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Conditions for foreign investors to establish securities companies
The stock market is closely related and has a profound impact on a country’s economy, so the goal of integrating into the international stock market while still maintaining the national economy, hence strict conditions have been set by Vietnam for foreign investors to establish securities companies.
Conditions on ownership ratio of foreign investors in securities companies
Securities are a type of long-term valuable document or accounting entry that confirms the owner’s legal rights and interests in the capital or assets of the issuing organization. Securities can be profitable or bring risk in income to the owner, so it has a price and is a commodity in the stock market. Securities today are expressed in intangible form through accounting records using electronic data to express the rights and benefits of ownership of assets or capital for joint stock companies. The types of valuable documents that are considered securities according to the laws of each country have certain differences.
In particular, Vietnamese law stipulates that securities include shares (representing the ownership relationship with the company); bonds (showing the creditor relationship); investment fund certificates and other types of securities such as convertible bonds or preferred stocks. Vietnam is on the path of economic development, increasingly attracting the participation of domestic and foreign investors in the stock market.
According to Vietnam’s commitments when joining the WTO, foreign investors are required to own a securities company in Vietnam with a charter capital of 51% or more if:
- Receive approval from the General Meeting of Shareholders, Board of Members, or owner of a foreign organization to purchase shares or capital contribution to own 51% or more of the charter capital of a securities trading organization in Vietnam;
- Only use equity and other legal capital sources to buy shares or capital contributions and are not subject to ownership restrictions according to regulations;
- The most recent annual financial statement up to the time of application submission of the foreign organization (or the most recent consolidated financial statement in case the foreign organization is the holding company) is prepared and audited according to regulations of foreign laws under international accounting and auditing standards.
Conditions for foreign investors to establish securities companies
Conditions for capital of securities trading companies
Contributed capital at the time of establishment of the securities trading company is at least equal to the legal capital as prescribed in Clauses 1 and 2, Article 71 of Decree 58/2012/ND-CP. Legal capital for the company’s business operations is as follows:
- Securities brokerage: 25 billion VND;
- Securities trading: 100 billion VND;
- Securities investment consulting: 10 billion VND;
- Securities issuance guarantee: 165 billion VND;
Capital contributed to establishing a securities business enterprise or a branch of a foreign fund management company in Vietnam must be in Vietnamese Dong. In case an organization requests a license for many business operations, the legal capital is the total legal capital corresponding to each business operation requested for licensing as above.
Conditions on personnel of securities trading companies
An organization operatate a securities business needs to have a tentative list of company personnel, including at least 03 appropriate securities practitioners for each business operation for which the company requests an establishment license and work.
The General Director (Director) of a securities company must meet the following standards:
✔️Not in the case of being prosecuted for criminal liability or serving a prison sentence or banned from practicing business by the court according to law;
✔️Have at least 02 years of experience working in operational departments in the fields of finance, banking, securities or in finance, accounting, and investment departments in other businesses and have a minimum 2 years of experience in managing
✔️Have a Certificate of Financial Analysis Practice; Certificate of fund management practice;
✔️Not be sanctioned according to securities and stock market laws within the most recent 6 months up to the time of application submission.
Conditions of workplace, facilities, equipment
✔️Have a secure office for securities business activities;
✔️There are enough facilities, techniques, office equipment, computer systems, and software to serve investment analysis, risk analysis and management, storage, and preservation of documents, and equipment to ensure safety and security for the company’s headquarters under regulations on securities business activities;
For securities underwriting and securities investment consulting operations, equipment and facilities conditions are not required.
Conditions for shareholders and capital-contributing members in the company
The structure of shareholders and capital-contributing members in the company meets the regulations in Clause 10 and Clause 6, Article 71 of Decree 58/2012/ND-CP and must ensure:
✔️At the time of establishment registration, the organization contributing capital has no accumulated losses on the most recent audited annual financial statements and the most recent reviewed semi-annual financial statements (if any);
✔️In case a securities company is organized as a one-member limited liability company, the owner must be a commercial bank, insurance enterprise or foreign organization that must meet regulations.
According to the provisions of Clause 10, Article 71 of Decree No. 58/2012/ND-CP
Conditions for foreign organizations to contribute capital to establish or purchase to own 100% of the capital of a securities business organization are as follows:
✔️Be an organization operating in the fields of banking, securities, insurance and with a minimum operating period of 02 years immediately preceding the year of participation;
✔️Overseas specialized management and supervision agencies in the fields of banking, securities, insurance and the State Securities Commission have signed bilateral or multilateral cooperation agreements.
According to the provisions of Clause 6, Article 71 of Decree No. 58/2012/ND-CP
Conditions for organizations contributing capital to establish a securities business organization need to be met as follows:
✔️Have legal status; not on alert; do not fall into the cases that do not have the right to establish and manage an enterprise according to regulations;
✔️Profitable business activities for the previous 2 consecutive years. Besides:
⭕️In the case of an organization operating in the fields of banking, securities, and insurance, it is not in a warning state; meet the prescribed conditions;
⭕️In the case of other economic organizations:
- Have a minimum operating period of 05 consecutive years immediately preceding the year of capital contribution to establish a securities business organization;
- After deducting long-term assets, the remaining equity must be at least equal to the expected capital contribution;
- Working capital must be at least equal to the amount of capital expected to be contributed.
✔️Only use equity and other valid capital sources according to regulations. The most recent audited annual financial statements must have no exceptions.
Siglaw is always ready to give advice and support customers with necessary information while carrying out procedures to change the investor’s address. Please contact Siglaw law firm for specific advice
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