Decree No. 09/2009/ND-CP dated February 5, 2009 of the Government promulgating the Regulation on financial management of state companies and management of state capital invested in other enterprises

DECREE

PROMULGATING THE REGULATION ON FINANCIAL MANAGEMENT OF STATE COMPANIES AND MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

THE GOVERNMENT

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the 2003 Law on State Enterprises;

At the proposal of the Minister of Finance,

DECREES:

Article 1. To promulgate together with this Decree the Regulation on financial management of state companies and management of state capital invested in other enterprises.

Article 2. This Decree takes effect on March 25, 2009, and replaces the Government's Decree No. 199/2004/ND-CP of December 3, 2004, promulgating the Regulation on financial management of state companies and management of state capital invested in other enterprises.

Article 3. The Minister of Finance shall guide and inspect the implementation of the Regulation on financial management of state companies and management of state capital invested in other enterprises, promulgated together with this Decree.

Article 4. Ministers, heads of ministerial-level agencies and government-attached agencies, presidents of provincial-level People's Committees; boards of directors, directors general or directors of state enterprises shall implement this Decree.

REGULATION

ON FINANCIAL MANAGEMENT OF STATE COMPANIES AND MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES
(Promulgated together with the Government's Decree No. 09/2009/ND-CP of February 5, 2009)

Chapter I

GENERAL PROVISIONS

Article 1. Subjects and scope of application

The Regulation prescribes the financial management of state companies and the management of state capital invested in other enterprises established and operating under the Law on Enterprises or the Law on Cooperatives.

For state enterprises subject to special financial management, apart from complying with the provisions of this Decree, they shall also observe the Government's specific regulations on special financial management.

Article 2. Interpretation of terms

1. State companies include:

a/ Independent state companies;

b/ State corporations, which are corporations invested and established under decisions of the State or those invested and established by companies themselves.

2. State business groups, which are groups of companies with the independent legal entity status and satisfying the conditions specified by law, and business groups without the independent legal entity status.

3. "Capital invested by the State in state companies" means capital allocated directly from the state budget to state companies upon their establishment and in the course of business operation; state capital received from other sources under decisions of competent authorities; the value of aid, gifts, presents; unclaimed assets, assets found redundant upon inventory of state companies and accounted as an increase in state capital at state companies; capital supplemented from after-tax profits; land use rights value and other amounts included in state capital under law.

4. "Assets of state companies'* include fixed assets (tangible fixed assets, intangible fixed assets, long-term financial investments, expenditures for unfinished capital construction works and long-term collateral and escrow account amounts); liquid assets (cash, short-term financial investments, receivables, inventories, other liquid assets and non-business budgets), which state companies have the right to possess, use and dispose of under law.

5. "Raised capital of state companies" means capital amounts raised by state companies through issuance of bonds, borrowing of loans from organizations and individuals at home and abroad and other forms of capital raising not banned by law.

6. "Preservation of state capital at state companies'" means preventing state capital at state companies from reduction throughout the course of business operation.

Boards for management and administration of a state company with board of directors include the board of directors and the directorate (director general and deputy directors general or director and deputy directors). For state companies without boards of directors, they are their directorates.

7. "Other enterprises" means enterprises operating under the Law on Enterprises or the Law on Cooperatives.

8. "State capital invested in other enterprises" means capital invested in other enterprises by the State or state companies.

9. "Representative of a state company's capital contributed at other enterprises" means a person authorized by the owner of a state company to represent its state capital invested in other enterprises.

10. "Representative of the owner of a state company" means an agency decentralized or authorized by the Government to perform the function of representing the owner, including the Prime Minister, line ministers, presidents of provincial-level People's Committees, and boards of directors of groups, corporations or parent companies.

11. "Owner of state capital in other enterprises" means a state company or an agency decentralized or authorized by the Government to act as an owner of state capital in other enterprises.

Article 3. State companies engaged in public-utility activities

1. State companies participating in the provision of public-utility products or services on the basis of bidding or orders placed or plans assigned by the State shall conduct economic accounting of these public-utility products or services under current regulations.

2. For public-utility products or services provided on the basis of bidding, state companies shall cover product or service expenses with the value of their bids and take accountability for results of these activities.

When providing public-utility products or services on orders placed or plans assigned by the State, state companies shall use sums of money paid by the State and/or beneficiaries of these public-utility products or services to cover expenses for these public-utility activities and ensure their laborers1 interests. In case paid amounts are smaller than actual reasonable expenses, the deficit will be offset by the state budget according to the actual quantity or volume and estimated unit prices. State companies shall separately account turnover and expenses for these products or services. Deficit-offsetting amounts are regarded as turnover of state companies. State companies' business results shall be determined on the basis of aggregating results of public-utility activities and business activities.

Article 4. State capital invested in other enterprises

State capital invested in other enterprises includes:

1. Capital in cash, land use rights value or land rents and the value of other assets of state companies which are invested in, or contributed to, other enterprises;

2. State budget capital invested in, or contributed to, other enterprises, and assigned to state companies for management;

3. Value of shares at equitized state companies, including the value of state shares provided by the State to laborers in state companies for enjoying dividends, which were equitized before July 14, 1998; and the value of state capital at state-run one-member limited liability companies and limited liability companies with more than one member;

4. Capital borrowed by state companies for investment;

5. Dividends and other divided amounts invested in, or contributed to, other enterprises by the State or state companies for re-investment in these enterprises;

6. Value of bonus shares or shares provided in substitution for dividends on state capital at other enterprises;

7. Other types of capital specified by law.

Article 5. Representatives of owners of state companies and owners of state capital at other enterprises

1. Representatives of owners of state companies and owners of state capital at other enterprises shall exercise the rights and perform the obligations provided in the Law on State Enterprises and as assigned or decentralized by the Government.

2. Owners of state capital at other enterprises shall manage state capital at other enterprises through exercising the rights and performing the obligations of shareholders or capital contributors, and appointing representatives of state capital at these enterprises.

In case owners do not appoint representatives of state capital invested in other enterprises, their heads shall exercise all rights and perform all obligations toward state capital at these enterprises.

Chapter II

REGULATION ON FINANCIAL MANAGEMENT OF STATE COMPANIES

Section I. MANAGEMENT AND USE OF CAPITAL AT STATE COMPANIES

Article 6. Charter capital

1. Charter capital of state companies

a/ Charter capital of a state company is the capital amount necessary for maintaining and assuring its production or business operations in normal conditions, suitable to its business scale and development strategy, and stated in its charter. Charier capital of a state company conducting a business line for which a legal capital level is prescribed by law must not be lower than such legal capital level. The Finance Ministry shall guide principles for determining charter capital;

b/ Owner representatives shall reach agreement with the Finance Ministry on charter capital levels and capital sources. In case budget sources are used to allocate charter capital, the Finance Ministry shall sum up and propose them to the Government and the National Assembly for decision;

c/ Based on capital investment plans already approved by competent authorities, the Finance Ministry (the central budget) and provincial-level People's Committees (local budgets) shall allocate sufficient charter capital for state companies. Specifically:

- Newly established state companies, which have to carry out investment and construction, will be allocated sufficient charter capital upon commencement of their business operations;

- Operating state companies will have their charter capital supplemented according to the progress of performance of tasks assigned by the State;

- State companies which are not allocated sufficient capital will have to reduce their charter capital at least equal to the legal capital.

In case owners do not reduce the charter capital of their companies, they may. depending on the practical situation, decide to transform, reorganize or equitize their companies under regulations.

2. In the course of business operation, owner representatives may decide to increase or reduce stale companies' charter capital.

Owner representatives may withdraw capital invested in state companies only when these state companies are reorganized or reduce their charter capital. Capital withdrawal may be effected only if it still ensures state companies' solvency.

The Finance Ministry shall guide the order of and procedures for increasing or reducing charter capital of state companies.

3. State companies, which have been designed, established with investment and made business registration to realize the main, regular and stable objective of providing public-utility products or services under orders placed or plans assigned by the State, or through bidding, will be allocated by owner representatives additional capital sufficient for the performance of public-utility product or service volumes.

4. State companies will be allocated start-up charter capital and additional charter capital in the course of business operation from the Slate's investment capital sources specified in Clause 3, Article 2 of this Regulation and additional sources from the Assistance Fund for Enterprise Reorganization.

Article 7. Assignment of state capital invested in state companies

1. Competent state authorities shall assign invested state capital to newly established state companies.

2. The capital assignment must be completed within 60 days from the date a state company is granted a business registration certificate. For a state company which has to carry out investment and construction, the capital assignment shall be carried out within 60 days from the dale the state company commences its business operation.

3. Capital recipients include:

a/ Chairmen of boards of directors, for state companies with boards of directors;

b/ Directors, for state companies without boards of directors.

4. For state companies which are established before the effective date of this Decree and have been assigned capital, capital assignment is not required to be conducted again. For state companies merged with other enterprises and state corporations accepting more members, the capital assignment and receipt is not required to be conducted again but state capital at these state companies shall be adjusted to correspond to these enterprises' capital amounts reflected in financial statements of those state companies or corporations.

