Decree No. 126/2017/ND-CP dated November 16, 2017 of the Government on conversion from state-owned enterprises and single-member limited liability companies with 100% of charter capital invested by state-owned enterprises into joint-stock companies

DECREE

On transformation of state enterprises and single-member limited liability companies with 100% state enterprise-invested charter capital into joint-stock companies^[1]

Pursuant to the June 19, 2015 Law on Organization of the Government;

Pursuant to the November 26, 2014 Law on Enterprises;

Pursuant to the November 26, 2014 Law on Management and Use of State Capital Invested in Production and Business at Enterprises;

Pursuant to the June 29, 2006 Securities Law and November 24, 2010 Law Amending and Supplementing a Number of Articles of the Securities Law;

Pursuant to the November 29, 2013 Land Law;

At the proposal of the Minister of Finance;

The Government promulgates the Decree on transformation of state enterprises and single-member limited liability companies with 100% state enterprise-invested charter capital into joint-stock companies.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree prescribes the transformation of state enterprises and single-member limited liability companies with 100% state enterprise-invested charter capital into joint-stock companies.

 Article 2. Subjects of application

1. Owner-representing agencies.

2. State enterprises, including:

a/ Single-member limited liability companies with 100% state-owned charter capital which are parent companies of state economic groups or parent companies of state corporations (including state-owned commercial banks), or parent companies in parent company-subsidiary conglomerates;

b/ Independent single-member limited liability companies with 100% state-owned charter capital;

c/ Enterprises with 100% state-owned charter capital which have not yet been transformed into single-member limited liability companies.

3. Single-member limited liability companies with 100% state enterprise-invested charter capital (below referred to as level-II enterprises).

4. Other agencies, organizations and individuals involved in the transformation of state enterprises into joint-stock companies.

Article 3. Interpretation of terms

In this Decree, the terms below shall be construed as follows:

1. Equitized enterprise means an enterprise referred to in Clause 2 or 3, Article 2 of this Decree which is transformed into a joint-stock company under this Decree. 

2. Time of equitization decision is the date the owner-representing agency issues a decision to equitize an enterprise.

3. Time of valuation of an equitized enterprise is the time selected by the owner-representing agency suitable to the enterprise valuation method. If an enterprise is valuated according to the asset method, the time of valuation of the enterprise is the closing date of account books for making a financial statement of the quarter or year following the time of equitization decision.

4. Time of announcement of the value of an enterprise is the date the owner-representing agency issues a decision to announce the value of an equitized enterprise.

5. Time of transformation of an equitized enterprise into a joint-stock company is the date an equitized enterprise is granted the certificate of first-time enterprise registration to operate in the form of a joint-stock company.

6. Share auction means the price competition-based public sale of shares of an equitized enterprise to different subjects. 

7. Share auction organization means a stock exchange, a securities company, or a property auction service center or enterprise as prescribed by the law on property auction under a decision of an owner-representing agency.

8. Reserve price means the initial price of a share offered to the public which is decided by an owner-representing agency but must not be lower than the share par value (VND 10,000). A reserve price shall be set by a consultancy organization to ensure the determination of the full actual value of state capital in the enterprise which has been revaluated and announced by a competent agency, and of the enterprise’s future potential.   

9. Equitization expenses include expenses directly related to the equitization process of an enterprise from the time of equitization decision to the time of handover between the equitized enterprise and the joint-stock company.

10. Owner-representing agency means a ministry, ministerial-level agency, government-attached agency, People’s Committee of a province or centrally run city or a lawfully established organization that is assigned by the Government to exercise the rights and perform the responsibilities of a representative of the state owner at an equitized enterprise.

Article 4. Equitization conditions

1. Enterprises referred to in Clauses 2 and 3, Article 2 of this Decree may be equitized when meeting both the following conditions:

a/ They are other than those in which the State needs to own 100% of charter capital. The list of enterprises with 100% of charter capital to be owned by the State shall be decided by the Prime Minister for each period;

b/  They still have some state capital after their financial matters are settled and they are revaluated.

2. If the actual value of an enterprise, after its financial matters are settled and it is revaluated under Chapters II and III of this Decree, is lower than its liabilities:

a/ If it is on the list of enterprises with over 50% of total shares to be owned by the State upon equitization under a decision of the Prime Minister, the owner-representing agency shall direct the enterprise to coordinate with the Vietnam Debt and Asset Trading Corporation and its creditors in working out a debt purchase and sale plan to restructure the enterprise.

In case such debt purchase and sale plan is infeasible and ineffective, other methods of transformation prescribed by law can be applied;  

b/ For other enterprises, the owner-representing agencies shall decide on the application of other methods of transformation in accordance with law.

3. The State shall not allocate additional capital for equitization, even for enterprises under the Prime Minister’s regulations on criteria, lists and classification of state enterprises with over 50% of total shares to be owned by the State when they are equitized.

Article 5. Forms of equitization

1. Keeping unchanged existing state capital in an enterprise, and issuing additional stocks to increase its charter capital.

2. Selling part of existing state capital in an enterprise or selling part of existing state capital in an enterprise in combination with issuing additional stocks to increase its charter capital.

3. Selling the whole existing state capital in an enterprise or selling the whole existing state capital in an enterprise in combination with issuing additional stocks to increase its charter capital.

Article 6. Share purchasers and conditions for share purchase

1. Domestic investors may purchase shares of equitized enterprises in unlimited quantity, except the cases specified in Clause 4 of this Article.

2. Foreign investors may purchase shares of equitized enterprises under this Decree and relevant legal documents.

Foreign investors wishing to purchase shares shall open accounts at credit institutions in accordance with the Vietnamese law on foreign exchange.

3. Strategic investors:

a/ Strategic investors are domestic investors and foreign investors that fully meet the following conditions:

- Having full legal person capacity as prescribed by law;

- Having adequate financial capability and having earned profits from production and business activities over the last 2 years by the time of registration for share purchase, and having no accumulated loss;

- Having a written commitment made by a competent person upon registration to become a strategic investor of an equitized enterprise regarding the following contents:

+ Continuing to maintain the core business line and brand of the equitized enterprise for at least 3 years since the time of officially becoming a strategic investor.

For an enterprise on the list of enterprises having achieved the national brand, the owner-representing agency shall propose the Prime Minister to decide on the period of time during which the strategic investor must commit to continuing to maintain the core business line and brand of the equitized enterprise.

+ Refraining from transferring the quantity of shares it purchases within 3 years from the date the joint-stock company is granted the certificate of first-time registration to operate under the Law on Enterprises.

+ A plan to provide the equitized enterprise with such supports as transferring new technologies; training human resources; raising financial capability; corporate governance; supplying raw materials and materials; and developing product outlets.

+ Compensation in case of violating the signed commitments for actual damage, and the State’s right to disposition over the entire quantity of shares purchased by the strategic investor if the latter violates the signed commitments. 

b/ The initial offering of shares to strategic investors may apply only to enterprises on the list of those in which the State continues to own over 50% of total shares upon equitization under decisions of the Prime Minister; 

c/ On the basis of the charter capital size, characteristics of business lines and development and expansion requirements of an enterprise, the enterprise equitization steering committee (below referred to as the steering committee) shall propose the owner-representing agency to decide on the initial offering of shares to strategic investors, criteria for selection of strategic investors and the rate of shares to be sold to strategic investors.

The selection of strategic investors in an equitized enterprise must follow the steps specified in Appendix I to this Decree, ensuring the selection of strategic investors and organization of their registration to purchase shares be completed before the time of disclosure of information on the initial public offering (IPO).

d/ In case there is only one strategic investor that meets the selection criteria registers to purchase shares with a quantity smaller than or equal to the quantity expected to be sold to strategic investors according to the approved equitization plan, the steering committee shall report it to the owner-representing agency for decision on the sale of shares to such strategic investor through direct negotiation at a price that must not be lower than the average successful bid based on the result of the public auction; in case of sale of shares to other investors under Clause 2, Article 37 of this Decree, the agreed price of shares to be sold to the strategic investor must not be lower than the price already agreed with these investors.

For the remaining quantity of shares (the difference between the quantity of shares expected to be sold to strategic investors under the approved equitization plan and the quantity registered to be purchased by the strategic investor), the steering committee shall report it to the owner-representing agency for decision to modify the equitization plan to auction this quantity to the public.

dd/ In case there are two  or more strategic investors that meet the selection criteria register to purchase shares with a total quantity higher than the quantity expected to be sold to strategic investors under the approved equitization plan, the steering committee shall report it to the owner-representing agency for decision on the auction of shares among these strategic investors on the stock exchange.

The auction of shares among these strategic investors shall be held after the public auction of shares, using the reserve price being the average successful bid based on the result of the public auction (in case of selling shares to other investors under Clause 2, Article 37 of this Decree, the reserve price at the auction of shares among strategic investors is the price already agreed with these investors), and adhering to the principle of selecting investors that offer higher prices in descending order until selling out the whole quantity of shares offered.

e/ In case there are two or more strategic investors that meet the selection criteria register to purchase shares with a total quantity not exceeding the quantity expected to be sold to strategic investors under the approved equitization plan, the steering committee shall reach agreement on the quantity of shares to be sold and their price with each strategic investor then report them to the owner-representing agency for approval. The quantity of shares sold to each strategic investor must be exactly the quantity registered by such investor at a price not lower than the average successful bid based on the result of the public auction (in case of selling shares to other investors under Clause 2, Article 37 of this Decree, the agreed price of shares to be sold to strategic investors must not be lower than the price already agreed with these investors).

For the remaining quantity of shares (the difference between the quantity of shares expected to be sold to strategic investors under the approved equitization plan and the quantity registered to be purchased by the strategic investors), the steering committee shall report it to the owner-representing agency for decision to modify the equitization plan to auction this quantity to the public.

g/ In case a strategic investor fails to fulfill its/his/her commitments or violates the share transfer regulations, it/he/she shall pay compensations for all losses incurred according to the signed contract and current regulations.

h/ Strategic investors shall deposit a cash amount or obtain a guarantee from a credit institution or foreign bank branch as prescribed by law which is equivalent to 20% of the value of shares they register to purchase at the reserve price decided by a competent agency in the approved equitization plan.

In case of waiving the right to purchase shares, a strategic investor will lose their deposit or shall pay a fine equivalent to the deposit in case it has an escrow account or a guarantee.

i/ The sale of shares to strategic investors shall be completed before the time of organizing the first general meeting of shareholders to transform the enterprise into a joint-stock company.

For the remaining quantity of shares (the difference between the quantity of shares actually sold to strategic investors and the quantity registered to be purchased by these strategic investors under the approved equitization plan), the steering committee shall report it to the owner-representing agency for decision to adjust the charter capital and charter capital structure before organizing the first general meeting of shareholders.

4. Organizations and individuals that may not purchase initially offered shares of an equitized enterprise include:

a/ Members of the steering committee and assisting team (excluding those who are representatives of the enterprise);

b/ Intermediary financial institutions and their individual members participating in giving equitization consultancy or auditing financial statements and audit firms auditing the enterprise’s valuation (excluding issuance underwriting institutions purchasing the quantity of shares not yet sold out under the underwriting contracts);

c/ Subsidiaries and associated companies in the same group or corporation or parent company-subsidiary conglomerates;

d/ The organization holding the share auction and its individual members involved in the auction;

dd/ Related persons defined in Clause 17, Article 4 of the 2014 Law on Enterprises of organizations and individuals specified at Points a, b and d of this Clause.

Article 7. Currency used in share payment and methods of initial offering of shares

1. Domestic and foreign investors shall purchase shares of enterprises in Vietnam dong.

2. Initial offering of shares shall be conducted by the methods prescribed in this Decree, specifically:

a/ Public auction;

b/ Issuance underwriting;

c/ Direct negotiation;

d/ Book building.

The Prime Minister shall decide on the subjects to apply the book building method and assign the Ministry of Finance to specifically guide the offering of shares by this method.

3. Depending on potential purchasers and conditions on initial purchase of shares, owner-representing agencies shall select appropriate methods of share offering specified in Clause 2 of this Article.

Article 8. Equitization expenses

1. Owner-representing agencies shall decide to approve estimated and finalized equitization expenses. Directors general (or directors) of equitized enterprises shall decide on specific expenses after they are approved by owner-representing agencies and take responsibility before law for their decisions. Equitization expenses shall be accompanied by adequate reasonable and valid supporting documents and ensure economization under current laws.  

2. Equitization expenses include:

a/ Direct expenses at an enterprise:

- Expense for training in enterprise equitization;

- Expense for asset inventory and valuation;

- Expense for elaboration of the equitization plan and the charter;

- Expense for organizing a meeting of employees to deploy the equitization;

- Expense for dissemination and disclosure of information on the enterprise;

- Expense for hiring audit of financial statements at the time of official transformation into a joint-stock company;

- Expense for organizing the sale of shares;

- Expense for organizing the first general meeting of shareholders.

b/ Owner-representing agencies or steering committees (if authorized) shall decide on funds for hiring audit and equitization consultancy organizations (consultancy organizations to valuate the enterprise, determine the reserve price, elaborate the equitization plan and sell shares). Payments to consultancy organizations shall be based on contracts signed between related parties.

c/ Remuneration for the steering committee and assisting team:

- Monthly remuneration for each member of the steering committee and assisting team must not exceed twice the base salary applicable to cadres, civil servants and public employees and armed forces members decided by the Government in each period.

