According to VnExpress, Hòa Phát Group (HPG) has decided to pay its 2024 dividend entirely in the form of shares at a rate of 20%, instead of the initial plan of 5% in cash and 15% in shares. This decision was made to safeguard cash flow and mitigate potential global risks, particularly those arising from the United States’ countervailing tax policies.

Currently, Hòa Phát has approximately 6.4 billion outstanding shares and will issue nearly 1.28 billion new shares, equivalent to VND 12,793 billion at par value. The company will use the undistributed after-tax profit, as shown in the audited 2024 financial statements, as the funding source for the issuance. It expects to begin the issuance in May, after receiving approval from the State Securities Commission (SSC).

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1. Legal Framework Governing Share Issuance Activities

• The Law on Securities No. 54/2019/QH14, effective from January 1, 2021, which regulates public offerings, including additional share issuances by public companies;
• The Law on Enterprises No. 59/2020/QH14, which governs profit distribution, dividend payments, and increases in charter capital by joint-stock companies;
• Decree No. 155/2020/ND-CP dated December 31, 2020, detailing the implementation of certain provisions of the Law on Securities, specifically regarding dossier requirements, procedures, and conditions for public offerings;
• Circular No. 118/2020/TT-BTC dated December 31, 2020, issued by the Ministry of Finance, providing guidance on public offerings, share issuances, tender offers, share buybacks, registration, and de-registration of public companies;
• And regulations issued by the Stock Exchange and the State Securities Commission concerning disclosure obligations and registration procedures for share issuance.

2. Conditions for Issuing Additional Shares under Current Regulations

Pursuant to Article 15 of the Law on Securities 2019 and Article 17 of Decree No. 155/2020/ND-CP, a public company issuing additional shares to the public (including for capital increase, dividend payment in shares, or issuance to existing shareholders) must satisfy the following key conditions:

1. Profitable Business Operations:
The issuer must record after-tax profits in its most recent audited annual financial statements, with no accumulated losses as of the issuance year.

2. Issuance Value Cap:
The par value of the new issuance must not exceed the total par value of currently outstanding shares, except where:

• The entire or remaining unsubscribed portion is underwritten;
• Shares are issued from owners’ equity (e.g., bonus shares, share dividends);
• Shares are issued for mergers, consolidations, or swaps.

3. Minimum Distribution Threshold:
For capital-raising issues linked to specific projects, at least 70% of the total offering must be successfully distributed, unless the issuance is to existing shareholders. Otherwise, the issuer must propose an alternative funding plan.

4. Minimum Contributed Charter Capital:
The issuer must have contributed charter capital of at least VND 30 billion as recorded in accounting books at the time of registration. In addition:

• The issuance and capital use plans must be approved by the General Meeting of Shareholders;
• The issuer must not be under criminal investigation or have unexpunged convictions for economic offenses;
• A securities company must advise on the dossier (except when the issuer itself is a securities company);
• The issuer must commit to listing or registering the shares for trading after the offering;
• A blocked account must be opened to receive proceeds from the offering.

5. Foreign Ownership Limit Compliance:
If the issuer is foreign-invested or operates in a conditional business line, it must ensure that the foreign ownership ratio complies with applicable laws, WTO commitments, the Law on Investment 2020, and relevant implementing regulations.

6. Disclosure Compliance:
The issuer must fulfill all periodic and ad hoc disclosure obligations under the Law on Securities and SSC guidelines.

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3. Procedures for Registering Share Issuance

According to the Law on Securities No. 54/2019/QH14 and Article 41 of Decree No. 155/2020/ND-CP, a public company conducting a share offering must follow these steps:

• Prepare Offering and Capital Use Plans:
  The issuer must prepare a share issuance plan and a capital use plan, and the General Meeting of Shareholders must approve both plans in accordance with the Law on Enterprises.
• Prepare and Finalize the Offering Dossier:
  The dossier must include documents such as: registration form, prospectus, audited financial statements, shareholder resolutions, listing or trading commitments, and proof of compliance with issuance conditions (Article 18 of Decree 155/2020/ND-CP).
• Submit to the State Securities Commission:
  The issuer submits the offering dossier to the SSC. Within 07 working days after notification of completed procedures, the issuer must submit six official copies of the prospectus for the SSC to issue the Certificate of Offering.
• Information Disclosure:
  Within 07 working days from the effective date of the Certificate of Offering, the issuer must announce the offering and publish the official prospectus on designated platforms in accordance with applicable regulations.

4. Regulations on Dividend Payment in Shares

• Approval of the General Meeting of Shareholders:
  Pursuant to Articles 135 and 138 of the Law on Enterprises 2020, a resolution of the General Meeting of Shareholders must approve the decision to pay dividends in shares, specifying the dividend rate and the funding source for the issuance.
• Availability of Legitimate Sources of Funds:
  The company may only pay dividends in shares if there are undistributed after-tax profits and sufficient equity to support the issuance. (Article 135 of the Law on Enterprises 2020 and Clause 2 Article 14 of Circular 96/2020/TT-BTC).
• Disclosure and Offering Procedures:
  Prior to paying dividends in shares, the company must register the additional share issuance with the SSC as prescribed in Articles 21 and 23 of Decree No. 155/2020/ND-CP, unless exempted from registration.
• Dividend Payment Deadline:
  The company must pay dividends within 6 months from the conclusion of the annual General Meeting of Shareholders. The Board of Directors must finalize the list of eligible shareholders and notify them of the amount, deadline, and form of payment at least 30 days before the payment. The Board must also ensure shareholders receive this notice no later than 15 days before the payment date.

5. Information Disclosure Obligations

Dividend Information Disclosure:
Under the Law on Securities 2019 and Article 11 of Circular No. 96/2020/TT-BTC, issuers must disclose both periodic and ad hoc information relating to dividend payments, including:Resolutions of the General Meeting of

• Shareholders or Board of Directors concerning dividend payments;
• Dividend rate, form of payment (cash or shares), payment schedule and method;
• The list of shareholders entitled to receive dividends and the record date.

Disclosure Channels and Timing:
As per Article 7 of Circular No. 96/2020/TT-BTC, the issuer must disclose information via:The issuer’s official website;

• The SSC’s information disclosure system;
• The Stock Exchange’s disclosure portal or other platforms under its rules;
• The website of the Vietnam Securities Depository and Clearing Corporation (VSDC);
• Other mass media as permitted by law.

Under Article 135 of the Law on Enterprises 2020, the company must also notify shareholders of the dividend payment by delivering the notice to their registered addresses no later than 15 days before the payment date.

6. Conclusion

The issuance of additional shares and the payment of dividends in shares are significant corporate finance activities for listed companies, directly affecting capital structure, shareholder rights, and market transparency. As reported by VnExpress, Hòa Phát Group has opted to pay its 2024 dividend entirely in shares at a 20% rate, instead of the originally planned 5% cash and 15% shares, in a bid to preserve cash flow and hedge against global uncertainties.

These activities must strictly comply with legal requirements. Issuers must be well-prepared from a legal and procedural standpoint to safeguard the interests of all stakeholders.

Harley Miller Law Firm

Email: info@luatminhnguyen.com/miller@hmlf.vn
Website: luatminhnguyen.com or hmlf.vn
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