People's Court of central province of Thua Thien Hue has recently assumed jurisdiction of Bien Hoa Confectionery Joint Stock Co (Bibica-coded BBC) and Hanoi's Thanh Hung Trade Ltd Co.
These two companies jointly sued Hue Foodstuff Industry Joint Stock Co (Infoco) because it made an illegal issuance for five billion dong of convertible bonds.
Bibica is Infoco's majority shareholder holding 27.61 percent stake into Infoco (headquartered at No 118B Ly Thai To, Hue city) and Thanh Hung Co holds 6 percent stake of Infoco.
Although not being allowed by shareholders' meeting in 2008, Infoco still issued five billion dong of convertible bonds. Till April 22, 2009, Infoco gave this issue to the shareholders' meeting to regularise. According to plaintiffs, this bond issuance had much derogation.
Issuing convertible bonds is an important issue that needs to be carefully considered. In the document sent to shareholders, Infoco did not mention the purpose of using capital being raised from the bond issuance. In addition, according to regulation, the bond must have face value of 100,000 dong per bond. But, Infoco's bonds have face value of only 10,000 dong per bond.
Moreover, according to plaintiffs, Infoco violated regulations on conditions to issue bond. According to Clause 17 of Decree No 52, enterprises will be allowed to issue bonds when posting profits in business activities. However, in Infoco's audited fiscal report, in 2008, the company posted a loss of over 1.3 billion dong and it was 2.905 billion dong loss in 2007.
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