Ministry readies tighter disclosure rules

A draft circular expected to be formally issued by the Ministry of Finance later this year would strengthen disclosure requirements applied to larger public companies, based upon charter capital and number of shareholders, Vietnam News Agency (VNA) reported. Companies with charter capital of 120 billion VND (US$5.8 million) and 300 or more shareholders would be required to release audited financial reports twice a year, within 45 days or the end of the reporting period (60 days for consolidated reports). To standardise the reporting, Vietnam Association of Certified Public Accountants general secretary Bui Van Mai also suggested that companies be required to give reasons for changes in equity. However, Nguyen Khac Hai of SSI Management Fund said the request for audited financial statements would be a burden on companies. "Enterprises would not risk distorting figures in their unaudited financial reports as it would be easy to discover and they would lose prestige," Hai said. "Therefore, it is not essential to have audited annual financial reports." Listed companies with charter capital in excess of 30 billion VND (US$1.5 million) but fewer than 300 shareholders would only be required to disclose audited financial statements annually. Nguyen Son, head of the market development department of the State Securities Commission, said that differing treatment for listed and unlisted public companies was appropriate to Vietnam's current conditions, with a lot of unlisted public companies. "However, the drafting committee will consider a more coherent distinction," Son said. Under the draft circular, unlisted public companies would only have to disclose audited financial statements annually, although the commission would encourage companies to make quarterly reports. The circular also includes proposed provisions on insider trading, forbidding company insiders from registering to buy and sell shares within the same reporting period. However, registration time would be reduced from 60 to 45 days. Robert Singletary, a legal expert who participated in the drafting process, said insiders should also register the number of shares and the price range in order to increase transparency of their transactions. In another major provision of the draft circular, the Vietnam Securities Depository Centre would be required to release two additional types of information, including transfers of shares by the company's founding shareholders and changes in the proportion of foreign ownership in the company. Lacking from the circular, however, are details of what information and time frame would comply with these disclosure requirements. Currently, the centre discloses information on market members, registration services, and issuance of trading codes for foreign investors.