Decree No. 71/2013/ND-CP of July 11, 2013, on investment of state capital in enterprises and financial management of enterprises of which 100% charter capital is held by the State

THE GOVERNMENT 

Decree No. 71/2013/ND-CP of July 11, 2013, on investment of state capital in enterprises and financial management of enterprises of which 100% charter capital is held by the State

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

Pursuant to the November 29, 2005 Law on Enterprises;

Pursuant to the November 29, 2005 Law on Investment;

At the proposal of the Minister of Finance;

The Government promulgates the Decree on investment of state capital in enterprises and financial management of enterprises of which 100% charter capital is held by the State.

Chapter I

GENERAL PROVISIONS

Article 1. Scope of regulation

This Decree provides the investment of state capital in enterprises and financial management of enterprises of which 100% charter capital is held by the State.

Article 2. Subjects of application

1. This Decree is applicable to:

a/ Single-member limited liability companies of which 100% charter capital is held by the State, which are established by the Prime Minister or ministries, ministerial-level agencies, government-attached agencies (below referred to as line ministries), or People’s Committees of provinces or centrally run cities (below referred to as provincial-level People’s Committees), including:

- Single-member limited liability companies that are parent companies of economic groups or of state corporations; and parent companies in the parent company-subsidiary company model;

- Independent single-member limited liability companies.

b/ Authorized representatives of enterprises of which 100% charter capital is held by the State and representatives of the state capital invested in other enterprises;

c/ Organizations and individuals related to the investment of state capital in and financial management of enterprises of which 100% charter capital is held by the State, and the management of state capital invested in other enterprises.

2. The parent companies defined at Point a, Clause 1 of this Article shall formulate and issue regulations on financial management of subsidiary companies of which 100% charter capital is held by the parent companies in accordance with this Decree’s provisions on financial management and other provisions.

3. Enterprises of which 100% charter capital is held by the State operating in the fields with financial particularities shall comply with separate regulations of the Government or the Prime Minister applicable to such particularities, and other provisions of this Decree.

Article 3. Interpretation of terms

In this Decree, the terms below are construed as follows:

1. Enterprise means a single-member limited liability company of which 100% charter capital is held by the State defined at Point a, Clause 1, Article 2 of this Decree.

2. State capital at an enterprise means the capital directly invested from the state budget and concentrated funds of the State when establishing an enterprise, and supplemented during its business operation; amounts payable to the budget but permitted to be retained; sources of the development investment fund at the enterprise; enterprise arrangement support fund; state capital transferred from other places; value of the rights to use land and national natural resources assigned by the State and recorded as capital increase of the enterprise; and other assets assigned by the State to the enterprise in accordance with law.

3. Equity of an enterprise means the capital formed from the sources specified in Clause 2 of this Article, undistributed profit and exchange rate differences recorded in financial statements of the enterprise in accordance with law.

4.  State capital invested in other enterprises means the state capital contributed to joint-stock companies and limited liability companies with two or more members with line ministries or provincial-level People’s Committees acting as their owners.

5. Capital of an enterprise means the equity of and capital raised by an enterprise.

6. Capital of an enterprise invested in other enterprises means the capital of an enterprise which is invested in subsidiary companies and associate companies.

7. Authorized representative of the state capital invested in other enterprises means the individual authorized in writing by the owner to exercise the rights and perform the responsibilities and obligations of the owner at other enterprises.

8. Authorized representative of the capital of an enterprise invested in other enterprises means the individual authorized in writing by an enterprise to exercise the rights and perform the responsibilities and obligations of the enterprise at other enterprises.

The authorized representatives mentioned in Clauses 7 and 8 of this Article are collectively referred to as representatives.

9. Managers means the chairperson and members of the Members’ Council or the company president, the controller, the director general or director, deputy director general or deputy director, and the chief accountant (except for director general or director, deputy director general or deputy director, and chief accountant working under labor contracts).

Chapter II

INVESTMENT AND MANAGEMENT OF STATE CAPITAL INVESTED IN ENTERPRISES

Section 1

INVESTMENT OF STATE CAPITAL IN ENTERPRISES

Article 4. Principles of investment of state capital in enterprises

1. Investment of state capital in enterprises aims to form sectors and fields that provide essential public products and services for the society; serve national defense and security; regulate the economy and stabilize the macro-economy in a strategic manner in each period.

2. Investment of state capital in enterprises must be for proper purposes, efficient, suitable to every investment project, public and transparent.

3. Investments of state capital for contributing to the establishment of enterprises or business cooperation with other economic sectors must be appraised and approved by competent agencies.

4. Investment of state capital must be lawful and on schedule, ensuring quality; avoiding thin-out, wastefulness and losses.

5. Increasing the value of state capital invested in enterprises.

Article 5. Forms of investment of state capital in enterprises

1. Investing in the implementation of important projects and works of the State at enterprises.

2. Investing in establishing new enterprises.

3. Investing, supplementing charter capital in enterprises for expanding their scale, raising productivity, business capacity, renewing technologies, reducing environmental pollution, and serving national defense and security.

4. Investing state capital to maintain the control or proportion of contributed state capital in joint-stock companies and limited liability companies with two or more members.

5. Buying part of the capital or the whole of enterprises in other economic sectors for economic restructuring.

Article 6. Conditions on investment of state capital in enterprises

1. Investing in important projects and works of the State at enterprises, including:

a/ Projects with total investment of VND 35,000 billion or more, of which the state capital is VND 11,000 billion or more;

b/ Projects and works that greatly affect the environment or are likely to seriously affect the environment, including:

- Nuclear power plants;

- Projects and works using land that require the conversion of the use purpose of 50 hectares or more of land of national parks, nature reserves, landscape protection zones, scientific research and experimentation forests, upstream protection forests; or 500 hectares or more of protection forests that shield wind, flying sand, tidal waves and protect the environment; or 1,000 hectares or more of production forests;

c/ Projects and works that require the conversion of the use purpose of at least 500 hectares of paddy land under 2 or more crops;

d/ Projects and works that require resettlement of at least 20,000 people in mountainous areas, or at least 50,000 people in other areas;

dd/ Projects and works in localities where exist national relics of special historical or cultural importance; or ranked national scenic places;

e/ Projects and works in the localities that are extremely important to national defense and security;

g/ Projects and works that require the application of special mechanisms and policies;

h/ Key national projects and works overseas which satisfy one of the criteria below:

- The total offshore investment is at least VND 20,000 billion, of which the state capital is at least VND 7,000 billion;

- The projects and works require the application of special mechanisms and policies that must be decided by the National Assembly;

- Other extremely important projects decided by the Prime Minister.

