Decision No. 100/2007/QD-BTC dated December 06, 2007 of the Ministry of Finance on promulgating Regulations on selection and supervision of valuation consultancy organizations

DECISION

REGULATIONS ON SELECTION AND SUPERVISION OF VALUATION CONSULTANCY ORGANIZATIONS

THE MINISTER OF FINANCE

Pursuant to Decree 109/2007/ND-CP of the Government dated 26 June 2007 on conversion of enterprises with 100% State owned capital into shareholding companies;

Pursuant to Decree 101/2005/ND-CP of the Government dated 3 August 2005 on price appraisal;

Pursuant to Decree 77/2003/ND-CP of the Government dated 1 July 2003 on functions, duties, powers and organizational structure of the Ministry of Finance;

On the proposal of the Director of the Department of Finance for Banks and Finance Institutions;

DECIDES:

Article 1. To  issue  with  this  Decision  the  Regulations  on  selection  and  supervision  of  valuation  consultancy organizations.

Article 2. This Decision shall be of full force and effect after fifteen (15) days from the date of its publication in the Official Gazette.

Article 3. The Director of the Department of Finance for Banks and Finance Institutions, the Director of the Enterprise Finance Division, the Head of the Office of the Ministry, heads of relevant entities and directors of valuation consultancy organizations shall be responsible for implementation of this Decision.

REGULATIONS

ON SELECTION AND SUPERVISION OF VALUATION CONSULTANCY ORGANIZATIONS
(Issued with Decision 100-2007-QD-BTC of the Minister of Finance dated 6 December 2007)

I. GENERAL PROVISIONS

Article 1. These Regulations apply to organizations providing enterprise valuation services (hereinafter abbreviated to  valuers1)  for  enterprises  with  100%  State  owned  capital  on  the  latters'  conversion  into  shareholding companies.

Other enterprises requesting enterprise valuations may select valuers in accordance with these Regulations.

Article 2. Valuer  means  an  organization which satisfies  all  the  standards and conditions  and which is  licensed [or which  has  permission]  to  provide  enterprise  valuation  services,  and  shall  include  auditing  companies, securities  companies,  price  appraisal  enterprises,  and  domestic  and  foreign  investment  banks  with  the capability to provide enterprise valuations and which are selected to provide such services in accordance with these Regulations.

Article 3. The  Ministry  of  Finance  shall  be  responsible  to  select  and  promulgate  a  list  of  valuation  consultancy organizations, and to conduct checks and inspections of the operations of such valuers.

II. STANDARDS AND CONDITIONS FOR SELECTION OF VALUERS

Article 4. Any domestic organization registering to provide enterprise valuation services must satisfy all the following standards and conditions:

1. It  is  an  entity  as  defined  in  article  2  of  these  Regulations  and  satisfies  all  the  conditions  on organization and operation applicable to each form of enterprise.

2. It has professional rules on enterprise valuation which are consistent with the current regulations of the  Government  on  conversion  of  enterprises  with  100%  State  owned  capital  into  shareholding companies.

3. It has at least two years' experience in one of the sectors being price appraisal, auditing, accounting, financial consultancy or consultancy on conversion of enterprise ownership. It must have performed at least ten (10) services contracts in the above-mentioned sectors in each of the two most recent years  preceding  the  time  of  submission  of  the  application  file  for  permission  to  provide  enterprise valuation services.

4. It must satisfy criteria on the number and quality of staff working in the sectors and branches in which such organization is currently operating.

5. It must not be in breach of the provisions of law governing business sectors and branches.

Article 5. Application file for accreditation as a valuation consultancy organization

1. Any  domestic  organization  satisfying  all  the  conditions  stipulated  in  article  4  of  these  Regulations which  wishes  to  provide  enterprise  valuation  services  shall  send  the  following  documents  to  the Ministry of Finance:

(a) Request  for  registration  to  provide  enterprise  valuation  services  (on  the  sample  form  in Appendix 1);

(b) Notarized copy of its decision on establishment or investment licence [or] business registration certificate;

(c) Professional rules on [how to carry out an] enterprise valuation, consistent with current law;

(d) Report  on  a  number  of  financial  indicators  of  the  year  immediately  preceding  the  year  of registration to provide enterprise valuation services (Appendix 2);

(dd) Report  on  services  contracts  already  performed  in  the  sectors  of  price  appraisal,  auditing, accounting, financial consultancy or consultancy on conversion of enterprise ownership, and a list  of  services  contracts  in  the  above-mentioned  sectors  in  the  two  most  recent  years preceding the year of registration (Appendix 3);

(e) [Data on the] number and quality of senior staff directly conducting the services activities of the organization.

