1. Conditions for a public company to issue shares to pay dividends

To be able to issue shares to pay dividends, a public company needs to comply with the provisions of Article 60 in Decree 155/2020/ND-CP, a legal document on enterprises in Vietnam.

– The first condition is that the company must have a plan to issue shares to pay dividends approved at the General Meeting of Shareholders. This means that the decision on the issuance of shares to pay dividends must be agreed by the shareholders of the company.

– The second condition is that the company must have insufficient after-tax profit to pay dividends, based on the audited financial statements of the most recent year, and this audit must be carried out by an approved auditing organization. In case the company is the parent company and the shares issued to pay dividends are those of the parent company, the profit decided to be distributed may not exceed the undistributed after-tax profit recorded in the audited consolidated financial statements. If the profit decided to be distributed is lower than the undistributed after-tax profit in the consolidated financial statements and higher than the undistributed after-tax profit in the parent company’s separate financial statements, the company may only be distributed after the profit has been transferred from the subsidiary to the parent company.

– The third condition is that the company must have a plan to handle surplus shares and fractional shares (if any) approved at the General Meeting of Shareholders or the Board of Directors.

– The last condition is that the company must be approved by the State Bank of Vietnam to request an increase in charter capital in accordance with the law on credit institutions for the issuance of shares of a credit institution, or approved by the Ministry of Finance to increase charter capital in accordance with the law on insurance business for the issuance of shares slip of the insurance business organization.

2. Documents reporting on share issuance to pay dividends of a public company

According to the provisions of Article 61 of Decree No. 155/2020/ND-CP, the report document on share issuance to pay dividends of a public company should include the following information:

– Issuance report: This document provides information related to the process of issuing shares to pay dividends, including objectives, methods, number of shares issued, price and timing.

– Decision of the General Meeting of Shareholders: The document must include the decision adopted at the General Meeting of Shareholders on the plan to issue shares to pay dividends. This decision is usually made after shareholders have discussed and voted to approve the option.

– Decision of the Board of Directors: For the implementation of the issuance plan, the document must include the decision of the Board of Directors. This decision confirms the specific implementation of steps and measures to implement the issuance of shares to pay dividends.

– Audited financial statements: The document should include the company’s most recent year financial statements, which have been audited by an approved auditing organization. This financial statement provides information about the financial position of the company and the reliability of the information during the issuance of shares to pay dividends.

– Decision of the competent authority of the subsidiary: If the public company is the parent company with a subsidiary, the document must include the decision of the competent authority of the subsidiary on the distribution of profits. The document must also be accompanied by a statement certified by the bank proving the transfer of profits from the subsidiary to the parent company. This maps the undistributed decision profit to less than the undistributed after-tax profit in the consolidated financial statements and greater than the undistributed after-tax profit in the parent company’s own financial statements.

– Decision of the General Meeting of Shareholders or the Board of Directors: If there is a necessity, the document must include a decision adopted at the General Meeting of Shareholders or the Board of Directors on a plan to handle a specific share or share.

– Written approval from the State Bank of Vietnam or the Ministry of Finance: If a public company is a credit institution or insurance company, the document should include a written approval from the State Bank of Vietnam or the Ministry of Finance on the request to increase charter capital in accordance with law for the issuance of shares of the organization credit or insurance business organization.

3. Order and procedures for issuing shares to pay dividends

– The issuer must send documents reporting on share issuance specified in Articles 61, 63 and 65 of this Decree to the State Securities Commission.

– Within 07 working days from the date of receipt of complete and valid issuance report documents, the State Securities Commission shall notify in writing the issuer and post on the website of the State Securities Commission the receipt of complete issuance report documents of the issuer; in case of refusal, a written response clearly stating the reasons therefor must be given.

– Within 07 working days from the date on which the State Securities Commission notifies the receipt of complete issuance report documents, the issuer must publish the Notice of Issuance on the website of the issuer or the Stock Exchange. The disclosure of the above information must be made at least 07 working days before the end of the issuance.

– The date of completion of the issuance must not exceed 45 days from the date on which the State Securities Commission notifies the receipt of complete reporting documents.

– In the process of issuing shares to pay dividends or issuing shares to increase share capital from equity sources, in case fractional shares arise, the company may buy back fractional shares as treasury shares according to the plan approved by the General Meeting of Shareholders or authorized for approval by the Board of Directors. The shares acquired by this company are handled in accordance with the provisions of Clause 7, Article 36 of the Law on Securities and relevant regulations.

– Within 15 days from the date of completion of the issuance, the issuer must send the report on the results of the issuance to the State Securities Commission and publish information on the website of the issuer or the Stock Exchange about the results of the issuance.

– Within 03 working days from the date of receipt of a complete and valid issuance result report, the State Securities Commission shall notify in writing the receipt of the issuance result report to the issuer and send it to the Stock Exchange, Vietnam Securities Depository and Clearing Corporation and post on the website of the State Securities Commission the receipt of the report on the results of the issuance.

– After receiving the State Securities Commission’s report on the results of the issuance, the issuer is required to stop freezing the proceeds from the issuance in case of issuing shares under the employee option program, except in the case of issuing bonus shares to employees.

Above is the content of KALF’s advice on related issues on the order and procedures for issuing shares to pay dividends. All of our above advice opinions are based on applicable legal provisions. If you have any questions or requests about legal issues, please contact us for timely answers.