Article 8. State companies' rights and obligations in using capital and funds under their management

1. State companies may take the initiative in using the State-assigned capital amounts and other kinds of capital and funds under their management for their business activities. State companies are answerable to owner representatives for capital preservation and development and effectiveness; and ensure the interests of related parties, such as creditors, customers and employees, under concluded contracts.

2. If state companies use funds under their management for purposes other than the prescribed ones, they shall ensure sufficient sources to meet their arising needs for using these funds. The use of capital and funds for construction investment must comply with the law on investment and construction management.

3. For state companies designed to regularly and stably provide public-utility products or services on orders placed or plans assigned by the State, they shall concentrate capital and resources for the production of public-utility products or the provision of such public-utility services. When necessary, owner representatives may transfer capital among these state companies in the form of recording capital increase or reduction. In case capital is transferred to companies of other ministries, sectors or localities or from ministries, central branches to localities or vice versa, owner representatives shall agree or decide on the transfer after obtaining the Finance Ministry's opinions. The aforesaid capital transfer must not affect the provision of public-utility products or services by state companies having their capital transferred.

4. State companies which are assigned special tasks by the State shall concentrate capital and other resources for the fulfillment of these tasks.

Article 9. Capital raising

1. Capital raising must comply with Clause 1, Article 17 of the Law on State Enterprises and adhere to the following principles:

a/ It must ensure solvency and have a plan approved by competent authorities. Persons approving capital raising plans shall inspect and supervise the capital raising, ensuring that raised capital is used effectively for proper purposes and targets;

b/ The raising of capital from foreign organizations and individuals must comply with current regulations on management of foreign debts;

c/ The raising of capital through issuance of bonds must comply with the laws on securities and enterprises. State companies dealing in securities investment, banking, insurance or investment funds, which are not their main business lines, may not issue bonds for investment in these businesses.

2. Competence to approve capital raising plans:

a/ State companies may take the initiative in raising capital for their production or business but shall ensure that their payable debts do not exceed thrice their charter capital, with:

- Their boards of directors deciding on plans to raise capital amounts larger than their charter capital. If their boards of directors authorize the directors general or directors to decide on these plans, such authorization must be stated in their charters and financial regulations;

- Their owner representatives, in case they have no boards of directors, deciding on plans to raise capital amounts larger than their charter capital.

Other loan contracts valued equal to or lower than charter capital shall be decided by directors general (directors) of state companies.

b/ State companies that need to borrow loans more than thrice charter capital shall report such to owner representatives for consideration and decision on the basis of effective capital raising projects. After making decisions, owner representatives shall notify their decisions to the Finance Ministry for coordinated monitoring and supervision.

3. Agencies representing state companies' owners shall coordinate with the Finance Ministry in strictly supervising the capital raising and use by these state companies.

Article 10. Management of payable debts

For payable debts, state companies shall:

1. Open books for monitoring all payable debts, including payable interests;

2. Pay payable debts strictly according to committed schedules. Regularly consider, assess and analyze their solvency to early detect difficulties in debt repayment and take timely remedies so as not to have overdue debts;

3. For debts to be paid in foreign currencies, state companies shall account as business expense the whole arising exchange rate difference (exchange rate increase or decrease at the time of making financial statements or recording accounting books) of the payable debit balance in the period. In case the accounting of an exchange rate difference as business expense puts the companies at a loss, that exchange rate difference can be partly carried forward to the subsequent year so that the companies will not sustain the loss, but the level of exchange rate difference accounted as business expense in a year must be at least equal to the exchange rate difference of foreign currency amounts due to be paid in that year.

Article 11. Preservation of state capital at state companies

State companies shall preserve stale capital with the following measures:

1. Strictly complying with regulations on capital and asset management and use, profit distribution, other financial management regulations and the accounting regime under the State's regulations;

2. Purchasing insurance for assets under law;

3. Handling in time any lost asset value under Article 20 of this Regulation, irrecoverable debts under Article 18 of this Regulation, and making deductions for setting up the following risk provisions:

a/ Inventory price decrease provision;

b/ Bad debt provision;

c/ Long-term investment price decrease provision;

4. Other measures for preserving state capital at state companies as specified by law.

5. The Finance Ministry shall guide the deduction for setting up and use of these provisions and methods of determining the extent of preservation of state capital at state companies.

Article 12. Outward investment of state companies

1. State companies may use assets (including cash, fixed assets, moveable assets, intellectual assets and other assets) under their management for outward investment. Land-related outward investments of state companies must comply with the land law. The Finance Ministry shall guide the capital contribution with intellectual assets.

2. The investment of state companies in other enterprises must comply with law, be in line with the companies' development strategies, plannings and plans and cause no impacts on the performance of their production or business tasks assigned by the State and ensure effectiveness, preservation and development of capital and increase of incomes.

3. State companies shall use at least 70% of their total capital to invest in enterprises operating in sectors being their main business lines. Total outward investments (both long-term and short-term) of a state company must not exceed its charter capital (including parent companies-business groups, state corporations, parent companies in the parent company-subsidiary model; member companies practicing independent accounting, and independent state companies). Particularly for capital contributions to such sectors as banking, insurance and securities, a state company may invest only in one enterprise in a sector a capital amount not exceeding 20% of the charter capital of the invested enterprise. If the parent company and subsidiaries of the same corporation or business group together invest in an outside enterprise, their total investment capital must not exceed 30% of the latter's charter capital. In special cases in which state companies wish to make investments exceeding that limit, they shall propose the cases to the Prime Minister for consideration and decision.

4. The addition of business lines or investment of capital in member enterprises conducting business lines other than main business lines of state companies can be made only after it is consented by organizations representing state capital owners.

5. State companies may not contribute capital to or purchase shares from other enterprises whose managers, executive officers or major shareholders are spouses, parents, children or blood siblings of members of boards of directors, control boards or directorates or chief accountants of these companies. Neither they may contribute capital to or purchase shares from hedge funds and securities investment funds or companies.

6. State companies that have made outward investments exceeding the limit specified in Clause 3 of this Article or contributed capital to hedge funds or securities investment funds or companies shall adjust, within two years after the effective date of this Decree, their investments on the principle of capital preservation.

The Finance Ministry shall assume the prime responsibility for, and coordinate with agencies acting as owner representatives in. inspecting and reporting to the Prime Minister for consideration and decision the transfer of outward investments of business groups or corporations to the State Capital Investment Corporation.

7. Forms of outward investments of state companies:

a/ Capital contribution or purchase of shares for the establishment of joint-stock companies, limited liability companies and partnerships; capital contribution to business cooperation contracts without forming new legal entities;

b/ Purchase of shares of, or contribution of capital to. operating joint-stock companies, limited liability companies and partnerships;

c/ Acquisition of another company;

d/ Purchase of debentures and bonds to enjoy interests;

dd/Other forms of investment specified by law.

8. Competence to decide on outward investment projects of state companies:

a/ Boards of directors or directors general of state companies without boards of directors shall decide on outward investment projects within the total value of their companies' financial investments, which are lower than 50% of their charter capital, or according to the empowerment in their charters. For investment projects capitalized at a level equal to or higher than 50% of their charter capital, state companies shall report them to owner representatives for decision;

b/ Owner representatives of state companies shall decide on the capital contribution to joint ventures with foreign investors; investment in or contribution of investment capital to the establishment of overseas companies; acquisition of companies of other economic sectors; outward investments of companies designed to regularly and stably produce major public-utility products or provide public-utility services; other financial investment projects falling beyond the deciding competence of boards of directors or directors general of state companies without boards of directors.

Section 2. MANAGEMENT AND USE OF ASSETS AT STATE COMPANIES

Article 13. Fixed assets - investment in fixed assets

1. Fixed assets of a state company include tangible assets and intangible assets. The Finance Ministry shall specify criteria for determination of fixed assets.

2. The competence to decide on investment or construction projects is prescribed below:

a/ For companies with boards of directors: The boards of directors shall decide on investment projects capitalized at up to 50% of the total asset value stated in their companies' financial statements publicized in the latest quarter, but not exceeding the highest level of group-B projects under the law on construction and investment project management. The empowered authority of boards of directors must be stated in the company charters.

Boards of directors shall decide to empower directors general or directors of their companies to decide on investment projects falling under their deciding competence.

Projects valued higher than the level which can be decided by boards of directors shall be decided by representatives of company owners or by competent authorities.

b/ For companies without boards of directors: The directors shall decide on investment projects capitalized at up to 30% of the total asset value stated in their companies' financial statements publicized in the latest quarter, but not exceeding the highest level of group-B projects under the law on investment and construction project management. This empowered authority must be stated in the company charters.

Investment projects valued higher than the level which can be decided by company directors shall be decided by representatives of company owners or by competent authorities.

3. The investment order and procedures comply with the law on investment and construction project management.

4. For state companies designed to regularly and stably provide public-utility products or services, their owner representatives may, when necessary, transfer their assets to other state companies, which perform similar tasks, by recording capital increase or decrease. In case of transfer of assets to state companies of other ministries, sectors or localities, or transfer of assets from ministries or central sectors to localities or vice versa, the owner representatives shall negotiate and make decision after obtaining the Finance Ministry's opinions. The asset transfer must not affect the provision of public-utility products or services by state companies having their assets transferred.

