A Vietnamese company which satisfies public company requirements but which has not registered its public company status with the State Securities Commission (SSC) may arguably not need to comply with various obligations of a public company under Vietnamese law.

Under the Securities Law 2019, a public company is a joint stock company that satisfies the following conditions (the Required Conditions):

·         having a minimum paid-up charter capital of 30 billion dongs, and

·         having at least 10% of the voting shares held by at least 100 investors not being major shareholders.

The Securities Law 2019 also provides that:

·         a company satisfying the Required Condition must register its public company status with the State Securities Commission (the SSC); and

·         after the SSC confirms the registration of public company status, the relevant company will have various rights and obligations of a public company such as public disclosure, corporate governance, and registration for trading.

However, the law is silent on the obligations of a company which satisfy the Required Conditions but which has not obtained the SSC’s confirmation on public company status.

There are reasonable arguments that such a company does not have to comply with the obligations of a public company. This is because:

·         The Securities Law 2019 explicitly provides that after the SSC’s confirmation, the relevant company will have obligations of a public company. By implication, this means that before SSC’s confirmation of the public company’s status, the relevant company needs not to comply with such obligations.

·         Article 38 of the Securities Law 2019 further prescribes that a joint stock company, which no longer satisfies the Required Conditions, must still comply with public company obligations until the SSC deregisters its public company status. This provision further suggests that public company’s obligations are tied to the registration status of the relevant company.

·         Public company registration can be considered legal entity registration under Article 82 and Article 86 of the Civil Code 2015. If a legal entity is required to be registered, the civil legal capacity of such legal entity only arises from the time of being recorded in the registration book. Accordingly, it can be construed that the obligations of a public company only arise when the SSC confirms its registration.

On the other hand, one may still argue that a company needs to comply with certain public company’s obligations before the SSC’s confirmation as long as it satisfies the Required Conditions. Specifically:

·         Under Article 118.1 of the Securities Law 2019, several entities other than public companies must disclose information, such as organizations issuing enterprise bonds to the public or organizations listing enterprise bonds. Therefore, a company that has not yet been confirmed as a public company by the SSC may still disclose relevant information.

·         Under Article 33.1(d) of the Securities Law 2019, the information disclosure document attached to the public company registration dossier must include information about the scale of the public company’s managerial organization, managerial apparatus, shareholders structure, and other information. Therefore, it is likely that at the time of registration, the company must comply with the obligations relating to corporate governance of a public company to be confirmed as registration completion by the SSC.

·         Moreover, under Article 7.2(a) of Circular 96/2020 of the Ministry of Finance on information disclosure, a public company must create a website before registering with SSC as a public company. This provision suggests that a company is considered a public company and must perform its obligations (at least the obligation to create a website) even though the SSC has not yet confirmed the completion of registration.

·         In practice, for the purpose of investor’s protection, it would be more appropriate if any company satisfying the Required Conditions to comply with public company’s obligations regardless of its registration status.

This post is written by Tran Duc Long and edited by Nguyen Quang Vu.