Circular No. 18/2007/TT-BTC guiding the purchase and sale of shares and certain cases of additional share issuance by public companies

CIRCULAR

Guidelines for purchasing, reselling shares and certain cases of additional share issuance by public companies

Implementing the Securities Law, the Ministry of Finance provides guidance on purchasing, reselling shares and certain cases of additional share issuance by public companies as follows:

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3 ||| Pursuant to the Securities Law, the Ministry of Finance hereby issues guidelines regarding the purchase and resale of shares by public companies, public tender offers for shares of public companies, and the issuance of shares by public companies for dividends, bonus shares from own capital, and employee stock option plans.

I.GENERAL PROVISIONS

1 ||| This Circular specifies detailed regulations concerning public companies' repurchase of their own shares, resale of repurchased shares; public tender offers for shares of public companies; issuance of shares by public companies for dividends, bonus shares from own capital, and employee stock option plans.

2 ||| Definitions: In this Circular, the following terms shall be understood as follows:

2.1 ||| Treasury shares: are shares issued by a public company and subsequently repurchased by the company using lawful funds.

2.2 ||| Issued shares: are shares that have been fully paid for and the information about the buyer has been accurately and completely recorded in the shareholder register; from that point onwards, the buyer becomes a shareholder of the company.

II. REPURCHASING SHARES, SELLING TREASURY SHARES

1 ||| Conditions for repurchasing shares

Public companies must meet the following conditions when repurchasing their own shares to become treasury shares:

1.1 ||| There must be a resolution of the Shareholders' Meeting approving the repurchase of more than 10% but not exceeding 30% of the total issued shares, or a resolution of the Board of Directors approving the repurchase of up to 10% of the total issued shares within each twelve-month period.

If a public company's repurchase of its own shares leads to the number of treasury shares reaching 25% or more of the total outstanding shares of the company, the company must conduct a public tender offer in accordance with the Securities Law and the provisions set out in Section III of this Circular.

1.2 ||| Must have sufficient funds to repurchase treasury shares from the following sources:

a) Surplus capital;

b) Retained earnings;

c) Other sources as prescribed by law.

1.3 ||| Must have a repurchase plan specifying the time frame and principles for determining the price.

2 ||| Cases where repurchasing shares is not allowed

2.1 ||| A company may not repurchase its own shares under the following circumstances:

a) The company is currently operating at a loss or has overdue debts;

b) The company is currently offering shares for sale to raise additional capital;

c) The company is currently undergoing a share split or consolidation;

d) The company's shares are currently the subject of a public tender offer.

2.2 ||| A company may not purchase shares from the following entities to become treasury shares:

a) Company managers; spouses, parents, adoptive parents, children, adopted children, siblings of such individuals;

b) Individuals holding shares with restricted transferability as stipulated by law and the company's charter;

c) Controlling shareholders, except in cases where the state sells off shares to reduce its ownership percentage.

3 ||| Conditions for selling treasury shares

3.1 ||| A public company may only sell treasury shares six months after the end of the most recent repurchase period, except in cases of distribution to employees within the company or use as bonus shares. When used as bonus shares for employees, there must be sufficient funds available from welfare and incentive funds.

3.2 ||| Must have a specific sales plan specifying the time frame and principles for determining the price.

4 ||| Reporting and disclosure of information

4.1 ||| Public companies repurchasing shares or selling treasury shares must report to the State Securities Commission in writing and disclose information on mass media no later than seven days before the date of the repurchase or sale. The report and disclosure of information shall include the following main contents:

a) Purpose of repurchasing shares or selling treasury shares;

b) Maximum number of shares expected to be repurchased or sold;

c) Source of funds for repurchasing;

d) Principles for determining the price;

đ) Time frame for conducting transactions;

e) Name of the securities company designated to execute the transaction;

g) Price stated in the disclosure (if applicable).

4.2 ||| In cases where the company discloses the repurchase price, the repurchase price must be clearly stated as the estimated price. The repurchase price must be determined and disclosed prior to the repurchase date.

4.3 ||| Public companies with shares listed on a stock exchange/trading center, when repurchasing their own shares or selling treasury shares, must simultaneously report to the Stock Exchange/Trading Center and disclose information on the Stock Exchange/Trading Center's information dissemination platform. The reporting and disclosure deadlines are as specified in Point 4.1.

