Circular No. 51/2006/TT-BTC dated June 12, 2006 of the Ministry of Finance guiding a number of contents of the Regulation on auction of state companies

CIRCULAR

GUIDING A NUMBER OF CONTENTS OF THE REGULATION ON AUCTION OF STATE COMPANIES

Pursuant to the Prime Minister's Decision No. 330/2005/QD-TTg of December 13, 2005, promulgating the Regulation on auction of state companies, the Finance Ministry hereby guides a number of contents of this Regulation as follows:

Part I

GENERAL PROVISIONS

1. Implementation principles

a/ The auction of state companies shall comply with the Prime Minister's Decision No. 330/2005/QD-TTg of December 13, 2005, and the provisions of this Circular, ensuring equality, publicity and transparency.

b/ To be-auctioned state companies are those which had their financial problems solved according to the State's current regulations.

c/ Parties involved in auctions shall be responsible before law for their observance of the State's regulations and auction sessions' rules.

2. Subjects and conditions of application

State companies (hereinafter referred to as companies for short) which fully meet the conditions specified in Article 5 of the Regulation on auction of state companies, promulgated together with the Prime Minister's Decision No. 330/2005/QD-TTg of December 13, 2005 (hereinafter referred to as the Regulation on auction of companies for short), and are put up for auction under competent agencies' decisions.

3. Conditions for investors to participate in an auction

Investors participating in the auction of companies are defined in Article 3 of the Regulation on auction of companies. If wishing to participate in an auction, foreign investors, including Vietnamese having foreign citizenship, must open their accounts at banks or payment service-providing organizations operating within the Vietnamese territory and observe Vietnamese law; all activities related to their participation in auctions of state companies must be carried out via these accounts.

Organizations and individuals that participate in the valuation of enterprises and auction consultancy organizations shall not be allowed to participate in auctions.

4. Handling of financial matters

The handling of financial matters of to be-auctioned companies shall comply with the provisions of the Finance Ministry's Circular No. 109/2005/TT-BTC of December 8, 2005, guiding a number of financial matters in the assignment, sale, business contracting and lease of state companies, Circular No. 126/2004/TT-BTC of December 24, 2004, guiding the implementation of the Government's Decree No. 187/2004/ND-CP of November 16, 2004, on transformation of state companies into joint-stock companies (hereinafter referred to as Circular No. 126/2004/TT-BTC for short).

5. Forms enclosed with the Circular

Forms enclosed with this Circular (not printed herein) are for reference; depending on the characteristics of to be-auctioned companies and the actual situation of ownership transformation in this form, company sale steering committees and consultancy organizations may apply them in a suitable and flexible manner, provided that all necessary contents of the forms are ensured.

Part II

SEVERAL STEPS OF AUCTIONING PROCEDURES

1. Preparation for an auction

a/ Basing themselves on state-company ownership transformation plans, approved by competent agencies under the provisions of Article 54 of the Government's Decree No. 80/2005/ND-CP of June 22, 2005, on assignment, sale, business contracting and lease of state companies, enterprise sale-deciding agencies shall select companies that fully meet the conditions specified in Article 5 of the Regulation on auction of companies for auction and, at the same time, set up steering committees for auction of state companies (hereinafter referred to as auction steering committees for short).

b/ Auction steering committees shall follow all the steps specified in Article 7 of the Regulation on auction of companies, audit financial statements and valuate companies according to the provisions of Circular No. 126/2004/TT-BTC and Article 7 of the Regulation on auction of companies.

c/ Basing themselves on the results of valuation of companies, auction steering committees shall draw up auction plans, determine reserve prices and report them to company auction-deciding agencies for approval and designation of auctioning organizations.

d/ Within 5 working days as specified in Article 8 of the Regulation on auction of companies, the selected auctioning organizations must announce necessary information related to the to be-auctioned companies and auction sessions on the mass media, at the auctioning organizations and at the companies' headquarters at least 45 working days before the auction is held. The announcement shall be made according to a set form.

2. Registration for auction participation

a/ Basing themselves on auctioning organizations' notices on the auction of state companies, investors qualified to participate in auctions shall carry out registration procedures for participating in the auction for the purchase of companies with the auctioning organizations. Upon registration, investors shall present grounds evidencing their full satisfaction of the conditions specified at Point 3, Part I of this Circular.

b/ An auction dossier issued by the auctioning organization shall provide detailed information on the financial situation and production and business activities of the state company, registration application (Form No. 2), authorization form (Form No. 3), rules of the auction session (Form No. 4), documents to be signed by the purchaser after the auction session such as auction session minutes (Form No. 5), sale and purchase contract (Form No. 6), and handover record (Form No. 7).

3. Survey of the actual state of companies

a/ Before auctioning a company, the auctioning organization shall coordinate with the company in making arrangements for investors that have registered for auction participation to survey the company's actual state and study dossiers, financial statements, asset inventories, asset and land ownership or use right certificates, and contracts related to the company.

b/ Depending on the number of registered investors and matters to be surveyed at the company, one or more than one survey of the company's actual state may be organized.

c/ Surveys of the company's actual state must not affect the company's production and business activities.

4. Submission of registration applications and payment of deposits

a/ Investors shall submit registration applications for participation in the auction of companies and pay deposits to auctioning organizations within the time limit and at the amount specified in Article 11 of the Regulation on auction of companies.

b/ In their registration applications, investors must clearly write the first-time bids, which must not be lower than the reserve price. Auctioning organizations shall keep secret investors' bids.

c/ Upon receiving the applications and deposits, auctioning organizations shall grant investors cards for participation in the auction for the purchase of state companies (Form No. 8) and deposit receipts. Such cards must be clearly written with investors' codes.

d/ Within the time limit for the receipt of registration applications, registered investors may withdraw their registration applications for participation in the auction of companies and have their deposits refunded immediately.

