Delisting is an important process in the stock market, affecting various stakeholders from companies to investors. This article provides a detailed guide on the process, procedures, and legal requirements related to delisting.

Definition and Importance of Delisting

Delisting of securities refers to a company’s decision to stop trading its shares on the stock exchange. This can be done voluntarily by the company or at the request of regulatory authorities (mandatory delisting). Voluntary delisting typically occurs when a company no longer wishes to be under the supervision of the stock exchange, has a change in business strategy, or plans to list on another exchange.

Delisting of securities is significant because it affects stock liquidity, reduces the ability of shareholders and investors to trade, and can lead to a decrease in stock value. The company may save costs and avoid oversight by regulatory authorities, but this may also diminish its reputation and create instability in the market. Delisting can also protect investors’ interests when the company does not meet listing criteria or violates information disclosure regulations.

Cases of Delisting

2.1. Mandatory Delisting (Clause 1, Article 120, Decree 155/2020)

  • Loss of public company status: As notified by the State Securities Commission.
  • Suspension of business operations: Cease or have its main business activities suspended for one year or more.
  • Revocation of license: The company’s business registration certificate or professional license is revoked.
  • Non-trading of shares: Shares are not traded on the stock exchange for 12 months.
  • Delay in trading: Shares are not traded within 90 days after being approved for listing.
  • Continuous losses: The company incurs losses for three consecutive years, with accumulated losses exceeding the contributed charter capital or negative equity.
  • Dissolution, Bankruptcy: Due to restructuring, dissolution, or bankruptcy.
  • Adverse audit opinion: Refusal of audit, contrary audit opinion, or exception for three consecutive years.
  • Failure to submit financial reports: The company fails to submit annual financial reports for three consecutive years.
  • Falsification of records: Falsification of listing documents.
  • Serious legal violations: Violations of prohibited activities under the Securities Law.
  • Suspension of operations: Prohibition or suspension of the company’s main business activities.
  • Failure to meet listing requirements: Due to mergers, splits, or restructuring without performing necessary procedures.
  • Violation of information disclosure obligations: Serious violation of disclosure obligations or failure to fulfill financial obligations to the stock exchange.
  • Decision by regulatory authorities: The stock exchange or the State Securities Commission decides to delist to protect investor interests.

2.2. Voluntary Delisting

  • Corporate restructuring strategy: When a company is undergoing restructuring or changes in ownership structure, delisting may be part of the strategy to reduce market control or to change the organizational form of the company.
  • Switching to another exchange: A company may decide to delist from one exchange and list on another that has more suitable listing requirements or conditions aligned with the company’s development strategy. This may be related to attracting international investors or accessing a larger stock market.
  • Business model transition: When a company changes its business model, such as transitioning from a public company to a private or family-owned company, delisting can be part of the decision to avoid regulatory oversight and information disclosure obligations.
  • Liquidity issues: If the company’s shares no longer attract investors or have infrequent trading, the company may delist to save costs or avoid maintaining the stock exchange’s listing requirements.
  • Listing and disclosure costs: Maintaining a listing on a stock exchange can create a significant cost burden, and the company may decide to delist to reduce these costs.

Conditions for Voluntary Delisting (Article 121, Decree 155/2020)

  1. Conditions for delisting stocks and fund certificates voluntarily:
    • The delisting decision must be approved by over 50% of votes from non-majority shareholders.
    • The delisting must occur at least 02 years after the listing approval date by the stock exchange.
  2. Conditions for delisting secured warrants voluntarily:
    • The issuer can delist part or all of the untraded warrants after a minimum of 30 days from the listing, following the principle that:
      • If warrants are still in circulation, the remaining warrants must account for at least 10% of the total warrants issued.
      • If the issuer holds all of the issued warrants, they can request to delist all of them.

Detailed Delisting Process

3.1. Voluntary Delisting

S1: The General Assembly of Shareholders (GAS) or the investor meeting convenes and approves the delisting decision (Point a, Clause 1, Article 121, Decree 155/2020)

  • The resolution must be written and include mandatory content such as the reason for delisting and the shareholder benefit resolution.
  • Avoid situations where the decision is made only by the management or a group of major shareholders without the agreement of minority shareholders.