- The period of payment of remuneration for each member of the steering committee and assisting team will depend on their actual working time but must not exceed 24 months counting from the time of establishment of such committee and team.

d/ Other expenses related to enterprise equitization.

3. An equitized enterprise may not regard expense for hired audit of financial statements at the time of its valuation as equitization expense but shall account such expense as a production and business expense in the period under regulations.  

4. Equitization expenses shall be paid with proceeds from the sale of shares prescribed in Article 39 of this Decree.

Article 9. Shares and stocks

1. Charter capital shall be divided into equal equities called shares. The par value of a share is ten thousand Vietnam dong (VND 10,000).

2. Stock is a certificate issued by a joint-stock company or a book entry or electronic data certifying the ownership of one share or a quantity of shares of a shareholder in this company. A stock must fully contain the principal contents specified in Clause 1, Article 120 of the 2014 Law on Enterprises.

Article 10. Principles of takeover of rights and obligations by joint-stock companies transformed from state enterprises

1. Equitized enterprises shall use to the maximum the number of employees working at the time of equitization decision and provide benefits to laid-off employees under current regulations.

Joint-stock companies are obliged to take over all responsibilities for employees transferred from equitized enterprises; may select and employ employees and coordinate with related agencies in providing benefits to employees in accordance with law.

2. Equitized enterprises shall coordinate with related agencies in examining and handling financial matters in order to valuate state capital at the time of official transformation into joint-stock companies.

3. Joint-stock companies may use all assets and capital amounts already handed over to them for organizing production and business; take over all lawful rights and interests and must be liable for all debts, including tax debts, employment contracts and other obligations of equitized enterprises.

4. Surplus or deficit assets compared to the value of an equitized enterprise already decided and announced by the owner-representing agency shall be disposed of as follows:

a/ In case the enterprise has some state capital left after its equitization:

- For surplus assets:

If the enterprise has not yet made a finalization statement by the time of official transformation into a joint-stock company, surplus assets shall be used to increase the state capital at the company (if the company needs to use such assets and its general meeting of shareholders adopts a resolution on this use) or handed over to the Vietnam Debt and Asset Trading Corporation (if the company does not need such assets).

If the enterprise has made a finalization statement by the time of official transformation into a joint-stock company, surplus assets shall be handed over to the Vietnam Debt and Asset Trading Corporation.

- For deficit assets after subtracting compensations (if any) paid by organizations and individuals:

If the enterprise has not made a finalization statement by the time of official transformation into a joint-stock company, such deficit assets shall be accounted into production and business expenses in the period from the time of enterprise valuation to the time of official transformation into a joint-stock company.

If the enterprise has made a finalization statement by the time of official transformation into a joint-stock company, such deficit assets shall be deducted from the state capital at the joint-stock company (if its general meeting of shareholders adopts a resolution on this deduction) or accounted into production and business expenses of the company (if its general meeting of shareholders does not adopt a resolution on this deduction).

b/ In case the enterprise has no state capital left after its equitization:

- Surplus assets shall be handed over to the Vietnam Debt and Asset Trading Corporation.

- Deficit assets, after subtracting compensations (if any) paid by organizations and individuals, shall be accounted into production and business expenses of the joint-stock company. 

Article 11. Disclosure and transparency of information and listing on the securities market

1. An equitized enterprise shall disclose on the Government Portal and concurrently send to the Ministry of Finance and the Steering Committee for Enterprise Renewal and Development for monitoring the following information: roadmap and schedule of equitization, information about the enterprise (including the approved land use plan, land areas involving unresolved disputes, if any), financial matters to be settled in the course of equitization, method of valuation of the enterprise and valuation result, equitization plan and its implementation situation and result, management and use of land, plan on share purchase of employees, and the draft charter of the enterprise which strictly conforms to the 2014 Law on Enterprises.

2. While compiling a dossier of initial public offering, an equitized enterprise shall also prepare a deposit registration dossier and a registration dossier for trading or listing on the securities market (if it is eligible for listing in accordance with the securities law).

3. Within 90 days from the date on which it finishes the public offering of stocks, an equitized enterprise shall complete the procedures for depositing stocks at the Vietnam Securities Depository and registering trading on the UPCOM.

4. If an enterprise that is equitized through both selling part of its state capital and issuing additional stocks to increase its charter capital in the form of auction to offer stocks to the public meets all the conditions for listing on the stock exchange, it shall submit a listing dossier as soon as it finishes the offering of stocks and notify the offering result to the State Securities Commission.

5. The owner-representing agency shall prescribe the equitization as well as the listing on the securities market in the equitization plan for disclosure to investors before the initial offering of shares.

In case an enterprise is equitized and listed on the stock exchange at the same time, the owner-representing agency shall decide on the minimum quantity of shares for purchase orders with regard to the quantity of shares to be sold to the public in the plan on initial offering of shares so that the equitized enterprise can be eligible for listing. The required minimum quantity of shares for purchase orders must not be discriminatory against investors of different economic sectors.

Article 12. Equitization consultancy

1. Equitized enterprises may hire consultancy organizations to carry out enterprise valuation, determine reserve prices and elaborate plans on equitization and initial offering of shares.

2. Equitized enterprises shall hire qualified consultancy organizations to carry out enterprise valuation.

3. Owner-representing agencies shall decide to select consultancy organizations that satisfy all the conditions specified in Clause 5 or 6 of this Article to valuate enterprises on the following principles:

a/ For consultancy packages of a value not exceeding VND 3 billion and there is only one organization registering to provide enterprise valuation consultancy services, the owner-representing agency may apply the method of contractor appointment to select enterprise valuation consultancy organizations;

b/ For consultancy packages other than those prescribed at Point a of this Clause, the owner-representing agency shall decide to hold a bidding to select an enterprise valuation consultancy unit in accordance with the bidding law.

4. Enterprise valuation consultancy organizations may select appropriate valuation methods, ensuring the principles prescribed in this Decree, the land law and price and price appraisal laws, complete the valuation on schedule and according to the commitments made in the signed contract. Equitized enterprises shall fully provide truthful information relating to them to enterprise valuation consultancy organizations in the process of valuation.

5. In order to provide enterprise valuation consultancy services, a domestic consultancy organization must fully meet the following standards: 

a/ Being an audit firm, a securities company or a price appraisal enterprise lawfully established and operating in Vietnam;

b/ Having at least 5 years’ experience (60 months of consecutive operation by the time of filing a dossier of registration for providing enterprise valuation consultancy services) in one of the following areas: price appraisal, audit, accounting, financial consultancy and enterprise ownership transformation consultancy.

Within 3 years preceding the time of filing a dossier of registration for providing enterprise valuation consultancy services, such organization must have performed at least 30 contracts on provision of services in one of the above-said areas;

c/ Being not subject to dissolution, bankruptcy, reorganization or special control by a competent state agency;

d/ Having at least 3 price appraisers who have a price appraiser card granted by the Ministry of Finance under regulations. They must have an indefinite-term or definite-term employment contract as prescribed at Point a or b, Clause 1, Article 22 of Labor Code No. 10/2012/QH13, signed with the enterprise.

If having fewer than 3 price appraisers, the organization must have a partnership contract with a qualified domestic price appraisal organization under law;

dd/ Satisfying the criteria on the quantity and quality of employees working in the sector or business line of the organization;

e/ Committing no violations pertaining to the sector or business line of the organization which are subject to administrative sanction or a heavier penalty in the five  consecutive years preceding the year it registers to provide enterprise valuation consultancy services;

g/ Having an enterprise valuation process compliant with current regulations on transformation of state enterprises into joint-stock companies and price appraisal standards.

6. In order to provide enterprise valuation consultancy services, a foreign consultancy organization must fully meet the following standards: 

a/ Operating in the area of price appraisal, audit, accounting, financial consultancy or of enterprise ownership transformation consultancy under the law of the country where such organization is headquartered;

b/ Having reputation, capability, brand and at least five  years’ experience (60 months’ consecutive operation by the time of filing a dossier of registration for providing enterprise valuation consultancy services) in one of the following areas: price appraisal, audit, accounting, financial consultancy and enterprise ownership transformation consultancy;

c/ If having fewer than 3 price appraisers, the organization must have a partnership contract with a qualified domestic valuation organization under the law on price appraisal.

7. Responsibilities of an enterprise valuation consultancy organization:

a/ To observe relevant laws in carrying out enterprise valuation operations and contracts signed with clients;

b/ To take responsibility before law for enterprise valuation results;

c/ To compensate for damage caused by its violations during the provision of valuation consultancy services or to be handled for violations under law;

d/ To explain or provide information and data relating to enterprise valuation results when there are complaints or written requests of the owner-representing agency, the State Audit Office of Vietnam, Ministry of Finance and related competent state agencies;

dd/ To keep confidential information about clients; to archive documents and records on valuated enterprises;

e/ To refrain from providing valuation consultancy services in the following cases:

- Its manager (as defined in Clause 18, Article 4 of the 2014 Law on Enterprises), chief accountant (or person in charge of accounting) or price appraiser is a person related (as defined in Clause 17, Article 4 of the 2014 Law on Enterprises) to the equitized enterprise.

- It has provided or is providing the service of audit, recording account books or making financial statements in the 2 years preceding the time of valuation of the equitized enterprise.

Chapter II 

FINANCIAL SETTLEMENT DURING EQUITIZATION

Article 13. Inventory and classification of assets and settlement of financial matters

1. Enterprises subject to equitization on the list of enterprises to be reorganized in each period approved by competent authorities shall review all land areas they are managing and using in order to work out land use plans under the land law and law on reorganization and handling of state-owned houses and land and submit them to competent state agencies for consideration and approval before the time of equitization decision.

Such land use plan must conform to the law on reorganization and handling of state-owned houses and land, local land use master plan and plan and construction master plan as well as development strategy of the enterprise.

2. When receiving an equitization decision from a competent agency, an enterprise shall organize inventory and classification of assets, capital sources and funds it is managing and using, and compare and certify debts as of the time of its valuation.

3. Equitized enterprises shall have their financial statements audited annually under regulations. In case the time of its valuation does not coincide with the end of a fiscal year, an equitized enterprise shall make a financial statement as of the time of its valuation.

When equitizing the parent company of a state economic group, the parent company of a state corporation or a parent company in a parent company-subsidiary conglomerate, subsidiaries with 100% charter capital owned by the parent company shall be valuated under this Decree. The valuation of such subsidiary shall be carried out concurrently with the valuation of the parent company.

4. If the time of its valuation coincides with the end of a fiscal year, before being valuated, an equitized enterprise shall request in writing the tax agency directly managing it to finalize its amounts to be remitted into the state budget under regulations.

If the time of its valuation does not coincide with the end of a fiscal year, before being valuated, an equitized enterprise shall request in writing the tax agency directly managing it to examine and certify its amounts to be remitted into the state budget under regulations.

Within 30 working days after receiving a written request from the enterprise, the tax agency shall promptly carry out the examination and finalization. Past this time limit, if the tax agency fails to do so, the equitized enterprise shall base itself on the declared data to determine its value under regulations.

5. Based on the results of inventory of assets, audit of financial statements and finalization of amounts to be remitted into the state budget, an equitized enterprise shall coordinate with related agencies in proactively settling according to their competence and the law the remaining financial problems before its valuation.

If the settlement meets with difficulties or falls beyond its competence, the equitized enterprise shall promptly report such to competent agencies for consideration and settlement.

If the reported problems remain unsettled, they shall be clearly stated in the written record of the valuation of the equitized enterprise to serve as a ground for further settlement in the period from the time of enterprise valuation to the time of official transformation into a joint-stock company.

Article 14. Handling of assets which are leased, borrowed, contributed as capital to joint ventures or business partnerships, assets which are no longer needed and assets formed with investments from reward funds or welfare funds

1. Assets which an equitized enterprise has leased, borrowed, received as capital contributed to joint ventures or business partnerships and other assets which do not belong to the enterprise shall not be included in the enterprise’s value for equitization.

For other assets already formed with investment supports from the state budget over which the equitized enterprise is assigned as a project owner but is not assigned to manage, use and operate technical infrastructure facilities, they shall not be included in its value for equitization. The equitized enterprise shall report them to a competent state agency for consideration and decision on their handling under the law on management of state assets.

2. Assets which are no longer needed nor used by an equitized enterprise or await liquidation shall be handled by the enterprise under current regulations on asset liquidation and sale.

Assets which have not yet been handled by the enterprise by the time of its valuation, except those specified in Clause 3 of this Article, shall be transferred to the Vietnam Debt and Asset Trading Corporation for handling in accordance with law. The residual book value of these assets shall be accounted into the enterprise’s production and business expenses in the period.

3. Assets disallowed to be excluded include:

a/ For houses and architectural objects (including also underground works, roads, fencing walls and yards and grounds) which an enterprise directly or indirectly uses; machinery, equipment and vehicles newly invested and put into use within the last 5 years or having a residual book value equal to at least 50% of their historical costs, an enterprise shall further manage, monitor and thoroughly handle them under current regulations by the time of official transformation into a joint-stock company;     

b/ For assets subject to destruction, including chemicals, hazardous substances, expired pesticides, etc., an enterprise shall coordinate with related agencies in disposing of or destroying them under current environmental management regulations before it is granted a certificate of first-time joint-stock enterprise registration.

