Lawmakers aim for definition of stock investment valuation in the updated corporate legislation
Hà Nội - The ongoing discussions surrounding the draft revised Law on Enterprises have brought attention to the methods used to evaluate the market value of share contributions. Specifically, the focus has shifted towards the valuation of shares used as capital.
During a group discussion on May 10, deputy Đỗ Đức Hiển from HCM City addressed concerns related to Point b, Clause 1, Article 1 of the draft law. This section outlines the market price of contributed capital or shares that are listed or traded on the stock market.
The draft law proposes a change from the current method, which determines the market value of contributed shares based on the trading price on the market immediately prior, to using the average trading price within 30 days. This adjustment aims to prevent inaccuracies caused by sudden stock market fluctuations.
However, deputy Hiển questioned the objectivity of the proposed 30-day average price. He proposed a hierarchy of preference to determine the most suitable method when the different techniques result in varying calculations. He also suggested adopting the method for determining the market price of contributed capital based on international financial reporting standards currently being researched in Việt Nam.
Moreover, the draft law includes provisions for companies to reduce their charter capital when returning contributed capital to shareholders holding redeemable preference shares. Deputy Hiển highlighted the existence of other preference shares with redeemable features under the current Enterprise Law, and advocated for similar regulations when repurchasing these shares.
Another deputy, Trần Anh Tuấn, praised the shift in management style outlined in the draft law from pre-inspection to post-inspection as a progressive measure. The draft law also empowers members' councils and the representative agency of the enterprise owner to manage certain business-related issues to cater to the requirements of mobilizing social resources for investment and development.
One concern raised by Tuấn was the lack of clarity in the draft law regarding the disclosure obligations of beneficial owners in listed companies. As stock market activity can result in rapid changes in beneficial ownership, Tuấn suggested that the regulations should be consistent for both domestic and foreign beneficial owners regarding the obligation to disclose information.
Tuấn also mentioned that the increased compliance costs in the new law could lead to a heavy burden on businesses. He suggested managing this burden through post-inspection, with inspections only being triggered by suspicions of wrongdoing.
Overall, the draft revised Law on Enterprises in Vietnam seeks to improve transparency and objectivity in determining the market value of share contributions. A hierarchy of preference for the different valuation methods, based on market-based valuations, professional valuations, and mutual agreements, could help maintain fairness and consistency. Consistent disclosure obligations for beneficial owners in listed companies should also be a priority to maintain transparency in stock market activities.
The headquarters of the Hà Nội Stock Exchange (HNX) on Phan Chu Trinh Street, Hoàn Kiếm District, Hà Nội. - VNA/VNS Photo
Additional Insights
- The draft law aims to align with international financial reporting standards in determining the market price of contributed capital, which is a positive step towards global financial integration.
- The increased transparency measures in the new law could help attract more foreign investments to Vietnam's stock market.
- Standardizing the disclosure obligations of beneficial owners in listed companies could help curb insider trading and ensure market integrity.
The draft revised Law on Enterprises in Vietnam introduces a proposed method for determining the market value of share contributions based on international financial reporting standards that are currently being researched in the country. This aim for global financial integration could attract more foreign investments to Vietnamese stock markets.
Deputy Hiển raised concerns about the objectivity of the proposed 30-day average price and suggested a hierarchy of preference for different valuation methods, which will help maintain fairness and consistency in the valuation process.
In regards to listing companies, deputy Tuấn advocated for consistent disclosure obligations for both domestic and foreign beneficial owners to maintain transparency and curb insider trading in stock market activities. This standardization could ensure market integrity and help attract more foreign investments.
