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Last updated: Friday, September 22, 2017

 

Loosening Room, Looking for Appropriate Steps

Posted: Monday, August 29, 2016


Regarding the stock market, new content on loosening the stock room has been added to the draft Law on amendments and supplements to the Law on Investment and Enterprises. This opens up hopes of removing obstacles of lifting the foreign ownership ratio of the companies listed on the Vietnamese stock market.
New proposals
Decree 60/2015 on the implementation of the provisions of loosening the stock room for foreign investors and the Securities Act guidelines is facing many difficulties, especially from the psychological fears of the listed companies to cooperate with foreign enterprises, as prescribed by the Law on Investment, in cooperation case that if foreign investors hold 51 per cent equity or more in a listed company on the stock market, this is now seen as a foreign organisation.
 
After a period of reviewing and collecting contributions from businesses as well as the state authorities, such the obstacles will be removed when the draft Law amending and supplementing the law on investment and enterprises have new content added that "foreign investors owned charter capital is not limited to economic entities, except in cases of ownership ratio of foreign investors in the listed companies, public companies, organisations dealing in securities and securities investment funds prescribed by the securities legislation.”
 
According to representatives of the SSC, if regulations are passed on, the SSC will propose to the Ministry of Finance and the Government to amend Decree 60/2015 towards allowing foreign investors to own up to 63 per cent of the charter capital (instead of 51 per cent as in the provisions of the current investment Law) at listed firms not belonging to the group of restricted professions ownership ratio of foreign investors and such the listed companies are considered domestic investors. These issues will be carefully considered to remove bottlenecks in regulations on loosening the stock room while avoiding the undesirable effects in the loosened stock room for foreigners up to 100 per cent.
 
Specific plans
If a series of new regulations are applicable, this will bring positive signals and create a new element to improve ability to attract foreign capital flows of the stock market.
 
The regulations further creates an impetus for investors as well as listed companies. However, according to an expert in the field of securities, if the new content specified in the draft law stipulates that legal entity decides the securities rate of the foreign ownership in listed companies and public company, this will go adversely the content of the new regulation that regulates 30 per cent securities rate of the banking sector.
 
Thus, according to the expert, if the draft law is adjusted in the direction that "Foreign investors owned charter capital is not limited to economic entities, except where the percentage of the ownership foreign investors in these institutions are restricted under the provisions of specialized law.”
 
This content should be legally specified to minimize the cases related to the economic organisations, which is a public company or public fund with ownership ratio of foreign investors up to a certain percentage of the charter capital of more than 51 per cent, and such the companies need to wait for adjustment of their ownership rate to meet up the rate requirements of the current Investment Law. In fact, this ratio changes constantly in the public companies and public fund and the control of this rate is not feasible.
 
In order to remove difficulties for loosening the stock room, many experts in the field of securities noted that there should be specific plans for each case. Accordingly, there are two directions proposed.
 
In the first direction, all the public companies and public investment funds founded, operated and listed on Vietnam's stock market are considered domestic companies regardless of having ownership of foreign partners. The foreign limited companies and joint stock companies that have not been public and other FDI companies with the 51 per cent of charter capital of foreign investment and ownership are considered as foreign entities.
 
In the second direction, the limitation on the foreign ownership ratio is only applicable in a number of large enterprises, especially controlled by the government. However, such the companies are not limited to the foreign ownership ratio. All these businesses are treated fairly and equally.
 
As expected, the draft law amending the law will be submitted to the National Assembly in the October. The topic on loosening the stock room for foreign investors is drawing more public attention. Will this problem be solved this year or still be in a waiting list?
 
PV








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