After the causes of and responsibilities for violations are identified and compensations are paid under current regulations, losses may be offset by an enterprise against their business results under regulations.

c/ For assets being uncompleted capital construction expenses of projects or uncompleted works delayed under decisions of competent authorities, an equitized enterprise shall further take over, monitor and handle them under law. Particularly for expenses of projects rejected by competent authorities, not yet turned into tangible objects and irrecoverable, such as those for elaboration of prefeasibility study plans, work survey and designing, an enterprise shall identify causes and responsibilities for paying compensations under current regulations, and offset losses against their business results under regulations;  

d/ Collaterals which have been mortgaged by an enterprise for loans taken from credit institutions;

dd/ For assets of an equitized enterprise specified in Clause 2, Article 4 of this Decree, during the time of coordinating with the Vietnam Debt and Asset Trading Corporation and the enterprise’s creditors in preparing a debt purchase and sale plan to restructure the enterprise for submission to the owner-representing agency for approval, the enterprise may not liquidate and sell those on the list of assets in the enterprise’s value announced by such agency. 

4. Welfare facilities, including crèches, kindergartens, infirmaries and other welfare assets invested with the reward fund or welfare fund, shall be transferred to the trade union of the joint-stock company for management and use to serve its employees.

Houses of cadres, employees and workers built with the enterprise’s welfare fund, including those built with allocated state budget funds, shall be transferred to the local housing and land administration agency for management.

5. Assets formed with investments from the reward fund or welfare fund of an equitized enterprise and used in its production and business activities and accompanied by adequate supporting documents shall be revaluated and included in the enterprise’s value and further used by the joint-stock company in its production and business.

6. For state-owned commercial banks, the inventory, valuation and classification of assets being cash, assets used for financial leasing and debts (receivables and payables) must comply with specific guidance of the Ministry of Finance.

7. When state economic groups or corporations are equitized, their training, vocational education and healthcare establishments shall also be equitized, but not be separated and transferred.

8. When equitizing the parent company of a state economic group, the parent company of a state corporation or the parent company in a parent company-subsidiary conglomerate that has revenue-generating non-business units (excluding training, vocational education and healthcare establishments), these units shall be handled as follows:

a/ In case the equitized enterprise takes over these units, these units shall be valuated for inclusion in the value of the enterprise under current regulations on transformation of non-business units into joint-stock companies;

b/ In case the equitized enterprise does not take over these units, the steering committee shall report them to the owner-representing agency for consideration and decision or report them to the Prime Minister for decision to transfer them to related ministries, sectors or provincial-level People’s Committees for management under law. Pending the transfer of these units under decisions of competent agencies, the equitized enterprise shall continue managing them.

Article 15. Receivable debts

1. An equitized enterprise shall compare and certify all their receivable debts (both due and undue debts; and even off-balance sheet receivables of credit institutions), and recover debts which become due before the time of its valuation.

Receivable debts without sufficient legal dossiers proving that they are still owed by debtors or irrecoverable under regulations may not be excluded from the enterprise’s value, and the enterprise shall identify their causes for handling them on the following principles:

a/ Identifying the compensation liability of collectives and individuals related to receivable debts whose debtors are unidentifiable, and handling remaining losses under the State’s current regulations on handling of outstanding debts;

b/ Completing dossiers and further monitoring for recovery debts which cannot be proven to be irrecoverable.   

2. If there remain some receivable debts with sufficient dossiers not compared and certified yet by the time of valuation of an equitized enterprise, the President or Members’ Council of such enterprise shall clearly explain these debts and identify the responsibility of related collectives and individuals to complete the comparison of debts before the enterprise is granted a certificate of first-time joint-stock enterprise registration and report them to the owner-representing agency for consideration and decision according to their book value; and concurrently specify them in the decision approving the enterprise’s value and equitization plan as the basis for auction of shares.

By the time the equitized enterprise is granted a certificate of first-time joint-stock enterprise registration, when making a financial statement for handover to the joint-stock company, if there are still debts for which comparison procedures have been carried out but which have not been compared yet, the compensation liability of related collectives and individuals shall be identified. The residual value of these debts (after subtracting the compensations of these collectives and individuals, and provisions for bad debts, if any) shall be accounted into production and business expenses of the equitized enterprise and their dossiers shall be transferred to the Vietnam Debt and Asset Trading Corporation for handling under law.

3. An equitized enterprise shall hand over debts which are not accounted into its value (including also bad debts already handled with provisions within 5 years preceding the time of valuation of the enterprise) together with sufficient relevant dossiers and documents to the Vietnam Debt and Asset Trading Corporation for handling under law.

4. Amounts already prepaid to goods or service providers (such as house rental, land rental, goods purchase amounts, remuneration, long-term insurance premiums and rentals paid one-off for lease of land in industrial parks) already accounted into its production and business expenses, an equitized enterprise shall compare them against relevant contracts and volumes of provided goods or services in order to reduce expenses (corresponding to the parts of goods and services not yet provided or the future lease period) and to increase prepaid expenses for its valuation purpose.

Article 16. Payable debts

1. An equitized enterprise shall compare and certify all their payable debts (both due and undue) before the time of its valuation.

If there remain some payable debts with sufficient dossiers not yet compared and certified by the time of valuation of an equitized enterprise, the President or Members’ Council of such enterprise shall clearly explain these debts and identify the responsibility of related collectives and individuals to complete the comparison of debts before the enterprise is granted a certificate of first-time joint-stock enterprise registration and report them to the owner-representing agency for consideration and decision according to their book value; and concurrently state them in the decision approving the enterprise’s value and equitization plan as the basis for auction of shares.

At the time an equitized enterprise is granted a certificate of first-time joint-stock enterprise registration, when making a financial statement for handover from to the joint-stock company, if all comparison procedures for these debts have been completed but their creditors are unidentifiable, the value of these debts shall be recorded as an increase in the state capital. The joint-stock company (transformed from a state enterprise) shall archive the dossiers of these debts, take over and monitor them, pay them when receiving their creditors’ claims, and account the paid amounts into its production and business expenses in the period.

2. An equitized enterprise shall mobilize lawful capital sources to pay debts which become due before the time of its valuation or reach written agreements with creditors on handling these debts, including the conversion of payable debts into contributed shares.

The conversion of payable debts due at the time of valuation of an equitized enterprise into contributed shares shall be stated in the equitization plan and the prospectus on the initial offering of shares and based on creditors’ successful bids. Accordingly, the creditors shall participate in the public auction of shares and their debts shall be converted into the quantity of shares they successfully purchase.   

3. Outstanding tax amounts and amounts owed to the state budget:

a/ Equitized enterprises shall pay taxes and amounts owed to the state budget before transformation;

b/ If an equitized enterprise has not yet fulfilled its obligation to pay taxes and amounts owed to the state budget, the joint-stock company shall take over all of these debts.

4. In the course of its equitization, if an enterprise meets difficulties due to its business losses in paying overdue loans borrowed from credit institutions (including also the Vietnam Development Bank), these debts shall be handled under the State’s current regulations on handling of outstanding debts.

Article 17. Provisions, losses or profits

1. The remaining amounts of provisions for inventory price decreases, financial investments and bad debts (if any) by the time of valuation of an equitized enterprise shall be used to offset losses under current regulations; any remainder shall be included in its production and business results.

2. For provisions for warranty for products, goods and construction works by the time of its valuation, an equitized enterprise may retain the remainder of the amounts already earmarked corresponding to its warranty obligations under still valid contracts.

3. For the exchange rate difference as a result of re-assessment of monetary items of foreign-currency origin at the time of its valuation, an equitized enterprise shall re-assess it under regulations and shall not transfer it to its production and business results. The balance of this difference at the time of its valuation shall be further monitored by the equitized enterprise in the period from the time of its valuation to the time of official transformation into a joint-stock company.

4. Banking risk provision funds and insurance operation provision funds, after being used to offset losses under regulations, shall be left to the equitized enterprise and included in the value of its state capital.

5. Profits shall be used to offset previous years’ losses (if any) under the Law on Enterprise Income Tax, deducted into the science and technology development fund under regulations and pay enterprise income tax; any remaining profits shall be distributed under current regulations applicable to state enterprises effective at the time of valuation of the enterprise.

6. After losses are handled under the above provisions, if it still owes some debts to credit institutions (including also the Vietnam Development Bank) by the time of its valuation, an equitized enterprise shall coordinate with related agencies in handling them under current regulations and the provisions in Clause 4, Article 16 of this Decree.

Article 18. Capital of equitized enterprises invested in other enterprises

1. If an equitized enterprise takes over capital already invested in other enterprises, the whole of this capital amount shall be determined on the principles set out in Article 32 of this Decree.

2. If an equitized enterprise does not take over investments in other enterprises, it shall report them to the owner-representing agency for handling as follows:

a/ Reaching agreement with capital contributors on transfer of its capital contribution to another state enterprise to act as a new partner;

b/ Selling its capital contribution to its partner(s) or other investors under law;

c/ Taking over these investments under Clause 1 of this Article if by the time of its valuation it is still unable to sell or transfer them to other partners.

3. For the value of capital invested by an equitized enterprise in a foreign-invested enterprise under a capital contribution investment contract or license which contains a commitment that upon the end of the operation term of this enterprise, all of its assets shall be transferred without compensation to the Vietnamese party, which the equitized enterprise takes over, it shall be included in the enterprise’s value for equitization on the principles set out in Article 32 of this Decree. When the foreign-invested enterprise terminates its operation under the above-said contract or license, the joint-stock company shall transfer the assets without compensation to the Vietnamese State for management under the law on management and use of state assets. The equitized enterprise shall disclose such information to investors and clearly state it in the handover report and its charter. 

Article 19. Cash balances of reward funds, welfare funds and bonus funds for managers and supervisors of enterprises

1. The cash balance of the reward fund at the time of valuation of an equitized enterprise shall be used to offset amounts (if any) paid in excess of prescribed levels to employees and pay benefits to employees under regulations applicable to state enterprises. The remainder shall be divided to employees currently working in the equitized enterprise based on the number of months they have worked in the enterprise. The payment of the cash balance of the reward fund shall be completed before the time the enterprise is transformed into a joint-stock company.

2. The cash balance of the welfare fund at the time of valuation of an equitized enterprise shall be used to offset amounts (if any) paid in excess of prescribed levels to employees and pay benefits to employees under regulations applicable to equitized enterprises. The remainder shall be divided to employees, managers and supervisors currently working in the equitized enterprise based on the number of months they have worked in the enterprise. The payment of the cash balance of the welfare fund to employees, managers and supervisors shall be completed before the time the enterprise is transformed into a joint-stock company.

3. The cash balance of the bonus fund for managers and supervisors at the time of valuation of an equitized enterprise shall be left at the enterprise to pay bonus under regulations applicable to state enterprises and be handled under Point e, Clause 2, Article 21 of this Decree. 

4. When equitizing the parent company of a state economic group, the state corporation or of a parent company-subsidiary conglomerate, the cash balances of the funds mentioned in Clauses 1, 2 and 3 of this Article shall be handled on the principle that employees and managers of an enterprise (parent company or level-II enterprise) will enjoy the corresponding funds of such enterprise.

Article 20. Balances of the Enterprise Reorganization Support Fund in enterprises and of the Science and Development Fund

1. The balance (if any) of the Enterprise Reorganization Support Fund in an equitized enterprise shall be regarded as state capital and remitted to the Enterprise Reorganization and Development Support Fund.

2. The balance of the Science and Technology Development Fund shall be left at the new enterprise or joint-stock company for management and use under regulations. 

Article 21. Financial settlement at the time of official transformation of enterprises into joint-stock companies

1. An equitized enterprise shall continue complying with regulations on financial management applicable to state enterprises from the time of its valuation to the time of official transformation into a joint-stock company.

 2. When an equitized enterprise is granted the certificate of first-time joint-stock enterprise registration, it shall make a financial statement according to financial regulations applicable to state enterprises as the basis for handover to the joint-stock company, in which:

a/ The balance (if any) of the provisions for inventory price decreases, financial investments and bad debts shall be used to offset losses under regulations; any remainder shall be included in the enterprise’s production and business results.

For the provisions for warranty of products, goods and construction works (under signed contracts for the unexpired warranty period), the equitized enterprise may deduct parts of these provisions according to the signed contracts and retain them to provide warranty for products, goods and construction works under the contracts.

An equitized enterprise shall make detailed statements for each type of product, goods and construction work and enclose them with the equitization dossier. If the provisions are not used up by the expiration of the warranty period of these products, goods and works, within 30 days after the expiration date of the warranty period, the joint-stock company shall remit the remainder to the Enterprise Reorganization and Development Support Fund.