5 ||| Execution of transactions

5.1 ||| Public companies with shares listed on a Stock Exchange/Trading Center, when executing the repurchase of their own shares or selling treasury shares, must comply with the Stock Exchange/Trading Center's regulations on repurchasing shares and selling treasury shares.

5.2 ||| Public companies without shares listed on a Stock Exchange or Trading Center, when repurchasing shares, can only do so through a brokerage securities company, without affecting market prices, and the maximum repurchase value cannot exceed 10% of the daily trading volume of those shares.

5.3 ||| Public companies must complete the repurchase of shares or sale of treasury shares within the timeframe stated in the disclosure, but not exceeding ninety days from the start of the transaction.

5.4 ||| Within ten days after completing the repurchase or sale of treasury shares, public companies must report the transaction results to the State Securities Commission and disclose them to the public. If the company does not complete the expected quantity of repurchased or resold shares, the company must report and disclose the reasons for non-completion.

Public companies with shares listed on a Stock Exchange/Trading Center must also report the transaction results to the Stock Exchange/Trading Center.

6 ||| Changes to transactions

A public joint stock company shall not change its intention or plan to repurchase shares or sell treasury shares as reported and publicly disclosed, except in cases of force majeure, in which case it must report and disclose the reasons.

7. Management and accounting of treasury shares: shall be carried out in accordance with the guidance of the Ministry of Finance.

III. PUBLIC TENDER OFFER

1. Registration for public tender offer

1.1. Organizations and individuals making a public tender offer for shares of a public joint stock company must submit registration documents for the tender offer to the State Securities Commission and simultaneously send them to the public joint stock company whose shares are being offered.

Within seven days from the date of receipt of the tender offer registration documents, the State Securities Commission must provide a written response; if disapproval is given, the reasons must be clearly stated, including: incomplete files after the State Securities Commission has requested supplementary documents or containing false or misleading information.

1.2. The registration documents for the tender offer include:

a) A public tender offer registration form according to the model attached as an appendix to this Circular;

b) Audited financial statements of the most recent fiscal year for legal entities or confirmation from a bank regarding the financial capability for individuals;

c) Written agreement with members of the Board of Directors and major shareholders of the public joint stock company whose shares are being offered, in cases where prior agreements exist between both parties;

d) Name of the securities company acting as agent to execute the tender offer;

đ) Documents proving that the company meets the conditions for repurchasing shares as stipulated in Point 1, Section II of this Circular, in cases where the public joint stock company repurchases its own shares through a public tender offer.

2. Opinion of the company being offered

2.1. Within seven days from the date of receipt of the tender offer registration documents, the public joint stock company whose shares are being offered must send its opinion to the State Securities Commission and notify all shareholders about the company's approval or rejection of the tender offer.

2.2. The opinion must be expressed in writing, signed by at least two-thirds of the Board of Directors' members, and must clearly state the Board of Directors' evaluation of the tender offer and recommendations for shareholders to accept or reject the offer; in cases of rejection, the company must specify the reasons.

3. Public tender offer transactions

3.1. The public tender offer can only be executed after the State Securities Commission's approval and the announcement on three consecutive issues of a central newspaper and a local newspaper where the company being offered is headquartered before the expected implementation time; in cases where the company being offered is listed, the announcement must be made through the information dissemination means of the Stock Exchange or the Securities Trading Center where the company is listed.

3.2. After the public announcement, the offeror may not change the announced tender offer intention, except in cases of force majeure or when the total number of shares registered for sale is less than the number of shares registered for purchase that have been reported to the State Securities Commission and approved to withdraw the tender offer registration.

3.3. The offeror must designate a securities company as the agent to execute the tender offer. Before executing the tender offer, the offeror must deposit an amount equivalent to 100% of the value of the shares registered for tender offer calculated based on the offer price.

3.4. During the public tender offer, the offeror may not engage in the following actions:

a) Directly or indirectly purchasing or committing to purchase shares being offered outside the tender offer period;

b) Selling or committing to sell shares that they are offering;

c) Treating holders of the same type of shares being offered unfairly;

d) Providing private information to certain shareholders or providing information to shareholders at different levels or times. This provision also applies to issuers whose shares are the target of the tender offer.

