Private placement of shares is a strategic move that companies often consider to raise capital and expand their operations. However, this process involves specific procedures and regulatory requirements that must be meticulously followed. Understanding the steps and guidelines for conducting a private share placement is crucial for businesses looking to attract investors and grow their shareholder base. In this discussion, we will delve into the essential aspects of conducting a private placement of shares, emphasizing the importance of compliance and thorough preparation.
Question:
Our company is a joint stock company (not a public company). Recently, at the general shareholders’ meeting, it was decided to issue additional shares and offer shares to existing shareholders in accordance with Article 124 of Law on Enterprise 2020. Subsequently, during the process of signing the share purchase agreements and making payments, some shareholders transferred their purchase rights to others (including both existing shareholders and non-shareholders), as allowed under point c, clause 2 of Article 124 of Law on Enterprise 2020. In this case, do we need to convene another general shareholders’ meeting to approve the separate private placement of shares for these cases and proceed with the notification procedure for the private placement of shares as stipulated in Article 125 of Law on Enterprise?
Answer:
– The company is advised to follow the procedures for the separate private placement of shares as specified in Article 125 of Law on Enterprise 2020.
– Clause 2 of Article 138 of Law on Enterprise states:
“2. The GMS has the following rights and obligations:
a) Ratify the orientation for development of the company;
b) Decide the types of authorized shares and quantity of each type; decide the annual dividends of each type of shares;
c) Elect, dismiss members of the Board of Directors and Controllers;
d) Decide investment in or sale of assets that are worth at least 35% of the total assets written in the latest financial statement, unless another ratio or value is specified in the company’s charter;
đ) Decide revisions to the company’s charter;
e) Ratify annual financial statements;
g) Decide repurchase of more than 10% of total sold shares of each type;
h) Take actions against violations committed by members of the Board of Directors and Controllers that cause damage the company and its shareholders;
i) Decide reorganization or dissolution of the company;
k) Decide the budget or total salaries, bonuses and other benefits of the Board of Directors and the Board of Controllers;
l) Approve the rules and regulations of the company, the Board of Directors and the Board of Controllers;
m) Approve the list of independent audit companies; choose independent audit companies carry out audit of the company; dismiss independent audits where necessary;
n) Other rights and obligations prescribed by Law and the company’s charter.”
- – So, if the company combines the issuance of shares to existing shareholders and a separate private placement of shares, they must convene the general meeting of shareholders to approve the capital amendment. Subsequently, after completing the share offering, the company can proceed.
- – Conduct the dossier, procedures, and steps for capital amendment in accordance with Article 52 of Decree No. 01/2021/NĐ-CP on enterprise registration regulations.
Conclusion
In conclusion, conducting a private placement of shares is a significant financial decision for any company. It offers the opportunity to secure vital capital for growth while expanding the circle of stakeholders. However, to successfully navigate this process, businesses must adhere to the prescribed procedures and regulatory requirements. By doing so, they can attract potential investors, build trust, and position themselves for strategic advancement. Securing funds through private share placement isn’t the sole objective; rather, it entails ensuring a transparent process aligned with legal standards, ultimately benefiting both the company and its shareholders.
HMLF is always available to offer assistance in understanding the procedures with authorities.
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