. The issuing organization�s commitment to fulfil obligations towards the investors as prescribed in Point 6, Section IV of this Circular; 2.4. The contract between the bond-issuing organization and the representative of the bond owners as prescribed in Point 3, Section VIII of this Circular; 2.5. The record on the determination of the value of the security property or the written acceptance of payment guaranty of the underwriting organization (in cases where secured bonds are issued). 3. The prospectus must satisfy the following requirements: 3.1. Containing adequate necessary, truthful and transparent information so as to enable the investor and securities firm to accurately assess the financial capability, business operation and prospect of the issuing organization; 3.2. Including the following main contents: - The full name and transaction name of the issuing organization; - The address of its head-office; transaction telephone number(s) and fax number(s); - The serial numbers, day, month, year of the establishment permit and the business registration certificate; - Summary of its operation charter; - Brief history of its formation and development process; - Organizational structure of the issuing organization or the group where the issuing organization is a member (if any); - The managerial apparatus; - The analysis of financial activities; - Capital ownership structure of the current shareholders; names and addresses of current shareholders holding more than 5% of the firm�s share capital; - Names and addresses of members of the Managing Board, executive director (general director), the chief accountant, the percentage of shares and/or bonds owned by each of the above-mentioned persons in the issuing organization; - The results of business and/or marketing activities in the two latest consecutive years, regarding the major products or services; - The situation on new products research and development; - Policies towards employees; - Taxes and the fulfillment of tax obligations towards the State; - The current debt situation; - The issuance plan: the use purpose of the sum of money collected from the issuance, the total capital amount to be achieved through the issuance, the number of shares or bonds to be issued, projected sale price offers, the distribution mode and principle, the timelimit for registration of share or bond purchases, the mode of payment and transfer of shares or bonds, the owners� interests. 3.3. Where shares are issued with the right to buy shares or convertible bonds and secured bonds are issued, the prospectus must clearly indicate conditions and rights related to the above-said shares or bonds; 3.4. The financial data in the prospectus must be consistent with the data of the audited financial report in the dossiers of application for the issuing license; 3.5. It must be signed by the Chairman and other members (at least 2/3) of the Managing Board, the head of the Control Board, the director (general director), and the chief accountant of the issuing organization as well as the executive directors (general directors) of all issuance-underwriting organizations (if any). Where it is signed by representatives, there must be letters of authorization; 3.6. Its cover-sheets must fully indicate: - Full names, head-office addresses, transaction telephone numbers and fax numbers of the auditing organization, the consulting organization and all issuance - underwriting organizations (if any); - The following inscriptions in capital letters: "THE STATE SECURITIES COMMISSION PERMITS THE ISSUANCE OF SECURITIES MEANING THAT THE SECURITIES ISSUANCE HAS MET THE REGULATIONS OF LAW, BUT WITHOUT IMPLYING TO ENSURE THE VALUE OF SECURITIES. ALL STATEMENTS CONTRARY TO THIS ARE ILLEGAL"; - Notice on all occupational risks, particular conditions or terms, and potential factors that may reduce incomes or liquitability of to be-issued shares or bonds. 3.7. The prospectus must be presented vertically on white paper of size A4 in black printed letters. 4. The financial report must satisfy the following requirements: 4.1. Strictly complying with the State�s current accountancy regulations. The annual balance of accounts and the annual report on business operation results must be certified by the recognized auditing organization; 4.2. The duration from the date of signing the latest annual financial report to the time of sending dossiers of application for the issuing license must not exceed 90 days. Where it exceeds 90 days the issuing organization shall have to make additional financial reports at the request of the State Securities Commission; 4.3. Where the issuing organization owns 50% or more of the share capital of another organization, it must also submit the latter�s financial report. 5. The issuance-underwriting commitment must satisfy the following requirements: 5.1. Being made according to set form; 5.2. The issuance-underwriting commitment shall be signed between the issuance-underwriting organization and the issuing organization. Where the issuance underwriting is made by group, the issuance-underwriting commitment must be signed between the principal issuance underwriter and the issuing organization. 6. The bond-issuing organization�s written commitment to fulfill its obligations towards investor(s) must include the following principal contents: 6.1. Name of the issuing organization; 6.2. The addresses issuing organization�s head-office, branches and representative offices; 6.3. Types and features of the issued bonds; 6.4. Commitment to pay the principals and interests of the issued bonds; 6.5. Commitment on maximum percentage of borrowing; 6.6. Terms of unsecured bonds; 6.7. Commitment to maintain the total security asset value of due bonds (if any); 6.8. Details on the third party�s security for principal and interests (if any); 6.9. The name of the representative of the bond owner under the contract between the issuing organization and the bond owner�s representative; 6.10. The terms on the bond owner�s representative. 7. Amending and supplementing dossiers of application for issuance before the issuing license is granted: 7.1. Cases of amendment/supplement. 7.1.1. Where the issuing organization deems it necessary to make amendments/supplements. 7.1.2. Where it is so requested by the State Securities Commission. 7.2. Where an amendment/supplement is made according to the provisions of Point 7.1, the amended/supplemented text must be s

Circular 01/1998/TT-UBCK