2. Any  foreign  organization  registering  to  provide  enterprise  valuation  services  must  be  an  entity  as defined in article 2 of these Regulations and must send the following documents to the Ministry of Finance:

(a) Request  for  registration  to  provide  enterprise  valuation  services  (on  the  sample  form  in Appendix 1);

(b) Data proving that it has sufficient capability and experience in the sector of asset valuation and enterprise valuation;

(c) Copy business registration certificate (or equivalent data) issued by the competent authority in the country where the foreign organization has its headquarters;

(d) Professional rules on [how to carry out an] enterprise valuation, consistent with the current law of Vietnam;

(dd) Introduction on the organization and its operational results in the valuation sector for the two most recent years: number of staff and number of branches currently conducting valuations, number of valuation services already performed, and proposed list of valuation experts who will work in Vietnam.

Any foreign organization which is not registered on the list of valuers shall only be permitted to co-operate with a valuer already on such list as promulgated by the Ministry of Finance, in order to conduct enterprise valuation activities.

Article 6. A valuer shall not be permitted to provide enterprise valuation services in the following cases:

1. It has not yet been approved by the Ministry of Finance.

2. It is related ["a related person"] as stipulated in article 4 of the Law on Enterprises, to the enterprise which is to be valued.

3. It is an organization currently providing services of auditing, book-keeping or preparation of financial statements to the enterprise to be valued, or it provided such services in the previous year to the enterprise to be valued.

Article 7. Approval and promulgation of list of valuers

1. With respect to newly registered organizations, the Ministry of Finance shall consider their accreditation in  the  months  of  June  and  December and  shall  provide  written notice  on  addition  of these organizations to the list of valuers on an annual basis.

If a registering organization is not approved to provide enterprise valuation services, the Ministry of Finance shall provide a written response specifying the reasons for non-approval.

2. Organizations already on the list of valuers shall not be required to conduct procedures for annual re- registration but may continue to provide enterprise valuation services if they are not in breach of the provisions in articles 13 and 14 of these Regulations.

3. The Ministry of Finance shall publicly promulgate the list of valuers and a list of organizations which are not permitted to continue to provide enterprise valuation services both in hard copy, and also on the website of the Ministry of Finance at http://www.mof.gov.vn.

III. MANAGEMENT AND SUPERVISION OF VALUATION CONSULTANCY ORGANIZATIONS

Article 8. Responsibilities of valuers

[Valuation consultancy organizations shall have the following responsibilities:]

1. To comply with the current law on enterprise valuation methods and to correctly perform the contents of contracts signed with clients.

2.To be liable for enterprise valuation results.  In a case where the results of an enterprise valuation fail to correctly ensure State regulations, the body making the equitization decision shall be entitled to refuse to pay the service fees, and the valuer shall also be liable to pay compensation for loss and damage caused by such valuer or the valuer shall be dealt with in accordance with law.

3. To manage the professional activities of staff under their management, and to promptly report to the Ministry of Finance any staff member who breaches the law while conducting his or her professional activities.

4. To provide an explanation or to supply information and data relevant to the results of an enterprise valuation when there is a complaint or upon written request from the representative of the owner of the enterprise, from the Ministry of Finance or from another competent body.

5. To keep client information confidential, and to archive files and data on the enterprise for which it has provided the enterprise valuation.

6. Valuation consultancy organizations and staff participating in enterprise valuations must comply with professional ethics and standards as stipulated by the law on professional ethics standards and other [relevant] laws.

Article 9. Bodies making equitization decisions shall select valuers from the list of valuation consultancy organizations promulgated annually by the Ministry of Finance.

1. Any enterprise undergoing equitization which has total asset value in its books of account of thirty (30) billion Vietnamese dong or more, or has a value of State owned capital in its books of account of ten (10) billion Vietnamese dong or more, or has an advantageous geographical position, must hire a valuation consultancy organization/s to conduct the enterprise valuation.