3.5. The duration of a public tender offer period shall not be shorter than thirty days and not longer than sixty days from the date of announcement. Any additional or adjusted tender offers must be conducted under conditions no less favorable than previous tender offers. The offeror may increase the offer price before the end of the minimum tender offer period by seven days. Adjustments to the initial tender offer registration must be announced in accordance with Point 3.1 of this section.

3.6. Shareholders who have deposited shares in a public tender offer period have the right to withdraw their shares at any time during the tender offer period.

3.7. In cases where the number of shares offered is less than the number of circulating shares of a company or the number of shares offered for sale exceeds the number of shares offered, the shares will be purchased based on a corresponding ratio.

3.8. After completing the public tender offer, if the offeror holds eighty percent or more of the circulating shares of a public joint stock company, they must purchase within thirty days the remaining shares of the same type held by other shareholders at the announced offer price, if these shareholders request it.

3.9. Within seven days from the end of the tender offer period, the designated securities company must transfer funds to shareholders selling shares and transfer shares to the offeror.

3.10. Within ten days from the end of the tender offer period, the offeror must report in writing to the State Securities Commission and publicly announce the results of the tender offer.

3.11. The offeror may not sell the shares purchased within six months from the end of the public tender offer period.

IV. CERTAIN SITUATIONS FOR ADDITIONAL ISSUE OF SHARES BY A PUBLIC JOINT STOCK COMPANY

1. Issuing shares to pay dividends

A public joint stock company issuing shares to pay dividends to existing shareholders to increase the charter capital must be approved by the General Meeting of Shareholders and have sufficient sources from the latest audited financial statement's post-tax profit.

2. Issuing bonus shares

A public company issuing bonus shares to existing shareholders to increase its registered capital must be approved by the Shareholders' Meeting and have sufficient sources from the following:

2.1. Investment Development Fund;

2.2. Capital Surplus Fund (the portion of capital that the joint stock company enjoys according to regulations);

In the case where the surplus capital results from the difference between the selling price of shares and their par value when issued for investment projects, the company may only use it to supplement the registered capital three years after the project has been completed and put into operation. In the case where the surplus capital results from the difference between the selling price and the par value of additional issued shares, the company may only use it to supplement the registered capital one year after the end of the issuance period.

2.3. Accumulated profits;

2.4. Other reserve funds as prescribed by laws on finance and banking (if any).

Documents for reporting the issuance of shares to pay dividends and issue bonus shares include:

3.1. The decision of the Shareholders' Meeting approving the issuance plan;

3.2. The most recent audited financial report and other necessary documents proving the lawful source of capital used to issue additional shares.

Issuing shares under an employee share option program:

A public company issuing shares under an employee share option program must meet the following conditions:

a) Having an option program and issuance plan approved by the Shareholders' Meeting;

b) The total number of shares issued under the program shall not exceed five percent of the outstanding shares of the company;

c) The Board of Directors must clearly announce the criteria and list of employees eligible to participate in the program, the pricing principles, and the implementation timeline.

5. Documents for reporting the issuance of shares under an employee share option program include:

a) The decision of the Shareholders' Meeting approving the option program and issuance plan for employees;

b) The resolution of the Board of Directors approving the criteria and list of employees eligible to participate in the program, the pricing principles, and the implementation timeline.

Reporting on issuance and information disclosure

6.1. The issuer must submit the documents specified in Point 3 or Point 5 of Section IV of this Circular to the Securities Commission at least ten days before the issuance date, while simultaneously disclosing the information through mass media. Within ten days after completing the issuance, the issuer must report the issuance results to the Securities Commission. For issuances of shares under an employee share option program, the issuance result report must be accompanied by a list signed by participating employees.

6.2. In cases where a public company has shares listed on a securities exchange or trading center, it must also report to the securities exchange or trading center.

V. IMPLEMENTATION

This Circular takes effect fifteen days after its publication in the Official Gazette.

The Securities Commission, securities exchanges, and trading centers within their respective functions and responsibilities are responsible for guiding and supervising public companies in implementing this Circular.

2. Amendments and supplements to this Circular shall be decided by the Minister of Finance.