2. Investing state capital in establishing new enterprises of which 100% charter capital is held by the State:

a/ Investing state capital in establishing new enterprises in the following sectors, fields and localities:

- Sectors and fields that provide essential products and services for the society or for national defense and security;

- Sectors and fields that apply high technologies, creating a driving force for fast development of other sectors and fields and the whole economy and requiring great investments;

- Localities with extremely difficult socio-economic conditions in which other economic sectors do not invest.

b/ The Prime Minister shall make a list of sectors, fields and localities defined at Point a of this Clause;

c/ The investment of state capital in the establishment of subsidiary companies of an enterprise must directly serve the main business line of the enterprise.

3. Supplementation of charter capital must only be effected for enterprises of which 100% charter capital is held by the State in accordance with the criteria and classification of state enterprises decided by the Prime Minister in each period, and which have not yet been provided with sufficient charter capital by the State.

4. Supplementation of state capital is effected to maintain or increase the proportion of state-invested capital in other enterprise, including:

a/ Other enterprises providing public products and services serving national defense and security;

b/ Other enterprises conducting business activities which greatly affect the sectoral or regional economic development and in which the State needs to hold controlling shares as decided by the Prime Minister in each period.

5. The purchase of part of the capital or the whole of enterprises in other economic sectors for economic restructuring is decided by the Prime Minister in each period.

Article 7. Competence to decide on investment of state capital in enterprises

1. The Prime Minister shall decide on the investment of state capital in enterprises in order to:

a/ Implement key projects of the State specified in Clause 1, Article 6 of this Decree after they are submitted by the Government and approved by the National Assembly;

b/ Establish state economic groups; supplement charter capital during the operation of state economic groups and the State Capital Investment Corporation;

c/ Supplement the state capital contributed to economic groups after equitization;

d/ Purchase part the capital or the whole of enterprises in other economic sectors at the proposal of line ministries or provincial-level People’s Committees.

2. Ministers of line ministries and chairpersons of provincial-level People’s Committees shall decide on the investment of state capital in enterprises in order to:

a/ Establish enterprises of line ministries or provincial-level People’s Committees after the establishment plans are submitted to and approved by the Prime Minister;

b/ Supplement charter capital during the operations of enterprises. The supplementation of charter capital of enterprises established by line ministries must be agreed by the Ministry of Finance;

c/ Increase the state capital contributed to other enterprises under the ownership of line ministries or provincial-level People’s Committees;

d/ Purchase part of the capital or the whole of enterprises in other economic sectors after assuming the prime responsibility for, and coordinating with the Ministry of Finance and the Ministry of Planning and Investment in, examining the purchase plan and submitting it to the Prime Minister for decision.

Section 2

MANAGEMENT OF STATE CAPITAL INVESTED IN OTHER ENTERPRISES

Article 8. Rights and responsibilities of line ministries and provincial-level People’s Committees with regard to the state capital invested in other enterprises

1. The rights of shareholders, capital contributors and joint-venture parties as provided by law and the charters of other enterprises.

2. To appoint, dismiss, commend, reward and discipline representatives at other enterprises; to decide on the salaries, allowances, bonuses and benefits for representatives, unless the representatives receive salaries from other enterprises.

3. To request the representatives to send periodic or irregular reports on the business results and finance of the enterprises.

4. To assign and instruct the representatives to protect the lawful interests of benefits of the State at other enterprises. To request the representatives to report on the performance of their tasks, powers and responsibilities, especially in the orientation of enterprises in which the State holds controlling shares or contributions, in order to implement the objectives and strategies of the State; to provide written instructions when requested by the representatives.

5. To decide according to their competence on the increase or withdrawal of capital invested in other enterprises in accordance with law and the charters of such enterprises.

6. To inspect and supervise activities of the representatives, detect their mistakes and weaknesses so as to prevent, handle and rectify them in time.

7. To supervise the withdrawal of capital invested in other enterprises and the collection of profit divided by other enterprises.

8. To take responsibility for the efficient use, preservation and development of invested capital.

9. Other rights and responsibilities as provided by law.

Article 9. Rights and responsibilities of representatives

1. Rights and responsibilities of representatives

a/ Representatives of state capital invested in other enterprises shall comply with law and strictly perform the tasks assigned by the owner when deciding on the issues mentioned in Article 8 of this Decree; promptly report on the enterprises’ loss, insolvency and failure to accomplish the objectives and tasks assigned by the owner, or other wrongdoings;

b/ The representatives shall obtain the written opinion of the owner before giving opinions, voting, and making decisions at general meetings of shareholders, meetings of the Board of Directors or the Members’ Council on the business line, objectives, tasks, strategies, production and business plans, development investment plans; reorganization, dissolution and bankruptcy; issuance and modification of the charter; increase or decrease of the charter capital; introduction for election, dismissal, reward and commendation or handling of violations of members of the Board of Directors, the Members’ Council, general director (director), deputy general director (deputy director); distribution of profit; setting up and use of funds; and annual distribution of dividends.

2. Salaries, bonus and benefits of representatives

a/ Full-time representatives in the management boards of other enterprises are entitled to salary, responsibility allowance (if any), bonus and other benefits as provided in the charters of these enterprises and paid by the enterprises in accordance with law;

b/ Part-time representatives in the management board of other enterprise have their salaries, responsibility allowances (if any), bonuses and other benefits paid by the owner in accordance with law;

c/ The representatives shall send a written report to the owner when they have the right to buy additionally issued shares and convertible bonds as decided by the joint-stock company (unless they have the right to buy in the capacity as existing shareholders). The owner shall decide in writing on the amount of shares the representatives may buy based on the level of contribution and result of performance of the representatives. The capital owner has the right to buy the remaining amount. If a representative is assigned to represent the state capital at more than one unit, such representative may select and exercise the right to buy at one unit. The representative at a joint-stock company shall transfer the right to buy remaining shares to the capital owner.

3. Standards of representatives

Representatives must meet the standards provided in Clause 2, Article 48 of the Law on Enterprises and the Government’s regulations on the application of the laws on cadres and civil servants applicable to the leading and managerial titles in single-member limited liability companies of which 100% charter capital is held by the State and persons appointed to acts as representatives of state capital of enterprises contributed by the State.