2. The Steering Committee for Equitization of the enterprise must hold tendering to select a valuation consultancy organization/s in accordance with current regulations in the case of a tender package for enterprise valuation services with a value of five hundred (500) million Vietnamese dong or more, or where two or more valuers register to provide the services.

Article 10. Fees for enterprise valuation services

1. Fees for enterprise valuation services must be related to the quality of the services provided and the results of the share sale auction, and shall be fixed by agreement between the valuer and the client and specifically recorded in the contract for provision of the enterprise valuation services.

2. The  actual  fees  incurred  shall  be  paid  from  the  source  for  the  expenses  for  equitization  of  the enterprise.

Article 11. The Ministry of Finance shall supervise the quality of enterprise valuation services provided by valuer/s in accordance with the following criteria:

1. Compliance with current regulations on the rules and methods for valuing enterprises.

2. Compliance with professional ethical standards in the relevant sectors.

3. Differences between the results of the enterprise valuation reached by a price appraisal organization/s and the result as approved by the representative of the owner and the actual price obtained via the [share sale] auction.

4. Compliance with the regime on submitting reports and the truthfulness of such reports sent by the valuer/s to the Ministry of Finance.

Article 12. The Ministry of Finance shall, on an annual basis or on a one-off basis on detection of any indication of a breach, conduct inspections of enterprise valuation activities of valuers. On  discovery  of  a  breach,  the Ministry  of  Finance  shall  suspend  [the  operation  of  the  valuer]  for  a  specified  term  or  shall  remove  the valuer from the list of valuation consultancy organizations in accordance with articles 13 and 14 of these Regulations.

Article 13. Suspension for a specified term of the enterprise valuation operation of a valuer

1. A valuer shall be suspended for a specified term from providing enterprise valuation services in the following circumstances:

(a) The valuer breaches the provisions in article 8 of these Regulations.

(b) The results of an enterprise valuation do not satisfy the requirements in accordance with an assessment  of  a  competent  State  body  based  on  the  rules  and  methods  for  valuing  an enterprise as stipulated by law and based on the Vietnamese standards for price appraisals, the accounting and auditing standards, and other relevant laws.

(c) Legal proceedings have been instituted regarding the results of an enterprise valuation which a law body is currently dealing with.

(d) The valuer fails to comply with the reporting regime stipulated in articles 16 and 17 of these Regulations.

2. The  term  of  any  suspension  shall  be  decided  by  the  Ministry  of  Finance  depending  on  the seriousness of the breach committed by the valuer.

Article 14. Removal of a valuer from the list of valuation consultancy organizations

1. A valuer shall be removed from the list of valuation consultancy organizations in the following circumstances:

(a) The investment license or business registration certificate of the valuer is withdrawn.

(b) The  valuer  failed,  on  upon  expiry  of  the  term  of  its  suspension,  to  remedy  the  event  which resulted in such suspension.

(c) The valuer committed a serious breach of the provisions of article 8 of these Regulations and of other provisions of law.

(d) The  valuer  inaccurately  or  dishonestly  reported  the  results  of  its  provision  of  enterprise valuation services.

2. Any valuer removed from the list of valuation consultancy organizations shall not be eligible to re- register within the following two years.

Article 15. Any  valuer  whose  operation  is  suspended  or  who  is  removed  from  the  list  of  valuation  consultancy organizations may continue to perform the contracts it is currently performing but shall not be permitted to sign any new contracts with enterprises as from the date of the notice provided by the Ministry of Finance up until the expiry of the approved duration [i.e. for performance of current contracts].

Article 16. Valuers shall, on a six-monthly and annual basis, provide written reports to the Ministry of Finance at the latest within fifteen (15) days after the end of such six-month or annual period, with the following contents:

1. An assessment of the status of their provision of enterprise valuation services: the results of such services,  the  quality  of  their  staff,  and  recommendations  to  the  State  authority  on  any  issues  or difficulties which arose.

2. A list of enterprises for which the valuer provided a valuation (on the sample form in Appendix 4).

3. Report on financial indicators on a six-monthly and annual basis (on the sample form in Appendix 2).

4. Any changes related to its decision on establishment or investment licence [or] business registration certificate.

Article 17. If any unusual matters arise during the course of a valuer's operation, the valuer must forward a one-off report to the Ministry of Finance for the latter's information and in order for the valuer to explain any relevant issues.

