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Before a Public Takeover Bid
3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

Under Vietnamese law, a joint stock company may issue different types of shares, each of which will entitle shareholders to different rights and interests. The types of shares that a joint stock company may issue include:

  • common shares;
  • voting preferred shares, which are a type of share that holds a greater number of votes than a common share (only issued to (a) founding shareholders during the first three years from the company establishment date, and/or (b) organizations authorized by the Government);
  • dividend preferred shares, which are a type of share where the shareholder will be paid dividends at a higher rate in comparison with the dividends paid to a common shareholder or at an annual fixed rate;
  • redeemable preferred shares, which are a type of share that entitles its holder to a return of the contributed capital by the company upon the request of the holder or in accordance with the conditions stated on the redeemable preferred share certificates and the company's charter; and
  • other types of preferred shares prescribed by the company's charter and the legal framework on securities.

The table below provides an overview of the different rights and powers that are attached to different levels of shareholding within a joint stock company in Vietnam:

Shareholding Level Rights and Powers
One common share
  • To participate in and speak at the General Meetings of Shareholders ("GMS") and exercise the right to vote in person, through an authorized representative or in accordance with another method stipulated by law or the company's charter. Each common share will have one vote;
  • To receive dividends at the rate determined by the GMS;
  • To have priority in buying the new shares offered for subscription corresponding to the proportion of common shares held by the shareholder in the company;
  • To freely transfer their share to another person, except (i) in the 3-year lock-up period applicable to founding shareholders and (ii) in instances where the company's charter provides for restrictions on share transfers;
  • To review, search for and make an excerpt from the information in the "Roster of Shareholders having the Right to Vote" and request for rectification of the inaccurate information therein;
  • To review, search for information in, make an excerpt from or photocopy the company's charter, minutes of the GMS and resolutions of the GMS; and
  • To receive a portion of the remaining assets corresponding to their proportion of share ownership in the company where the company is dissolved or bankrupt.

1% or more common shares for a consecutive six months 

In their own name or in the name of the company, to initiate legal action (on a personal or joint liability basis) against the members of the Board of Management ("BOM") or the (General) Director of the company for the refund of benefits or payment of compensation for loss to the company or to others if such member of the BOM or the (General) Director:

  1. commits a breach of the responsibilities of managers of the company;
  2. fails to implement or fails to implement completely and promptly their assigned rights and obligations or implements the same contrary to the provisions of law, the charter of the company or the resolutions and decisions of the BOM;
  3. abuses their position and power or uses information, knowhow, business opportunities and other assets of the company for their own personal benefit or for the benefit of other organizations or individuals; or
  4. other cases in accordance with law and the charter of the company.

5% or more common shares (or a smaller proportion as stipulated by the charter)
  • To review and make an excerpt from the minutes book and resolutions of the BOM, the mid-year and annual financial statements, the reports of the Control Committee, the contracts and transactions, subject to BOM's approval, and other documents, except those related to commercial and trade secrets of the company;
  • To request the convening of a GMS in certain instances or to convene the GMS if the BOM or the Control Committee fails to do so;
  • To propose matters to be included in the meeting agenda of the GMS;
  • To request the Control Committee to examine each specific matter relating to the management and administration of the company's activities when deemed necessary;
  • To request for an abolition of a GMS resolution by Vietnamese courts or arbitration; and
  • Other rights under the provisions of the Enterprise Law and the company's charter. 
10% or more common shares (or a smaller proportion as stipulated by the charter)
  • To nominate candidates to the BOM and the Control Committee; and
  • Other rights under the provisions of the Enterprise Law and the company's charter. 

More than 35% (but less than 50%) of the total number of votes (of all of the shareholders attending the GMS)

The veto right against GMS resolutions in relation to special matters (a 'super majority') at a meeting. Special matters include:

  • Types/classes of shares and total number of shares in each type/class;
  • Change to the industries/lines or areas of business;
  • Change to the company's managerial and organizational structure;
  • The company's investment or sale of its assets with a value to equal to or greater than 35% of the total value of assets stated in the most recent financial statements of the company (or another smaller proportion or value as stipulated by the company's charter);
  • The company's reorganization or dissolution; and
  • Other matters as stipulated in the company's charter. 

50% or more of the total number of votes (of all of the shareholders attending the physically-held GMS)

The veto right against GMS resolutions on any matters at a meeting other than (a) election of BOM members by cumulative votes, and (b) any adverse change of rights and obligations of a preference shareholder (which requires the votes of shareholders representing at least 75% of the total number of preference shares).