4. Reporting responsibility of representatives

Every quarter, at the end of the fiscal year, or at the request of the owner, based on financial statements and other reports of the enterprises, the representatives appointed to such enterprises shall summarize and assess the production and business activities and finance of these enterprises, propose solutions to their difficulties in order to raise the efficiency of state capital invested in other enterprises, and send a report to the owner.

Article 10. Collection of distributed profits and dividends

1. Distributed profits and dividends from the state capital invested in other enterprises must be remitted to the Enterprise Arrangement and Development Support Fund.

2. Representatives shall request other enterprises to remit distributed profits and dividends to the Enterprise Arrangement and Development Support Fund.

Article 11. Decision on increase, reduction and withdrawal of state capital invested in other enterprises

1. State capital invested in other enterprises may be increased as follows:

a/ The competence to decide on plans on increase of state capital invested in other enterprises complies with Article 7 of this Decree;

b/ The method of increasing the capital invested in other enterprises complies with law and the charters of such enterprises;

c/ When another enterprise increases its capital but the line ministry or provincial-level People’s Committee does not wish to invest more capital, the line ministry or provincial-level People’s Committee shall consider and decide to transfer the right to buy or the right to contribute capital in accordance with law.

2. The reduction or withdrawal of the whole of state capital invested in other enterprises must be effected in the form of transfer according to Section 3, Chapter II of this Decree.

Section 3

TRANSFER OF STATE CAPITAL INVESTED IN ENTERPRISES

Article 12. Purposes of transfer of state capital invested in enterprises

1. The State shall transfer part or the whole of state capital invested in enterprises under Article 5 of this Decree.

2. The State shall transfer the capital invested in enterprises in order to:

a/ Restructure the enterprises in the fields of sectors in which the State no longer holds 100% charter capital;

b/ Withdraw state capital invested in other enterprises being joint-stock companies and limited liability companies that operate in the fields in which the State does not need to maintain capital contribution;

c/ Attract investments of strategic investors at home and overseas.

Article 13. Principles of transfer of state capital invested in enterprises

1. A plan on transfer of state capital invested in an enterprise must be approved by a competent authority.

2. The transfer of state capital invested in enterprises must ensure publicity, transparency and efficiency, minimize loss (if any), and facilitate the development of enterprises.

3. The transfer of state capital invested in enterprises that is related to land must comply with the land law.

Article 14. Methods of transferring state capital invested in enterprises

1. The transfer of capital in enterprises of which 100% charter capital is held by the State during equitization complies with regulations on equitization of enterprises of which 100% charter capital is held by the State.

2. The transfer of state capital in single-member limited liability companies or limited liability companies with two or more members complies with the Law on Enterprises. The transfer of capital must fully reflect the actual value of the state capital at the enterprise, including the value of the right to use allocated land as provided by law.

3. The sale of enterprises of which 100% charter capital is held by the State complies with regulations on sale of enterprises.

4. Regarding transfer of state capital in joint-stock companies:

a/ For joint-stock companies listed on the Stock Exchange, the transfer is made through order-matching transactions or agreements via the trading system of the Stock Exchange;

b/ For joint-stock companies that are not listed on the Stock Exchange but have registered in the securities trading system, the transfer is made similarly to selling shares of listed companies according to Point a of this Clause;

c/ For joint-stock companies that are not mentioned at Points a and b of this Clause, the transfer is made through selling shares at public auctions. When only one investor registers to buy the shares or the Prime Minister makes a written approval, the shares may be sold according to the direct agreement with the investor.

Article 15. Competence to decide on the transfer of state capital invested in enterprises

1. The Prime Minister shall decide on the transfer of state capital in the form of equitization, sale of enterprises, or conversion into limited liability companies with two or more members, for enterprises established by the Prime Minister; and decide on the transfer of state capital invested in equitized economic groups.

2. Ministers of line ministries and chairpersons of provincial-level People’s Committees shall decide on the transfer of state capital invested in enterprises they establish in the form of equitization, sale of enterprises, or conversion into limited liability companies with two or more members according to the enterprise rearrangement and renewal plans approved by the Prime Minister; and decide on the transfer of shares and capital contributions in other enterprises of which the capital is owned by their line ministries or People’s Committees after consulting the Ministry of Finance and the Ministry of Planning and Investment.

Article 16. Collection of proceeds from the transfer of state capital invested in enterprises

The proceeds from the transfer of state capital invested in enterprises in the forms in Article 14 of this Decree, after deducting expenses related to the transfer, fulfilling obligations toward the state budget, and settling policies for laid-off employees in accordance with law, must be paid to the Enterprise Arrangement and Development Support Fund.

Section 4

MANAGEMENT AND USE OF THE ENTERPRISE ARRANGEMENT AND DEVELOPMENT SUPPORT FUND

Article 17. Management and use of the Enterprise Arrangement and Development Support Fund

The Prime Minister shall decide on the establishment and promulgate the Regulation on the management and use of the Enterprise Arrangement and Development Support Fund. The Ministry of Finance shall perform the state management of the Fund, assuring concentration, uniformity and efficiency of its sources of revenue.

1. Sources of revenue of the Enterprise Arrangement and Development Support Fund:

a/ The positive difference between the equity of an enterprise and its charter capital which is approved by the owner according to Clause 4, Article 38 of this Decree;

b/ Revenues from the equitization and other forms of ownership conversion of enterprises of which 100% charter capital is held by the State;

c/ Proceeds from the transfer of state capital invested in other enterprises of which the capital ownership is represented by line ministries or provincial-level People’s Committees, after deducting expenses related to the transfer;

d/ After-tax profit of enterprises of which 100% charter capital is held by the State according to Point dd, Clause 3, Article 38 of this Decree;

dd/ Distributed profit and dividends from other enterprises of which the capital ownership is represented by line ministries and provincial-level People’s Committees;

e/ Regulation of the enterprise arrangement support funds of groups, corporations and parent companies;

g/ Other revenues as provided by law.

2. Expenses of the Enterprise Arrangement and Development Support Fund:

a/ Providing supplementary charter capital for enterprises of which 100% charter capital is held by the State, which lack capital, or for new enterprises;

b/ Buying part of capital or the whole of enterprises in other economic sectors;

c/ Investing in joint-stock companies in which the State maintains capital contribution;

d/ Investing in projects as decided by the Prime Minister;

dd/ Expenses for support for laid-off employees;

e/ Other expenses as provided by law.

