Vietnam: Obstacles to the establishment and operation of SPACs under Vietnamese law

Operation of Spac

Listing via SPAC is a growing trend in the US stock market. American investors are increasingly establishing a SPAC for the purpose of acquiring or merging with a business company from other countries to allow that company to become public on the U.S. stock exchange. So, what is a SPAC? Do Vietnamese laws allow the establishment of SPACs for listing purposes?

In this article, BLawyers Vietnam would like to provide our readers with information regarding the establishment and operation of SPAC companies under Vietnamese law.

1. What is SPAC?

SPAC stands for Special Purpose Acquisition Company. A SPAC, often known as a “blank check” company, does not engage in commercial business activities or carry out the sale and purchase of products or services. SPACs are usually established by a small group of professional financial investors with the purpose of conducting an initial public offering (traditional IPO) to raise capital, and then to purchase or merge with an unlisted company that is actually operating.

In the United States, SPACs are allowed by the U.S. Securities and Exchange Commission (SEC) to be listed and traded on the U.S. stock market with a short IPO approval time and simple procedures. Accordingly, SPACs will commit to seek and merge with a target company within two years. If exceeding two years, and the SPACs fail to find a target company, it will be dissolved as regulated.

Therefore, through a SPAC, companies with actual operation acquired by a SPAC would be listed and become public on the U.S. stock market without going through the process of a traditional IPO.

2. What are the obstacles to the establishment and operation of SPACs under Vietnamese laws?

Currently, Vietnamese laws do not regulate the establishment of a SPAC with the intention of raising capital through an IPO as US laws do. Accordingly, there are two questions being raised regarding the application of the SPAC method in the Vietnamese stock market as follows:

(i) Question 1: Can a company established in Vietnam with no business operation carry out an IPO on the Vietnamese stock market?

Regarding the Law on Securities on the requirements for an initial public offering applicable to joint-stock companies, the Vietnamese stock market regulates various technical requirements for IPO and listings. Among them, the two following requirements are mentioned:

  • The contributed charter capital of the company at the time of IPO registration must be no less than VND30 billion, which is calculated based on the accounting books; and
  • The company’s business operation during the last two years prior to the year of the IPO registration made profits, and at the same time, there has been no accumulated loss until the offering year.

Therefore, Vietnamese laws require the companies wishing to carry out an IPO in Vietnam to engage in actual business operations and have profits from such operations. This shows that a SPAC without business activities cannot be listed and raise capital on the Vietnamese stock market.

(ii) Question 2: Can a company be listed in Vietnam through a merger with a company already listed on the Vietnamese stock exchange?

It could be. There are still some cases in Vietnam where a listing is achieved through mergers and acquisitions with a company that is already listed on the Vietnamese stock exchange. As it could be implemented as mentioned above, a listed company in Vietnam has a purpose almost like a SPAC, rather than a completely empty company.

From that, the party being acquired by the listed company will also be “listed” without going through the strict listing requirements pursuant to Vietnamese laws. There are also cases where a listed small-scale company satisfies the requirements for listing on a stock market and then conducts a significant capital raise to acquire the company that is the main target of the listing that has not yet qualified for listing.

In general, listing via SPAC on the Vietnamese stock market is still a relatively new issue under Vietnamese laws. Therefore, enterprises should study the issue and consider choosing a proper approach.

The above is not official advice from BLawyers Vietnam. If you have any questions or suggestions about the above, please contact us at BLawyers Vietnam would love to hear from you.

Date: 10 October 2023

Writer: Trinh Nguyen


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