50% or more of the total number of votes (of all of the shareholders having voting rights in case of adopting resolutions by way of collecting written opinions)

The veto right against GMS resolutions adopted by way of collecting written opinions, except for any adverse change of rights and obligations of a preference shareholder (which requires the votes of shareholders representing at least 75% of the total number of preference shares).

More than 50% (but less than 65%) of the total number of votes (of all of the shareholders attending the physically-held GMS)

Adopt GMS resolutions on matters at a meeting other than (a) those requiring a super majority, (b) election of BOM members by cumulative votes, and (c) any adverse change of rights and obligations of a preference shareholder (which requires the votes of shareholders representing at least 75% of the total number of preference shares).

More than 50% of the total number of votes (of all of the shareholders having voting rights in case of adopting resolutions by way of collecting written opinions)

Adopt GMS resolutions by way of collecting written opinions, except for any adverse change of rights and obligations of a preference shareholder (which requires the votes of shareholders representing at least 75% of the total number of preference shares).

65% or more of the total number of votes (of all of the shareholders attending the physically-held GMS)

Adopt GMS resolutions on any matters, including those that require a super majority at a meeting, except for (a) election of BOM members by cumulative votes, and (b) any adverse change of rights and obligations of a preference shareholder (which requires the votes of shareholders representing at least 75% of the total number of preference shares).

80% or more shares of a public company

Acquire the remaining shares within 30 days from the completion of the previous public tender offer (see 7 below).

 

3.2 Due diligence

Vietnamese law on public tender offer rules does not contain specific regulations regarding the question of whether a prior due diligence needs to be undertaken, or how such due diligence process should be organized. Hence, from the authorities' perspective, whether a prior due diligence has been undertaken before carrying out the public tender offer or not is not an issue. That being said, as a matter of practice, the concept of a prior due diligence or pre-acquisition review by an investor is generally accepted by the business community for the purposes of avoiding potential obstacles and mitigating potential risks during and after the acquisition. Nonetheless, the authorities would still expect all relevant parties to strictly comply with the rules on insider trading.

3.3 Restrictions and careful planning

Vietnamese law contains a number of rules that would apply before a public tender offer is announced. Some careful planning is therefore necessary if a potential investor or a target company intends to start a process that is to lead towards a public tender offer.

  1. Foreign investment

    Foreign investors, when investing in Vietnam by establishing a new entity or acquiring an existing company, are subject to market access conditions. Such conditions are provided for under Vietnam's international trade commitments as well as domestic regulations. It is important to note the business sectors which are subject to conditions that may hinder foreign investors from carrying out the acquisition or otherwise affect the foreign investors' objectives in carrying out such acquisition.

    For instance, according to Vietnam's WTO commitments, foreign investors and foreign invested enterprises are not allowed to distribute drugs and pharmaceuticals in Vietnam. Accordingly, the common interpretation of the authorities is that an economic organization with even 1% of foreign ownership would be considered as a foreign-invested company and is prohibited from distributing third party drugs. In Vietnam, we have observed cases where certain investment structures are being established to enable the investing or acquiring entity to be considered a domestic investor, thereby, the operating company will be considered a domestically owned company. In any case, the foreign investor should be mindful of these potential challenges.

    Also, under Decree No. 155, the foreign ownership limitations in public companies are as follows:

    • Where foreign ownership limits in a business sector have been agreed by Vietnam under an international treaty, public companies are subject to the ownership limits set out in those treaties.
    • Where foreign ownership limits in a business sector are set out in Vietnamese law, those limits also apply to public companies.
    • If a public company operates in a business sector that is subject to foreign investment market access restrictions, those access restrictions will apply. If the market access list does not specify the foreign ownership limit in any sector, the maximum foreign ownership for a public company operating in that sector is 50% of the company's charter capital.

    If none of the above circumstances apply, the foreign ownership is unlimited.

    • A public company has multiple business lines that are subject to different foreign ownership caps, the final foreign ownership is the lowest cap among them.
    • A public company may elect to apply a different foreign ownership cap (that is lower than the statutory cap), provided that it is approved by the GMS and specified in its charter.
    A public company with a foreign ownership ratio exceeding the maximum permitted ratio must ensure that there will be no further increase in such ratio. The foreign shareholders of such public company shall only have the right to sell their shares until the foreign ownership ratio is within the permitted range (except in the cases of receiving dividend shares or subscribing for more shares that are issued to all existing shareholders on a pro rata basis).