Chapter III

FINANCIAL MANAGEMENT OF ENTERPRISES OF WHICH 100% CHARTER CAPITAL IS HELD BY THE STATE

Section 1

MANAGEMENT AND USE OF CAPITAL AND ASSETS OF ENTERPRISES

Article 18. Charter capital

1. For new enterprises:

The charter capital of a new enterprise is determined in its establishment plan approved by competent authorities, which is at most equal to 30% of total investment to form the enterprise’s assets and suitable to each sector or field, and ensures the normal operation of the enterprise according to its size and design capacity. If all assets of the enterprise are invested by the state budget, the charter capital is equal to the total state capital invested.

2. When an operating enterprise wishes to increase its charter capital, the owner shall approve the increase of charter capital based on the objectives, tasks, strategy for development and expansion of production and business operations, and characteristics of operation of the enterprise. The increase of charter capital must be determined for at least 3 years from the year in which the decision on charter capital adjustment is made.

a/ The Prime Minister shall decide on the increase of charter capital of the enterprises established by the Prime Minister at the proposal of line ministries, the opinion of the Ministry of Planning and Investment and the appraisal of the Ministry of Finance;

b/ Ministers of line ministries shall decide on the increase of charter capital of the enterprises they establish after obtaining written agreement from the Ministry of Finance;

c/ Chairpersons of provincial-level People’s Committees shall decide on the increase of charter capital of the enterprises established by provincial-level People’s Committees.

3. The Ministry of Finance shall guide the dossier, procedures and method for determination of charter capital.

4. Right and responsibility to supplement charter capital

a/ The enterprises shall use their development investment funds to make up for the deficit of charter capital after the charter capital is approved by competent authorities. The use of the enterprise arrangement support fund of the parent company (if any) for supplementing charter capital must be permitted in writing by the Prime Minister;

b/ The Ministry of Finance shall supplement the deficit of charter capital of the enterprises for which the Prime Minister or line ministries have decided to increase their charter capital during their operation after they use the sources mentioned at Point a of this Clause;

c/ Provincial-level People’s Committees shall allocate the deficit of charter capital of the enterprises for which provincial-level People’s Committees have decided to increase their charter capital during their operation after they use the sources mentioned at Point a of this Clause. If requesting allocation of charter capital from the central budget or other lawful capital sources under the central management, a plan must be sent to the Ministry of Finance and approved by the Prime Minister.

Article 19. Capital raising

1. Methods of capital raising: issuing bonds; taking loans from credit institutions, other financial institutions, individuals, external organizations, employees, and other methods of capital raising as provided by law.

2. Capital raising principles:

a/ The plan on capital raising must be approved by competent authorities to ensure debt payment. The person who approves the capital raising plan shall conduct inspection and supervision to ensure the capital raised is used properly and efficiently;

b/ A loan contract must be made with the domestic lender in accordance with law, in which the lending interest rate must not exceed that for the same lending term applied by the commercial bank where the enterprise opens its account at the time of borrowing. If the enterprise opens many accounts at different banks, the lending interest rate must not exceed the highest one for the same duration applied by the commercial banks where the enterprise opens its accounts;

c/ The taking of loans from foreign lenders must comply with the law on borrowing and repayment of foreign loans. The borrowing and repayment of loans by the enterprise must comply with relevant legal documents on taking of foreign loans. Line ministries or provincial-level People’s Committees shall approve the enterprises’ policies on taking foreign loans and request appraisal and approval from the Ministry of Finance;

d/ The capital raising in the form of bond issuance to serve the main business line must comply with the provisions on issuance of corporate bonds in the Law on Enterprises and relevant documents concerning issuance of corporate bonds.

3. Competence to approve capital raising plans:

a/ Enterprises may take the initiative in raising capital to serve their production and business while ensuring that the ratio of debt to equity does not exceed 3:1, including loan guarantees for enterprises with capital contributed by parent companies according to Clause 4 of this Article. The Members’ Council or the company president may decide on plans for raising capital that does not exceed 50% of charter capital of the enterprise. If the general director or director is delegated by the Members’ Council or the company president to decide on capital raising plans, the level of capital raising must be specified in the charter and finance regulation of the enterprise;

b/ When an enterprise wishes to raise a capital amount that exceeds the limit specified at Point a of this Clause for investment in important projects, it shall report it to the owner for consideration and decision to ensure the debt payment ability and efficiency of the projects to be funded with raised capital. The owner shall notify these projects to the Ministry of Finance for coordinated monitoring and supervision.

4. The parent company may guarantee in accordance with law loans taken from banks and credit institutions by its subsidiary companies of which 100% charter capital is held by the parent company. The total value of loan guarantees provided to a single subsidiary company must not exceed the value of capital contributed by the parent company to the subsidiary company.

When an enterprise with capital contributed by the parent company wishes to have its loans guaranteed, the parent company may provide guarantee on the principle that the rate of guarantee (%) for each loan does not exceed the proportion (%) of the capital contributed by the parent company to the guaranteed enterprise, and that the total amount of loan guarantees does not exceed the actual capital of the parent company contributed to the guaranteed enterprise.

The total value of loan guarantees provided by the parent company to the subsidiary companies of which 100% charter capital is held by the parent company and the enterprises with capital contributed by the parent company must not exceed the equity of the parent company and the ratio of debt to equity specified at Point a, Clause 3 of this Article must be ensured. The parent company shall supervise the proper use of loans and on-schedule payment of the loans taken by the enterprises that are guaranteed by the parent company.

5. The owner shall closely supervise the capital raising and the use of raised capital by enterprises. If the raised capital is not properly used or exceeds 3 times the equity and not accepted by the owner, the owner shall coordinate with the Ministry of Finance in inspecting and reporting the case to the Prime Minister for consideration and decision on the handling of the Members’ Council or the company president in accordance with current law.

Article 20. Investment in, construction and procurement of fixed assets of enterprises

Enterprises shall make 5-year plans on development investment projects, including projects of group B or above in accordance with the law on management of construction investment projects, or at a lower level specified in their charters, then submit them to the owner for approval.

1. The competence to decide on projects of investment in, construction and procurement of fixed assets of enterprises:

a/ The Members’ Council and the company president shall decide on the projects of investment in, construction and procurement of fixed assets that have a value smaller than 50% of charter capital of the enterprise and do not exceed the level of group-B projects according to the law on management of investment construction projects. The competence of the Members’ Council and the company president must be specified in the charter of the enterprise. The enterprise owner shall consider and decide on projects that fall beyond the competence of the Members’ Council and the company president.

The Members’ Council or the company president may delegate the general director or director of the enterprise to decide on projects of investment in, construction and procurement of fixed assets within the competence of the Members’ Council and the company president;

b/ The order and procedures for investment in, construction and procurement of fixed assets comply with the law on management investment construction projects.