Article 14. Fixed asset amortization

All existing fixed assets of a state company must be amortized, including fixed assets no longer in use and awaiting liquidation, excluding fixed assets of public welfare works or houses. Fixed assets already fully amortized but still used for production and business activities are not required to be further amortized.

The Finance Ministry shall specify the minimum amortization level for each type of fixed asset. Companies' directors general or directors shall decide on specific amortization levels which, however, must not be lower than the levels specified by the Finance Ministry.

Article 15. Asset lease, mortgage and pledge

1. Companies may lease, mortgage or pledge their assets on the principles of capital effectiveness, preservation and development under law.

a/ Boards of directors or owner representatives (for companies without boards of directors) may decide on contracts for lease of assets valued higher than their companies' charter capital. Directors general or directors of companies may decide on contracts of lower value;

b/ The competence to decide to mortgage or pledge state companies' assets for borrowing loans complies with Article 9 of this Regulation.

2. For companies invested to regularly and stably provide public-utility products or services, the lease, pledge or mortgage of their assets directly used for that public-utility duty must be consented by their owner representatives.

3. The asset lease, mortgage or pledge must strictly comply with the provisions of the Civil Code and other regulations of the State.

Article 16. Liquidation or sale of fixed assets and financial investments

1. Companies may take the initiative in and are responsible for selling or liquidating fixed assets which are out of order, technically obsolete, no longer needed or become unusable; and financial investments which they no longer need to maintain, for capital recovery.

2. Competence to decide on liquidation or sale of fixed assets:

a/ For companies with boards of directors: The boards of directors shall decide on plans on liquidation or sale of fixed assets with their residual value smaller than or equal to 50% of the total asset value stated in the companies' financial statements publicized in the latest quarter. The specific level shall be stated in the company charters. The boards of directors may decide to authorize or empower the companies' directors general or directors to decide on sale of assets falling under the jurisdiction of the boards of directors;

Representatives of company owners shall decide on fixed asset liquidation or sale plans involving a value larger than the level which boards of directors are empowered to decide.

b/ For companies without boards of directors: The directors shall decide on plans on liquidation or sale of fixed assets with their residual values smaller than or equal to 30% of the total asset value stated in the companies' financial statements publicized in the latest quarter. The specific level shall be stated in the company charters;

Representatives of company owners shall decide on fixed asset liquidation or sale plans involving a value larger than the level the companies' directors are empowered to decide.

c/ For state companies designed to regularly and stably provide public-utility products or services, the sale of assets used directly for that public-utility duty must be consented by owner representatives.

3. The method of fixed asset liquidation or sale: The sale of fixed assets shall be publicly carried out by auctioning organizations or companies themselves strictly according to the order and procedures specified by the law on asset auction. In case the book residual value of sold fixed assets is VND 100 million or less (as stated in the charters and financial regulations of companies), directors general or directors shall decide to opt for the sale by auction or negotiation, but the auctioned asset prices must not be lower than the market prices. For fixed assets not traded in the market, state companies may hire price appraisal organizations to determine prices to serve as a basis for asset sale by negotiation.

4. Transfer of financial investments

The sale of financial investments must comply with the Law on Enterprises and the Law on Securities.

a/ Sale method:

- For transfer of financial investments in joint-stock companies which have been listed on the securities market, state companies may take the initiative in conducting the transfer by the method of order matching, auction or negotiation but sale prices must not be lower than market prices at the time of sale;

- For transfer of financial investments in unlisted companies, the method of public auction or negotiation may be applied but sale prices must not be lower than market prices at the time of sale.

b/ Competence to decide on sale of financial investments:

- Owner representatives may decide on the sale of financial investments in joint-stock companies transformed from state corporations or parent companies;

- Owner representatives, boards of directors or directors of state companies may decide on the transfer of financial investments falling under their investment-deciding competence under law.

c/ Proceeds from the sale of state capital portions left by the time limited liability companies or joint-stock companies are transformed from member companies or dependent units of state companies, including also deposits not required to be refunded to investors (after subtracting the book value of invested state capital, expenses for sale or underwriting of issuance of shares), will be recorded as an increase in state capital at state companies which represent owners of state capital portions contributed to these enterprises. In case state capital portions at state companies exceed these companies' charter capital, the difference shall be:

- Transferred to corporations or parent companies, for state companies being members of these corporations or companies;

- Transferred to the Support Fund for Enterprise Reorganization at the State Capital Investment Corporation, for business groups, corporations, parent companies and independent state companies of ministries and localities.

Article 17. Management of inventories

1. Inventories means goods purchased for sale but still left in stock, raw materials, materials, instruments and tools in stock or already purchased and transported en route, unfinished products being in the process of manufacture, finished products but not yet warehoused, finished products left in stock, or finished products consigned for sale.

2. Companies may and shall promptly handle inventories, which are of inferior quality or deteriorated, outmoded, technically obsolete, unsaleable or in late circulation, for capital recovery. The competence to decide on the handling complies with Clause 2. Article 16 of this Regulation.

3. At the end of an accounting period, if the cost of inventories recorded in accounting books is higher than their recoverable net value, companies shall make deductions for setting up inventory price decrease provisions under regulations.

Article 18. Management of receivable debts

1. Companies have the following responsibilities for managing receivable debts:

2. To elaborate and promulgate regulations on management of receivable debts, to clearly assign and define responsibilities of collectives and individuals for monitoring, recovering and settling debts;

3. To open books to monitor debts by debtor; to regularly classify debts (floating debts, bad debts, irrecoverable debts), to urge debt recovery;

Companies may sell receivable debts under law, including immature debts, bad debts, and irrecoverable debts, in order to recover capital. Debt-selling prices shall be agreed upon by involved parties.

4. Bad debts mean debts which become overdue under the terms of contracts or other commitments or which have not yet become mature but the debtors are almost incapable of repaying them. Companies shall make deductions for setting up bad debt provisions under Article 11 of this Regulation.

Companies shall handle irrecoverable receivable debts. Irrecoverable debt amounts, after subtracting compensations paid by individuals or collectives concerned, shall be offset against bad debt provisions and financial provision funds. In case of insufficient provisions, they may be accounted as business expenses of companies.

After being handled by the above method, irrecoverable debts must still be monitored on off-balance sheet accounts and recovered by state companies. Recovered amounts shall be accounted as incomes of state companies.

Boards of directors, directors general or directors of state companies shall promptly handle bad and irrecoverable debts. If failing to promptly handle irrecoverable debts under this Clause, they shall be held responsible as for untruthfully reporting on companies' financial status. If their failure to promptly handle these debts leads to the loss of state capital at their companies, they shall bear responsibility to owner representatives.

Article 19. Inventory of assets

When division, separation, merger, consolidation, ownership transformation decisions are implemented, or natural disasters or enemy sabotage occur, or there is a change in company assets for any reason, or the State adopts a new policy, companies shall inventory their assets (fixed assets and long-term investments, working assets and short-term investments), determine their quantities, compare payable debts and receivable debts upon closing accounting books for making annual financial statements. For surplus or deficient assets, irrecoverable debts and overdue debts, the causes, liabilities of related persons and payable material compensations must be clearly determined under regulations.

Article 20. Handling of asset loss

An asset loss means that an asset is found, through a regular or irregular inventory, to be lost, deficient, damaged, qualitatively deteriorated, outmoded, technically obsolete, left in stock. Companies shall determine the lost value, causes of the loss, liability of involved parties and handle the loss as follows:

1. If it is due to subjective causes, loss causers shall pay compensations. Boards of directors or directors (for companies without boards of directors) shall decide on compensation levels under law and bear responsibility for their decisions.

2. Insured assets, if lost, shall be handled under insurance policies.

3. The lost asset value shall be offset against monetary compensations paid by responsible individuals or collectives or indemnified by insurers. The deficit, if any, shall be further made up for by financial provision funds of companies. If financial provision funds are also insufficient for the deficit, the remaining deficit shall be accounted as production or business expense in the period.

4. In special cases in which serious damage caused by natural disasters or force majeure circumstances cannot be remedied by companies themselves, their boards of directors or directors (for companies without boards of directors) shall elaborate damage remedy plans for submission to owner representatives and competent finance agencies. After obtaining opinions of finance agencies, owner representatives shall decide on the handling of damage according to their competence.

5. Companies shall promptly handle the asset loss. In case the asset loss is left unhandled, their boards of directors, directors general or directors shall be held responsible before the owner representatives therefor as in the case of untruthfully reporting on the financial status of enterprises.

Article 21. Asset revaluation

1. Companies shall revaluate their assets in the following cases:

a/ Under decisions of competent state bodies;

b/ Upon ownership transformation of companies, such as equitization or sale of companies, or diversification of forms of ownership;

c/ Use of assets for outward investment.