    In addition to market access restrictions, governmental prior approval will be required for foreign investment in public companies operating in specific industries. For example, foreign investment in public companies in the banking sector will require the State Bank of Vietnam's prior approval, whereas foreign investment in public companies in the insurance sector will require the Ministry of Finance's prior approval. 

    During the planning process, foreign purchasers need to be mindful of all the market access conditions to determine relevant matters in relation to the public tender offer, e.g., the maximum number of shares that they may be permitted to acquire in the target company. If the proposed acquisition fails to meet the conditions as provided for under law, the acquisition/public tender offer is likely to be rejected by the competent authorities in Vietnam.

  2. Acting in concert

    Vietnamese law does not define "acting in concert". However, it provides for the concept of "affiliated persons" which encompasses the following persons/entities:

    • an enterprise and its internal personnel; a public fund or public investment company and its internal personnel;
    • an enterprise and any organization or individual that holds more than 10% of voting shares or stakes of such enterprise;
    • an organization or individual who in a relationship with another organization or individual directly or indirectly controls or is jointly controlled by such other organization or individual, or is subject to the same control with such other organization or individual;
    • an individual and his/her biological parent, adoptive parent, parents-in-law, spouse, biological child, son- or daughter-in-law, siblings, brother- or sister-in-law;
    • a securities investment fund management company and securities investment funds or securities investment companies managed by such securities investment fund management company;
    • a contractual relationship in which one organization or individual is the representative of the other;
    • any other organization or individual being an affiliated person as stipulated in the Enterprise Law.

    According to Vietnamese regulations on public tender offers, the aggregate amount of the shareholding of the purchaser and its affiliated persons in the target company will be a factor that may trigger the public tender offer requirement (see 4.1).  If, after the tender offer, the number of shares owned by the investor along with its affiliated persons reaches 5% or more of the voting shares of the company, they will together be considered "major shareholders" and will therefore be required to carry out certain disclosure procedures (see 3.5).

3.4 Insider trading

The Securities Law 2019 and Decree No. 155 contains provisions dealing with insider trading in the context of public companies. Specifically, the acts of (i) using inside information to buy securities for oneself or for others and (ii) disclosing or supplying inside information or advising others to buy or sell securities based on inside information, are all prohibited.

Under Decree No. 155, the target company, internal persons and affiliated persons of the target company, the tender offer agent and any other person having information about the tender offer must not (i) take advantage of inside information for purchasing or selling securities for themselves and (ii) disclose such information to or incite or induce other persons into purchasing or selling securities before the official commencement of the public tender offer.

A person committing these prohibited acts would be subject to administrative sanctions, including monetary fines with the value ranging from VND 1 billion to VND 1.5 billion (approximately US$40,000 to US$60,000) and confiscation of the illegal earnings.

Under Penal Code No. 100/2015/QH13 ("Penal Code 2015"), which is effective from 1 July 2016 and Law No. 12/2017/QH14 amending and supplementing some articles of Penal Code 2015, which took effect on 1 January 2018, the criminal liabilities that may be applied to the person committing these prohibited acts would include (i) monetary fines of up to VND 5 billion (approximately US$200,000), or (ii) imprisonment with a term of up to 7 years. Additional sanctions would then comprise (i) monetary fines of up to VND 200 million (approximately US$80,000), or (ii) being banned from holding certain positions or being banned from practicing certain professions or performing certain jobs for a period between 1 - 5 years.

Under Penal Code 2015, both a company or an individual may be subject to criminal liabilities for certain crimes, including the acts of (i) using inside information to buy securities, or (ii) disclosing or supplying inside information to others, or advising others to buy or sell securities based on the inside information. A company committing these crimes would be subject to a monetary fine of up to VND 10 billion (approximately US$400,000). Such company may also be suspended from doing business or operating in certain fields or banned from mobilizing capital for a period of 1 - 3 years. 

3.5 Disclosure of shareholdings

The rules regarding the disclosure of shareholdings apply before and after a public tender offer.

Pursuant to these rules, when the potential investor intends to conduct the public tender offer, it must first register the tender offer with the SSC (the procedure of which is set out in 3.6 below). Amongst the documentations to be submitted to the SSC is the "announcement of the public tender offer", which follows the template provided by the Ministry of Finance. Under this template, the potential investor will have to disclose its current shareholding level before the public tender offer.

