Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses

During their operations, many public companies need to increase their charter capital to expand business scale, supplement working capital, meet financial capacity requirements, or attract strategic investors. One common method used is an additional share offering.

However, for public companies, the issuance of additional shares is not only governed by the Enterprise Law but also must strictly comply with the provisions of the Securities Law and guiding documents. Businesses must fully meet the conditions, follow the correct procedures, and fulfill disclosure obligations before, during, and after the offering.

The following article by OPLAW analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

Governing Legal Basis

The additional share offering by public companies is currently primarily governed by:

• Securities Law 2019;
• Enterprise Law;
• Decree No. 155/2020/ND-CP guiding the Securities Law;
• Circular No. 96/2020/TT-BTC on information disclosure in the securities market;
• Regulations related to enterprise registration and adjustment of operating licenses for enterprises operating in the securities sector.

For securities companies or fund management companies, after completing the increase in charter capital, they must also carry out procedures to adjust their Establishment and Operation License at the State Securities Commission before adjusting their Enterprise Registration Certificate.

Two Common Offering Forms

According to the document, businesses can choose one of two issuance methods:

1. Offering to Existing Shareholders

This is an issuance method to ensure the pre-emptive rights of existing shareholders in proportion to their ownership.

Shareholders have the right to:

• exercise their purchase rights;
• transfer their purchase rights;
• or decline to exercise their purchase rights in accordance with legal provisions and the offering plan.

This method of offering helps limit the dilution of ownership for existing shareholders and is often used when a business wants to raise additional capital from its current investors.

2. Private Placement to Strategic Investors

Unlike offerings to existing shareholders, businesses can choose to privately place shares to strategic investors or professional securities investors.

In this case, the offering plan must clearly define:

• investor selection criteria;
• projected ownership percentage after issuance;
• number of shares offered;
• offering price or pricing principles.

This method is often chosen when a business wishes to attract shareholders with financial capacity, management experience, or the ability to support business development.

Legal Conditions for Private Placement

According to the regulations cited in the document, private placements must simultaneously meet several conditions.

Approved by the General Meeting of Shareholders

The General Meeting of Shareholders must issue a resolution approving:

• the issuance plan;
• the plan for using the proceeds;
• the target recipients of the issuance;
• the number of shares;
• the offering price or pricing principles;
• the increase in charter capital after issuance;
• amendment of the company's Charter if necessary.

Concurrently, the General Meeting of Shareholders may authorize the Board of Directors to implement specific tasks of the offering.

Ensuring Conditions for Eligible Recipients

For private placements to strategic investors, the participants must belong to one of the following groups:

• strategic investors; or
• professional securities investors.

This is a mandatory condition under the Securities Law for private placements.

Compliance with Time Between Offerings

According to the document, private placements must be spaced at least 06 months apart from the completion date of the most recent offering.

This regulation aims to prevent businesses from conducting continuous issuances, which could affect shareholder rights and market stability.

Share Transfer Restrictions

For privately placed shares:

• strategic investors are restricted from transferring shares for a minimum of 03 years;
• professional securities investors are restricted from transferring shares for a minimum of 01 year from the completion date of the offering.

This regulation helps ensure the long-term commitment of strategic investors to the business.

Additional Share Offering Implementation Process

From a practical perspective, the issuance process typically involves several consecutive steps.

Step 1. Approval of Policy by the General Meeting of Shareholders

This is the most crucial step because the entire offering plan must be approved by the General Meeting of Shareholders.

The resolution needs to fully specify:

• the purpose of the issuance;
• the number of shares;
• the plan for capital utilization;
• the increase in charter capital;
• amendment of the Charter;
• the mechanism for authorizing the Board of Directors to implement the offering.

Step 2. Board of Directors Implements the Offering Plan

After approval by the General Meeting of Shareholders, the Board of Directors will:

• issue a resolution to implement the plan;
• approve the offering registration dossier;
• identify investors (if it is an offering to strategic investors);
• assign a representative to carry out necessary procedures.