If the joint-stock company fails to fully and timely remit the remainder of the above-said provisions, it shall pay an interest under the Regulation on management and use of the Enterprise Reorganization and Development Support Fund.

b/ For the exchange rate difference as a result of re-assessment of monetary items of foreign-currency origin at the time of official transformation into a joint-stock company, an equitized enterprise shall re-assess it under regulations and shall not include it in its production and business results. This difference shall be transferred to the joint-stock company (after the transformation) for monitoring and handling under regulations.

c/ For the after-tax profit and dividends from financial investments (already approved under resolutions of the general meeting of shareholders or Members’ Councils of the capital contribution-receiving organizations) that arise from the time of its valuation to the time of official transformation into a joint-stock company but are not yet received, an equitized enterprise shall record them as an increase in the revenue from financial activities as well as an increase in its receivable debts.

d/ For stocks an equitized enterprise has additionally received from the time of its valuation to the time of official transformation into a joint-stock company without having to pay for them, it shall record the quantity of these stocks as an increase in the value of its state capital (according to the price determined on the principles set out in Article 32 of this Decree) as well as an increase in the value of its financial investments.

dd/ An equitized enterprise shall distribute profits and set up various funds under current regulations applicable to state enterprises.

In case the time of official transformation into a joint-stock company does not coincide with the time of making an annual financial statement so the enterprise classification cannot be done to provide a basis for setting up its funds, it shall set up the bonus fund for its managers and supervisors and the reward fund and welfare fund at the time of its official transformation into a joint-stock company on the following principles:

- To be based on the enterprise classification of the year preceding the time of official transformation.

- To be based on the profit amount allowed to be used for setting up the funds.

- The amounts deducted into these funds must comply with the regulations on profit distribution applicable to state enterprises, which shall be calculated by dividing the amount specified under these regulations by 12 then multiplied by the number of months from the beginning of the year to the time of official transformation.

e/ For the bonus fund for managers and supervisors at the time of official transformation into a joint-stock company, an equitized enterprise shall manage and use it under regulations. Any remainder of this fund shall be reported by the enterprise to the owner-representing agency for consideration and decision to remit it into the Enterprise Reorganization and Development Support Fund.     

3. Within 90 working days after obtaining its certificate of first-time joint-stock enterprise registration, an equitized enterprise shall complete the following:

a/ Making a financial statement at the time of enterprise registration;

b/ Having this financial statement audited;

c/ Finalizing its tax liabilities and amounts to be remitted into the state budget with the tax agency;

d/ After completing the tasks specified at Points a, b and c of this Clause, the enterprise shall propose the owner-representing agency to approve the value of the state capital at the time of official transformation into a joint-stock company; proceeds from the equitization, payments to laid-off employees, and equitization expenses under regulations.

4. Within 60 days after receiving the enterprise’s request for approval of the value of state capital at the time of official transformation into a joint-stock company, the owner-representing agency shall coordinate with related agencies in examining and handling financial matters of the enterprise and issue decisions to approve the financial finalization, finalization of proceeds from equitization, finalization of equitization expenses, and finalization of financial supports for laid-off employees, and to announce the actual value of the state capital at the time of the enterprise’s official transformation into a joint-stock company and the amount (if any) to be additionally remitted into the Enterprise Reorganization and Development Support Fund under regulations.  

5. Based on the approval decision of the owner-representing agency, the equitized enterprise shall re-make a financial statement at the time of obtaining the certificate of first-time joint-stock enterprise registration as the basis for handover to the joint-stock company.

The re-making of a financial statement for handover to the joint-stock company shall be based on adjustments according to the contents of financial settlement prescribed in this Decree, the finalization of proceeds from equitization, finalization of equitization expenses, finalization of financial supports for laid-off employees and the decision to announce the actual value of the state capital at the time of the enterprise’s official transformation into a joint-stock company (not according to the re-assessment results).

6. The after-tax profit arising from the time of its valuation to the time of its first-time registration shall be used by the equitized enterprise to offset the state capital decrease due to losses (if any) incurred in its production and business at the time of its valuation; any remainder of this profit shall be distributed and used to set up the funds under Point dd, Clause 2 of this Article.

The profit amount deducted into the development investment fund under regulations and the increase in the state capital arising from the time of its valuation to the time of official transformation into a joint-stock company, after subtracting expenses under regulations, shall be remitted by the equitized enterprise into the Enterprise Reorganization and Development Support Fund.     

7. In case a difference arises as a result of a decrease in the state capital, the equitized enterprise shall report it to the owner-representing agency for the latter to coordinate with related agencies in examining and identifying the cause and the responsibilities of related collectives and individuals, and handle it as follows:

a/ If it is due to an objective cause (natural disaster; enemy sabotage, state policy change, international market fluctuation or other force majeure circumstances), the equitized enterprise shall report it to the owner-representing agency for consideration and decision on the use of the proceeds from the sale of shares to offset the loss, after subtracting insurance indemnities (if any).

If the proceeds from the sale of shares are not enough to offset the decrease in the state capital, the owner-representing agency shall consider and propose the general meeting of shareholders to reduce the state capital contributed to the joint-stock company and adjust its charter capital and charter capital structure as suitable to reality.

b/ If it is due to a subjective cause:

- If the loss is caused by the failure to thoroughly settle financial matters under the State’s current regulations, the responsibilities of related agencies and individuals, such as the enterprise, consultancy organization, audit office, state audit office and agency having decided on the equitization, shall be clearly identified so that responsible organizations or individuals shall pay material compensation;

- If the capital and asset losses are caused by production and business administration and management, the enterprise’s managers shall pay compensations under current regulations for all losses caused due to their subjective fault;

- If, responsible organizations or persons, for force majeure reasons, are unable to pay compensations under competent agencies’ decisions, any remaining losses shall be handled as those attributable to an objective cause under Point a of this Clause.

8. For assets specified in Clause 4, Article 10 of this Decree, within 15 working days after the owner-representing agency issues a decision on their handover to the Vietnam Debt and Asset Trading Corporation, the equitized enterprise shall preserve these assets and hand them over to the Corporation.

Chapter III

VALUATION OF EQUITIZED ENTERPRISES

Section 1

ENTERPRISE VALUATION ORGANIZATIONS

Article 22. Enterprise valuation methods

1. Enterprise valuation consultancy organizations may select appropriate methods of valuation prescribed by the law on price and price appraisal to valuate enterprises, ensuring that each equitized enterprise shall be valuated by at least two  different methods approved by the owner-representing agency.

2. The determined and disclosed values of an enterprise and its state capital must not be lower than the values of the enterprise and its state capital determined by the asset method prescribed in Section 2 of this Chapter.

Article 23. Announcement of enterprise value

1. Based on the enterprise valuation dossier compiled by the valuation consultancy organization, the steering committee shall verify the process, procedures and compliance with the law on enterprise valuation, and report the enterprise value to the owner-representing agency for decision.

The period of financial settlement and valuation of an enterprise by an valuation consultancy organization (from the time of valuation to the time of announcement of the value of the enterprise) must not exceed 12 months; for enterprises subject to state audit under Clause 1, Article 26 of this Decree, this period must not exceed 15 months.

If the value of an equitized enterprise cannot be announced after the above-said time limit, the owner-representing agency shall decide to adjust the time of valuation of the enterprise for organizing the financial settlement and valuation of the enterprise under regulations and concurrently identify the causes of and responsibilities for the delay and ask responsible organizations and individuals to pay expenses incurred due to the delay.

2. The owner-representing agency shall consider, decide on and announce the value of the enterprise within 15 working days after receiving a complete dossier (including also the State Audit Office of Vietnam’s conclusion for the enterprises specified in Clause 1, Article 26 of this Decree).

3. Within 15 working days after the owner-representing agency issues a decision to announce its value, the equitized enterprise shall preserve and hand over the debts and assets already excluded from its value under Clause 2, Article 14, and Clauses 2 and 3, Article 15, of this Decree, to the Vietnam Debt and Asset Trading Corporation; for other assets, it shall continue monitoring, managing and accounting them according to their book values at the time of its valuation.

Article 24. Use of enterprise valuation results

Enterprise valuation results announced by the owner-representing agency serve as an important basis for setting the reserve price for the initial auction of shares of equitized enterprises.

Article 25. Adjustment of enterprise value

1. The owner-representing agency shall consider and decide to adjust the announced value of an equitized enterprise in the following cases:

a/ There appear objective causes (natural disaster, enemy sabotage, state policy change or other force majeure circumstances) affecting the value of the enterprise’s assets;

b/ It detects errors in the process of valuation committed by the consultancy organization or the enterprise. 

2. The adjustment of the announced value of an enterprise under Clause 1 of this Article shall apply only to equitized enterprises that have not yet carried out initial public offering (IPO) of their shares.

3. An enterprise shall be re-valuated if it fails to carry out initial public offering (IPO) of its shares 9 months after the time of announcement of its value, except special cases decided by the Prime Minister.

Article 26. State audit of equitized enterprises

1. Objects and scope of audit:

Based on the enterprise valuation result for equitization determined by the consultancy organization and the opinion of the owner-representing agency, the State Audit Office of Vietnam shall audit such result and the settlement of financial matters prior to the valuation of the following enterprises:

a/ Single-member limited liability companies with 100% state-owned charter capital which are parent companies of state economic groups or state corporations (including also state-owned commercial banks);

b/ State enterprises (including parent companies in the parent company-subsidiary conglomerates and single-member limited liability companies with 100% state-owned charter capital) having state capital worth VND 1,800 billion or more according to their account books at the time of their valuation;

c/ Single-member limited liability companies referred to in Clause 3, Article 2 of this Decree (level-II enterprises) having equity worth VND 1,800 billion or more according to their account books at the time of their valuation;

d/ Other single-member limited liability companies as requested by the Prime Minister or the owner-representing agency.

2. For enterprises referred to at Points a, b and c, Clause 1 of this Article, the owner-representing agency shall send a list of enterprises and their equitization roadmaps to the State Audit Office of Vietnam for preparing programs and plans on audit of enterprise valuation results of valuation consultancy organizations and of the settlement of financial matters before the official announcement of the values of equitized enterprises.

For enterprises specified at Point d, Clause 1 of this Article, within 5 working days after receiving the Prime Minister’s request for audit, the owner-representing agency shall notify their equitization roadmaps to the State Audit Office of Vietnam for preparing programs and plans on audit of enterprise valuation results of valuation consultancy organizations and the settlement of financial matters before the official announcement of the values of equitized enterprises.

2. Responsibilities of the State Audit Office of Vietnam and related agencies:

a/ After obtaining valuation consultancy results, the owner-representing agency shall send a dossier enclosed with a written request to the State Audit Office of Vietnam for audit of these results and the settlement of financial matters before the official announcement of the value of the equitized enterprise;

b/ Within 10 days after receiving the request of the owner-representing agency, the State Audit Office of Vietnam shall organize the audit of valuation consultancy results and the settlement of financial matters of the equitized enterprise. The time limit for completing the audit and announcing the audit result is 60 working days after the audit commences. The State Audit Office of Vietnam shall take responsibility for audit results under law;

c/ The equitized enterprise and the valuation consultancy organization shall provide adequate dossiers and documents relevant to the valuation of the enterprise and settlement of financial matters prior to the valuation at the request of the State Audit Office of Vietnam.

3. Processing of audit results:

Based on the State Audit Office of Vietnam’s audit result, the owner-representing agency shall consider and decide to announce the enterprise’s value and take subsequent steps of the equitization process under regulations.

In case the owner-representing agency disagrees with the audit result announced by the State Audit Office of Vietnam, it shall organize a meeting to express its opinions for reaching agreement or report its disagreement to the Prime Minister for consideration and decision according to his/her competence before the announcement of the enterprise’s value.

Section 2

ENTERPRISE VALUATION BY THE ASSET METHOD

Article 27. Value of equitized enterprises by the asset method

1. The total actual value of an equitized enterprise is the re-assessed value of all assets of the enterprise at the time of its valuation, taking into account the enterprise’s profitability.

The actual value of the state capital in an equitized enterprise is the enterprise’s total actual value after subtracting payable debts, the balance of non-business funds (if any), and excluding the balance of the exchange rate difference as a result of re-assessment of monetary items of foreign-currency origin prescribed in Clause 3, Article 17 of this Decree.

2. When equitizing the parent company of a state economic group or corporation or the parent company in a parent company-subsidiary conglomerate, the value of the state capital in the equitized company is the actual value of the state capital in this parent company.

3. For a financial institution or credit institution valuated by the asset method, its financial statement audit result may be used to determine its capital assets in money and liabilities and other types of assets provided that its fixed assets, financial investments in other enterprises and its land use rights value are inventoried and assessed under the State’s regulations.

4. For intangible assets (excluding the land use rights value), an equitized enterprise that still needs to use them shall re-valuate these assets for inclusion in its value. The re-valuation of intangible assets must comply with the law on price appraisal and shall be performed by a licensed price appraisal organization.

5. For stocks an equitized enterprise has received by the time of its valuation without having to pay for them, it shall record the quantity of these stocks as an increase in the value of its state capital according to the price determined on the principles set out in Article 32 of this Decree as well as an increase in the value of its financial investments.

6. Assets created under BOT contracts shall be valuated according to their book values and investors shall be publicly notified that these assets shall be handed over to competent state agencies after these contracts expire.

7. For assets being technical infrastructure facilities in industrial parks (excluding the leased land use rights) which have been invested by an equitized enterprise, if the enterprise has signed contracts on their sublease, determined the rental rates in the contracts and collected rentals one-off for the entire period of the projects, the enterprise will not have to re-assess these assets for determining its value for equitization. The joint-stock company shall pay land rentals under the current land law. For technical facilities in industrial parks that have not yet been leased, they shall be re-assessed under regulations.