IV. IMPLEMENTING PROVISIONS

Article 18. The  Ministry  of  Finance  shall  receive  application  files  from  organizations  wishing  to  register  to  provide enterprise  valuation  services,  shall  check  and  verify  the  files,  and  shall  publicly  promulgate  the  list  of enterprise valuation organizations.

Article 19. Organizations which are currently accredited as satisfying all the conditions to provide enterprise valuation services must submit an application file for re-registration in accordance with these Regulations.

Article 20. The Minister of Finance shall make any decision on amendments or additions to these Regulations.

Article 21. If any problems arise during implementation of these Regulations, valuers and other related entities should promptly  report  them  to  the  Ministry  of  Finance  for  the  latter's  consideration  and  provision  of  specific guidance.

APPENDIX 1

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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APPLICATION FILE FOR REGISTRATION TO PROVIDE ENTERPRISE VALUATION SERVICES

To: The Ministry of Finance

1. Name  of company (organization)…………………………………………………………………………..

2. Address………………………………………………………………………………………………………..

3. Telephone Number……………………….Fax……..…………………Email……………….……………..

4. Form of enterprise (private, shareholding, partnership, joint venture, or 100% foreign owned capital)

…………………………………………………………………………………………………………………….

5. Business  registration  certificate  (or  investment  licence)  number………………………………………... dated……………………………………..

6. Number  of  years  for  which  the  organization  has  already  provided  enterprise  valuation  services  in Vietnam (calculated from the date of lodging this application file) and the number of clients for whom these services have been provided……………………………………………………………………………

7. Number of years during which the organization has provided financial consultancy, consultancy on conversion  of  ownership,  asset  valuation,  consultancy  on  listing,  on  registration  for  trading,  and provision  of  accounting  and  auditing  services  and  the  number  of  clients  for  whom  these  services have been provided………………………………………………………………………………………………

8. Charter capital (equity)………………………………………………………………………………………….

9. Number of practising auditors who have been registered with the Ministry of Finance………………….

10. Number of price appraisers…………………………………………………………………..........................

11. Number of accountants to whom the Ministry of Finance has issued accounting practising certificates

…………………………………………………………………………………………………………………….

12. Number  of  securities  practising  staff  to  whom  the  Ministry  of  Finance  has  issued  practising certificates…………………………………………………………………………………………..................

13. Professional  rules  consistent  with  the  current  regulations  of  law  on  conversion  of  State  owned enterprises into shareholding companies (enclosing a copy of the rules)………………………………..

Company  [name…………………]  hereby  applies  for  registration  to  provide  enterprise  valuation  services and assures that both the company and its professional staff providing enterprise valuation services satisfy all  the  standards  and  conditions  stipulated  in  the  Regulations  on  selection  and  supervision  of  valuation consultancy  organizations  issued  with  Decision  100-2007-QD-BTC  of  the  Minister  of  Finance  dated  6 December 2007.

Company  [name…………………]  hereby  undertakes  that  the  information  provided  in  this  application  and the data enclosed are truthful and correct, and if there is an error then the company shall be wholly liable for it.

We sincerely request that the Ministry of Finance consider and approve our application.

APPENDIX 2

SOCIALIST REPUBLIC OF VIETNAM
 Independence - Freedom – Happiness
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NAME OF VALUATION ORGANIZATION:……………

REPORT ON FINANCIAL INDICATORS

1. Charter capital…………………………………………………………………………………………………..

2. Source of owner's capital (equity)……………………………………………………………………………..

3. Total revenue, including details of revenue from service provision activities…………………………….

4. Total expenses…………………………………………………………………………………………………..

5. After tax profit……………………………………………………………………………………………………

6. Explanation of financial status ………………………………………………………………………………...

APPENDIX 3

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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NAME OF VALUATION ORGANIZATION:………

LIST OF ENTERPRISES FOR WHICH THE APPLICANT HAS PROVIDED SERVICES

SOCIALIST REPUBLIC OF VIETNAM
Independence - Freedom – Happiness
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NAME OF VALUATION ORGANIZATION:……

LIST OF ENTERPRISES FOR WHICH THERE HAS ALREADY BEEN A VALUATION AND AN INITIAL PUBLIC SHARE AUCTION

Dated………………

Company Director
        (Signature and seal)