2. Investment and procurement of vehicles serving the operation of enterprises:

Enterprise managers shall use vehicles to commute from their residences to work, to go on business trips, or to serve operation of the enterprises shall comply with the regulations of the Prime Minister. The procurement or replacement of vehicles must be decided by the Members’ Council or the company president. If the procurement of vehicles is delegated to the general director or director, it must be specified in the charter or finance regulation of the enterprise.

3. The persons who decide on investment in, construction and procurement of fixed assets are responsible for inappropriate, technologically obsolete, or unusable fixed assets.

Article 21. Depreciation of fixed assets

1. Depreciation principles:

All current fixed assets of an enterprise must be appreciated, except:

a/ Fixed assets that have been completely depreciated but are still used for production and business activities;

b/ Fixed assets that are lost before being completely depreciated;

c/ Other fixed assets under the management but not under the ownership of the enterprise (except fixed assets finance leased);

d/ Fixed assets that are not managed, monitored, or recorded in accounting books of the enterprise;

dd/ Fixed assets used for welfare activities serving employees of the enterprise, (except fixed assets serving employees at the enterprise such as the recreation room, canteen, locker room, restroom, freshwater tanks, parking lot, clinic, worker bus, vocational training facilities, and housing for employees, which are invested by the enterprise);

e/ Fixed assets from non-refundable aid that are allocated by competent agencies to the enterprise to serve scientific research.

2. The Ministry of Finance shall provide specific guidance on the management, use, and duration of depreciation of fixed assets.

Article 22. Lease, mortgage and pledge of assets

1. Enterprises may lease, mortgage and pledge their assets on the principle of ensuring the efficiency, preservation and development of capital in accordance with law.

a/ The Members’ Council or the company president shall decide on asset lease contracts valued at below 50% of charter capital of the enterprise;

b/ The competence to decide on the mortgage and pledge of assets for loans complies with Article 19 of this Decree.

2. The lease, mortgage and pledge of assets of enterprises established to continuously and stably produce and supply public products or directly serve national defense and security must be approved by the owner.

3. The lease, mortgage and pledge of assets must comply with the Civil Code and relevant laws.

Article 23. Liquidation and sale of fixed assets

1. Enterprises may proactively sell and liquidate fixed assets that are broken, technologically obsolete, no longer needed, or unusable in order to recover capital on the principle of publicity, transparency and preservation of capital.

2. The competence to decide on the liquidation and sale of fixed assets:

a/ The Members’ Council or the company president shall decide on plans on  liquidation or sale of assets valued at below 50% of charter capital of the enterprise but do not exceed the level of group-B projects;

A plan on liquidation or sale of fixed assets valued beyond the delegated competence of the Members’ Council or the company president must be decided by the owner.

b/ For enterprises established to continuously and stably produce and supply public products or directly serve national defense and security, the liquidation of assets directly serving these tasks must be approved by the owner;

c/ When an enterprise sees that a plan on sale of fixed assets is incapable of recovering the invested capital, before selling the fixed assets, it shall clearly explain the incapability of capital recovery to the owner and the finance agency of the same level for supervision;

d/ When an enterprise no longer needs and sells its new fixed assets that fail to bring about economic benefits as planned, and the sale is not able to recover the invested capital and leads to the enterprise’s failure to repay loans according to the loan contracts, the responsibilities of persons involved must be clarified and reported to the owner for handling in accordance with law;

dd/ Apart from this Decree, the sale or liquidation of assets of enterprises engaged in special fields (tobacco production, sea shipping, aviation, etc.) must also comply with specialized laws.

3. Methods of liquidating and selling fixed assets: Fixed assets must be sold through auctions via an organization with the function to hold auctions, or publicly sold by the enterprise itself in accordance with the law on asset auction. The general director or director may decide to sell fixed assets with the residual book value of less than VND 100 million at an auction or at agreed prices which must not below the market prices. For fixed assets that are not traded on the market, the enterprise may hire an organization with the price appraisal function to determine the prices as a basis for selling assets using the aforesaid methods.

The Ministry of Finance shall specify the order and procedure for asset liquidation and sale.

Article 24. Management of inventories

1. Inventories are goods bought by an enterprise for sale that are still unsold, materials and tools in stock or already bought and transported en route, unfinished products in production, finished products that are not put in stock, finished products that are unsold, and finished products consigned for sale.

2. Enterprises may take the initiative in and take responsibility for handling poor-quality, outmoded, technologically obsolete or slow-moving inventories in order to recover investment. The competence to decide on the handling complies with Clause 2, Article 23 of this Decree.

3. At the end of the accounting period, when the cost of inventories in the accounting book is higher than the recoverable net value, the enterprise shall make provisions for inventory devaluation according to Clause 3, Article 34 of this Decree.

Article 25. Management of receivables and payables

1. Management of receivables

a/ Responsibilities of an enterprise:

- To formulate and issue a regulation on the management of receivables, assigning and clearly defining the responsibility of collectives and individuals for monitoring, collecting and paying debts;

- To keep books to monitor debts by debtor; regularly classify debts (circulating debts, bad debts, irrecoverable debts), and urge the debt repayment;

- The Members’ Council, the company president, and the general director or director of the enterprise are responsible for promptly handling bad debts and irrecoverable debts. If failing to promptly handle the irrecoverable debts under this Clause, the Members’ Council, the company president, general director or director shall be dismissed, similarly to the case of making untruthful reports on finance twice or more. If the failure to promptly handle irrecoverable debts leads to the loss of equity of the enterprise, they shall take responsibility before the owner and law;

- To make a provision for bad debts under Clause 3, Article 34 of this Decree;

- For irrecoverable debts, to identify the responsibilities of related individuals and collectives for compensation and make up for the remaining amount with the provision for bad debts. To account the unsettled debts in the business expense of the enterprise;

- After irrecoverable debts are handled in the way above, to monitor them on the account off the balance sheet and organize the collection. To account the collected amount as an income of the enterprise.

b/ Powers of an enterprise:

To sell overdue debts, bad debts and irrecoverable debts to recover its capital. The enterprise may only sell debts to economic organizations that have the function to trade in debts, and may not sell debts directly to debtors. The parties shall reach an agreement on the sale prices of debts and take responsibility for the decision to sell receivables. If the sale of debts makes the enterprise suffer from a loss, lose its capital, or become insolvent, which leads to the dissolution or bankruptcy of the enterprise, the Member s’ Council, the company president and the persons directly involved in the occurrence of such debts shall pay compensations and be handled in accordance with law and its charter.