8. For assets which an equitized enterprise liquidates or sells in the period from the time of its valuation to the time a consultancy organization valuates the enterprise (these assets no longer exist by the time the consultancy organization valuates the enterprise), the enterprise shall account according to financial management regulations the revenues from and expenses for the liquidation or sale of these assets. When valuating the enterprise, the consultancy organization shall use the values of these assets actually recovered through liquidation or sale, which must not be lower than their book values.

Article 28. Amounts excluded from an enterprise’s value for equitization

1. Value of the assets specified in Clauses 1, 2 and 4, Article 14 of this Decree.

2. Receivable debts which are irrecoverable.

3. Investments in other enterprises, specified at Points a and b, Clause 2, Article 18 of this Decree.

4. Assets of revenue-generating non-business units when equitizing the parent company of a state economic group, parent company of a state corporation or parent company of a parent company-subsidiary conglomerate (excluding training, vocational education and healthcare establishments); assets used for non-business activities which the equitized enterprise does not take over and are transferred under the decision of the owner-representing agency to related agencies for socialization purposes under law.

5. A person competent to decide on an enterprise’s value for equitization shall consider and decide on the exclusion from the enterprise’s value of the amounts specified in Clauses 1, 2, 3 and 4 of this Article, and take responsibility before law for his/her decision. 

Article 29. Bases for determination of the actual value of an enterprise

1. Figures in the enterprise’s account books at the time of its valuation.

2. Documents on inventory, classification and quality assessment of the enterprise’s assets at the time of its valuation.

3. Market prices of assets at the time of the enterprise valuation.

4. Re-assessed value of the use rights of allocated land or land rental and value of the business advantages of the enterprise.

Article 30. Value of land use rights

1. For land areas which an equitized enterprise is allocated for building houses for sale and building infrastructure facilities for transfer or lease according to its land use plan approved by a competent state agency, their land use rights shall be re-valuated for inclusion in the enterprise’s value as follows:

a/ The land price used for valuating land use rights for inclusion in the value of an equitized enterprise is the specific price applicable to land areas at the position allocated to the enterprise which is decided by the provincial-level People’s Committee of the locality (where the enterprise’s allocated land is located) under Clause 3, and Point d, Clause 4, Article 114 of the Land Law;

b/ The positive difference (if any) between the value of land use rights re-re-determined under Point a of this Clause and the value of these rights reflected on account books shall be remitted into the state budget.

In case the value of land use rights re-determined under Point a of this Clause is lower than the value of these rights reflected on account books, the value to be included in the value of the equitized enterprise is the value reflected on its account books.

c/ Land areas allocated to an equitized enterprise, including also land areas used for production of public products and provision of public services or for public welfare purposes (parks, urban environment, passenger car terminals, irrigation works, etc.), which are exempt from land use levy under the land law, shall be excluded from the value of land use rights to be included in the enterprise’s value. Land areas used for public works with a safety protection corridor under the land law shall also be considered and excluded under competent agencies’ decisions. The equitized enterprise shall manage and use these land areas for their approved use purposes in line with the land law.

2. For remaining land areas (after excluding land areas specified in Clause 1 of this Article) according to the approved land use plan of an equitized enterprise, the enterprise shall rent them for a definite period in accordance with the land law and pay annual rentals according to the specific price applicable to the position of such land which is decided by the provincial-level People’s Committee of the locality (where the land rented by the enterprise is located) under Clause 3, and Point d, Clause 4, Article 114 of the Land Law.

For land areas which are leased by the State to the equitized enterprise with one-off rental payment for the entire lease period and land areas acquired by the enterprise which are originally leased land areas and for which a one-off rental has been paid to the State, the enterprise may continue renting them until the lease period expires. The money amounts which the enterprise already paid for acquiring these land areas but has not accounted into its production and business results by the time of its valuation shall be regarded as prepaid amounts and subtracted from the land rental to be paid annually by the joint-stock company according to the specific land price decided by the provincial-level People’s Committee.

For land areas allocated by the State with land use levy and land areas acquired by the equitized enterprise which are originally land areas allocated by the State with land use levy, if these land areas are required to change to be leased under the 2013 Land Law, their allocation shall be changed to lease. The money amounts which the enterprise already paid when it was allocated such land areas by the State or for acquiring these land areas but has not accounted into its production and business results by the time of its valuation shall be regarded as prepaid amounts and subtracted from the land rentals to be paid annually by the joint-stock company according to the specific land price decided by the provincial-level People’s Committee.       

3. For land areas which an equitized national defense or security enterprise is using and have been planned for national defense or security purposes but are not yet necessarily used for such purposes, the Ministry of National Defense or Ministry of Public Security shall coordinate with the provincial-level People’s Committee of the locality (where such land areas are located) in considering and deciding to permit the enterprise to continue using such land areas until recovery decisions are issued by competent state agencies under Clause 3, Article 148 of the 2013 Land Law.  

4. Within 60 days after the date of grant of the certificate of first-time joint-stock enterprise registration, the equitized enterprise shall carry out procedures for land lease or allocation by the State in accordance with the land law.

5. The joint-stock company transformed from the enterprise referred to in Clause 2 or 3, Article 2 of this Decree shall manage and use the enterprise’s land according to its use purpose and the plan for the entire land area already approved by a competent agency in accordance with the land law.

6. Provincial-level People’s Committees have the following responsibilities:

a/ Within 30 working days after receiving a complete dossier, to give their official opinion on the entire land area which the enterprise will further use after its equitization and on the specific land price referred to in this Article in accordance with the land law;

b/ In case the enterprise’s land use proposal does not conform with the local master plan and the land use purpose stated in the decision of a competent state agency on rearrangement and handling of state-owned houses and land, the enterprise shall return the land concerned to the State for use for another purpose. The provincial-level People’s Committee shall coordinate with the owner-representing agency in handling such land under regulations;

c/ To direct related agencies in guiding the equitized enterprise in carrying out all the procedures to sign land lease contracts and apply for a certificate of land use rights and ownership of houses and land-attached assets under the current land law.

Article 31. Value of business advantages of enterprises

1. The value of business advantages of an equitized enterprise includes the value of its brand and its development potential.

2. The value of business advantages of an equitized enterprise shall be determined as follows:

a/ The value of a brand shall be determined based on expenses actually paid for the creation and protection of trade marks and names in the course of operation of an enterprise within 5 years preceding the time of its valuation, including expenses for its establishment, expenses for staff training, expenses for advertisement and promotion at home and abroad to advertise and introduce products and introduce the enterprise and for building its website.

For some special enterprises, the value of their brands shall be decided by the owner-representing agency based on the reports of consultancy agencies based on their historical and traditional characteristics (if any).

b/ The value of development potential to be included in the value of an equitized enterprise is its development potential assessed on the basis of its future profitability when comparing the enterprise’s profit ratio and the interest rate of government bonds as follows:

In which:

- The book value of state capital at the time of valuation of the enterprise is the total actual value according to its account books at the time of valuation of the enterprise minus payable debts and the balance of non-business funds (if any), and excluding the balance of the exchange rate difference due to re-assessment of monetary items of foreign-currency origin specified in Clause 3, Article 17 of this Decree.

- State capital includes the balances of: equity - account 411; the development investment fund - account 414 and capital construction investment capital - account 441, according to the Ministry of Finance’s Circular No. 200/2014/TT-BTC of December 22, 2014, guiding corporate accounting. The determination of state capital of an equitized credit institution must comply with the guidance of the State Bank of Vietnam.

- The ratio of after-tax profit shall be determined as follows:

Average state capital according to account books in five  years shall be determined by dividing the total average annual state capital by 5. Average annual state capital shall be determined by dividing the sum of the state capital at the beginning of the year and the state capital at the end of the year by 2.

Article 32. Valuation of investment capital of equitized enterprises in other enterprises

1. An equitized enterprise’s capital contribution to a single-member limited liability company with 100% charter capital contributed by the enterprise shall be valuated as follows:

a/ The capital contribution of the equitized enterprise in a level-II enterprise shall be re-valuated under Chapters II and III of this Decree;

b/ In case the level-II enterprise has a capital contribution in another single-member limited liability company (below referred to as level-III enterprise), the valuation of this level-II enterprise’s capital contribution in a level-III enterprise must comply with Points a, b and c, Clause 3 of this Article;

c/ For level-II enterprises established and operating overseas, the determination of capital contributions in these enterprises shall be performed in the same way as for investments of an equitized enterprise in other enterprises prescribed at Points a, b and c, Clause 3 of this Article.

The value of capital contributions of an equitized enterprise in level-II and level-III enterprises operating overseas shall be converted at the foreign exchange rate applied by the commercial bank where the equitized enterprise has regular transactions at the time of its valuation.      

2. The value of the capital contribution of an equitized enterprise in a joint-stock company already listed on the securities market shall be determined on the basis of the reference price of its stocks traded on the securities market at the time of the enterprise’s valuation. If there is no transaction at the time of the enterprise’s valuation, the reference price of the trading session immediately preceding the time of the enterprise’s valuation shall be used. 

The value of the capital contribution of an equitized enterprise in a joint-stock company already registered on the trading market of unlisted public companies (UPCOM) shall be determined on the basis of the average trading price on the system at the time of the enterprise’s valuation. If there is no transaction at the time of the enterprise’s valuation, the average trading price on the system on the date immediately preceding the time of the enterprise’s valuation shall be used. In case the stocks of the joint-stock company already registered on the UPCOM see no transaction within 30 days before the time of the enterprise’s valuation, the value of the capital contribution of the equitized enterprise shall be determined under Points a, b and c, Clause 3 of this Article.

In case the joint-stock company operates at a profit but the price of its stocks on the securities market or UPCOM is lower the par value (VND 10,000), the capital contribution of an equitized enterprise in this company shall be valuated under Points a and b, Clause 3 of this Article.

3. The capital contribution of an equitized enterprise in another enterprise (other than the cases prescribed in Clauses 1 and 2 of this Article) shall be valuated by multiplying the rate of the actually contributed capital by the value of the equity of another enterprise:

a/ The rate of the actually contributed capital of an equitized enterprise is the percentage (%) of the capital that has been actually contributed by the equitized enterprise to the total actually contributed capital (capital contributed by owners) of another enterprise;

b/ The equity of another enterprise shall be valuated according to its audited financial statement as of the time of valuation of the equitized enterprise. In case no audit has been conducted, the equity according to the unaudited financial statement as of the time of valuation of the equitized enterprise may be used. In case such another enterprise has no financial statement as of the time of valuation of the equitized enterprise, its financial statement made at the time nearest to the time of valuation of the equitized enterprise may be used;

c/ In case the value of the capital contribution of an equitized enterprise in another enterprise is re-assessed to be lower than the value reflected on account books of the equitized enterprise, the re-assessed value shall be used, provided it must not be lower than VND 0 (zero);

d/ The value of the capital contribution of an equitized enterprise in a joint-stock company or a limited liability company with two or more members operating overseas shall be converted at the foreign exchange rate applied by the commercial bank where the equitized enterprise has regular transactions at the time of its valuation.      

Chapter IV

INITIAL SALE OF SHARES AND MANAGEMENT AND USE OF PROCEEDS FROM EQUITIZATION

Article 33. Determination of charter capital and initial structure of shares

1. Based on the value of the state capital according to account books in an equitized enterprise and its production and business plan for the years following its successful transformation into a joint-stock company, the owner-representing agency shall decide on the size of the enterprise’s charter capital on the following principles:

a/ In case the actual value of the state capital according to the enterprise’s account books is higher than the charter capital amount necessary for the enterprise’s operation, the owner-representing agency shall determine the charter capital according to practical requirements. The difference between the actual value of the state capital according to the enterprise’s account books and the determined charter capital shall be remitted into the Enterprise Reorganization and Development Support Fund;

b/ In case of additional issuance of stocks, the charter capital will be the actual value of the state capital according to the enterprise’s account books plus the value of additionally issued shares calculated based on the stock’s par value.

2. Based on the determined charter capital, the owner-representing agency shall decide on the initial structure of shares, comprising:

a/ State-owned shares according to the criteria for classification of state enterprises announced by the Prime Minister for each period.

For special enterprises holding an important role in local economic development, serving the development strategy of a sector or economic group (such as seaport management and operation; enterprises with 36% state-owned charter capital and other specific cases), the owner-representing agency shall report to the Prime Minister for decision on specific quantities of shares to be further owned by the State and quantities of voting preferential shares prescribed in Clause 3, Article 113, and Article 116, of the Law on Enterprises.

b/ Shares to be sold to grassroots trade union organizations in equitized enterprises.

The grassroots trade union in an equitized enterprise may use its fund in the enterprise (under Article 26 of the 2012 Law on Trade Union; but not raised capital or loans) to purchase shares not exceeding 3% of the charter capital. This quantity of shares shall be held by the trade union and may not be transferred within 3 years from the time of transformation of the equitized enterprise into a joint-stock company.

The selling price of shares to the trade union in an equitized enterprise is the par value of shares (VND 10,000/share).

c/  Shares shall be sold to employees of enterprises under Clauses 1 and 2, Article 42 of this Decree;

d/  Shares shall be sold to strategic investors (if any) under Clause 3, Article 6 of this Decree;

dd/ Shares to be auctioned to the public, which must account for at least 20% of the charter capital.

