1. What are the conditions for a public company to buy back its own shares?

Clause 1, Article 36 of the Law on Securities 2019 stipulates, a public company that buys back its own shares must meet the following conditions:

• There is a decision of the General Meeting of Shareholders approving the repurchase of shares to reduce charter capital, a repurchase plan, clearly stating the quantity, implementation time, principles for determining the redemption price;
• There are sufficient sources to buy back shares from the following sources: surplus of share capital, development investment funds, undistributed after-tax profits, other funds belonging to equity used to supplement charter capital in accordance with law;
• Having a securities company appointed to conduct transactions, unless a securities company that is a member of the Vietnam Stock Exchange buys back its own shares;
• Satisfy the conditions prescribed by law in case the public company belongs to a conditional business investment line or line;
• Not in the case of not being able to buy back their own shares.

2. Cases in which a public company may not buy back its own shares

• There are overdue liabilities based on the most recent audited financial statements; In case the expected time of redemption of shares is more than 06 months from thepoint of death in the main year, the overdue debt is based on the financial statements of the last 06 months audited or examine;
• In the process of offering and issuing shares to raise more capital
• CLottery of the company’s shares is the subject of a public offer
• They have made the redemption of their own shares within 06 months from the date of reporting the results of the repurchase or have just concluded the offering or issuance of shares for capital not exceeding 06 months from the date of completionof the offering or issuance.

Note: Exceptions for cases specified at Point c, Clause 2 of this Article.

3. 3. Where a public company is exempt from conditions when buying back its own shares

The redemption of shares is exempt from conditions in the following cases:

• Repurchase shares at the request of shareholders in accordance with the Law on Enterprises;
• Redemption of shares of employees according to the regulations on issuing shares to employees of the company, redemption of fractional shares under the plan of issuing shares to pay dividends, issuance of shares from equity sources;
• The securities company buys back its own shares to correct trading errors or buys back odd-lot shares.

4. 4. Who can a public company not buy back shares of?

Except in the case of redemption of shares in proportion to the percentage of ownership in the company or redemption of shares pursuant to a judgment, decision of the Court that has taken legal effect, an arbitrator’s decision or a redemption of shares through a transaction carried out by the method of order matching, The company may not redeem shares of the following objects:

• Insiders and related persons of insiders in accordance with the provisions of this Law;
• Owners of shares with transfer restrictions in accordance with the law and the company’s charter;
• Major shareholders in accordance with this Law.

A public company that buys back its own shares as prescribed in Clauses 1 and a, Clause 2, Article 36 of the Law on securities must carry out procedures to reduce its charter capital in proportion to the total value calculated by the par value of the shares repurchased by the company within 10 days from the date of completion of the share repurchase payment.

In case the company buys back shares of employees according to the company’s regulations on issuing shares to employees, it shall comply with the following provisions:

• The total number of shares of employees that have been redeemed by the company to reduce the charter capital must be reported at the Annual General Meeting of Shareholders;
• The company must carry out procedures to reduce its charter capital corresponding to the total value calculated by par value of the shares repurchased by the company within 10 days from the date of reporting to the Annual General Meeting of Shareholders as prescribed at Point a of this Clause.

5. 5. Principles for determining the price of redemption of one’s own shares

The principle of determining the order price for redemption of one’s own shares of a public company by the method of order execution or agreement is stipulated as follows:

• Bid price ≤ Reference price + (Reference price x 50% Share price fluctuation range).
• Order volume: In each trading day, the total order volume is at least 3% and the maximum is 10% of the trading volume registered with the State Securities Commission (order volume does not include order cancellation volume and this regulation is exempt when the remaining purchase volume is less than 3%).

This provision applies until the public company completes the transaction of buying back its own shares in the volume registered with the State Securities Commission.

6. 6. Can a public company change its own stock buy back?

A public company may not change its mind or plan to buy back shares as reported and disclose information to the public, except in force majeure cases (natural disasters, epidemics, wars and others) that must be approved by the State Securities Commission.

Within 24 hours from the issuance of the decision to change the share repurchase plan, the public company must report to the State Securities Commission, and at the same time publish information on the company’s website, the State Securities Commission’s means of disclosure, etc The Stock Exchange shall decide to change according to the Form in Appendix No. 37 enclosed with this Circular.

The State Securities Commission shall comment on the change of the share repurchase plan within 03 working days from the date of receipt of the change report.

Within 24 hours after being approved by the State Securities Commission to change the share repurchase plan, the public company must publish information on the company’s website, the State Securities Commission’s means of disclosure, etc The Stock Exchange shall change the share repurchase plan according to the Form in Appendix No. 38 promulgated together with this Circular.

Public companies are allowed to change the repurchase of shares after the disclosure of information in accordance with regulations.

The above is KALF’s advice on whether a public company can buy back its own shares and some related legal issues. 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.