2. The asset revaluation must strictly comply with the State's regulations. Any positive or negative value differences due to asset revaluation prescribed in Clause 1 of this Article shall be handled under the State's regulations on a case-by-case basis.

Section 3. TURNOVER, EXPENDITURE AND BUSINESS OPERATION RESULTS

Article 22. Turnover

1. A company's turnover includes turnover from business activities and other incomes.

2. Turnover from business activities includes turnover from ordinary business activities and turnover from financial activities:

a/ Turnover from ordinary business activities means the whole receivable sum of money earned in the period from the sale of products or goods or the provision of services by the company. For companies providing public-utility products or services, their turnover include also the State's supports when they provide products or services according to their State-assigned tasks and earn turnover insufficient to cover expenditures;

b/Turnover from financial activities includes amounts earned from copyright, and allowing other parties to use their assets, loan interests, deposit interests, interests on deferred payment or installment payment on goods sale, financial leasing profits; profits from foreign currency sale, exchange rate difference (including exchange rate difference of debts payable in foreign currencies when exchange rates at the time of making financial statements are lower than those recorded in accounting books); profits from die transfer of capital contributions to limited liability companies or joint-stock companies (except transfer of slate capital portions under Point c, Clause 4. Article 16 of this Regulation); divided profits from outward investments (including also after-tax profits after making deductions for setting up various funds of state-run one-member limited liability companies; after-tax profits divided in proportion to state capital portions, and after-tax profits set aside for setting up development investment funds of independent cost-accounting member companies). In case enterprises have paid enterprise income tax before dividing profits, their parent corporations are not required to pay income tax on profit amounts divided by these enterprises.

3. Other incomes include proceeds from the liquidation and sale of fixed assets, collected insurance indemnities, payable debts of unidentified creditors recorded as income increases, fines collected from customers for contractual breaches, the value of intellectual assets accepted by capital contribution recipients and recorded as other incomes of state companies, and other revenues.

4. For enterprises conducting special business lines such as banking and insurance, their turnover shall be determined under the laws governing these business domains.

5. The Finance Ministry shall specify conditions and time for turnover determination.

Article 23. Business expenses

Business expenses of a state company are spent amounts related to its production or business operations in a fiscal year, including:

1. Production and business expenses:

a/ Expense for raw materials, materials, fuels power, semi-finished products and purchased services from outside (calculating according to actual consumption levels and actual costs), allocated expense for labor instruments and tools, expense for fixed asset repair, pre-deducted expense and expense for fixed asset overhaul.

b/ Expense for fixed asset amortization calculated under Article 14 of this Regulation.

c/ Expense for payment of salaries and wages, expense of salary nature payable to employees and decided by the board of directors or director (for companies without boards of directors) under the guidance of the Ministry of Labor, War Invalids and Social Affairs.

d/ Social insurance premiums, trade union dues and health insurance premiums, which must be paid for its employees under regulations.

dd/ Expense for transactions, brokerage, guest reception, marketing, trade promotion, advertisement, meetings, calculated according to actually paid amounts.

e/ Other monetary expenses include:

- Royalties, land tax, license tax;

- Land rent;

- Severance or job-loss allowances of employees;

- Expense for management and skills training for employees;

- Expense for health care;

- Expense for scientific research, technological renewal research;

- Rewards for innovations, increased labor productivity, supplies and expense saving. Reward levels shall be decided by the director general or director of the company based on performance efficiency but must not be higher than expense savings brought about by such performance within one year;

- Expense on female employees;

- Expense for environmental protection;

- Expense for mid-shift meals for employees;

- Expenses for activities of Party and mass organizations in the company (expenses outside the budgets of Party and mass organizations allocated from the prescribed sources);

- Other monetary expenses.

g/ The actually lost asset value and irrecoverable debts shall be handled under Clause 4, Article 18 and Clause 3, Article 20, of this Regulation.

h/ The value of inventory price decrease and bad debt provisions set up Clause 3. Article 11 of this Regulation, the exchange rate difference according to the foreign-currency long-term debt balance, pre-deducted expense for product warranty and provisions specified by law for enterprises engaged in special activities.

i/ Financial activity expenses, including expenses related to outward financial investments (including expenses borne by capital contributors, including also losses divided from capital contributors); the value of transferred capital contributions (excluding state capital portions specified at Point c. Clause 4, Article 16 of this Regulation), payable interests on raised capital, exchange rate difference, discount expense, asset-leasing expense; and long-term investment price decrease provision.

2. Other expenses, including:

a/ Expense for fixed asset sale or liquidation, including also the residual value of fixed assets upon their liquidation or sale;

b/ Expense for recovery of debts already written off;

c/ Expense for fine collection;

d/ Fines paid for contractual breaches;

dd/ Other expenses.

3. The following amounts covered by other sources or irrelated to production or business operations must not be accounted as production or business expenses:

a/ Expense for procurement, construction and installation of tangible or intangible fixed assets;

b/ Expense for payment of loan interests accounted as investment and construction expenditures, foreign exchange rate differences of construction investments arising before the time of putting works into use;

c/ Other expenses irrelated to business operations the company; expenses without valid vouchers;

d/ Fines for violations committed by individuals but not by the company.

Article 24. Expenditure management

State companies shall strictly manage all expenditures to reduce expenses and product costs and increase profits by the following managerial measures:

1. Elaborating, promulgating, and organizing the implementation of, econo-technical norms suitable to their econo-technical characteristics, business lines, managerial and organizational forms and equipment. The norms must be notified to implementers and publicized among employees in the companies for application, inspection and supervision. In case of failure to achieve the norms, thus raising costs, the causes thereof and responsibilities therefor must be clearly analyzed for handling under law. If it is due to subjective causes, compensations for damage must be paid. The competence to decide on compensation levels is defined in Clause 1, Article 20 of this Regulation:

2. Companies conducting monopolistic business shall annually report to their owner representatives and finance agencies (provincial-level Finance Services, for local enterprises, and the Finance Ministry, for central enterprises) on their production and business expenses. These reports must analyze and compare the set norms and actually paid fixed asset amortization expenses, labor and wage expenses, raw material, material and fuel expense, enterprise management expense including expenses for advertisement, marketing, transaction, guest reception and other expenses, clearly identifying the reasons and responsibilities of collectives or individuals for expenses paid in excess of the norms. The Finance Ministry shall specify this reporting regime;

3. Periodically analyzing expenses and product costs to identify management shortcomings and weaknesses and factors attributable to increased expenditures and product costs so as to take timely remedies.

Article 25. Product costs and service expenses

1. Total costs of all products or goods consumed in a period (or costs of goods sold) include prime costs of products or goods consumed in the period (or costs of goods sold); company management expenses arising in the period; and goods sale expenses arising in the period.

2. Service expenses spent in a period include service expense arising in the period, company management expense arising in the period, and goods sale and service expense arising in the period.

3. The Finance Ministry shall set out principles and methods of determining product and service costs.

Article 26. Earned profits

1. Profits earned in a year by a state company include profits earned from business operations and profits earned from other activities.

2. Profits from business operations include:

a/ Difference between the goods sale or service provision turnover and the total costs of sold products and goods or service expenses in the period;

b/ Difference between the turnover from financial operations and the expense for financial operations arising in the period.

3. Profits from other activities mean the difference between the income from other activities and the expense for other activities arising in the period.

Section 4. PROFIT DISTRIBUTION

Article 27. Profit distribution

1. A state company's earned profits in a year, after offsetting the previous year's losses under the Enterprise Income Tax Law and paying enterprise income tax, shall be distributed as follows:

a/ Dividing interests to associated capital contributors under contracts (if any);

b/ Offsetting losses of previous years which are no longer permitted for deduction from pretax profits;

c/ Deducting 10% for the financial provision. When the provision's balance reaches 25% of the charter capital, no more deduction is required;

d/ Making deductions for setting up special funds from after-tax profits according to percentages specified by the State for special companies which are required by law to make deductions;

dd/ The remainder after making deductions under Points a, b, c and d of this Clause shall be distributed according to the year's average ratio between the state capital invested in the company and the capital raised by the company itself in the year.

Capital raised by the company itself means money amounts raised through issuance of bonds or promissory bills or borrowing of loans from organizations and individuals at home or abroad which the company is responsible for repaying both principals and interests to lenders as committed, except loans guaranteed by the Government or the Finance Ministry and loans eligible for interest rate support.

2. For state companies with insufficient charter capital, profits divided in proportion to the state-invested capital shall be used for reinvestment to supplement state capital at the companies. Annually, based on state companies' production or business operation results and needs for charter capital supplementation, the Finance Ministry shall consider and permit these state companies to use divided profits to supplement their charter capital or transfer divided profits to the Support Fund for Enterprise Reorganization at the State Capital Investment Corporation for concentrated investment in enterprises and investment projects and allocation to the reward and welfare funds of state companies regularly providing public-utility services eligible for subsidies.