S2: Prepare the documents as required (Clause 3, Article 121, Decree 155/2020):

  • A request for voluntary delisting according to Form 32;
  • A decision to approve the voluntary delisting;
  • A plan to resolve shareholders’ rights after voluntary delisting (for cases of delisting shares).

Submit the documents to the Stock Exchange (Clause 4, Article 121, Decree 155/2020).

S4: Disclose information about the delisting (Point c, Clause 1, Article 11, Circular 96/2020)

  • Deadline: 24 hours from the approval of the decision by the extraordinary General Assembly of Shareholders.
  • The disclosed documents include: The GAS resolution, meeting minutes and accompanying documents, resolution or voting minutes (in the case of voting by written consent), information about the delisting, and the approval rate of non-major shareholders.

S5: Complete final procedures and officially delist (Article 47, Decision 17/QD-HĐTV, Clause 4, Article 121, Decree 155/2020).

  • The Stock Exchange issues a decision to approve voluntary delisting. If refused, a written response with the reason must be provided.

Deadline: 07 days from receipt of full and valid documents.

  • If necessary, the Stock Exchange will consult and only consider delisting after obtaining feedback from the Vietnam Stock Exchange or the State Securities Commission (SSC).
  • The Stock Exchange announces the approval or rejection of the voluntary delisting request.

3.2. Mandatory Delisting (Article 46, Decision 17/QD-HĐTV)

S1: Detect the listed stock that may be subject to mandatory delisting according to legal regulations:

  • The Stock Exchange notifies the listed organization and discloses the information to the market.
  • The Stock Exchange requires the listed organization to report and explain specifically (if necessary).

S2: The Stock Exchange issues a decision to delist and announces information about the delisting.

Securities subject to mandatory delisting

  • Will continue to trade for a maximum of 30 days from the date the Stock Exchange issues the delisting decision,
  • Except for cases of delisting as per Clause 4, Article 120, Decree 155/2020/NĐ-CP.

S4: After delisting

  • The delisted securities, if they meet the public company requirements, must register for trading on the UPCoM trading system.
  • Except for delisting cases as per Points a, c, g, Clause 1, Article 120, Decree 155/2020/NĐ-CP.

Protection of Investor Rights

The company needs to ensure investors’ rights by:

1. Disclosing full and transparent information: 

The company must clearly and timely disclose information regarding the delisting, including:

  • The reason for the delisting.
  • The expected delisting time.
  • The impact of the delisting on shareholders.
  • The plan to handle shareholder rights.

The information must be disclosed on official channels such as:

  • The Stock Exchange’s portal.
  • The company’s website.
  • Notifications to shareholders via email or media channels.

Significance:

  • Ensure investors receive all necessary information to make appropriate decisions.
  • Minimize the risk of misunderstanding or disputes between the company and shareholders.
  • Maintain the company’s reputation and transparency in the stock market.

2. Having a share buyback plan from shareholders

When delisting, the company needs to prepare a buyback plan for shareholders who wish to exit. This plan must be clearly publicized, including:

  • The number of shares expected to be repurchased.
  • The time of execution.
  • The procedure for investors to sell shares back to the company.

The buyback plan must be approved by the General Assembly of Shareholders (GAS) to ensure legality.

Significance:

  • Helps shareholders exit risk when shares are no longer traded on the exchange.
  • Ensures the financial rights of shareholders, especially small shareholders who may not be able to transfer shares on the over-the-counter (OTC) market.
  • Builds trust among investors in the company’s commitment to its shareholders.

3. Ensuring a reasonable buyback price

The buyback price must ensure:

  • It matches the market value of the shares at the time of announcement.
  • It is no lower than the book value of the shares (if applicable).
  • It reflects the true value of the company.

The buyback price must be transparently determined based on:

  • Audited financial reports.
  • The most recent trading price before delisting.
    The company may hire a third party, such as an independent valuation organization, to determine the buyback price.

Significance:

  • Ensures fairness between major and minority shareholders.
  • Reduces the risk of disputes or complaints regarding share value.
  • Creates a positive image for the company and helps maintain investor support in future business activities.

Conclusion

The delisting process requires strict compliance with legal regulations and thorough preparation. The company needs to pay special attention to protecting shareholder and investor rights throughout this process.

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