Businesses may soon have "no way" to arbitrarily lock foreign rooms.

Less than 10 days after the National Assembly voted to pass the Law amending and supplementing a number of articles of 9 laws, the Ministry of Finance has urgently announced to collect opinions on the draft amendment to Decree 155.

Amendment to Decree 155: Enterprises may soon have "no way" to arbitrarily lock foreign room

Less than 10 days after the National Assembly voted to pass the Law amending and supplementing a number of articles of 9 laws, the Ministry of Finance has urgently announced to collect opinions on the draft amendment to Decree 155.

Paradox after the Decree on opening foreign room

In mid-June 2024, the extraordinary shareholders' meeting of Vietnam International Commercial Joint Stock Bank ( VIB ) approved the proposal to reduce the foreign room from 20.5% to 4.99%. With an overwhelming approval rate, the above proposal, although quite unexpected, was quickly approved. The maximum ownership ratio of foreign investors will take effect immediately after half a month, from July 1.

Current regulations allow VIB to lower its room. Specifically, in Clause 1.e, Article 139 on foreign ownership ratio in the Vietnamese stock market, a public company has the right to decide on a maximum foreign ownership ratio lower than the prescribed ratio in the case of "approval by the General Meeting of Shareholders and stipulated in the Company Charter".

However, similar proposals may no longer be feasible in the coming time. In the Draft Decree amending and supplementing a number of articles of Decree No. 155/2020/ND-CP detailing the implementation of a number of articles of the Securities Law, which is soliciting comments, the drafting agency is submitting to remove this provision, unless otherwise decided by a competent state agency.

Specifically, the new regulation amends and supplements Point e, Clause 1, Article 139 as follows: “e) In case the competent state agency decides on a maximum foreign ownership ratio different from the ratio prescribed in Points a, b, c, d, and dd, Clause 1 of this Article, the maximum foreign ownership ratio at the company shall be implemented according to that ratio.”

According to the drafter's submission to the Government, this is to ensure the rights of foreign shareholders under the Enterprise Law, as well as reduce risks for foreign investors when they cannot predict changes from enterprises, thereby increasing the attractiveness of the Vietnamese stock market, attracting this group of investors.

In fact, even in the story of foreign room at VIB, although it has been approved, this is still one of the contents with the highest rate of disapproval in the history of the bank's general meetings of shareholders. Commonwealth Bank of Australia (CBA), VIB's largest shareholder, has completed divestment at VIB according to a plan that was outlined many years ago. The transactions took place in the second half of 2024, so of course, it can only be sold to domestic investors because the foreign room has dropped sharply, leaving no room for other foreign investors to participate.

Regulations regarding the maximum ownership ratio of foreign investors in listed organizations have changed significantly after the promulgation of Decree 60/2015/ND-CP. Instead of the maximum level of 49%, for the first time the Government has allowed an unlimited foreign ownership ratio. However, after nearly a decade of promulgation, the results have not met initial expectations.

VIB is not the only case where the general meeting of shareholders has chosen to lower the maximum foreign ownership ratio. According to the latest update from the Vietnam Securities Depository (VSD), there are more than 500 enterprises with foreign room at 0% out of nearly 1,900 enterprises listed and registered for trading on the stock exchange.

Some of them are registered in business lines that are subject to foreign ownership restrictions. However, some enterprises reduce foreign room due to proposals from the board of directors and approval by the majority of shareholders.

Closely monitor the "room" announcement stage

According to the criteria set by the market rating organization FTSE Russell, Vietnamese securities have met 7/9 upgrading criteria and only 2 criteria need to be improved, including removing the requirement for foreign investors to deposit funds before trading (prefunding) and handling failed transactions (failed trade management).

However, FTSE Russell itself, in its most recent stock market classification report published in early October, also mentioned the need to introduce an effective mechanism to facilitate transactions between foreign investors in securities that have reached or are approaching the maximum foreign ownership ratio.

Besides FTSE, Vietnam is also pursuing the goal of upgrading its market according to MSCI standards - the side that has indexes with many investment funds as reference but also sets somewhat stricter criteria. By June 2024, Vietnam's stock market had met 10/18 criteria. One of the criteria that still needs improvement is the foreign ownership limit, the remaining foreign ownership level and the level of liberalization of the foreign exchange market that has not been met...

Sharing at the workshop "Overview of the capital market in 2024 and prospects for 2025", Mr. To Tran Hoa - Deputy Director of the Market Development Department of the State Securities Commission said that a current problem is that the list of industries accessible to foreign investors has not been clarified. This is a story that requires many ministries and branches to get involved. In addition, many enterprises when registering their business lines choose broad industries, covering smaller industries subject to regulations limiting foreign ownership ratio. This makes it impossible for enterprises operating in restricted fields to "open room" for foreign investors.

Mr. To Tran Hoa, Deputy Director of Market Development Department, State Securities Commission

“The list of industries accessible to foreign investors is an issue that ministries and sectors need to coordinate and clarify together. If implemented, the experience of securities investors will be significantly improved,” Mr. To Tran Hoa also emphasized.

In the Draft Amendment to the Decree, the responsibility to notify the maximum foreign ownership ratio of equitized enterprises that are public companies listed and registered for trading on the market has been clarified. The announcement of the "foreign room" will be managed much more closely when the above contents are passed in the Draft Amendment to Decree 155, opening the door wider for foreign investors to access the market.

Source: https://baodautu.vn/sua-doi-nghi-dinh-155-doanh-nghiep-co-the-sap-het-cua-tuy-y-khoa-room-ngoai-d232044.html