3. Profits divided in proportion to capital amounts raised by a state company itself shall be distributed as follows:

a/ Deducting at least 30% for the development investment fund of the company;

b/ Deducting up to 5% for the reward fund for the company's managerial and executive boards. The annual deduction level must not exceed VND 500 million (for companies with boards of directors) or VND 200 million (for companies without boards of directors) depending on the performance of managerial and executive boards and the companies' grading results. The Finance Ministry shall guide the implementation of this stipulation;

c/ The remaining profits shall be distributed into the reward and welfare funds according to the company grading as follows:

- Grade-A slate companies may deduct up to three months' paid salary;

- Grade-B state companies may deduct up to 1.5 months' paid salary;

- Grade-C state companies may deduct up to one month's paid salary;

- State companies which are not graded under regulations may not make deductions for setting up the reward and welfare funds.

- The deduction level for each fund shall be decided by the boards of directors or directors, for companies without boards of directors, after consulting the executive boards of trade unions of the companies.

4. Owner representatives shall decide on the specific deduction percentages for the reward fund for the companies' managerial and executive boards based on their operation efficiency and grading (A or B).

5. State companies conducting monopolistic businesses may deduct a maximum of three months' paid salary for the reward and welfare funds.

6. For newly invested and established companies, in two consecutive years after earning profits, if their profits are distributed as specified above but the reward and welfare funds cannot reach two months' paid salary, they may reduce deductions for the development investment fund in order to have two months' full paid salary for these two funds. The maximum reduction level is equal to the whole deduction for the development investment fund in the profit distribution period of that year.

7. For state companies designed to regularly and stably provide public-utility products or services under orders placed or plans assigned by the State and they actually do so, if the above-specified profit distribution fails to ensure sufficient deductions for the reward and welfare funds at the level specified in Clause 3 of this Article, these companies may reduce the deduction level for the development investment fund and profit amounts divided in proportion to their state capital in order to make sufficient deductions for the reward and welfare funds under regulations. If after such reduction, the reward fund and welfare funds are still deficient, the State will consider and provide supports which:

- Equal 100% of the deficit, for grade-A companies with the turnover from supply of public-utility products or services accounting for at least 50% of total turnover.

- Equal 50% of the deficit, for grade-A companies with the turnover from supply of public-utility products or services accounting for less than 50% of total turnover, or for grade-B companies.

After-tax profits to be deducted for setting up the reward and welfare funds include profit from the provision of public-utility products or services under orders placed or plans assigned by the State or bid-winning contracts, and profits from other business operations.

8. Deductions for the reward and welfare funds by special state companies:

a/ Special state companies which have state capital portions larger than capital amounts raised by themselves; state companies subject to ownership transformation, including those having obtained competent authorities' decisions on enterprise equitization, assignment or sale but not yet undergone ownership transformation (not yet been granted first-time business registration certificates for the new form of ownership); state companies currently performing some state-assigned socio-economic tasks in border areas, islands or strategic localities, performing economic-cum-defense tasks, or creating jobs for ethnic minority people, and their reward and welfare funds remain low even after after-tax profits are divided under Clauses 1. 2 and 3 of this Article because after-tax profits divided in proportion to raised capital are too small or there is no after-tax profit, may make deductions for setting up the reward and welfare funds as follows:

- They may make maximum deductions equal to three months' paid salary, for grade-A companies paying budget remittances in the year higher than or equal to those in the last year:

- They may make maximum deductions equal to one and a half months' paid salary, for grade-A companies paying budget remittances in the year lower than those in the last year, or grade-B companies paying budget remittances in the year higher than or equal to those in the last year;

- They may make maximum deductions equal to one month's paid salary, for other graded companies;

- State companies which are not graded under regulations may not make deductions for setting up the two funds.

b/ Sources for supplementation of the reward and welfare funds:

- Earned profit amounts to be deducted for setting up the development investment fund;

- Profit amounts divided in proportion to state capital.

c/ The order of supplementation of the reward and welfare funds is as follows:

- Reduce deductions under regulations for the development investment fund for supplementation of the reward and welfare funds to the maximum level specified at Point a of this Clause;

- If after being supplemented with all permitted deductions for the development investment fund, the reward and welfare funds cannot still reach the maximum level specified above, enterprises may use up to 50% of profit amounts divided in proportion to state capital portions to further supplement these two funds.

d/ The Prime Minister shall decide on the mechanism of making deductions for setting up and using the reward and welfare funds applicable to a number of special state companies, such as the State Capital Investment Corporation, the Stock Exchange, the Securities Trading Center and the Securities Depository Center, which have been transformed into enterprises under the Law on Securities;

dd/ The deduction for setting up the reward and welfare funds of special state companies made from 2007 must comply with this Clause.

9. For state companies with sufficient charter capital, the State will transfer part of their after-tax profits (profit amounts divided in proportion to their state capital and for their development investment fund) to the Support Fund for Enterprise Reorganization at the State Capital Investment Corporation.

Article 28. Use purposes of provisions and funds

1. The financial provision fund shall be used:

a/ To make up for property loss or damage, irrecoverable debts arising in the course of business operation;

b/ To make up for the companies' losses under decisions of their boards of directors or owner representatives.

2. The development investment fund shall be used to supplement the companies' charter capital.

3. The reward fund shall be used:

a/ To give year-end or periodical rewards to officials and employees of state companies on the basis of their productivity and performance;

b/ To give irregular rewards to individuals and collectives of state companies;

c/ To give rewards to individuals and units outside state companies for their great contributions to business operations and managerial work of these companies.

4. The reward levels specified at Points a. b and c of this Clause shall be decided by directors general or directors. Particularly for rewards mentioned at Point a, companies' trade unions should be consulted before reward decisions are made.

4. The welfare fund shall be used:

a/ To invest in building or repairing public-utility works of the company;

b/ To pay expenses for public welfare activities of collectives of workers and employees of the company, and for social welfare;

c/ To contribute partial investment in the construction of common welfare works within the sector or with other units under contracts;

d/ To provide partial unexpected difficulty supports to company employees, including pensioners, persons having retired due to their poor health or meeting with difficulties or helpless persons, or for social charity purposes.

The use of the welfare fund shall be decided by boards of directors or directors (for companies without boards of directors) after consulting trade unions of companies.

5. The reward fund for executive boards of companies shall be used to reward their boards of directors and directorates. Reward levels shall be decided by owner representatives, based on the efficiency of business operations and at the proposal of chairmen of boards of directors or directors of companies, for companies without boards of directors.

6. The use of the above funds must be publicized under regulations on financial publicity, regulations on grassroots democracy and the State's regulations.

7. Companies can spend the reward fund, the welfare fund and the reward fund for their managerial and executive boards only after full) paying due debts and fulfilling other due property obligations.

Section 5. FINANCIAL PLANS, ACCOUNTING STATISTICAL AND AUDITING REGIMES

Article 29. Financial plans

Based on the target ratio of profits to state-invested capital assigned by owner representatives, companies shall work out long-term and annual financial plans compatible with their business plans.

Boards of directors or directors (for companies without boards of directors) shall decide on their companies' financial plans and report them to owner representatives for use as a basis for supervising and evaluating results of business management and administration by the boards of directors or directors.

The Finance Ministry shall specify targets of financial plans of state companies.

Article 30. Financial statements and other reports

1. At the end of an accounting period (quarter, year), companies shall elaborate, present and send financial statements and statistical reports under law. Boards of directors or directors of companies (for companies without boards of directors) shall bear responsibility for the accuracy and truthfulness of these statements and reports.

State companies shall have their annual financial statements audited under law.

2. State companies shall elaborate and send under regulations reports on supervision and evaluation of their operation efficiency; reports on financial investments, and capital raising and use. The Finance Ministry shall specify the reporting regime.

3. State companies shall publicize their financial status under the State's regulations. The Finance Ministry shall guide, inspect and supervise the publicization of data and financial statements of suite companies.

4. State companies shall organize accounting and statistical work under law.

5. Companies shall submit to the inspection, examination and supervision of their financial work by competent finance agencies under law.

Section 6. POWERS, OBLIGATIONS AND RESPONSIBILITIES OF BOARDS OF DIRECTORS. DIRECTORS GENERAL OR DIRECTORS IN THE FINANCIAL MANAGEMENT OF COMPANIES

Article 31. Powers of boards of directors of state companies

1. To perform the function of company management and. within the ambit of their competence, organize, examine and supervise financial activities of companies.

2. To receive and preserve as well as develop capital assigned by the State. To be answerable to owner representatives for results of their companies' business operations, ensure the achievement of targets assigned by the State to their companies. To propose owner representatives to increase or reduce their companies' charter capital.

3. To submit to owner representatives for approval investment and construction plans, plans on outward investment, contracts on assignment and sale of assets beyond the level which boards of directors are empowered to decide on; to decide on percentages of deductions for the development investment fund and the reward fund for managerial and executive boards; to decide on plans on capital raising leading to a change in company ownership.

4. To decide according to their competence on the following issues:

Apart from the competence specified in Clause 1, Article 9; Clause 3, Article 12; Clause 2, Article 13; Clause 1. Article 15; Clause 2, Article 16 and other articles of this Regulation, boards of directors shall decide on the following issues:

a/ The percentage of deductions for the reward and welfare funds of their companies: the percentage of deductions for funds as prescribed for state-run one-member limited liability companies with boards of directors acting as owners.

b/ The promulgation of internal regulations on financial management of their companies, econo-technical norms, labor norms, labor productivity, financial spending norms and other norms;

c/ Targets of long-term and annual financial plans of their companies;

d/ The appointment of representatives of capital portions invested in other enterprises.

