Joint stock companies that are not public companies can issue additional shares and offer them privately to raise investment capital.

Legal grounds:

• Securities Law 2019;
• Enterprise Law 2020;
• Decree No. 01/2021/ND-CP.

We get the following questions:

We has been operating joint stock company for 5 years, the current capital is 10 billion dong, including 3 shareholders who are all acquaintances. I would like to invite more people to contribute capital to the company to develop the business. Currently, there are about 10 people who want to invest. What procedure do I need to do?

Small-scale joint stock companies (not yet public) as mentioned in the above question still have the right to issue additional shares to raise investment capital through the private placement procedure.

1. Conditions for offering individual shares

Pursuant to Clause 1, Article 32 of the Securities Law 2019, a public company is a joint stock company in one of the following two cases:

• The company has contributed charter capital of VND 30 billion or more and has at least 10% of the voting shares held by at least 100 investors who are not major shareholders;
• The Company has successfully conducted the initial public offering of shares through registration with the State Securities Commission in accordance with the provisions of Clause 1, Article 16 of this Law.

Thus, the joint stock company in the question above is not a public company yet.

Pursuant to Clause 1, Article 125 of the Enterprise Law 2020, a joint-stock company that is not a public company must satisfy the following conditions when making a private placement of shares:

• Do not offer for sale through the mass media;
• Offering for sale to less than 100 investors, excluding professional securities investors or only offering to professional securities investors.

According to the above provisions, it should be noted:

• Joint stock companies that are not public companies are restricted in the number of shareholders when offering individual shares;
• Due to the small size of the offering, the company is not allowed to disclose information about the private placement of shares on the mass media such as radio stations, television stations, printed newspapers, online newspapers and websites/e-portals.

2. Order of private placement of shares

Pursuant to Clause 2, Article 125 of the Enterprise Law 2020, the private placement of shares of a non-public joint-stock company is carried out as follows:

Step 1. Develop and approve the plan for private placement of shares

The plan for private placement of shares has basic information including: type of shares, expected quantity and price, transfer conditions, transfer restrictions (if any), …

Step 2. Organize the sale of shares according to the approved plan

After the company approves the plan for private placement of shares, the sale of shares is carried out as follows:

• Prioritize the sale of shares to existing shareholders: at least 15 days before the end of the registration period to buy shares, the company must send a notice to existing shareholders for them to register to buy or transfer the right to buy shares to others.
• Sale of shares to new investors: If existing shareholders and/or transferees do not buy all the shares proposed for sale, the remaining shares will be sold to other investors with conditions not more favorable than those offered to existing shareholders, unless otherwise approved by the General Meeting of Shareholders.
• The individual subscriber to buy shares must make the payment for the share purchase to the company. Note: if the investor is an organization, a non-cash payment must be followed.

Step 3. The company summarizes the results of the private placement of shares and updates the register of shareholders

Step 4. Make a notice of registration of change of charter capital with the business registration agency

Based on the results of the private placement of shares, within 10 days from the end of the sale, the company must carry out the  procedure for registration for change of charter capital  (increasing capital).

3. Dossier for carrying out procedures for registration of change of charter capital

Pursuant to Clauses 1 and 3, Article 51 of Decree No. 01/2021/ND-CP as follows:

In case the General Meeting of Shareholders directly approves the charter capital increase:

• Notice of change of business registration information signed by the legal representative of the enterprise;
• Resolution, decision and copy of meeting minutes of the General Meeting of Shareholders on the change of charter capital;
• Document of the Investment Registration Authority approving the purchase of shares by foreign investors or economic organizations with foreign owned capital, in case requirement of the procedures for registration of capital contribution or share purchase, buy the contributed capital according to the provisions of the Law on Investment;
• If the applicant is not the legal representative of the enterprise, it must include: a written authorization and a copy of the citizen’s identity card/passport for the authorized person.

In case the General Meeting of Shareholders approves the offering of shares to increase charter capital, and assigns the Board of Directors to carry out procedures for registration of increase of charter capital after the end of each share sale:

• Notice of change of business registration information signed by the legal representative of the enterprise;
• Resolution and a copy of the minutes of the General Meeting of Shareholders on the offering of shares to increase charter capital, specifying the number of shares to be offered and assigning the Board of Directors to carry out procedures for registration of an increase in charter capital after the end of each share sale;
• Resolution, decision and copy of meeting minutes of the Board of Directors on the registration to increase charter capital of the company after the end of each share sale.
• Document of the Investment Registration Authority approving the purchase of shares by foreign investors or economic organizations with foreign owned capital, in case requirement of the procedures for registration of capital contribution or share purchase, buy the contributed capital according to the provisions of the Law on Investment;
• If the applicant is not the legal representative of the enterprise, it must include: a written authorization and a copy of the citizen’s identity card/passport for the authorized person.