5. Auction sessions

a/ Upon the expiration of the time limit for registration for participation in the auction of a company, the auctioning organization must notify the auction steering committee of the registration results. An auction session shall be held only when there are at least two investors submitting valid registration applications for the purchase of the company.

b/ Where there is only one application for auction participation, the auctioning organization shall report thereon to the auction steering committee in order to further report to the state company auction-deciding agency for consideration and decision the application of the direct agreement-based sale as provided for in the Government's Decree No. 80/2005/ND-CP of June 22, 2005, on assignment, sale, business contracting and lease of state companies.

c/ Investors that have been granted auction participation cards shall carry out procedures for registration in the auction participation register; the time limit for such registration shall comply with the rules of auction sessions.

6. Running an auction session

a/ The auctioning organization must issue a decision appointing its competent representative to run an auction session and invite a notary public to witness the auction session. The calling of bids and the conduct of participants at an auction session shall comply with the rules of the auction session.

b/ At all sessions of auctioning state companies, secret ballots shall be cast round by round; bidding rounds shall be held continuously until a bid is selected.

c/ Before auctioning, the auctioneer must announce the rules of the auction session and the highest bid among bids written in the investors' registration applications for auction participation for the purchase of the state company, which shall be used as the reserve price of the first bidding round of an auction session.

d/ The auctioneer shall deliver to investors bid cards, which is written with the reserve price of the current bidding round, with a blank box for investors to write their bids. After each bidding round, after gathering all the delivered cards, the auctioneer shall publicize the code of the investor who has offered the highest bid as well as such bid and continue delivering cards to auction participants for the latter to offer bids for the next bidding round. The highest bid offered in the previous round shall serve as the reserve price of the next round. The auction shall finish when the remaining participants voluntarily refuse to cast other cards; the investor who has offered the highest bid (at the last bidding round) shall win the auction.

e/ Where investors, including those that have offered the same bid, voluntarily refuse to continue participating in an auction (the last bidding round), the auctioneer shall organize a draw for such investors and publicize the draw winner who won the auction and has the right to purchase the company.

7. Auction minutes

a/ At the end of an auction session, the auctioneer shall make the auction minutes and send it to the auction steering committee. Such a minutes must bear signatures of the auctioneer, the witness and investors.

b/ Where, due to different reasons, an auction session fails, the auctioneer shall make a record on the unsuccessful auction (Form No. 9), clearly stating the reasons therefor. Such a record must bear signatures of the auctioneer and the witness.

8. Post-auction procedures

a/ Within the time limit specified in Article 15 of the Regulation on auction of companies, the competent representative of the company auction-deciding agency and investors shall sign a company sale and purchase contract while the auctioning organization shall refund deposits to investors.

b/ Deposits shall not be refunded to investors who offered bids lower than the reserve price, offered bids at the subsequent round lower than the highest bid offered at the previous round, refused to sign company sale and purchase contracts, or breached the auction rules.

9. Payment

The payment for the purchase of companies shall comply with the provisions of Article 16 of the Regulation on auction of companies, Article 26 of the Government's Decree No. 80/2005/ND-CP of June 22, 2005, on assignment, sale, business contracting and lease of state companies, and agreements in contracts on sale and purchase of state companies.

10. Handover of companies

a/ After investors have made payment strictly according to the terms of the company sale and purchase contract, the company auction-deciding agency shall hand over the company to investors as stipulated in the company sale and purchase contract, and the two parties shall sign a handover record.

b/ The company sale and purchase contract and the signed handover record shall serve as legal grounds evidencing investors' ownership over the company. Such dossiers shall be sent to the finance office of the same level for monitoring and supervision.

11. Proceeds from the sale of companies

After subtracting expenses for the auction of state companies, the proceeds from the auction and deposits not refunded to investors as specified at Item b of Point 8 above shall be handled according to the provisions of Article 19 of the Regulation on auction of companies.

12. Announcement on termination of operation of companies

Within the time limit specified in Article 18 of the Regulation on auction of companies, enterprise sale-deciding agencies shall announce that the companies have been sold, and the termination of operation of such companies on the mass media.

13. Expenses for the auction of companies and settlement of the expenses

a/ Expenses for the auction of companies consist of:

- Expense for professional training on the auction of companies;

- Expense for inventory and valuation of companies;

- Expense for making dossiers and plans on the auction of companies;

- Expense on auction organization;

- Other expenses related to the auction of companies.

b/ The maximum expenses for the auction of companies shall be the same as in case of transformation of state companies into joint-stock companies specified in Circular No. 126/2004/TT-BTC.

General directors or directors of companies shall decide on expenses and their levels within the maximum amounts for the auction of companies and bear responsibility for the lawfulness and validity of these expenses. Where to be-auctioned companies are big or in complicated circumstances, or arising expenses are in excess of the maximum amounts, auction-deciding agencies may consider and make decisions by themselves and notify the Finance Ministry thereof.

At the end of an auction, companies shall settle auction expenses and report thereon to auction-deciding agencies for approval.

Part III

ORGANIZATION OF IMPLEMENTATION

This Circular takes effect 15 days after its publication in "CONG BAO." For other regulations which are contrary to this Circular, the guidance in this Circular shall prevail.

Any problems or difficulties arising in the course of implementation should be reported to the Finance Ministry for study and settlement.