5. To adopt annual financial statements of their companies, plans on use of after-tax profits or handling of losses; to announce and publicize annual financial statements under regulations; to adopt annual financial statements of independent cost-accounting member companies or one-member limited liability companies of corporations, and consolidated financial statements of their companies and their subsidiaries; to approve plans on use of after-tax profits of one-member limited liability companies.

6. To inspect and supervise directors general, directors and member units in the capital use, preservation and development, the performance of obligations towards the State, the achievement of targets assigned by the State to their companies under law. To inspect and supervise chairmen and members of boards of directors, presidents, directors general (directors) of one-member limited liability companies; and representatives of the companies' capital contributions to other enterprises in the performance of their functions and tasks under the Law on State Enterprises and this Decree.

7. To implement the regulation on supervision and evaluation of operation efficiency of member companies under the State's regulations.

8. To decide on other issues as prescribed by law.

Article 32. Obligations and responsibilities of boards of directors, chairmen of boards of directors

1. Obligations of chairmen and members of boards of directors:

a/ To honestly and responsibly exercise the delegated powers and perform the assigned obligations in the interests of the State and their companies;

b/ Not to abuse their positions and powers to use company capital and assets for their personal benefits and families or other persons. Not to donate, present company assets to any party;

c/ To annually report on results of management and supervision of company operations to owner representatives, and grading results of member companies and state companies;

d/ Other obligations specified by law.

2. The chairmen and members of boards of directors, who violate the company charters, make decisions beyond their competence or ultra vires, abuse their positions and powers, thus causing damage to their companies and the Stale, shall pay damages under law and the company charters. Owner representatives shall decide on damages level.

3. The chairman and members of a board of directors shall be relieved from duty in ihe following cases:

a/ They report untruthfully on the financial status of their company twice or more or once but seriously distort their company's financial status;

b/ They let their company suffer from losses for two consecutive years or fail to achieve the profit-state-invested capital ratio for two consecutive years or fall into a state that there appears a profitable or break-even year in between two years of loss, unless losses or profit-state-invested capital ratio decreases are approved by competent authorities; or losses or profit-state-invested capital ratio decreases arc attributed to objective causes already explained to and accepted by competent authorities; or in the first years of operation after new investment or production expansion investment or technological renewal is made, losses are already determined in feasibility study reports;

c/ They fail to promulgate econo-technical norms, labor norms, labor productivity norms, norms of financial expense and other expenses; fail to urge directors general or directors of their companies to disseminate and organize the implementation of promulgated norms; or fail to organize the evaluation and adjustment of norms to suit the reality and management requirements.

4. In case they let their companies suffer from losses or profit-state capital ratio decrease year after year or fail to achieve planned profit targets assigned by owner representatives, fail to ensure the minimum salary for employees, they will have their salaries cut and not be entitled to rewards.

5. They shall be administratively handled or disciplined for the following acts depending on their seriousness:

a/ Violating financial management, accounting and auditing regulations and other regulations but not seriously enough for penal liability examination;

b/ Deciding on ineffective investment projects, failing to recover capital, failing to repay loans.

6. In case companies fall into bankruptcy but their boards of directors do not request their directors general or directors to file written petitions for bankruptcy, or companies undergo reorganization or ownership transformation but their boards of directors do not request their directors general or directors to carry out procedures for reorganization, dissolution or ownership transformation, chairmen and members of boards of directors shall be relieved from duty.

7. To perform other responsibilities specified by law.

Article 33. Powers of directors general or directors of state companies

1. To act as legal-entity representatives of their companies; to have the supreme executive powers in implementing investment projects and business operations in order to achieve business plan targets set by boards of directors. To propose boards of directors to submit to owner representatives or to personally submit to owner representatives (for companies without boards of directors) an increase or decrease in their companies" charter capital.

2. To receive capital assigned by the State, for companies without boards of directors; to take responsibility before boards of directors or owner representatives (for companies without boards of directors) for the preservation and development of state capital at their companies.

3. To decide on investment projects, projects for outward investment, plans on capital borrowing, plans on asset liquidation or sale according to the empowerment by boards of directors or owner representatives (for companies without boards of directors). To submit to boards of directors or owner representatives (for companies without boards of directors) for approval projects and plans falling beyond their competence.

4. To work out and submit to boards of directors for decision or decide by themselves (for companies without boards of directors) long-term and annual financial plans compatible with business plans; econo-technical norms, labor norms, financial expense norms and other expenses suitable to business conditions of their companies, which shall serve as bases for administration of business operations of their companies.

5. To determine percentages of deductions for the development investment fund and the reward fund for managerial and executive boards of their companies and report them to boards of directors for submission to owner representatives or personally submit them to owner representatives (for companies without boards of directors) for decision. To decide on percentages of deductions for the reward and welfare funds of their companies (for companies without boards of directors) and take responsibility before owner representatives for their decisions.

Article 34. Obligations and responsibilities of directors general or directors

1. To honestly and responsibly exercise the delegated powers and perform the assigned obligations in the interests of the State and their companies.

2. Not to abuse their positions and powers to use company capital and assets for their personal benefits, their families and other persons. Not to donate or present company assets to any party.

3. When their companies are unable to pay their debts and fulfill property obligations, to report such to boards of directors and concurrently notify creditors thereof and to devise measures to overcome their companies' financial difficulties; neither to raise salaries nor pay rewards to company employees and managers. If their failure to apply these measures causes damage to creditors, they shall bear personal liability for such damage.

4. If they violate the company charter, make decisions beyond their competence or ultra vires, abuse positions and powers, thus causing damage to their companies and the State, to pay compensations therefor under law and the company charter. Boards of directors or capital owner representatives (for companies without boards of directors) shall decide on compensation levels.

5. To bear responsibility before owner representatives, boards of directors and law for administration of company operations.

6. To bear responsibility for, and fulfill obligations towards, raised capital amounts and other capital sources of their companies; to take material liability for damage caused to their companies by their faults.

7. To elaborate and submit to boards of directors or owner representatives (for companies without boards of directors) for adoption financial statements of their companies. To take responsibility for die accuracy and truthfulness of data in such financial statements and other financial information.

8. To be relieved from duty or to have their contracts terminated ahead of time in the following cases:

a/ They report untruthfully on the financial status of their companies twice or more or once but seriously distorting the financial status of their companies;

b/ They let their companies suffer from losses for two consecutive years or fail to achieve the profit-state-invested capital ratio for two consecutive years or fall into a state that there appears a profitable or break-even year between two years of loss, unless losses or profit-state-invested capital ratio decreases are approved by competent authorities; or losses or profit-state investment capital ratio decreases are attributed to objective causes already explained to and accepted by competent authorities; or in the first years of operation after new investment or production expansion investment or technological renewal is made, losses are already determined in feasibility study reports;

c/ They fail to file written petitions for bankruptcy when their companies have fallen into bankruptcy; fail to carry out procedures for reorganization, dissolution or ownership transformation when their companies are subject to reorganization, dissolution or ownership transformation;

d/ They fail to fulfill tasks or targets assigned by persons who have appointed or recruited them or fail to fulfill their contractual obligations;

dd/ They fail to organize the determination of econo-technical norms, labor norms, labor productivity, financial expense and other expense norms for promulgation (for companies without boards of directors) or for submission to boards of directors for promulgation; fail to disseminate them to persons obliged to implement norms; fail to organize the implementation of norms; fail to organize the analysis, evaluation, revision or supplementation of norms to suit the reality and management requirements.

9. In case of letting their companies suffer from losses or profit-state-invested capital ratio decrease year after year or fail to achieve plan profit targets according to contractual terms or targets assigned by persons who have appointed them, or fail to ensure the minimum salary for employees, to have their salaries cut and to receive no bonus.

10. To be administratively handled or disciplined, depending on the seriousness of their violations, for the following acts:

a/ Violating financial management, accounting and auditing regulations and other regulations but not seriously enough for penal liability examination;

b/ Deciding on ineffective investment projects, organizing the implementation of investment projects at variance with plan or prolonging it, leading to late capital recovery or inability to recover capital or pay debts.

11. To report, on an annual basis, on results of administration of company operations to owner representatives and boards of directors, for companies with boards of directors.

12. To fulfill other responsibilities as specified by law.

Chapter III

STATE CORPORATIONS

Article 35. State corporations' capital

1. A corporation's capital includes capital invested in that corporation by the State, capital raised by the corporation itself and other capital sources specified by law.

2. State capital invested in state corporations established and invested under decisions of the State means state capital amounts directly managed by these corporations or invested by these corporations in their independent cost-accounting member companies. State capital directly managed by state corporations includes:

a/ State capital directly managed by corporations at their head offices and their dependent cost-accounting member units; state capital in non-business units under the corporations;

b/ State capital invested by corporations in state-run one-member limited liability companies with corporations acting as owners;

c/ State capital invested by corporations in other enterprises.

