HDI Global SE samples ways to cut ownership in Vietnamese non-life insurer PVI

April 29, 2021 | 10:58
Germany-headquartered insurer HDI Global SE – the largest shareholder of Vietnam’s non-life insurer PVI – has been fined for holding stakes in excess of the foreign ownership limit. However, what route HDI chooses to comply with Vietnamese regulations remains a question.
hdi global se samples ways to cut ownership in vietnamese non life insurer pvi
HDI Global SE – a Germany-based corporation and the majority shareholder of Vietnamese non-life insurer PVI – has been fined for non-compliance with information disclosure and foreign ownership limit rules

VIR reported that on April 16 the State Securities Commission (SSC) fined HDI Global SE due to non-compliance with information disclosure and violating foreign ownership limit rules.

Specifically, a fine of VND125 million ($5,435) is stipulated in Article 28.2 of Decree No.108/2013/ND-CP dated September 23, 2013 on administrative penalties for violations in the securities market for performing one or more transactions in order to conceal real ownership of a security in order to avoid the obligation to disclose information in accordance with regulations.

The fine imposed on HDI is not a considerable amount. However, the SSC’s official decision to require HDI to transfer PVI shares back to their original owners to reduce its ownership ratio has raised tough questions among investors.

In accordance with Article 28.3b of Decree 108, PVI has to comply with the SSC's requirement within 60 days of receiving the decision.

Many investors have asked how HDI will sell these shares and how it will change PVI’s management structure.

Currently, the foreign ownership limit in PVI has been raised to 100 per cent, but no single investor is allowed to own more than 50 per cent of the stakes. This raises questions whether HDI will find an insider to negotiate the number of shares that it must sell.

The story of HDI's acquisition of PVI was also mentioned by a German newswire, Handelsblatt Today.

“Insurer HDI Global is facing unexpected legal problems due to its business expansion strategy in Asia. The subsidiary of the Talanx Group has been trying for years to bolster its influence in PVI - one of the largest insurance groups in Vietnam. However, regulators in the Southeast Asian country are now accusing the Hanover-based company of using unfair approach,” Handelsblatt Today noted. “In this particular case, the question is whether HDI has raised its stake in the Vietnamese insurer to more than 50 per cent in the former state-owned PVI in an inadmissible manner. From the point of view of the Vietnamese financial regulator SSC, HDI's actions have violated local securities law.”

hdi global se samples ways to cut ownership in vietnamese non life insurer pvi

Jens Holger Wohlthat, member of the Board of Management of HDI Global SE, Hannover, also the chair of PVI's board for 2017-2022 tenure, effective since January 16, 2020

On the other hand, HDI remains adamant that its investment in Vietnam is strictly compliant with Vietnamese regulations.

HDI confirms that its compliance with the local laws always remains its priority. HDI affirms that with respect to HDI's investment activities in Vietnam, prior to making any transactions, the company always reviews and assesses the local regulations, to ensure that HDI's investments in Vietnam are strictly compliant with Vietnamese regulations,” a representative of HDI Global SE previously said. “HDI has transparently provided its explanations and has been working closely with the SSC as well as other Vietnamese agencies regarding issues presented in OL 4513 and OL 5106 of the SSC within the required period by the SSC. HDI is convinced that we have complied fully with the laws and regulations of Vietnam and we intend to vigorously defend this position.”

“HDI trusts that the Vietnamese Government will provide judicious guidance to ensure the stability and legal safety for the investment activities of HDI in particular and those of foreign investors in general. HDI once again is committed to working closely with the Government of Vietnam, and especially with Vietnam Oil and Gas Group, to ensure that the relationship is effective and constructive, thus ensuring a significant contribution to the good trade relations between Vietnam and the Federal Republic of Germany,” the representative replied in an email response to VIR.

By Lam Tien

What the stars mean:

★ Poor ★ ★ Promising ★★★ Good ★★★★ Very good ★★★★★ Exceptional