3. In case the quantity of shares sold at a preferential price to employees of an enterprise (at the most preferential price) is higher than the remaining quantity of shares projected to be issued (after subtracting the quantity of state-owned shares and the quantity of shares sold to investors and the trade union under Points a, b, d and dd, Clause 2 of this Article), and the enterprise does not fall into the category of enterprises where the State needs to hold dominant shares, the owner-representing agency shall consider and decide to decrease the quantity of state-owned shares in order to increase the quantity of shares sold at a preferential price to employees.

Article 34. Public auction method

1. The auction method is applied in case of auction to the public regardless of whether the investors are institutional, individual, domestic or foreign ones.

2. Public auctions shall be held at the stock exchange. If the quantity of shares on sale is valued at under VND 10 billion, the owner-representing agency may consider and decide to allow the auction to be held at a securities company or a property auction service center or enterprise in accordance with the law on asset property.

3. At least 20 working days before the initial sale of shares, the steering committee shall coordinate with the stock exchange or auction organization in disclosing information at the enterprise, at the auction venue, in the mass media and on the Government Portal.

4. The selling price determined by the public auction method is the successful bid of each investor. By this method, an investor that wins the auction at a certain bid shall purchase shares at such bid, which must not be lower than the reserve price.

Article 35. Issuance underwriting method

1. The issuance underwriting method is a method of share issuance secured by a commitment of an organization with the underwriting function to fully distributing the quantity of shares to be sold to the outside, which has been approved by a competent authority.

Issuance underwriting for foreign investors must comply with regulations on the right of foreign investors to purchase shares from or contribute capital to Vietnamese enterprises.

In case shares are not sold out, issuance underwriters shall purchase all remaining shares at guaranteed prices already agreed in the underwriting contracts, which must not be lower than the reserve prices.

2. The obligations and rights of underwriters must comply with the law on securities and securities market and stock issuance underwriting contracts signed between underwriters and competent representatives of equitized enterprises.

Article 36. Direct negotiation method    

1. The direct negotiation method is a method of selling shares to investors according to results of negotiation between the steering committee or an organization authorized by the steering committee and each investor.

2. The selling price determined by the negotiation method must comply with Points d and e, Clause 3, Article 6, and Clauses 2 and 4, Article 37 of this Decree.

Article 37. Handling of quantities of unsold shares

1. In case there is no investor registering to purchase shares, the steering committee shall sell shares to employees and the trade union in the enterprise according to the approved equitization plan, and concurrently carry out procedures to transform the enterprise into a joint-stock company. For the unsold quantity of shares, the charter capital and its structure shall be adjusted and capital shall be withdrawn once the enterprise has operated in the form of a joint-stock company.

2. In case there is only one investor registering to purchase shares, the steering committee shall agree to sell shares in a lawfully registered quantity to such investor at a price not lower than the reserve price. If such investor refuses to purchase shares, the equitized enterprise shall follow Clause 1 of this Article.

3. In case after holding a public auction, all investors with successful bids refuse to purchase shares, the equitized enterprise shall follow Clause 1 of this Article.

4. In case some shares have been sold at a public auction, the unsold quantity of shares (including the quantity of shares which investors with successful bids refuse to purchase) shall be handled as follows:

a/ The steering committee shall inform investors that lawfully participated in the auction (excluding those with successful bids in the public auction) to sell shares to them by the negotiation method in the exact quantities they registered and at the prices they offered at the auction on the principle of selecting prices in descending order offered at the auction until the whole quantity of shares put on sale is sold out;

b/ If there remain some shares after selling shares to investors by the negotiation method, the steering committee shall inform investors with successful bids in the public auction (excluding those who refused to purchase shares) to purchase these shares by the negotiation method at the prices offered by each investor at the auction on the principle of selecting negotiated prices in descending order until all remaining shares are sold out;

c/ If there remain some shares after implementing the provisions of Points a and b of this Clause, the equitized enterprise shall follow Clause 1 of this Article.

Article 38. Time limit for completion of sale of shares

Within 4 months after the issuance of the decision approving the equitization plan, an enterprise shall complete the sale of shares (including sale of shares by issuance underwriting and direct negotiation methods).

Article 39. Management and use of proceeds from equitization

1. Determination of proceeds from the initial sale of shares

a/ Within 5 working days from the deadline for payment for shares by investors participating in a public auction, the organization holding the auction shall transfer the proceeds from the initial sale of shares to the equitized enterprise to pay benefits to laid-off employees and equitization expenses according to the estimates stated in the approved equitization plan. The remainder shall be remitted into the Enterprise Reorganization and Development Support Fund;

b/ Within 20 days from the deadline for payment for shares by investors participating in a public auction, the steering committee shall instruct the enterprise to complete the sale of shares to the trade union and employees under this Decree and the approved equitization plan. It shall also instruct the enterprise to remit the proceeds from the sale of shares to the trade union and employees into the Enterprise Reorganization and Development Support Fund within 5 days from the payment deadline;

c/ Within 20 days from the deadline for payment for shares by investors participating in a public auction, the steering committee shall instruct the enterprise to complete the sale of shares under Clause 4 of Article 37. It shall also instruct the enterprise to remit the proceeds from the sale of these shares into the Enterprise Reorganization and Development Support Fund within 5 days from the payment deadline;

d/ Within 30 days from the deadline for payment for shares by investors participating in a public auction, the steering committee shall instruct the enterprise to complete the sale of shares to strategic investors according to the negotiation method under this Decree. It shall also remit the proceeds from the sale of these shares into the Enterprise Reorganization and Development Support Fund within 5 days from the payment deadline; 

dd/ Within 30 days from the deadline for payment for shares by investors participating in a public auction, the steering committee shall coordinate with the organization holding the auction to complete the auction of shares to strategic investors. It shall also remit the proceeds from the sale of these shares into the Enterprise Reorganization and Development Support Fund within 5 days from the payment deadline;

e/ In case the total proceeds from the initial sale of shares under Points a, b, c, d and dd, Clause 1 of this Article are lower than the estimated fund to pay benefits to laid-off employees and equitization expense estimates under the approved equitization plan, the equitized enterprise may retain the whole proceeds to pay expenses according to the approved estimates and officially finalize them at the time the enterprise is granted a certificate of first-time enterprise registration.

2. Determination of proceeds from the sale of shares at the time an enterprise is officially transformed into a joint-stock company

a/ Within 90 days from the time of grant of the certificate of first-time enterprise registration, based on the financial statement as of the time of grant of this certificate and the guidance on the settlement of financial matters at the time of official transformation into a joint-stock company prescribed in Article 21 of this Decree, an enterprise shall determine by itself the amount to be remitted into the Enterprise Reorganization and Development Support Fund. It may retain the following amounts:

- The amount corresponding to the quantity of additionally issued shares calculated according to the par value of shares.

- The surplus amount from the additionally issued shares, which may be used to pay equitization expenses and benefits to laid-off employees (if this amount is insufficient, follow the provisions of Point d of this Clause); the remainder (if any) may be left to the joint-stock company according to the rate of the quantity of additionally issued shares in the charter capital structure, in which:

b/ Within 5 working days after the date of issuance of a decision by the owner-representing agency regarding the contents prescribed in Clause 4, Article 21 of this Decree, an enterprise shall further remit the difference (if any) in excess of the remitted amount determined under Point a, Clause 2 of this Article into the Enterprise Reorganization and Development Support Fund;

c/ In case the amount to be remitted into the Enterprise Reorganization and Development Support Fund according to the finalization statement approved by the owner-representing agency is lower than the amount determined and remitted by the enterprise under Point a, Clause 2 of this Article, the enterprise shall send a written request to the Ministry of Finance for refund of the excessive amount. Based on the written request of the enterprise and dossiers and documents required under the Regulation on Management and Use of the Enterprise Reorganization and Development Support Fund, the Ministry of Finance shall decide to refund the excessive amount to the enterprise from the Fund within 10 working days.

d/ In case the actual proceeds from the sale of preferential shares to employees, the trade union, strategic investors and other investors in the IPO are insufficient to pay related expenses (including equitization expenses, financial supports for laid-off employees and incentives for employees) according to the finalization statement approved by a competent authority, the owner-representing agency shall consider and asks the general meeting of shareholders to adopt a decision to reduce the state capital contributed to the joint-stock company (if there is some state capital left in the joint-stock company), and adjust charter capital and charter capital structure to suit the reality. In case after such adjustment there is no more state capital, the enterprise shall report it to the owner-representing agency to send a written request to the Ministry of Finance to refund the deficit amount to the enterprise from the Enterprise Reorganization and Development Support Fund under Point c of this Clause.

3. After the time limits specified in Clauses 1 and 2 of this Article, if the auction-holding organization and enterprise fail to remit the proceeds into the Enterprise Reorganization and Development Support Fund, they shall additionally pay an interest on these proceeds for the period of late payment according to the mechanism of management and use of the Enterprise Reorganization and Development Support Fund. This late-payment interest shall be neither included in reasonable expenses for enterprise income tax calculation nor offset by the after-enterprise income tax profit after subtracting the compensations paid by the Members’ Council or Board of Directors and collectives and individuals responsible for the late payment (if any). 

4. The Prime Minister shall decide on the mechanism of management and use of the Enterprise Reorganization and Development Support Fund. The Ministry of Finance shall organize the management apparatus of the Enterprise Reorganization and Development Support Fund according to the mechanism decided by the Prime Minister.

5. The owner-representing agency shall direct the steering committees and equitized enterprises to fully and promptly report on the management and use of proceeds from the equitization to the Ministry of Finance.

Article 40. Charters of joint-stock companies

1. The charter of a joint-stock company shall be drafted by the steering committee in coordination with the equitization consultancy organization and notified to investors before the sale of shares. The draft charter of a joint-stock company must not be contrary to the Law on Enterprises and relevant laws.

2. The charter of a joint-stock company shall be adopted by the first general meeting of shareholders when it is voted for by at least 65% of total share-purchasing investors attending the meeting.

Article 41. General meetings of shareholders and first-time enterprise registration

1. Within 30 working days after completing the sale of shares, an equitized enterprise shall organize the first general meeting of shareholders to transform the enterprise into a joint-stock company and make enterprise registration in accordance with law.

2. A dossier of enterprise registration must comprise the decision of the agency competent to decide on the equitization plan on transformation of the enterprise into a joint-stock company, the decision (if any) of the owner-representing agency to appoint a representative for the state capital in the joint-stock company and the joint-stock company’s charter bearing the signature of the company’s at-law representative.

Chapter V

POLICIES TOWARD EMPLOYEES DURING EQUITIZATION

Article 42. Policies on sale of shares to employees

1. Shares to be sold at preferential prices to employees

a/ Persons eligible to purchase shares at preferential prices include:

- Employees working under employment contracts and managers of the equitized enterprise at the time of valuation of the enterprise.

- Employees of an equitized enterprise at the time of valuation of the enterprise who have been appointed to work as representatives of the enterprise’s capital amounts in other enterprises but not yet enjoyed the policy on purchase of preferential shares in other enterprises.

- Employees working under employment contracts and managers of a level-II enterprise (who have not enjoyed the policy on purchase of preferential shares in other enterprises) at the time of valuation of the enterprise, for enterprises prescribed at Point a, Clause 2, Article 2 of this Decree.

b/ The eligible persons specified at Point a, Clause 1 of this Article may purchase at most 100 shares per year of actually working in the state sector at the price equal to 60% of the par value of shares (VND 10,000/share);

c/ For employees representing households (one representative per household) having stable and long-term contracts signed with an equitized agricultural or forestry company at the time of valuation of the company  may purchase at most 100 shares per year of performing the contracts with the company at the price equal to 60% of the par value of shares (VND 10,000/share);   

d/ The difference between the price of shares sold to employees and the par value of shares under Clause 1 of this Article shall be subtracted from the value of the state capital finalized at the time of official transformation of the enterprise into a joint-stock company;

dd/ The quantity of shares sold at the preferential price prescribed in this Clause shall not be transferred by employees within 3 years from the time of payment to purchase these shares.

2. Employees working under employment contracts and managers of an equitized enterprise at the time of valuation of the enterprise who are needed by the enterprise and commit to working for the enterprise for at least 3 years (from the date the enterprise is granted the certificate of first-time enterprise registration) may additionally purchase shares under the following provisions:

a/  They may purchase an addition of 200 shares for each year they commit to continuing to work in the enterprise, with the total quantity of additionally purchased shares not exceeding 2,000 per employee.

Particularly, excellent, highly professionally qualified experts working in the enterprise may additionally purchase 500 shares for each year they commit to continuing to work in the enterprise, with the total quantity of additionally purchase shares not exceeding 5,000 per expert. The equitized enterprise shall base itself on the particularities of its sector or business line to develop and decide on criteria for identifying excellent, highly professionally qualified experts and have these criteria adopted by their employees’ meeting before the time of equitization;

b/ The price of shares to be additionally sold to employees under Point a of this Clause is the reserve price approved by the owner-representing agency in the equitization plan;

c/ Each employee may enjoy the right to additionally purchase shares in a quantity specified at Point a of this Clause;

d/ The shares employees additionally purchase under Point a, Clause 2 of this Article may be converted into ordinary shares upon the expiration of the committed time limit.