After the public tender offer is completed, the investor is required to submit a report to the SSC on the result of the public tender offer within five days, and to make a public announcement of the same. This report must include the number of shares owned by the investor and the shareholding ratio of the investor in the target company before and after the public tender offer.

In addition, if, after the public tender offer, the investor becomes a major shareholder, i.e., directly or indirectly owning 5% of the voting shares of the company, the investor must report to the target company, the SSC and the stock exchange where the company's shares are listed within five days from the date the investor becomes the major shareholder.

3.6 Announcements of a public tender offer

Prior to announcing the public tender offer to the public, the investor is required to register its proposed tender offer with the competent authorities of Vietnam. Specifically, the investor needs to send a registration dossier to the SSC and the target company. The dossier comprises several documents, including a "public tender offer registration form" whereby the investor discloses information on the public tender offer, number of shares it proposes to buy and the purchase price and an "announcement of the public tender offer" whereby the investor discloses information about the target company, its relationship with the target company, its current shareholding in the target company, number of shares it proposes to buy, purchase price and timeline for the public tender offer.

The BOM of the target company will need to review the registration dossier of the investor. Within 10 days from the date of receipt of the application dossier, the BOM of the target company must disclose its opinions in respect of the public tender offer to the SSC and its shareholders. The opinions of the BOM must be made in writing. If any members of the BOM have a different opinion, then the BOM must include such opinion when making the disclosure of information.

The law entitles the SSC to 15 days to examine the application dossier submitted by the investor and respond in writing to the investor if there is any amendment/supplementation that needs to be made to the application dossier by the investor.

Within seven working days from the date the investor receives the opinion of the SSC that the application for tender offer has been complete, the investor will make a public announcement regarding its tender offer, for at least three days, on the investor's website (if any), the website of the tender offer agent and the website of the stock exchange (if the target company is listed on any stock exchange).

After the tender offer is publicly announced, the investor may still withdraw its tender offer in certain limited cases, as stipulated below:

  • where the number of shares registered for sale does not reach the minimum percentage which has been announced in the public tender offer registration form submitted to the SSC;
  • where the target company increases the number of voting shares via conversion of preference shares;
  • where the target company reduces the number of voting shares;
  • where the target company issues additional shares, convertible bonds, bonds with warrants attached or options to purchase; or
  • where the target company sells its assets valued at 35% of the total asset value based on the most recent financial statements.

Cases in which it is permitted to propose withdrawal of a public tender offer must be specified in the tender offer registration dossier.

In order to withdraw the tender offer, the investor is required to submit a notification to the SSC within three working days from the date of occurrence of any of the events mentioned above. Within three working days from the date of receipt of the proposal for withdrawal, the SSC will provide its written response. Upon receiving the SSC's approval for withdrawal, the investor must make a public announcement of the withdrawal on its website (if any), on the website of the tender offer agent and the website of the stock exchange (if applicable) within 24 hours after receipt of SSC's approval.

Otherwise, if the investor proceeds with the bidding process, then once the public tender offer is completed, the investor must submit a report to the SSC on the result of the public tender offer and make a public announcement regarding the same. These reporting obligations must be done by no later than five days from the completion date of the tender offer.

Furthermore, to ensure the equality and fairness of the public tender offer, during the period commencing from the time when the investor sends the registration dossier to the SSC until when the tender offer is completed, the investor must disclose the same information at the same time to the shareholders. 

3.7 Disclosures by the target company

Vietnamese law provides for rules around the target company's obligations to disclose information about the public tender offer.

The target company needs to announce its receipt of the tender offer on its website and the stock exchange where its shares are listed within three working days after receiving the application dossier for the bidding registration. The BOM of the target company has 10 days to review the application dossier and must send the BOM's opinions on the public tender offer to the SSC and its shareholders within this time limit.

Under Decree No. 155, the target company, internal persons and affiliated persons of the target company, the tender offer agent and any other person having information about the tender offer must not (i) take advantage of inside information for purchasing or selling securities for themselves and (ii) disclose such information to or incite or induce other persons into purchasing or selling securities before the official commencement of the public tender offer.

After the public tender offer, if there are changes with respect to the shareholding level of major shareholders in the target company, the target company must make a public announcement on its website for three working days upon its receipt of the major shareholders' notice on the same.

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