Luat Viet

:: Question :: In the process of conversion of enterprises with 100% state owned capital into shareholding companies, how to choose strategic shareholders of such shareholding companies?

Answer:

According to the current laws and regulations, the concept of a strategic shareholder has not been indentified yet, instead of that; only the concept of a strategic investor has been addressed. The latter definition shall apply for enterprises with 100% state owned capital that are equitized and not apply for enterprises newly established under Law on Enterprises year 2005.
Point a of Clause 3 of Article 6 of Decree 109/2007/ND-CP of the Government dated 26 June 2007 on conversion of enterprises of enterprises with 100% state owned capital into shareholding companies (“Decree 109”) and Circular 146/TT-BTC dated 6 December 2007 providing some guidelines for implementing some financial issues during the conversion of enterprises with 100% state owned capital into shareholding companies according to Decree 109 as followings:
“Strategic investors means domestic investors and foreign investors with financial and enterprise management capability; [who] transfer new technology, supply raw materials, [and/or] develop the product consumption market; [and whose] long-term interests are closely connected with the enterprise;”
According to this point, based on the volume of the Charter Capital, the nature of the lines of business and the demand of developing and expanding the enterprises, the Steering Committee for Equitization shall submit [a plan on] the initial share sale to the strategic investors and the criteria for selecting strategic investors to the person making the equitization decision. Thus, depending on the circumstances and the specific characteristics of the enterprise, the initial public offering for strategic investors, the criteria for choosing strategic investors shall be decided by the equitization deciders, based on the proposal of the Steering Committee for Equitization.
Points c & d of Clause 3 of Article 6 of Decree 109 also further provide certain limitations for Strategic Investors; Strategic Investors shall accordingly be entitled to purchase shares at a price not less than the average successful auction price. If it is absolutely necessary for a group or State owned corporation (including a State commercial bank) to select a strategic investor, then the body making the equitization decision shall report to the Prime Minister of the Government to hold separate tendering between strategic investor. Especially, strategic investors shall not be permitted to transfer purchased shares for a minimum period of three years from the date on which a business registration certificate is issued to the shareholding company.
A notable point is that in accordance with Clause 4 of Article 6 of Decree 109, where an enterprise carries out equitization simultaneously with immediate listing on the Stock Exchange/Securities Trading Center, then the body authorized to approve the equitization plan shall fix the maximum or minimum number of subscribed shares applicable to the public sale in the plan for the initial share issue so that enterprise after equitization will satisfy all listing conditions. The maximum or minimum number of subscribed shares stipulated in the plan for the initial share issue shall apply to investors in all economic sectors without discrimination. In this case, there is no limitation for Strategic Investors in maximum or minimum purchase in initial public offering.
 

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