In case a joint-stock company changes its structure and technology, is relocated or narrows down its production and business area at the request of a competent state agency, causing its employees to terminate employment contracts, give up jobs or lose jobs under the Labor Code ahead of the committed time limit, their additionally purchased shares may be converted into ordinary shares. In case these employees wish to sell their shares, the joint-stock company shall redeem these shares at a price close to the market trading price.

Employees who terminate their employment contracts ahead of the committed time limit shall sell all of their additionally purchased shares to the joint-stock company at a price close to the market trading price but not higher than the price they purchased these shares at the time of equitization.

3. Employees in an enterprise that is restructured and transformed into a joint-stock company through the Vietnam Debt and Asset Trading Corporation under Clause 2, Article 4 of this Decree, are entitled to the policies specified in Clauses 1 and 2 of this Article according to specific conditions of their enterprise and the approved equitization plan.

4. Employees who wish to purchase more shares in addition to the quantity they are entitled to purchase under Clauses 1 and 2 of this Article shall register to purchase shares through public auction like other investors. 

Article 43. Policies toward laid-off employees

1. If employees working under employment contracts and employees of an equitized enterprise at the time of its valuation who are appointed to work as representatives for its capital amounts in other enterprises cannot be arranged any jobs in the joint-stock company according to its employment plan are entitled to policies applicable to laid-off employees as prescribed by law.

2. The owner-representing agency shall consider and arrange jobs for managers of an equitized enterprise. If it cannot arrange any jobs after having taken every measure, managers of an equitized enterprise are entitled to policies like laid-off cadres and civil servants as prescribed by law.   

3. The Members’ Council or President of a state enterprise shall consider and arrange jobs for managers of level-II enterprises prescribed in Clause 2, Article 2 of this Decree. If it/he/she cannot arrange any jobs after having taken every measure, managers of an equitized enterprise are entitled to the policies prescribed by the labor law.   

Chapter VI 

ORGANIZATION OF IMPLEMENTATION

Article 44. Transformation of single-member limited liability companies with 100% state enterprise-invested charter capital into joint-stock companies

1. The Members’ Councils or presidents of state enterprises specified in Clause 2, Article 2 shall transform their level-II enterprises into joint-stock companies in accordance with this Decree.

2. By the time of its valuation, a level-II enterprise shall account the residual book value of all assets which are no longer needed, stockpiled assets and assets awaiting liquidation, except assets which are not allowed to be excluded under Clause 3, Article 14 of this Decree, into its production and business expenses and hand over these assets to their parent company for management and liquidation or sale under regulations. The proceeds from the liquidation or sale of these assets shall be accounted by the parent company into its business results.

3. For level-II enterprises which have equity of VND 1,800 billion or more according to their account books at the time of their valuation, on the basis of the results of their valuation for equitization determined by a consultancy organization and the opinion of the owner-representing agency, the State Audit Office of Vietnam shall audit this results and the settlement of financial matters before the valuation of these enterprises.

4. The proceeds from the sale of shares of a level-II enterprise according to the finalization statement approved by a competent authority after subtracting the cost price (book value) of sold shares, equitization expenses, expenses for paying benefits to laid-off employees and incentives for employees and tax liabilities (if any) under regulations shall be remitted into the Enterprise Reorganization and Development Support Fund within 5 working days after the date of issuance of a decision of a competent authority.

If the above proceeds from the equitization of a level-II enterprise are insufficient to pay its equitization expenses under regulations (equitization expenses, expenses for paying benefits to laid-off employees and incentives to employees), the parent company shall cover the deficit, which shall be accounted into its financial activity expenses.

Article 45. Powers and responsibilities in the organization of equitization

1. The Prime Minister:

a/ To approve the list of enterprises prescribed in Clauses 2 and 3, Article 2 of this Decree for transformation into joint-stock companies;

b/ To approve equitization plans of state economic groups and corporations and enterprises each having a state capital of VND 1,800 billion or more according to their account books and level-II enterprises each having equity of VND 1,800 billion or more according to their account books;

c/ To decide on agencies to act as representatives of the owner of state capital in the units referred to at Point b, Clause 1 of this Article, excluding level-II enterprises;

d/ To consider and handle specific issues and problems arising in the course of equitization of each enterprise which are not specifically prescribed in this Decree at the proposal of owner-representing agencies.

2.  An owner-representing agency shall base itself on the Prime Minister- approved list of enterprises to be equitized:

a/ To form a steering committee to assist the owner-representing agency in performing equitization work under this Decree.

To form a steering committee to assist the Prime Minister in organizing the equitization of the units specified at Point b, Clause 1 of this Article;

b/ To instruct, supervise and monitor the process of equitization of units under its management regarding the contents specified in this Decree;

c/ To decide to select equitization consultancy organizations and share auction organizations; to announce the values of enterprises and submit equitization plans of the units specified at Point b, Clause 1 of this Article;

d/ To decide to select equitization consultancy organizations and share auction organizations; to announce the enterprise’s value and equitization plans of enterprises under its management together the draft charters of joint-stock companies which are elaborated in accordance with the Law on Enterprises and relevant laws;

dd/ To approve debt purchase and sale plans and equitization plans of loss-making enterprises after reaching written agreement on these plans with the Vietnam Debt and Asset Trading Corporation and creditors of the enterprises under Clause 2, Article 4 of this Decree.

The time limit for approving debt purchase and sale plans and equitization plans of loss-making enterprises under Clause 2, Article 4 of this Decree is 3 months after the date of issuance of a decision to announce the enterprise’s value;

e/ To decide to adjust the state capital in joint-stock companies under regulations; to decide to hand over to the Vietnam Debt and Asset Trading Corporation surplus assets (if any) under Clause 4, Article 10 of this Decree;

g/ To approve plans on employment and settlement of laid-off employees of equitized enterprises;

h/ Within the time limit specified in Clause 4, Article 21 of this Decree, to coordinate with related agencies in approving financial finalization; equitization expense finalization; finalization of financial supports for laid-off employees; and finalization of proceeds from equitization; and announce the actual value of the state capital at the time the joint-stock company is granted the certificate of first-time enterprise registration (including also units specified at Point b, Clause 1 of this Article);

i/ To settle problems, complaints and denunciations in equitized enterprises according to their competence under current law;

k/ To direct equitized enterprises to register and deposit their shares purchased through auction at the Vietnam Securities Depository and to register trading on the stock exchanges under regulations;

l/ To direct equitized enterprises to compile dossiers and transfer the right of a representative for the owner of state capital in the joint-stock companies (transformed from state enterprises) to the State Capital Investment Corporation under regulations;

m/ To approve criteria for and selection of strategic investors for enterprises selling shares to strategic investors, including also enterprises referred to at Point b, Clause 1 of this Article.

3. The Members’ Council or president of a state enterprise prescribed in Clause 2, Article 2 of this Decree shall:

a/ Organize the implementation of equitization plans of level-II enterprises according to the Prime Minister-approved list of enterprises to be equitized;

b/ Form a steering committee to assist the Members’ Council or president in organizing the equitization of level-II enterprises, excluding the units specified at Point b, Clause 1 of this Article;

c/ Decide to select equitization consultancy organizations and share auction organizations; settle financial matters; announce the values of enterprises; approve equitization plans, approve employment plans; approve financial finalization; equitization expense finalization; finalization of financial supports for laid-off employees; and finalization of proceeds from equitization; and announce the actual value of the state capital at the time the joint-stock company transformed from a level-II enterprise is granted the certificate of first-time joint-stock enterprise registration under this Decree  (excluding the units specified at Point b, Clause 1 of this Article);

d/ Instruct, supervise and monitor the process of equitization of units under its/his/her management regarding the issues specified in this Decree;

dd/ Approve criteria for and selection of strategic investors for level-II enterprises selling shares to strategic investors, excluding enterprises referred to at Point b, Clause 1 of this Article.

4. Powers, responsibilities and composition of steering committees:

a/ A steering committee has the following powers and responsibilities:

- To assist the agency competent to decide on equitization in directing and organizing the equitization of one enterprise or several enterprises under this Decree.

- To use the owner-representing agency’s seal in performing its duties;

- To form an assisting team to carry out equitization work at enterprises.

- To direct the enterprise to base itself on the approved equitization plan:

+ To take the initiative in preparing legal dossiers and documents on its assets (including also houses and land); a plan on land use after equitization; inventorying assets and comparing debts by the time of making a financial statement under law.

+ To make an equitization plan (specifying the time limit for performance of each task) and submit it to the owner-representing agency for approval. If failing to carry out the equitization on schedule, the leadership of the enterprise shall be considered failing to accomplish their tasks.

- To direct the settlement of financial and labor matters, organize the valuation of the enterprise under this Decree.

- To report the methods of initial sale of shares to the owner-representing agency for selection.

- To direct the making of the equitization plan and the drafting of the first-time charter of the joint-stock company.

- To direct the making of the employment plan and submit it to the owner-representing agency (for state enterprises) or to the Members’ Council or president of a state enterprise (for level-II enterprises, excluding the units specified at Point b, Clause 1 of this Article) for approval.

- To verify and submit to the owner-representing agency for selection equitization consultancy organizations and share auction organizations, for announcement the value of the enterprise, and for approval equitization plans. 

- To direct the equitized enterprise to cooperate with auction organizations in holding share auctions under regulations.

- To direct the equitized enterprise to determine the proceeds from equitization suitable to the form of equitization, make finalization statements (financial finalization by the time of official transformation into a joint-stock company; equitization expense finalization; finalization of financial supports for laid-off employees; and finalization of incentives granted to employees and the trade union) and report them to a competent agency for approval.

- To summarize and report on share sale results to the owner-representing agency.

- To summarize and submit to the owner-representing agency for decision adjustments to the equitization plan and for decision adjustments to the enterprise’s value after the enterprise is transformed into a joint-stock company.

- To coordinate with related agencies in verifying and submitting to the owner-representing agency for approval the financial finalization; equitization expense finalization; finalization of financial supports for laid-off employees; and finalization of the proceeds from the equitization, and for announcement the actual value of the state capital at the time the joint-stock company is granted the certificate of first-time enterprise registration.

- To consider and propose the owner-representing agency to appoint a representative of the state capital in the equitized enterprise.

- To direct the equitized enterprise to promptly and fully disclose information on the equitization process on the Government Portal and send such information to the Ministry of Finance and the Enterprise Renewal and Development Steering Committee for monitoring.

b/ The composition of a steering committee shall be decided by the minister, head of the ministerial-level agency or government-attached agency, chairperson of the provincial-level People’s Committee or  Members’ Council of the parent company of a state economic group or corporation or of the parent company in a parent company-subsidiary conglomerate.

For units specified at Point b, Clause 1 of this Article, the steering committee must be composed of representatives from the Ministry of Finance and the Enterprise Renewal and Development Steering Committee.

5. The trade union in an equitized enterprise shall coordinate with the steering committee in:

a/ Mobilizing cadres, employees and workers of the equitized enterprise to implement the State’s equitization policy;

b/ Participating in overseeing the equitization process;

c/ Appointing representatives for the capital amount of the trade union to stand for election to the Board of Directors and the Supervisory Board of the joint-stock company in accordance with law;

d/ Using funds of the trade union as prescribed by law to purchase shares of the enterprise, participating in the enterprise management in the capacity as shareholders and protecting the interests of employees of the enterprise in accordance with law.

Article 46. Reporting regime

Ministers, heads of ministerial-level agencies or government-attached agencies, chairpersons of provincial-level People’s Committees and Members’ Councils or presidents of parent companies of economic groups or corporations and parent companies in parent company-subsidiary conglomerates shall promptly report to the Enterprise Renewal and Development Steering Committee and the Ministry of Finance on equitization-related issues, such as results of settlement of financial matters, valuation results, decision to announce the enterprise’s value and adjustment of the enterprise’s value, equitization plan, results of sale of shares, finalization of equitization expenses, finalization of the handover to joint-stock companies, and violations of consultancy organizations in the process of equitization. At the same time, they shall also direct equitized enterprises to promptly and fully disclose information on the issues specified in Clause 1, Article 11 of this Decree.

Article 47. Process of equitization

Equitization shall be carried out in the sequence of specific steps specified in Appendix II to this Decree, basically including:

1. Elaboration of an equitization plan

a/ Forming a steering committee and an assisting team;

b/ Preparing dossiers and documents (including the land use plan already approved by a competent state agency);

c/ Organizing inventory, settlement of financial matters and valuation of the enterprise;

d/ Deciding on and announcing the enterprise’s value;

e/ Finalizing the equitization plan and submitting it to a competent authority for approval.

2. Implementation of the equitization plan.

3. Completion of transformation of the enterprise into a joint-stock company

a/ Holding the first general meeting of shareholders and making enterprise registration;

b/ Organizing the finalization and handover between the enterprise and the joint-stock company.

Chapter VII

IMPLEMENTATION PROVISIONS

Article 48. Transitional provisions

1. Enterprises which have obtained decisions announcing their values but have not had their equitization plans approved before the effective date of this Decree shall prepare their equitization plans and implement them under this Decree. Enterprises prescribed in Clause 1, Article 26 of this Decree shall be subject to state audit and adjust their already announced values if there are any disparities.

2. Enterprises which have their equitization plans approved by a competent authority before the effective date of this Decree shall continue implementing these plans. The settlement of financial matters and finalization of the proceeds from equitization at the time the joint-stock companies are granted the certificates of first-time joint-stock enterprise registration must comply with the provisions of this Decree.

