The Government last week approved a decision clarifying regulations on the equitisation of State-owned enterprises (SOEs) that could ultimately help accelerate the process and limit certain financial risks.
Under Decision No 109/2007/ND-CP issued on June 26, the definition for equitising enterprises was widened to include independent State companies under ministerial or municipal authority, national corporations, parent companies, subsidiaries that conduct account practices independently from their parent, and State-owned limited companies.
These SOEs can now also appoint underwriters for their initial public offerings or carry out direct negotiations with investors.
Decision 109 overrules Decision No 187/2004/ND-CP that was issued in November 2004, and is in line with the Enterprise Law and Securities Law.
A key point in Decision 109 is that companies with over VND 30 billion (1.87 million USD) in assets, over 10 billion VND (625,000 USD) in State capital or own favourable real estate are now required to have their assets appraised by a foreign or local company.
“Under Decision 187, many enterprises had the opportunity to steal State assets by manipulating asset values (especially when it came to property) in order to generate profits for individuals after equitisation,” says Nguyen Son, deputy director of the State Securities Commission’s Market Development Department.
The Ministry of Finance must be informed over which appraisal company is employed.
Companies that do not fall under the criteria are allowed to conduct appraisals independently and then report to authorities.
Another key aspect to Decision 109 is that executives are given greater autonomy to resolve issues arising during the equitisation process, including measures to sell shares and greater flinancial management authority.
“This creates favourable conditions for enterprises to hasten equitisation,” says Dinh Quang Tri, deputy general director at Electricity of Viet Nam.
The decision also addresses specific issues relating to initial public offerings (IPO).
Companies must announce the bookbuilding date 10 days before the auction. If the company plans to list right after the equitisation, authorities must determine the minimum and maximum volume of shares to be issued.
SOEs are no longer allowed to offer strategic investors shares at preferential prices below that set during the bookbuilding phase.
Removing preferential pricing is good for EVN as it helps attract more foreign shareholders, says the company’s deputy general director.
Strategic investors are not allowed to sell their shares for three years after the IPO without first receiving majority shareholder approval, and must offer financial management, training and technology expertise.
Top officials at Vietcombank and BIDV agreed with the strategic investor criteria, saying the requirements will help SOEs develop in the long run,
Local banks are trying to access new technology and expertise, and thus strategic shareholders should be of a high calibre, says Nguyen Hoa Binh, Vietcombank chairman.
SOEs must sell shares within three months after receiving approval of their equitisation plan. Total shares sold to strategic partners and other investors must exceed 25 percent of charter capital.
Companies with over 500 billion VND (31.25 million USD) in State capital or operate in special sectors such as insurance, banking, telecommunications, airlines and mining, will be subject to Government approval over the volume of shares to be issued.
Source: VNA
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