3. State capital invested in corporations established and invested by companies themselves (below referred to as parent companies and subsidiaries) means state capital amounts invested in companies which hold dominant control over oilier enterprises (below referred to as parent companies), including state capital directly managed and used by parent companies for production or business activities, state capital invested by parent companies in their subsidiaries and other enterprises.

4. Charter capital of independent cost-accounting member companies of state corporations established and invested by the State means capital amounts invested by these corporations and stated in the charters of these independent cost-accounting member companies.

5. Charter capital of state-run one-member limited liability companies with their corporations or parent companies acting as owners means capital amounts invested by these corporations or parent companies and stated in the charters of these state-run one-member limited liability companies.

6. The State shall invest capital only in corporations or parent companies. The investment of capital in independent cost-accounting member companies and other enterprises shall be decided by these corporations or parent companies.

Article 36. Assets of state corporations

1. Assets of state corporations invested and established under decisions of the State shall be formed from state capital invested in these corporations, loans and other lawful capital sources managed and used by the corporations.

The assets of a corporation include:

a/ Tangible and intangible fixed assets, working assets of the corporation's head office, independent cost-accounting units and non-business units;

b/ Long-term investments, including capital invested by the corporation in its independent cost-accounting member companies, state-run one-member limited liability companies with the corporation acting as owner, other enterprises, long-term bond and promissory bill investments and other long-term investments;

c/ Short-term investments invested directly by the head office or dependent cost-accounting units of the corporation.

The corporation's assets exclude assets of limited liability companies, independent cost-accounting member companies and joint-stock companies in which the corporation holds a dominant stake.

2. Assets of corporations invested and established by state companies shall be formed from state capital invested in parent companies, loans and other lawful capital sources directly managed and used by parent companies. These assets are assets of parent companies.

3. Assets of independent cost-accounting member companies in corporations invested and established under the State's decisions shall be formed from capital invested by corporations in their member companies, loans and other lawful capital sources managed and used by member companies.

Assets of independent cost-accounting member companies of corporations are not under these corporations' ownership.

4. Assets of state-run one-member limited liability companies with corporations or parent companies acting as owners shall be formed from capital invested by corporations or parent companies in one-member limited liability companies, loans and other lawful capital sources managed and used by state-run one-member limited liability companies.

Assets of state-run one-member limited liability companies are not under the ownership of corporations or parent companies.

Article 37. Management of capital and assets of corporations invested and established by the State

1. Corporations invested and established by the State:

a/ Corporations may invest capital in their independent cost-accounting member companies. Capital amounts assigned by corporations before the effective date of this Decree shall be regarded as capital amounts invested by these corporations in their member companies. Corporations are responsible for debts and other property liabilities of their member companies within the limit of capital amounts they have invested in their member companies;

b/ For state-run one-member limited liability companies with corporations acting as their owners, these corporations are not required to conduct capital assignment and receipt but invest capital in those companies;

c/ Corporations may not transfer assets of their independent cost-accounting member companies or state-run one-member limited liability companies by the method of non-payment:

d/ Corporations may not directly withdraw capital already invested in their independent cost-accounting member companies or state-run one-member limited liability companies for which these corporations act as owner representatives or other enterprises. Capital withdrawal may be made only by the method of reselling the invested capital amounts to individuals or other legal entities. In case of reorganization or adjustment of the charter capital of independent cost-accounting member companies or state-run one-member limited liability companies, corporations may directly withdraw capital already invested in these companies but shall ensure sufficient charter capital and solvency of these companies;

dd/ Total asset value serving as a basis for decentralizing the competence to decide on projects for outward investment, sale of fixed assets, long-term investments of state corporations or companies shall be determined under Clause 1, Article 36 above;

e/ To exercise other rights and perform other responsibilities specified by law.

2. Independent cost-accounting member companies of corporations shall manage capital and assets under Sections 1 and 2. Chapter II of this Regulation and the following provisions:

a/ Member companies may flexibly use capital amounts under their management, including capital invested by their corporations, take responsibility to boards of directors for the target profit-capital ratio and the effectiveness, preservation and development of capital invested by their corporations;

b/ Member companies may decide on investment plans according to the level of empowerment by corporations, which is stated in their charters.

3. State-run one member limited liability companies and joint-stock companies in which corporations hold a dominant stake shall manage capital and assets under the laws applicable to these types of enterprise.

Article 38. Management of capital and assets of parent companies and subsidiaries

1. Parent companies shall manage capital and assets under Sections 1 and 2, Chapter II of this Regulation.

Parent companies shall exercise the rights and perform the responsibilities of owners over capital amounts invested in their subsidiaries and other enterprises under law.

2. Subsidiaries shall manage capital and assets under the law applicable to the form of organization and operation of such companies.

Article 39. Management of turnover, business costs and results of state corporations

1. Corporations invested and established under the State's decisions shall manage their turnover, business costs and results under Section 3. Chapter II of this Regulation and the following provisions:

a/ Turnover of a corporation includes turnover from business operations and turnover from other activities carried out by the corporation's head office and dependent cost-accounting units. Turnover items are specified in Article 22 of this Regulation. Capital invested by a corporation in its independent cost-accounting member companies shall be regarded as capital invested outside the corporation. Profits divided in proportion to capital amounts invested by the corporation in its member companies constitute a turnover from financial activities of the corporation.

Management expenses collected by the corporation's superior authorities from member companies constitute a turnover of the corporation;

b/ A corporation's expenditures include expenses for business operations and expenses for other activities of its head office and dependent units. Expenditure items are specified in Article 23 of this Regulation;

c/ A corporation's profits include profits from business operations and profits from other activities of its head office and dependent units. Profit items are specified in Article 26 of this Regulation;

d/ Independent cost-accounting member companies shall manage their turnover, expenditures and profits under Section 3, Chapter II of this Regulation. Management expenses paid to the corporation for its superior authorities shall be accounted as expenses for business operations in the year by independent cost-accounting member companies before being transformed into other types of enterprise. For member companies already transformed into joint-stock companies or limited liability companies, if they are provided by the corporation consultancy, management assistance and advertisement services, they shall pay service charges to the corporation under contracts.

2. Parent companies shall manage turnover, expenditures and profits under Section 3, Chapter II of this Regulation.

Article 40. Distribution of profits of stale corporations

1. A corporation's profits include profits from direct business operations at the corporation, including also profits divided from the corporation's investments in other enterprises. In case these enterprises have paid enterprise income tax before profit division, the corporation does not have to pay income tax on profits divided from these enterprises.

The corporation's remaining profits, after paying enterprise income tax and subtracting amounts to supplement the capital of its independent cost-accounting member companies or state-run one-member limited liability companies for which the corporation acts as their owner, shall be distributed under Article 27 of this Regulation.

2. Remaining profits of independent cost-accounting member companies of corporations invested and established by the State, after paying enterprise income tax, shall be distributed under Clause 1, Article 27 of this Regulation and the following provisions:

Profits divided in proportion to corporations' capital amounts shall be used to increase these corporations' capital amounts at their member companies. In case companies have no need for capital supplementation or it is unnecessary to supplement capital for these companies, corporations may decide to collect these profits.

3. Profits of state-run one-member limited liability companies for which corporations act as their owners shall be distributed under the financial regulation applicable to this type of enterprise.

4. Profits of joint-stock companies and limited liability companies with more than one member shall be distributed under decisions of Shareholders' General Meeting, the Members' Council or capital contributors.

Article 41. Use purposes of funds

The use purposes of funds of corporations, parent companies and independent cost-accounting member companies comply with Article 28 of this Regulation.

Article 42. Financial statements of corporations

Corporations invested and established by the State, corporations invested and established by state companies and independent cost-accounting member companies shall make their financial statements under Article 30 of this Regulation.

Apart from financial statements on their own business operations, corporations invested and established by the State and corporations invested and established by state companies shall also make consolidated financial statements for the entire corporations under law.

Chapter IV

MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

Article 43. Representatives of owners of state capital at other enterprises

Representatives of owners are defined in the Law on State Enterprises and have their tasks and responsibilities assigned and powers vested by the Prime Minister.

For corporations, parent companies and independent state companies:

a/ State capital in state-run one-member limited liability companies transformed from member enterprises of corporations or newly established and invested by corporations, parent companies or state companies;

b/ State capital in joint-stock companies established on the basis of equitization of the whole member enterprises of corporations or sections of independent state companies;

c/ State capital in joint ventures formed on the basis that member enterprises of corporations have contributed the whole of their capital to the joint ventures and no longer have the legal entity status as member enterprises of corporations or that these corporations, parent companies or independent state companies have contributed capital to the joint ventures;

d/ Capital invested in other enterprises by corporations, parent companies or independent state companies.

3. Ministries, branches and provincial-level People's Committees shall transfer the task of managing state capital in other enterprises to the State Capital Investment Corporation according to the Prime Minister's decisions and schedule.