2. Management of payables of an enterprise:

a/ To keep books to monitor all payables, including also their interests;

b/ To pay the payables on schedule as committed. To regularly review, assess and analyze the solvency of the enterprise, early detect difficulties in debt payment in order to take timely solutions and prevent the occurrence of overdue debts. To record the payables that are written off or without creditors as incomes of the enterprise.

Article 26. Exchange rate differences

The exchange rate difference that arises when making payment of monetary items of foreign currency origin, or when making reports on monetary items of foreign currency origin of an enterprise at exchange rates different from the currently used exchange rate or the exchange rate used in the financial statements is stipulated as follows:

1. During the period of investment to construct fixed assets of a new enterprise that has not yet operated, the exchange rate differences that occur when making payment of monetary items of foreign currency origin for the construction and when reassessing the monetary items of foreign currency origin at the end of the fiscal year must be cumulatively and separately reflected on the balance sheet. When the fixed assets are completely constructed, the exchange rate differences that occur during the period of investment must be gradually allocated to the financial income or cost for at least 5 years from the date on which the assets are put into use.

2. For operating enterprises, the exchange rate differences that occur when making payment of monetary items of foreign currency origin and when reassessing monetary items of foreign currency origin at the end of the fiscal year, including investment in forming their fixed assets, must be accounted as financial income or cost of the enterprises.

The Ministry of Finance shall guide the handling of exchange rate differences.

Article 27. Asset inventory

1. Enterprises shall regularly or irregularly inventory their assets in order to determine the quantity of assets (fixed assets, long-term investments, current assets and short-term investments); compare the payables and receivables when: closing the accounting book to make the annual financial statement, implementing the decision on the division, splitting, merger, consolidation or ownership transfer of the enterprise; their assets are changed after a disaster or enemy sabotage occurs or for other reasons; or when so required by state regulations. They shall determine surplus or deficit assets, irrecoverable debts and overdue debts; identify the reasons and responsibilities of related organizations and individuals, and determine the level of compensation according to regulations.

2. Handling of inventory results

a/ Handling of asset loss after inventory

Asset loss means assets that are lost, missing, damaged, deteriorated in quality, outmoded, technologically obsolete or assets left in stock which are determined during regular and irregular inventory. Enterprises shall determine the loss value, causes and responsibilities, and:

- If the loss is due to subjective causes, the persons that cause the loss shall pay compensation and be handled in accordance with law. The Members’ Council or the company president shall decide on the level of compensation in accordance with law and take responsibility for such decisions;

- The loss of insured assets must be handled in accordance with insurance contracts;

- After the asset loss is offset by compensations paid by individuals, collectives or insurers, the deficit can be accounted into production and business expenses in the period;

- For special cases in which the severe damage caused by natural disasters or force majeure events cannot be remedied by the enterprise itself, the Members’ Council or the company president shall make and send a plan on loss handling to the owner and a competent finance agency. The owner shall decide on the loss handling according to his/her competence after consulting the finance agency;

- Enterprises shall promptly handle assets losses. If failing to handle asset losses, the Member‘s Council, the company president and the general director or director of the enterprise shall bear responsibility to the owner similarly to the cases of making untruthful reports on the enterprise finance.

b/ Surplus assets after asset inventory

Surplus assets after asset inventory means the difference between the actually inventoried assets and those recorded in the accounting book. The surplus asset value after the asset inventory is accounted as an income of the enterprise.

Article 28. Reassessment of assets

1. An enterprise shall reassess its assets in the following cases:

a/ According to the decision of a competent state agency;

b/ Transferring the enterprise ownership: equitizing, selling, or transferring the enterprise ownership in other forms;

c/ Making outward investments with assets;

d/ Other cases provided by law.

2. The reassessment of assets must comply with regulations of the State. The surplus or deficit of value as a result of asset reassessment under Clause 1 of this Article in each case must be handled on a case-by-case basis according to regulations.

Article 29. Outward investment

1. Outward investment principles

a/ Enterprises may use assets under their management that have been invested with corporate capital to make outward investment. The use of land-related assets for making outward investment must comply with the land law;

b/ The investment of corporate capital in other enterprises must comply with law as well as development strategies, master plans and plans of enterprises, without affecting their production and business operations as assigned by the owner, and ensure the principles of efficiency, preservation and development of invested capital;

c/ Enterprises may neither contribute capital to nor make investment in real estate (except enterprises having the main business line of real estate), nor contribute capital to nor buy shares from banks, insurance firms, securities companies, venture investment funds and securities investment funds or companies, except special cases decided by the Prime Minister;

d/ Enterprises that have made contribution or investment in the fields specified Point c of this Clause that are not permitted by the Prime Minister shall make plans for restructuring and withdraw all investments under decisions of competent authorities;

dd/ An enterprise may neither contribute capital to nor buy shares from other enterprises of which the key managers or owners are spouses or blood parents, children, siblings of the chairperson and members of the Members’ Council, the controller, the general director (deputy general director), the director (deputy director) and the chief accountant of the enterprise.

2. Forms of outward investment:

a/ Contributing capital or buying shares to establish joint-stock companies, limited liability companies, contributing capital to business cooperation contracts without establishing a new legal entity;

b/ Buying shares from or contributing capital to operating joint-stock companies, limited liability companies or partnerships;

c/ Acquiring another enterprise to establish a new legal entity;

d/ Buy bonds for interest;

dd/ Other forms of outward investment as provided by law.

3. Competence to decide on outward investment projects:

a/ The Members’ Council or the company president shall decide on outward investment projects after the policies thereon are approved by the owner;

b/ The owner shall decide on the contribution of capital to joint ventures with foreign investors in Vietnam; investment in or contribution of capital to establishment of enterprises overseas; acquisition of enterprises from other economic sectors; investment in enterprises established to mainly, continuously and stably produce public products or provide public services or to serve national defense and security; and other financial investment projects beyond the competence of the Members’ Council or the company president.

4. Apart from the cases in which capital contribution is banned specified at Points c and dd, Clause 1 of this Article, enterprises are also restricted from receiving capital contribution as follows:

a/ The parent company may not receive capital contribution from subsidiary companies;

b/ A subsidiary company of which 100% charter capital is held by the parent company and a dependent-accounting company may not make capital contribution together with the parent company to establish a new enterprise; may neither make capital contribution nor buy shares when another subsidiary company in the same group, corporation or parent company-subsidiary company system is equitized.

