ESOP Of Normal Joint Stock Company Under Vietnamese Law: Allowable Or Not? - Apolat Legal

ESOP Of Normal Joint Stock Company Under Vietnamese Law: Allowable Or Not?

WHAT IS ESOP? HOW DOES THE STATUTORY LAW OF VIETNAM REGULATE ABOUT ESOP? This article shall analyze some statutory regulation relating to this issue so that readers can have a closer look at the issue mentioned above.
Up to now, there is no specific definition of ESOP in the valid statutory law documents of Viet Nam. However, in business practice, ESOP is understood as an abbreviation for “employee stock ownership plan.”
Although there is no specific definition, Clause 3, Article 1 of Circular 162/2015 / TT-BTC still classifies ESOP as a permitted activity of issuing additional shares of public companies. Accordingly, ESOP shares will be issued to employee(s) who is qualified enough through 02 forms: (i) selling shares pursuant to standards, regulations, and principles issued by the Board of Directors or (i) giving bonus shares to employees (if ensuring sufficient capital to giving bonus shares to employee[1]. 
Under the Enterprise Law of Vietnam, an ordinary joint-stock company is eligible to increase its capital by issuing shares. The increase in the charter capital of a joint-stock company can be done through the offer of shares in any of the following forms:

  • Offering share to existing shareholders;
  • Public Offering;
  • Private Equity Offering.

The regulation of the Enterprise Law 2014 and its guiding documents do not have specific provisions on the issuance of ESOP shares of ordinary joint-stock companies. However, at present, there is still one statutory law documents mentions about ESOP ordinary joint-stock companies – Circular No. 19/2003 / TT-BTC. Circular No. 19/2003 / TT-BTC stated that joint-stock companies in common have the right to buy issued shares to (i) sell to employees (including enterprise management) at incentives prices or (ii) give such shares to employees as bonus share for employees according to the resolution of the general meeting of shareholders (as defined in Section III, Clause 1, Point c of Circular No. 19/2003 / TT-BTC) provided that all following conditions are satisfied:

  • Companies have plans adopted by the shareholders’ congress, for cases where they purchase back over 10% of the total already issued shares; or plans decided by their managing boards, for cases where they purchase back under 10% of the total already issued shares.
  • Companies have financial capabilities to ensure the full repayment of their debts and fulfillment of their financial obligations, which means they do not belong to these following cases:
    • conducting business operation at a loss;
    • carrying out the procedures for issuing securities to mobilize more capital;
    • having overdue debts;
      • The total amount of Companies’ receivable debts is larger than 10% of their shareholders’ total capital;
      • The company fails to fully meet the requirements for the increase of charter capital or legal capital according to the current provisions of law;
      • The company uses borrowed money and capital being debt arrears owed to financial institutions, credit institutions, legal persons, and/or individuals to purchase treasury stocks.
Although Circular No. 19/2003 / TT-BTC is still recognized to remain valid, it has been issued based on and to guide for the old enterprise law regulations and its guiding documents, which are all ceased to be effective at this moment. Therefore, the validity of  Circular No. 19/2003 / TT-BTC  is a matter of concern.
Although the 2014 Enterprise Law does not regulate the issuance of ESOP shares, in nature, the issuance and offering of shares under ESOP is also a form of Private Equity Offering of shares. Consequently, ordinary joint-stock companies may consider using private equity offering of shares to offer shares to employees instead of offering shares under an employee stock ownership plan. However, in this case, if Company offers shares at a lower price than the par value or market price of shares, it should pay attention to the regulations on selling shares in accordance with Article 125 of the Law on Enterprises.
This article only indicates the author’s views on the legal issues raised at the beginning hereof based on the statutory provisions that the author has approached and researched. It’s not recommended to apply directly to any specific situation without consulting a lawyer or legal expert.


If you have any questions or require any additional information, please contact Apolat Legal – An International Law Firm in Viet Nam.

This article is for general information only and is not a substitute for legal advice.

[1] Article 35.3 Circular 162/2015/TT-BTC

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