Decree 306/2025/ND-CP strictly handles violations in the issuance of individual shares of enterprises

Stocks are securities that confirm the legitimate rights and interests of the owner to a part of the issuer's share capital.[1] The issuance and private placement of shares is a strategic activity for businesses to achieve the important dual goal of increasing charter capital and finding investors for the company. However, if this activity does not comply with legal regulations, regardless of whether due to weak management capacity or intentional wrongdoing of the business/manager, it will cause damage to investors.

The Government's Decree No. 156/2020/ND-CP dated 31/12/2020 on sanctioning administrative violations in the field of securities and securities market (Decree 156) has recorded sanctions for violations in the issuance and private placement of shares. A number of relevant provisions in Decree 156 are amended and supplemented by the Government's Decree No. 306/2025/ND-CP dated November 25, 2025 (Decree 306) in the direction of strengthening sanctions and tightening discipline to promote the development of Vietnam's stock market. Decree 306 will take effect from 09/01/2026 and has a great impact on the activities of public companies in private placement activities.

Increasing sanctions in private placement and issuance of shares

Firstly, Decree 306 has amended the principle of sanctioning and determining the fine level for enterprises that commit administrative violations repeatedly. Clause 2, Article 5 of Decree 306 according to the guidance refers to the provisions stipulating the applicable acts in the case of "repeated administrative violations". Therefore, enterprises that violate systematically and continuously over the years will fall into this case and be sanctioned with aggravating circumstances.

Secondly, Decree 306 also rearranges a number of violations that are essentially the same act but due to the severity of the violation, there are different penalty frames (violations of reporting deadlines when transactions of insiders and related persons, violations of information disclosure deadlines, etc  violations of the reporting time limit, violations of the registration time limit). Currently, the penalties for violations are mostly applied according to the fixed framework, except for the penalties for violations of the obligation to disclose information about transactions of insiders and related persons in Article 33.

In addition, Decree 306 has amended and supplemented a number of sanctions to ensure consistency, consistency and synchronization with current legal documents. For example, the sanction for violations in the language of information disclosure is increased from 10 to 30 million VND to 30 million VND,[2] ensuring the  implementation of regulations on information disclosure in English in Circular No. 68/2024/TT-BTC.[3] Decree 306 also increases the fine level for risky violations, affecting the issuance and private placement of shares, specifically  adding 02 acts subject to a fine of 100 to 150 million VND, and at the same time significantly increases the fine amount of 03 other fines.

Tightening the mechanism for using capital and cash flow from private placement activities

Practice shows that there are some enterprises that arbitrarily change the issuance plan and/or plan to use the proceeds from the offering without legal internal approval. Some enterprises implement the plans that they have registered and approved by the SSC. As a result, investors are at a disadvantage when they do not have access to accurate and timely information. Therefore, Decree 306 has required enterprises to implement plans to use capital and cash flow from offering activities in accordance with the approved, registered and approved contents. Violations related to the financial plan of the offering will be subject to stricter sanctions than before, with a fine of up to 300 million VND.

It is worth noting that the report on the use of capital and the amount of proceeds must be audited by the auditing organization that the enterprise has approved, and at the same time explained in the audited annual financial statements. The fine in Article 8 for related violations is up to 100 million VND. Therefore, the failure of the General Meeting of Shareholders to approve the audit organization, or the failure of the General Meeting of Shareholders to approve the audited annual financial statements, all lead to the consequence that the enterprise fails to fulfill this obligation and is subject to sanctions according to the new penalty framework under Decree 306.

Enterprises should also note that violations of different nature and severity are still sanctioned according to the same penalty bracket if they are the same violation in nature. For example, the case of only delaying the report (there is a violation but the violation has been terminated when sending the report even though it is late compared to the prescribed time limit) is still subject to the same penalty bracket as for the case of not sending the report (not terminating the violation) even though the actual fine amount of each case may be different.

Setting sanctions when determining the status of a professional securities investor

According to the law, enterprises are only allowed to offer individual shares to strategic investors and professional investors.[4] This is a statutory responsibility of enterprises that previously did not have sanctions or supervision mechanisms, but so far it has been wrongly handled according to Article 8. A fine of up to VND 150 million is imposed on enterprises that violate regulations on determining the status of professional securities investors participating in the offering and issuance and enterprises that do not have relevant documents to prove it.

Therefore, the issuer needs to properly determine the status of the investor through the collection of sufficient dossiers and documents (for example, securities practice certificates for individual investors). At the same time, the enterprise must archive the dossier for at least 01 year from the time of determination so that it does not have to be re-determined within 01 year that the law allows[5] and avoid the risk of being sanctioned under this new regulation.

Source: Government News

Adding many remedial measures to best protect investors

Decree 306 also sets out the responsibility to recover individual shares that have been offered, issued and refunded to investors the purchase price or deposit (if any) plus interest arising when there is a violation in the issuance of shares. In case of violation of the conditions for offering and issuance, the time limit for returning to investors is 60 days; in case of offering or issuance beyond the prescribed time, the time limit is 30 days; in case the implementation of the plan is not in accordance with the registered and approved contents, the time limit is 15 days.[6]

The subject that must take remedial measures is the subject sanctioned for administrative violations, here it is the issuing or offering enterprise that commits the violation. Therefore, investors have the right to request the enterprise  to cancel the transaction and refund money to the investor if the enterprise violates its commitments when issuing individual shares.

What businesses need to do to minimize the risk of administrative sanctions

Firstly, it is necessary to ensure the conditions for reporting and disclosing information and managing employees and practitioners so as not to be suspended or sanctioned for violations.

Secondly, it is necessary to ensure the legality of the private placement plan and all related factors such as the number of shares, the offering price or the principle of determining the offering price of shares, and carry out legal internal approval procedures before issuance.

Thirdly, it is necessary to register with the SSC the financial plan of the offering and all related changes, report, announce and receive authorization from the General Meeting of Shareholders to conduct the offering. In addition, it is necessary to ensure that the implementation is in accordance with the approved, registered and approved contents; at the same time, be transparent and comply with the process of completing the offering and fulfill the obligation to report to the SSC to use the proceeds.

In addition, it is necessary to accurately determine the status of professional securities investors subject to offering. On the other hand, for the offering object is a strategic investor (not a professional securities investor), which is selected by the General Meeting of Shareholders according to the criteria in the Securities Law, the enterprise should archive the relevant resolution of the General Meeting of Shareholders as a supporting document.

In general, the new regulations in Decree 306 have amended and supplemented the provisions of Decree 156 in the direction of stricter control and stricter handling of enterprises issuing and offering individual stocks and violations in the issuance and offering of individual shares of enterprises. This shows that the State is aiming to improve professional securities market governance standards, ensuring the interests of individual stock investors in Vietnam in the coming time.