Annually, line ministries and provincial-level People’s Committees shall inspect and supervise the management and use of capital for outward investment according to regulations. Line ministries and provincial-level People’s Committees shall coordinate with the Ministry of Finance and report to the Prime Minister for consideration, decision and handling of the Members’ Council or the company presidents of the enterprises that have made outward investments in improper subjects but fail to restructure the investment structure as provided in Clause 1 of this Article.

Article 30. Transfer of outward investments

The transfer of outward investment comply with the Law on Enterprises, the Law on Securities and current laws, specifically:

1. Transfer method:

Depending on the method of contribution, an enterprise shall transfer its investments in accordance with law, the charters of the enterprises with contributed capital, and commitments of the parties in business cooperation contracts.

a/ The transfer of corporate capital in a single-member limited liability company or a limited liability company with two or more members in order to become a multiple-member limited liability company must comply with Clause 2, Article 14 of this Decree;

b/ The transfer of investments in joint-stock companies already listed on the securities market or registered for trading on UPCOM may be made in the form of order matching, auction, agreement or competitive offer provided that the prices are not lower than the market price at the time of transfer;

c/ The transfer of investments in unlisted joint-stock companies may be made at auctions on the principles of publicity, transparency and capital preservation, in which:

The transfer of investments valued at VND 10 billion or higher must be put up for auctions via the Stock Exchange. Financial investments bookvalued at below VND 10 billion must be transferred at auctions held by an intermediate financial institution (securities company) selected by the enterprise, held by the enterprise itself or via the Stock Exchange.

The sale agreement may only be made after the public auction is held and only 1 person registers to buy. The sale price must be close to the market price at the time of sale. In this case, the market price at the time of sale must be based on the prices offered by at least 3 securities companies that trade in securities of the joint-stock company with capital contributed by the enterprise; if there is no transaction in such securities, the sale price must not be lower than the price in accounting books of the enterprise.

2. The Members’ Council or the company president shall decide on the transfer of investments in other enterprises within their competence as provided by law. The transfer prices must be close to market prices and not lower than the prices in accounting books of enterprises.

3. When transferring outward investments, if the price is lower than the book value (after offsetting the provision for loss of capital investment according to regulations and benefits from capital investment), an enterprise shall report it to the owner for consideration and decision

Article 31. Rights and obligations of enterprises that invest capital in other enterprises

1. An enterprise that invests capital in single-member limited liability companies of which 100% charter capital is held by the enterprise shall exercise the rights and fulfill the responsibilities defined by the Law on Enterprises.

2. An enterprise that invests capital in other enterprises has the following rights and responsibilities:

a/ The rights of shareholders, capital contributors, and joint venture parties defined by law and the charters of other enterprises;

b/ Designating, dismissing, rewarding, and disciplining representatives at the other enterprises; deciding the salaries, allowances, bonuses, and benefits for representatives, except for the representatives that receive salaries from the other enterprises;

c/ Requesting representatives to make periodic and unscheduled reports on the performance and business of the other enterprises;

d/ Assigning and instructing the representatives to protect the lawful rights and interests of the enterprise at the other enterprises. Requesting the representatives to report the fulfillment of their tasks and obligations, especially to direct the enterprises in which the controlling shares are held by the State to achieve the targets of the enterprise;

dd/ Inspecting and supervising representatives, finding and repairing the errors of representatives;

e/ Deciding or requesting competent persons to decide on the increase or withdrawal of investments in other enterprises in accordance with law and the charters of the other enterprises;

g/ Supervising the withdrawal of investments in the other enterprises, collection of dividends distributed by the other enterprises;

h/ Taking responsibility for the efficiency, preservation and development of capital;

i/ Other rights and obligations as provided by law.

3. Rights, obligations, salaries, bonuses, interests, and standards of representatives of the enterprise at other enterprises:

The rights, obligations, salaries, bonuses, interests, and standards, and obligations to report of representatives of the corporate capital invested in other enterprises must be decided in accordance with Article 9 of this Decree.

4. Reporting by representatives of enterprises

Every quarter and at the end of the fiscal year or at the request of the owner, based on financial statement and other reports, representatives shall summarize, assess the performance and finance of enterprises, suggest solutions for difficulties in order to raise the efficiency of corporate capital invested in other enterprises, and send reports to the capital owner.

5. Collection of profit distributed from corporate capital invested in other enterprises.

Representatives are responsible for requesting the other enterprises to send distributable profit and dividends to the contributing enterprise.

Article 32. The right to decide on the increase or decrease of corporate capital invested in other enterprises

The increase or decrease of corporate capital invested in other enterprises must be decided as follows:

1. The person who decides on the plan for capital investment in other enterprises shall also decide on the increase or decrease of such investments.

2. The methods of increasing or decreasing investments in other enterprise must comply with law and the charter of the enterprise.

3. When another enterprise increases its charter capital but the contributing enterprise does not wishes to provide supplementary capital, the contributing enterprise shall consider transferring the right to buy or to contribute capital in accordance with law.

Article 33. Withdrawal of investments in other enterprises

The amount of capital that is withdrawn when decreasing the corporate capital invested in other enterprises or when an enterprise is dissolved or bankrupt must be remitted to the contributing enterprise.

Article 34. Capital preservation

1. Enterprises shall preserve and develop their equity. Enterprises shall report the increases and decreases of their equity to the owners and finance authorities for supervising.

Biannually and annually, enterprises shall assess the efficiency of capital by the criteria for capital preservation guided by the Ministry of Finance.

2. The equity of enterprises must be preserved as follows:

a/ Complying with the regime for management and use of capital and assets, profit distribution, other financial management regimes, and accounting regimes defined by law;

b/ Buying asset insurance in accordance with law;

c/ Promptly settling asset damage, irrecoverable debts, and making the following provisions:

- Provision for inventory devaluation;

- Provision for bad debts;

- Provision for devaluation of long-term financial investments;

- Provisions for product, goods and construction and installation warranty.

d/ Other measures to preserve the equity of enterprises defined by law.

3. Principles of making provisions:

a/ The aforesaid provisions must be accounted as business expenses in the reporting year at the time of making the financial statement of the enterprise to ensure the financial source for making up for losses that might occur in the subsequent year;

b/ Enterprises shall elaborate regulations on the management of supplies, goods and debts to minimize business risks; clearly identify responsibility of every section and individual for the monitoring and management of goods and debt collection;

c/ Enterprises are prohibited from making improper provisions and accounting them as expenses in order to reduce payments to the state budget. Enterprises deliberately violating this prohibition shall be handled in accordance with current law as in the case of evading tax.

