Legal News
Regulations on eligibility for SOEs strategic investor

24 - 01 - 2018
VGP

The Government issued Decree 126/2017/ND-CP (Decree 126) dated November 16, 2017 guiding the conversion of state owned enterprises ("SOEs") and one-member limited liability companies of which their charter capital is 100% invested by an SOE into joint stock companies.

Question: What are the requirements on eligibility for SOEs strategic investor?

Answer:

Decree 126 introduced stricter conditions for strategic investors upon their intention to buy shares, specifically:

+ being adequately qualified for legal status;

+ having financial capability, bringing profits and suffering no accumulated losses from production and business activities in the last two years;

+ having a written commitment to becoming a strategic investor to maintain the core business and brand of the equitized enterprise; not transferring the purchased shares for a period of 3 years; having a plan to support post-equitization enterprises in transferring new technologies, training human resources, etc. In case of any failure to fulfill such commitments, and having the obligation to compensate any violations.

The decree also stipulates that the initial offering to strategic investors only applies to the list of the enterprises where the State continues to hold more than 50% of total shares upon their equitization under the Prime Minister’s decision.

The process of selecting strategic investors in equitized enterprises must comply with the specific work steps specified in Appendix I to this Decree, and ensure that the selection and organization of share subscription by strategic investors is conducted prior to the date of disclosure on the initial public offering Supplementing the method of initial public offering./.

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