IS PUBLIC OFFERING OF SHARES BY LIMITED LIABILITY COMPANY PERMITTED?

According to current Enterprise Law, the right to issue shares is applied to joint stock companies for the purpose of raising capital. However, in some cases, the right of share issuance and public offering of shares by limited liability company is permitted. So under which circumstances may a limited liability company offer shares to the public and what are the implementation conditions?

In what cases may limited liability company issue shares?

Limited liability companies include one-member limited liability companies and limited liability companies with multiple members. A limited liability company increases its charter capital by mobilizing additional capital contributions.

Regulations in the Enterprise Law 2020, limited liability companies with single member and multiple members are not allowed to issue shares, except in the case of converting into joint stock company.

Initial public offering of shares by limited liability company may be performed to become a public company through changing the ownership structure and/or increasing the charter capital of the issuing organization. In particular, the offering of shares in particular or securities in general to the public is the offering of securities by one of the following methods:

– Through mass media;

– To at least 100 investors, not including professional investors; or

– To unidentified investors.

What are the conditions for public offering of shares by limited liability company?

Limited liability company needs to fully meet the conditions for the initial public offering of shares to convert the limited liability company into a joint stock company.

Conditions for implementation plan

A validly approved implementation plan is one of the conditions for limited liability company to perform public offering of shares. Including:

– Plan for conversion of a limited liability company into a joint-stock company;

– Shares issuance plan;

– Plan for use of revenue generated by the offering, except in the case of not increasing charter capital.

Noted, these plans must be approved by the Board of members or company owners.

Conditions on the ratio of charter capital to be held by capital contributions for owners of companies offering shares to the public

Capital contributing members (for for multiple-member limited liability companies) or company owners (for single-member limited liability companies) must commit to holding at least 20% of charter capital in the issuance organization.

The minimum holding period is 01 year from the date of completion of the offering.

Conditions on foreign ownership ratio in enterprises

The public offering of shares by limited liability company to convert into a joint stock company also needs to meet the regulations on foreign ownership ratio in public companies according to the provisions of law.

Conditions on the agreement to sell capital contributions of company members

For multiple-member limited liability company, in the case of offering to sell members’ capital contributions, there needs to be an agreement between the members whose capital is being offered and the issuing organization, regarding:

– Offering plan;

– Offering price.

Conditions for initial public offering of shares by limited liablity company

– The contributed charter capital is at least 30 billion VND on the offering date according to the accounting books;

– The company has profit over the last 02 years and has no accumulated loss on the offering date;

– At least 15% of its voting shares have been sold to at least 100 non-major shareholders. If the issuer’s charter capital is 1.000 billion VND or above, the ratio shall be 10%.

– The issuer is not undergoing criminal prosecution and does not have any unspent conviction for economic crimes;

– The offering is consulted by a securities company, unless the issuer is already a securities company;

–  The issuer has a commitment to have its shares listed or registered on the securities trading system after the end of the offering;

– The issuer has an escrow account to receive payments for the offered shares.

What to be noted after public offering of share by limited liability company?

A limited liability company offering shares to the public needs to carry out all legal procedures as prescribed, including internal approval procedures and legal procedures with the business registration agency and the Commission State Securities…

After the State Securities Commission has approved the public offering of shares of limited liability company to convert into joint stock company, the company’s shares must be listed or registered for trading on stock trading system according to regulations.

>> PROCEDURES FOR INITIAL PUBLIC OFFERING https://linconlaw.vn/procedures-for-initial-public-offering/

>> 07 STRICTLY PROHIBITED ACTS IN SECURITIES https://linconlaw.vn/07-strictly-prohibited-acts-in-securities/