3. Enterprises which were equitized before the effective date of the Government’s Decree No. 59/2011/ND-CP of July 18, 2011, if facing any difficulties and problems when subtracting the value of the geographical location advantage from payable annual land rentals of joint-stock companies, shall report them to the Prime Minister for consideration and settlement.

4. Enterprises which have their plans on sale of shares to strategic investors approved before the effective date of this Decree shall continue implementing these plans. For the remaining quantity of shares (the difference between the quantity of shares actually sold to strategic investors and the total quantity of shares expected to be sold to strategic investors under the approved equitization plan), the owner-representing agency shall decide to adjust the charter capital and its structure before holding the first general meeting of shareholders in order to continue transferring capital under current regulations on transfer of state capital in joint-stock companies. 

5. Equitized enterprises which have shifted to operate in the form of joint-stock company before the effective date of this Decree are not required to apply this Decree.

Within 90 days after the effective date of this Decree, the owner-representing agency shall coordinate with related agencies in settling financial matters and approving financial finalization; equitization expense finalization; finalization of financial supports for laid-off employees; and finalization of the proceeds from the equitization, and deciding to announce the actual value of the state capital at the time the joint-stock company is granted the certificate of first-time joint-stock enterprise registration, and directing the handover to the joint-stock company under the Government’s Decree No. 59/2011/ND-CP of July 18, 2011, Decree No. 189/2013/ND-CP of November 20, 2013, and Decree No. 116/2015/ND-CP of November 11, 2015.

6. Enterprises mentioned in Clauses 1 and 2 of this Article which have not had their land use plans approved by a competent authority under the Government’s Decree No. 01/2007/ND-CP of January 6, 2007, amending and supplementing some decrees detailing the implementation of the Land Law, shall have them approved before the time the joint-stock companies are granted the certificate of first-time joint-stock enterprise registration.

The owner-representing agency shall coordinate with the provincial-level People’s Committee (of the locality where is located the land area the equitized enterprise wishes to be allocated or to rent) in directing the enterprise and related agencies in considering and giving opinions in order to approve the land use plan for such enterprise under regulations. 

7. The enterprise reorganization support funds in the parent companies of state economic groups, parent companies of state corporations and parent companies in parent company-subsidiary conglomerates which still have some balance by December 31, 2017 (including receivables and cash balance), shall remit such balance into the Enterprise Reorganization and Development Support Fund. For parent companies of state economic groups, parent companies of state corporations and parent companies in parent company-subsidiary conglomerates which have been approved to add their charter capital with funds from the enterprise reorganization support funds before the effective date of this Decree may keep these funds to add their charter capital under the approved plans.

Article 49. Implementation provisions

1. This Decree takes effect on January 1, 2018, and replaces the Government’s Decree No. 59/2011/ND-CP of July 18, 2011, on transformation of enterprises with 100% state capital into joint-stock companies; and Decree No. 189/2013/ND-CP of November 20, 2013, and Decree No. 116/2015/ND-CP of November 11, 2015, amending and supplementing a number of articles of Decree No. 59/2011/ND-CP.  All previous provisions on equitization which are contrary to this Decree cease to be effective.

2. Single-member limited liability companies with 100% charter capital held by political organizations or socio-political organizations which are established and operate under the Law on Enterprises may apply the provisions of this Decree to be transformed into joint-stock companies.

Article 50. Implementation and implementation organization responsibilities

1. The Ministries of Finance; Labor, War Invalids and Social Affairs; Natural Resources and Environment; and Planning and Investment; the State Bank of Vietnam; the Vietnam Social Security; the State Audit Office of Vietnam and other related agencies shall, within the ambit of their respective functions and tasks, guide the implementation of this Decree.

2. Ministers, heads of ministerial-level agencies or government-attached agencies, chairpersons of provincial-level People’s Committees, and Members’ Councils of state economic groups and corporations established under decisions of the Prime Minister shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN XUAN PHUC

Appendix I

Process of selection of strategic investors in equitized enterprises

(To the Government’s Decree No. 126/2017/ND-CP
of November 16, 2017)

The process of selection of strategic investors in an equitized enterprise involves the following steps:

Step 1: Based on the size of charter capital, characteristics of the business line and expansion and development requirements of the enterprise, the steering committee shall direct the assisting team to coordinate with the enterprise and the consultancy organization (if any) in developing selection criteria, percentage of shares to be offered and the purpose of offering shares to strategic investors for including in the equitization plan.

For equitized enterprises on the list of conditional business lines prescribed by the investment law, selection criteria should take into account conditions for selection of strategic investors engaged in the same core production and business line.

Step 2. The steering committee shall appraise the plan on sale of shares to strategic investors and report it to the owner-representing agency for approval in the equitization plan (specifying the selection criteria, percentage and price of shares to be offered to strategic investors).

Step 3. Within 5 working days after the owner-representing agency approve the equitization plan, the equitized enterprise shall disclose in the mass media (in both English and Vietnamese) contents relating to the offering of shares to strategic investors, including:

- Information about the enterprise;

- Purpose of selection of strategic investors;

- Criteria for selection of strategic investors;

- Percentage of shares to be offered to strategic investors;

- Interests and obligations when becoming a strategic investor of the equitized enterprise (as prescribed in Article 6 of this Decree);

- Dossier of registration to become a strategic investor;

- Time and place of submission of registration dossiers.

Step 4. Within 20 days after disclosing information; the equitized enterprise shall examine the dossiers of registration to become a strategic investor and draw up a list of strategic investors eligible to purchase shares, and submit it to the steering committee, which shall propose the owner-representing agency to issue a decision approving the list. The equitized enterprise shall then notify the strategic investors to inquire about information relating to production and business activities, financial state and other matters of the equitized enterprise.

The selection of strategic investors qualified to purchase shares shall be completed before organizing a public auction of shares.

Step 5. Based on the list of strategic investors already approved by the owner-representing agency, the steering  committee shall plan and organize the sale of shares to strategic investors according to the contents specified in Clause 3, Article 6 of this Decree.

Step 6. The equitized enterprise shall report the result of sale of shares to strategic investors to the owner-representing agency for consideration and official signing of commitment contracts with strategic investors that win at the auction, and transfer the proceeds from the sale of shares to strategic investors to the Enterprise Reorganization and Development Support Fund under Article 39 of this Decree.-

Appendix II

Process of transformation of state enterprises into joint-stock companies

(To the Government’s Decree No. 126/2017/ND-CP
of November 16, 2017)

The process of transformation of a state enterprise into a joint-stock company involves the following steps:

Step 1: Making an equitization plan

1. Forming a steering committee and an assisting team.

a/ Based on the equitization plan in the Prime Minister-approved list of reorganization of state enterprises, the owner-representing agency deciding on equitization shall decide to form a steering committee and on a plan and roadmap for organizing the equitization;

b/ The head of the steering committee shall select and issue a decision to form an equitization assisting team within 5 working days after obtaining the committee’s establishment decision.

2. Preparing dossiers and documents.

The steering committee shall direct the assisting team in coordinating with the enterprise in preparing relevant dossiers and documents, including:

- Legal dossiers on enterprise establishment.

- Legal dossiers on assets, capital sources and debts of the enterprise.

- Financial statement and tax finalization report of the company by the time of valuation of the enterprise.

- Estimation of equitization expenses under regulations.

- Elaboration of plan on the use of land currently managed by the enterprise in accordance with the land law and laws on rearrangement and handling of state-owned houses and land in each period already approved by competent state agencies.

- Drawing up of a list and plan on employment of employees currently managed by the enterprise.

- Selection of methods and forms of valuation of the enterprise, selection of the time of valuation suitable to the enterprise’s conditions and guiding documents concerning equitization.

3. The steering committee shall direct the assisting team in coordinating with the enterprise in preparing related dossiers and documents and submitting the estimate of equitization expenses and proposing the selection of equitization consultancy organizations to the owner-representing agency for approval and decision.  

4. Organizing inventory and settlement of financial matters and valuation of the enterprise.

The enterprise shall coordinate with the consultancy organization in:

a/ Inventorying and classifying assets and making financial and tax finalization, and coordinating with related agencies in settling financial matters by the time of valuation of the enterprise;

b/ Sending the approved land use plan together with all related dossiers to the provincial-level People’s Committee for opinion on land price to serve as a basis for the valuation of the enterprise;

c/ Organizing the valuation of the enterprise.

The steering committee shall direct the assisting team to coordinate with the enterprise and the valuation organization in organizing the valuation of the enterprise under regulations. In case the consultancy organization has the valuation function, it may be hired to elaborate the equitization plan, valuate the enterprise and organize the sale of shares.

5. Deciding on and announcing the enterprise’s value.

The steering committee shall verify results of inventory and classification of assets and results of valuation of the enterprise, then report them to the owner-representing agency to decide on announcement of the enterprise’s value.

For enterprises subject to audit as specified in Clause 1, Article 26 of this Decree, the steering committee shall propose the owner-representing agency competent to decide on the enterprise’s value to send documents and dossiers to request the state audit office to audit results of valuation consultancy results and the settlement of financial matters before the official announcement of the equitized enterprise’s value.

The decision to announce the value of the enterprise must specify the debts and assets already excluded in the course of valuation of the enterprise for handover to the Vietnam Debt and Asset Trading Corporation under Clause 2, Article 14, and Clauses 2 and 3, Article 15, of this Decree.

6. Finalizing the equitization plan and submitting it to a competent authority for approval.

a/ Based on the decision announcing the value and the actual state of the equitized  enterprise, the steering committee shall direct the assisting team to coordinate with the enterprise and consultancy organization in preparing an enterprise equitization plan, which must have the following principal contents:

- Actual state of the company at the time of valuation.

- Results of the valuation and matters which need to be further settled.

- Form of equitization and charter capital suitable to production and business operations of the joint-stock company.

- Charter capital structure, reserve price and method of issuance of stocks under regulations.

- Draft organization and operation charter of the joint-stock company under the Law on Enterprises and current legal documents.

- Labor rearrangement plan already approved by the owner-representing agency.

- Plan on production or business operations for subsequent 3-5 years.

- Land use plan approved by a competent authority.

b/ The steering committee shall direct the assisting team and the enterprise to coordinate with the consultancy organization in disclosing the equitization plan and sending it to each section of the company for study before organizing an (extraordinary) employees’ meeting.

Following the employees’ meeting, the assisting team and the enterprise shall coordinate with the consultancy organization in finalizing the equitization plan then submitting it to the owner-representing agency for approval.

c/ The steering committee shall appraise the equitization plan and report it to the owner-representing agency for approval.

For an enterprise of which the actual value is lower than its payables specified in Clause 2, Article 4 of this Decree, the owner-representing agency shall direct the steering committee and the enterprise to coordinate with the Vietnam Debt and Asset Trading Corporation and the enterprise’s creditors in elaborating a plan on the enterprise restructuring. Based on the effectiveness and feasibility of the enterprise restructuring plan, the owner-representing agency shall decide to approve this plan for transforming the enterprise into a joint-stock company.

Step 2: Organization of implementation of the equitization plan

1. The steering committee shall direct the enterprise in coordinating with intermediary consultancy organizations in organizing the sale of shares according to the approved equitization plan and this Decree.

2. The steering committee shall direct the enterprise in selling preferential shares to employees and the trade union (if any) in the enterprise according to the approved plan.

3. Based on summarized results of the sale of shares to the entities specified in the equitization plan, the steering committee shall direct the enterprise in remitting the proceeds from the equitization into the Fund under regulations.

In case some shares remain unsold after the sale of shares to according to the approved equitization plan, the steering committee shall report such to the owner-representing agency competent to decide to approve the equitization plan and issue a decision on adjustment of the quantity and structure of shares of the equitized enterprise.

4. The steering committee shall report to the owner-representing agency for decision on appointment of persons acting as representatives for capital amounts in equitized enterprises with state capital to continue participating in the joint-stock companies and to be responsible for exercising the rights and performing the obligations of representatives for state capital under law.

Step 3: Completion of the transformation of the enterprise into a joint-stock company

1. Organizing the first general meeting of shareholders and enterprise registration.

a/ The steering committee shall direct the assisting team, the representative for state capital (if any) and the enterprise in organizing the first general meeting of shareholders to adopt the organization and operation charter and the production and business plan, elect the Board of Directors, the Supervisory Board and the executive apparatus of the joint-stock company;

b/ Based on results of the first general meeting of shareholders, the Board of Directors of the joint-stock company shall make enterprise registration under regulations.

2. Organizing the finalization and handover between the enterprise and the joint-stock company.

a/ Within 90 working days after the grant of the certificate of first-time enterprise registration, the steering committee shall direct the assisting team and the enterprise in making a financial statement as of the time the joint-stock company is granted the certificate of first-time business registration, finalizing taxes, having the financial statement audited, finalizing equitization expenses and reporting them to the owner-representing agency;

b/ Based on results of the re-assessment of the value of the state capital as of the time of enterprise registration by the owner-representing agency, the steering committee shall direct the assisting team and the enterprise in organizing the handover between the enterprise and the joint-stock company;

c/ To organize the public appearance of the joint-stock company and make announcements in the mass media as required.

In the course of implementation, the equitization-deciding agency, the steering committee, the assisting team and the enterprise may take several steps simultaneously in order to accelerate the equitization process.-