Shares made during private offerings would not be allowed to transfer for at least one year and a private offering must be done at least six month after the first private offering, according to the draft. These measures aim to prevent the over-dilution of shares to ensure capital effectiveness and to improve issuer's responsibilities.

Private offerings raise funds from a small group of investors (about 100) without public disclosure and are generally conducted under exemptions allowed by the State Securities Commission.

Private offerings are facilitated by both public and non-public companies. Regulations that govern these issuers are different and based on the Enterprises Law and the Securities Law.

The draft proposal aims to prevent non-public companies from making private offerings before making an initial IPO. – VNS