Thang Long Power JSC, a member of the Geleximco Group, sent a document to the Hanoi Stock Exchange (HNX) about the correction to the information disclosed on March 27, 2024, regarding its 2023 financial report.

Thang Long Power said it mistook the column "previous period" for "reporting period" and vice versa.

This means that for the 2023 reporting period, the company actually incurred a loss of over VND528 billion, but mistakenly reported the 2022 profit of nearly VND122 billion.

The noteworthy point is that the error occurred just before Thang Long Power issued two new bonds, totaling nearly VND1,800 billion, in the domestic market.

Consequences

Nguyen Quang Huy, Executive Director of the Faculty of Finance and Banking at Nguyen Trai University, said that when a company discloses financial data with mistakes due to mixing up reporting periods—its actual 2023 and first-half 2024 results show no profit—it may prompt investors to more carefully assess the financial situation.

“However, if the company has transparently corrected it and the accompanying disclosures reflect reality, this might just be a technical oversight in data compilation rather than something affecting the core operations.

"Investors not only need to look at the company’s profits but also evaluate the its financial history, reputation, and compliance with financial obligations for a comprehensive view before making investment decisions,” Huy said.

Meanwhile, according to Lawyer Le Thi Thuy, Managing Lawyer at Lawlink Vietnam, in many cases, if a company deliberately fabricates figures and turns a loss into a profit, especially right before bond issuance and fund-raising in any form, it could lead to serious consequences.

An intentional move is believed to support its bond issuance campaign and "beautify" the financial situation, thereby enabling to attract capital more easily and affect the financial market.

“Investors would be misled by falsified financial reports, leading to wrong decisions to buy bonds or invest based on inaccurate, untruthful data. Credit rating agencies might misjudge the company’s risk level based on the provided wrong information, resulting in ratings higher than reality,” Thuy explained.

Moreover, if the company is unprofitable in reality and only beautifies its books, there’s no real cash flow to pay bond interest and principal when due. Without sufficient revenue to cover debts, the company could default at any moment, causing significant losses for investors.

In recent years, the financial market, especially the stock market, has seen numerous violations. As such incidents recur, investor’s confidence in the bond market—already low—drops further, making it harder for other companies to call for capital in the future.

When violations happen repeatedly, market regulators will tighten rules on bond issuance and capital raising in general. This could make the financial market less flexible, Thuy said.

Particularly, when fraud is exposed, the stock prices of offending companies could plummet, directly harming shareholders. Business partners and banks might halt cooperation or tighten credit terms, pushing the company into deeper trouble.

Who bears responsibility?

Lawyer Le Thi Thuy believes that when intentional fraud occurs, the company and related individuals could face liability, ranging from administrative to civil and even criminal prosecution, if caught falsifying financial reports for capital-raising or profiteering purposes.

The management board and individuals like the legal representative, chief accountant, finance director, internal auditors and others would bear primary responsibility since they directly prepare and disclose the financial reports.

If businesses are found deliberately falsifying figures and violating the Accounting Law or Securities Law such as prohibitions on forging or falsifying accounting records or documents or directly or indirectly engaging in fraudulent acts, falsifying materials, or creating false information, or disclosing untruthful information, they would face greater consequences, including administrative fines, suspension of operations, or license revocation.

Related individuals could face criminal liability, with the most severe cases carrying up to 20 years in prison.

The lawyer cited the 2020 Enterprise Law as saying that the board of directors (BOD) also bears significant responsibility and duty in reviewing annual financial reports before presenting them to the general shareholders’ meeting.

In case of Thang Long Power JSC, Lawyer Le Thi Thuy believes authorities should investigate the cause of the misleading information.

“Verifying and clarifying this will allow investors to know whether the company made an unintentional error, a technical mistake, or deliberately falsified data. This is crucial for investors and for maintaining transparency in the financial market,” the lawyer stated.

Luong Bang