Legal uncertainties cloud foreign IPOs

Many people think that success of the auction session held on May 27 at HCM City Securities Trading Centre (HSC) should have created better conditions for Taiwan-owned electrical wire and cable producer Taya Vietnam to list on the southern stock market. To do so, a minimum 20% of Taya’s stake is held by at least 50 external shareholders.
However, listing guidelines for such foreign invested enterprises (FIEs) like Taya have not been issued yet.
Cheng Ping Sen, Taya’s general director, confirmed that following completion of selling shares to the public, the company would submit listing documents to the State Securities Committee (SSC) so that Taya’s shares could be listed on the HCM City stock market by the third or fourth quarter of this year.
After the recent share issue by Taya—the country’s first foreign company share offer—equity is as follows: founding shareholders including Taiwan Electrical Wire and Cable Co and Dai Trien Electrical Wire and Cable Co retain 80% of Taya’s chartered capital or 14,614,147 shares. Employees hold 5% or 913,330 shares and external shareholders hold 15% of which strategic partners account for 1.64% and other investors 13.36%.
If the company is listed on the stock market this year as scheduled, this will be the first foreign owned joint stock company that has ever listed shares at the Securities Transaction Centre in HCM City.
It is scheduled that the company will hold a founding shareholders’ meeting in order to approve the draft charter on Taya’s operation and organisation, appoint the executive board through business development strategies and particularly approve a listing schedule of Taya on the STC in the third or fourth quarter.
According to Nguyen Quang Vinh, director of Bao Viet Securities Trading Co (BVSC) in charge of consulting transformation and listing for Taya, BVSC is completing required documents to submit to the State Securities Committee.
Additionally, regarding the listing shares of FIEs, state administrators said they are considering issuing specific guidelines. In fact, exactly how the listing will be conducted and how many shares Taya will be allowed to list on the stock market is also still up in the air. Taya is the first FIE allowed to transform to a joint stock company on a trial basis and the legal aspects of a share listing by a foreign firm is likewise far from clear.
Vinh from BVSC said “even whether 100% of Taya’s chartered capital equal to 182 billion dong or only 20% will be listed on the stock market is also being seriously considered.”
Further clouding the legal issue, one SSC official said “shares of FIEs being transformed into joint stock companies are not subject to Decree 144/2003/ND-CP defining securities and the stock market. Therefore, listing conditions on the stock market as presently are considered as a reference only.
Transforming FIEs into joint stock companies accompanied with a listing requires a clear-cut legal framework so that listing shares can be made following transformation of any FIE at any time.
It is certainty that the government will have to revise Decree 144/2003/ND-CP on securities and the stock market in the near future to cater to the twenty or so foreign firms wanting go public.

 

Category: Stocks