Step 3. Information Disclosure

Throughout the issuance process, the business must make multiple information disclosures as required by regulations.

The information to be disclosed includes:

• resolution of the General Meeting of Shareholders;
• resolution of the Board of Directors;
• approval document from the State Securities Commission;
• issuance results;
• changes in major shareholders' ownership (if any);
• adjusted operating license;
• adjusted enterprise registration certificate.

This is a mandatory obligation for public companies to ensure market transparency.

Step 4. Registration with the State Securities Commission

Before proceeding with the issuance, the enterprise must submit the registration dossier for the offering to the State Securities Commission.

The dossier includes various documents such as:

• offering registration form;
• resolution of the General Meeting of Shareholders;
• resolution of the Board of Directors;
• confirmation of escrow account opening;
• commitment not to violate cross-ownership regulations;
• issuance prospectus and capital utilization plan (if any).

Upon receipt of a complete and valid dossier, the State Securities Commission will provide a written response within the prescribed timeframe.

Step 5. Organize the issuance

After approval, the enterprise proceeds with:

• sending notices to shareholders (for issuance to existing shareholders);
• receiving subscription registrations;
• collecting share purchase payments through the escrow account;
• completing the distribution of shares according to the approved plan.

For issuance plans to existing shareholders, the enterprise must send notices by secured method and complete them before the end of the offering period within the timeframe specified in the documents.

Step 6. Report issuance results

After the issuance concludes, the enterprise must:

• report the results to the State Securities Commission;
• disclose information about the issuance results;
• update the shareholder register;
• terminate the escrow of the share purchase payment account.

If the issuance changes the ownership ratio of shareholders beyond the prescribed thresholds, the enterprise must also disclose information about this change.

Step 7. Adjust charter capital and licenses

After completing the issuance, the enterprise continues to perform:

• adjustment of the Establishment and Operation License (for enterprises operating in the securities sector);
• adjustment of the Enterprise Registration Certificate;
• amendment of the Charter according to the new charter capital;
• disclosure of information about these changes.

This is the final step to complete the entire process of increasing charter capital.

Some legal risks enterprises need to be aware of

Through practical consultation, many enterprises focus on capital mobilization but overlook legal procedural requirements. Some common risks include:

• The issuance plan was not approved by the General Meeting of Shareholders with proper authority or did not meet the prescribed voting ratio.
• The offering registration dossier submitted to the regulatory agency lacked documents or was incomplete, leading to prolonged processing times.
• Delay or failure to fulfill information disclosure obligations at each stage of the issuance.
• Failure to ensure the opening and use of the escrow account for share purchase payments in accordance with regulations.
• Delay in performing procedures for adjusting the Operating License, Enterprise Registration Certificate, and Charter after completing the capital increase. These steps are all outlined in the reference process and need to be closely monitored by the enterprise.

Conclusion

Additional share offerings are an important tool for enterprises to mobilize capital to serve their development strategies. However, for public companies, this is a complex legal process, requiring coordination among the General Meeting of Shareholders, the Board of Directors, the enterprise, the escrow bank, and the State Securities Commission.

Thorough preparation of the issuance plan, legal dossier, compliance with information disclosure obligations, and completion of post-issuance adjustment procedures not only help enterprises ensure the legality of the capital increase but also mitigate the risk of violations or delays in implementation.

For enterprises operating in finance, securities, or fund management, having the support of a legal consulting team from the initial stage of developing the issuance plan will help ensure that the capital increase process is carried out in compliance with regulations and effectively.

Frequently Asked Questions

What should readers know about Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses?

This article analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

What should readers know about Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses?

This article analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

What should readers know about Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses?

This article analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

What should readers know about Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses?

This article analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

What should readers know about Additional Share Offering in Public Companies: Legal Conditions, Implementation Procedures, and Key Considerations for Businesses?

This article analyzes the legal conditions and implementation procedures for private placements of additional shares by public companies, based on current regulations and practical processes outlined in reference materials.

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