Article 44. Rights and obligations of representatives of owners of state capital invested in other enterprises

1. Organizations acting as owners of state-run one-member limited liability companies shall exercise the rights and perform the owner obligations under the Law on Enterprises.

2. Organizations acting as representatives of owners of state capital invested in other enterprises have the following rights:

a/ The rights of shareholders, capital-contributing members or joint-venture parties as specified by law and the charters of other enterprises;

b/ To appoint representatives of state capital or authorized representatives to exercise the rights of shareholders, capital contributors or joint-venture parties at general meetings of shareholders, capital contributors or joint-venture parties;

c/ To appoint, dismiss, commend or discipline representatives of state capital portions or authorized representatives at other enterprises (below referred to as representatives), and decide on salaries, allowances, bonuses and preferential treatments for representatives, unless these representatives are already salaried by other enterprises;

d/ To request representatives to make regular or irregular reports on business results and the financial status of other enterprises;

dd/ To assign tasks and direct representatives to protect lawful rights and interests of the State and companies in other enterprises. To request representatives to report on the performance of their tasks and responsibilities and exercise of their powers, particularly in directing enterprises in which the State holds dominant shares or capital contributions, to realize the State's objectives and strategies;

e/ To examine and supervise activities of representatives and detect their shortcomings and weaknesses in order to promptly redress them;

g/ To decide or propose competent persons to decide to increase or withdraw state capital invested in other enterprises under law and the charters of other enterprises;

h/ To bear responsibility for the effectiveness, preservation and development of capital invested by the State;

i/ To supervise the recovery of state capital lent to employees for share purchase upon equitization of state enterprises, the recovery of shares provided for employees to enjoy dividends when they die without heirs or when they voluntarily return shares (for enterprises equitized before July 14, 1998) sold on credit to poor employees in stale enterprises equitized after July 14, 1998;

k/ To supervise the recovery of capital invested in other enterprises and the collection of profits divided from other enterprises;

l/ To exercise other rights and perform other obligations specified by law.

Article 45. Rights and obligations of representatives

1. To stand as candidates for managerial and executive apparatuses of other enterprises according to these enterprises' charters.

2. To exercise, when authorized, the rights of shareholders, capital-contributing members or joint-venture parties at meetings of Shareholders' General Meeting, capital contributors or joint-venture parties in a prudent manner strictly according to directions of owner representatives, especially in case they are dominant shareholders or capital contributors.

3. To monitor and supervise the situation of business and financial operations, results of business operations of other enterprises under law and the charters of these enterprises. To report periodically or at the request of owner representatives on the situation and results of business operations, financial matters of other enterprises, or the performance of tasks assigned by owner representatives.

4. To monitor, urge and recover state capital in other enterprises, including capital lent to employees for share purchase, shares sold on credit to employees, shares divided to laborers for enjoying dividends, transfer of stale shares, collection of dividends and other amounts divided from capital contributed to other enterprises.

5. Representatives joining in managerial and executive boards of other enterprises shall study and propose orientations and measures for their activities at other enterprises to owner representatives for approval. For important issues put up for discussion in boards of directors, directorates or Shareholders' General Meetings, or among capital contributors or joint-venture parties, such as orientations, strategies and plans on business, issuance of additional shares, contributed capital, division of dividends..., representatives shall report in writing to and seek opinions of capital owner representatives and raise their opinions at meetings and cast their votes as directed by owner representatives. In case many representatives join the board of directors and directorate of another enterprise, they shall unanimously follow directions of owner representatives.

6. Representatives in enterprises in which the State holds dominant shares or capital contributions shall direct these enterprises to follow the objectives and orientations set forth by the State; exercise their control right or veto to decide on the addition of business lines in other enterprises. If detecting that enterprises have diverted from the State's objectives and orientations, they shall promptly report such to capital owner representatives and propose remedies. After getting the consent of capital owner representatives, they shall promptly apply the remedies so as to quickly direct the enterprises to follow the set objectives and orientations.

7. To exercise other rights and perform other obligations under law provisions, enterprise charters and regulations of assigned capital owner representatives.

8. To be answerable to capital owner representatives for their assigned tasks. If causing damage to capital owner representatives due to their irresponsibility or abuse of their tasks and powers, they shall bear responsibility and pay material compensations therefor under law.

Article 46. Salaries, bonuses and benefits of representatives

1. Representatives of stale capital portions at other enterprises who are full-lime members of managerial and executive boards or employees of other enterprises are entitled to salaries, responsibility allowances (if any), bonuses and other benefits specified in the charters of and paid by these enterprises.

2. Representatives who are part-time members and do not hold specialized positions in managerial and executive boards of other enterprises are entitled to salaries, responsibility allowances (if any), bonuses and other benefits paid by capital owners' representatives. In addition, they also enjoy representative allowances paid by owner representatives under regulations.

In case representatives enjoy remunerations paid by other enterprises, they shall remit these remunerations to owner representatives.

3. When having the right to purchase additionally issued shares or convertible bonds under decisions of joint-stock companies (except for case of purchase with the rights of existing shareholders) representatives of state capital portions at other enterprises shall report such in writing to state capital owners. State capital owners shall decide in writing on the quantity of shares representatives may purchase according to these representatives' contribution level and task performance. State capital owners have the right to purchase remaining shares.

In case a representative is appointed as the representative of state capital portions at different units, he/she will be given priority to choose to purchase shares from a certain unit. Representatives of state capital portions at joint-stock companies shall transfer the right to purchase remaining shares to state capital owners.

In case representatives of state capital portions at other enterprises fail to report on their right to purchase shares or convertible bonds from joint-stock companies, their status as representatives of state capital portions at other enterprises shall be invalidated and they shall transfer to state capital owners the share and convertible bond quantities in excess of the level they are permitted to purchase under the above regulations at purchase prices at the time of issuance. In case representatives of state capital portions at other enterprises have sold these shares, they shall remit to state capital owners the difference between the share market sale price at the time of sale and the purchase price and expenses (if any).

Article 47. Criteria of representatives

Representatives must satisfy the following criteria:

1. Being Vietnamese citizens permanently residing in Vietnam.

2. Possessing good ethical qualities and being physically fit for a representative's tasks.

3. Having law knowledge and a good sense of law observance.

4. Having professional qualifications in corporate finance or business domains of other enterprises with state-invested capital, having business and corporate governance capabilities. Persons directly managing state capital portions at joint ventures with foreign parties must be proficient in a foreign language so that they are able to directly work with foreigners in joint ventures without interpreters.

5. Being neither parents, spouses, children nor blood siblings of owner representatives, board of directors members and enterprise directors having contributed capital to enterprises which are assigned to these persons for management; having no relations in capital contribution for establishment of enterprises, loan provision, in signing trading contracts with state-invested enterprises which are assigned to these persons for direct management, unless they have shares of equitized state enterprises.

6. Representatives standing as candidates for members of boards of directors or directors of other enterprises must meet all criteria and conditions required for members of boards of directors or directors of state companies specified by law.

6. Having the full civil act capacity.

7. Being not banned from managing enterprises.

Article 48. Collection of divided profits

For profits divided from other enterprises, representatives shall request other enterprises to transfer them to companies which have contributed capital to other enterprises, for cases specified in Clause 2, Article 43 of this Regulation.

Article 49. Right to decide on increase or reduction of state capital at other enterprises

The increase or reduction of state capital portions at other enterprises is specified as follows:

1. The increase or reduction shall be considered and decided by owner representatives in case they are empowered or authorized by the Prime Minister to do so.

2. In case corporations or independent state companies are representatives of owners of state capital at other enterprises under Clause 2, Article 43 of this Regulation, these corporations shall consider and decide on the principle that persons deciding on plans for capital investment in other enterprises must be persons deciding on the supplementation of state capital invested in other enterprises; or decide on the reduction of state capital invested in other enterprises.

3. The method of increase or reduction of state capital at other enterprises complies with law and the charters of enterprises.

4. In case other enterprises increase their capital but state companies do not need to invest additional capital, they shall report thereon to owner representatives for consideration and decision on transfer of the right to purchase shares or contribute capital under law.

Article 50. Handling of state capital recovered from other enterprises

State capital amounts recovered upon issuance of decisions on reduction of state capital portions at other enterprises or dissolution or bankruptcy of other enterprises; recovered money amounts previously lent to employees for share purchase upon equitization of state enterprises, the value of shares divided to employees for enjoying dividends or shares sold on credit to poor employees in enterprises shall be handled as follows:

They shall be transferred to state companies which have contributed capital, for the cases specified in Clause 2, Article 43 of this Regulation, upon the sale of part of stale capital portions at other enterprises or the dissolution or bankruptcy of these enterprises. Recovered loans previously provided for employees to purchase shares upon equitization of state enterprises, the value of shares divided to employees for enjoying dividends or shares sold on credit to poor employees in member enterprises of state corporations shall be remitted into the support funds for enterprise reorganization at state corporations.

Article 51. The Finance Ministry shall guide the implementation of this Regulation. State business groups, state corporations and state companies shall base themselves on this Regulation and guiding documents to elaborate, amend and supplement their own financial regulations for submission to competent authorities for approval.