Dong A Commercial Joint Stock Bank (DongABank) has released the documents of the extraordinary shareholder meeting in 2019. The closing date for shareholder list is September 26th 2019. The meeting is scheduled to be held on October 12th 2019.
According to DongABank, after being put under special control, the bank has hired Ernst & Young Vietnam Company Limited (EY) to evaluate the financial situation, and determine the real value of charter capital and reserve funds as of December 31st 2018.
EY’s audited data showed that by the end of 2018, DongABank is having accumulated losses and negative equity. Therefore, in order to offset the negative equity and ensure that the bank has a real charter capital value of over three trillion dong (the minimum legal capital), the bank must carry out additional charter capital to ensure that it meets legal requirements.
EY’s leader board said that based on DongABank’s current operating situation, the bank can raise its charter capital from issuing shares to the public or conducting private placement.
However, under the current condition, the bank cannot make a public issuance because it does not meet the conditions to offer shares. Particularly, regulation requires that the bank’s business performance in the year preceding the year registering the offer must be profitable with no accumulated loss up to the year of the registration.
Thus, DongABank can only choose to carry out private placement.
This option is assessed to have advantage of not requiring the issuer to meet the conditions of having profitable business and have no accumulated losses in the year preceding the year of the issuance like the option of selling shares to the public.
Nevertheless, if choosing this option, the issuer can only offer shares to less than 100 investors (excluding professional securities investors), and cannot use the mass media or the Internet.
In addition, investors who buy shares in a private offering are restricted to transfer for at least one year. However, since this is the only choice of DongABank at the present time, the bank’s Board of directors (BOD) still choose this method to increase capital.
Despite announcing the capital raising plan to bring the minimum charter capital to three trillion dong, DongABank’s leader board did not disclose the expected increase.
In the upcoming offer, DongABank will give priority to existing shareholders, in addition to issuing to eligible external shareholders as prescribed by the law.
The offer is expected to be launched after being approved by competent agencies. All of the capital collected from this share offer will be used to offset the negative charter capital of the bank.
This is the first time DongABank holds a general shareholder meeting after four years being put under special control by the State Bank of Vietnam (SBV) in July 2015.
After being under special control, all shareholders of the bank are not allowed to transfer DongABank’s shares.
In special cases, the SBV will consider the transfer of shares based on the proposal of the Special Supervisory Board. The bank has also refunded shareholders who made payment in the bank’s charter capital increase from five trillion dong to six trillion dong.
Throughout the last four years, DongABank did not publish its financial statement and only announced the operation situation in some periods.
Closing the first six months of 2019, DongABank’s total mobilisation from customers reached 63.450 trillion dong, up by 2.595 trillion dong, equivalent to an increase of 4.3 percent compared to the beginning of 2019 and an increase of three percent (1.730 trillion dong) compared to the same period of 2018. In particular, the bank’s customer deposits reached 50.903 trillion dong, up by 4.8 percent compared to the beginning of 2019.
The service income of DongABank in the same period was 247 billion dong, an approximate compared to the same period of 2018. The bank’s foreign exchange trading rose up by 16 billion dong, equivalent to 40 percent compared to the same period of last year. The profit from remittance activities continued to record high results, contributing to diversifying DongABank’s revenues.