The Ministry of Finance shall guide the making and use of provisions for inventory devaluation, bad debts, loss of financial investments and product, goods and construction and installation warranty.

Section 2

REVENUES, EXPENDITURES AND BUSINESS RESULTS

Article 35. Revenues and other incomes

1. Revenues and other incomes of the enterprise must be determined in accordance with accounting standards and current tax laws.

2. Revenues include revenues from production and business activities and revenues from financial activities, specifically:

a/ Revenues from production and business activities are all receivables that arise in a period from the sale of products and goods and provision of services of an enterprise. For enterprises that provide public products and services, their revenues also include subsidies provided by the State when they suffer a loss from the provision of products and services assigned by the State;

b/ Revenues from financial activities include amounts of money earned from royalties, the use of the enterprise’s assets by other parties, interests on loans, deposits, deferred payments and installments, profits from financial leasing; interest differences from the sale of foreign currencies, exchange rate differences, including exchange rate differences of payables in foreign currencies of which the exchange rates at the time of making the financial statement are lower than those in the accounting books; proceeds from the transfer of corporate capital invested in other enterprises; distributed profits and dividends from outward investments (including after-tax profit retained for setting up funds of single-member limited liability companies of which 100% charter capital is held by the enterprise, and dividends distributed in the form of shares in joint-stock companies). If the enterprise income tax on the distributed profit has been paid, the enterprise is not required to pay the income tax on this profit.

3. Other incomes include revenues from the liquidation and sale of fixed assets, insurance money, payables without creditors that are recorded as incomes, fines for contract breaches paid by customers, value of intellectual assets accepted by the capital contribution recipients and recorded as other incomes of the enterprise, and other revenues as provided by law.

4. The revenues of enterprises engaged in banking or insurance are determined in accordance with relevant specialized laws.

Article 36. Business expenses

Business expenses of an enterprise include expenses related to production and business activities in the fiscal year. The determination of expenses complies with accounting standards and current tax laws. Business expenses include:

1. Production and business expenses:

a/ Expenses for raw materials, materials, fuel, power, semi-finished products and external services (according to actual consumption levels and prices); expenses for allocation of working tools and equipment, expenses for repairs of fixed assets, and pre-deducted expenses for overhauls of fixed assets;

b/ Depreciation of fixed assets under regulations;

c/ Salaries, wages and expenses of salary nature paid to employees decided by the Members’ Council or the company president in accordance with the guidance of the Ministry of Labor, War Invalids and Social Affairs;

d/ Payments for social insurance, unemployment insurance, trade union dues and health insurance for employees paid by the enterprise under regulations;

dd/ Expenses for transactions, brokerage, receptions, marketing, trade promotion, advertising, and meetings as actually paid in accordance with the Law on Enterprise Income Tax;

e/ Other monetary expenses, including:

- Taxes, charges and fees as provided by law that are accounted as production and business expenses of an enterprise;

- Land rents;

- Severance pay and job loss pay for employees;

- Management capability and skills training for employees;

- Expenses for health care;

- Rewards for innovations, productivity improvement, saving of materials and expenses. The rewards must be decided by the general director or director of the enterprise based on the efficiency, and must not exceed the total saving achieved in 1 year;

- Expenses for female employees;

- Expenses for environmental protection;

- Expenses for shift meals;

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

- Other monetary expenses.

g/ Irrecoverable debts according to Clause 1, Article 25, and value of actual asset loss according to Clause 2, Article 27 of this Decree;

h/ The value of provisions for inventory devaluation, bad debts, loss of financial investments and warranty specified in Article 34 of this Decree, exchange rate differences according to the outstanding long-term debts in foreign currencies, pre-deducted expenses for product warranty, and provisions made under law by the enterprise engaged in a special field;

i/ Expenses for financial activities, including expenses for external financial investments (including expenses incurred by capital contributors, even loss distributed by enterprises with contributed capital); value of transferred capital contributions, interest on raised capital, exchange rate differences, expenses for payment discounts, expenses for asset lease; and provisions for devaluation of long-term investments.

2. Other expenses, including:

a/ Expenses for the sale and liquidation of fixed assets, including residual value of fixed assets upon liquidation or sale;

b/ Expenses for collection of debts already removed form accounting books;

c/ Expenses for collection of fines;

d/ Expenditures on fines for contract breaches;

dd/ Other expenses as provided by law.

3. Expenses covered by other sources and expenses not related to production and business must not be accounted as production and business expenses, including:

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

b/ Expenses for loan interests accounted as investment and construction expenses;

c/ Other expenses not related to production and business activities of the company; expenses that have no valid documents;

d/ Fines for violations of law committed by individuals, not in the name of the company.

4. Expenses of enterprises engaged in banking or insurance must be determined in accordance with relevant specialized laws.

Article 37. Expense management

Enterprises shall strictly manage their expenses to reduce expenses and prices of products and increase profits with the following measures:

1. Formulating, issuing and applying economic-technical norms that suit the economic-technical characteristics, business line, management and organizational model, and equipment of the enterprise. These norms must be disseminated to the persons in charge of implementing them and employees in the enterprise for implementation, inspection and supervision. For cases of failure to comply with these norms which leads to increase of expenses, the causes and responsibilities therefor must be identified for taking handling measures in accordance with law. Compensation must be paid if the causes are subjective. The competence to decide on levels of compensation complies with Clause 2, Article 27 of this Decree.

2. Enterprises engaged in the fields in which prices must be registered with the State shall send annual reports on their business expenses to the owners and the Ministry of Finance (for centrally managed enterprises) or to provincial-level Finance Departments (for locally managed enterprises). These reports must analyze and compare the planned and actual expenses for depreciation of fixed assets, wages, materials, fuel, enterprise management, including expenses for advertising, marketing, transaction, reception and other expenses; and identify the causes and responsibilities of individuals and collectives for excessive spending.

3. Periodically, enterprises shall analyze production costs and product prices in order to detect weaknesses in the management and the causes of the increase of costs and prices, and promptly take solutions.

4. The general directors or directors of enterprises shall formulate economic-technical norms, labor norms, and norms of financial expenses and other expenses which suit the business conditions, and submit them to the Members’ Council or the company president as a basis for business administration. To take the initiative in making plans for reducing expenses in conformity with the situation and operation of the enterprise.

Article 38. Income distribution

After the profit is used for offsetting the loss of the previous year in accordance with the Law on Enterprise Income Tax, setting up the science and technology development fund in accordance with law, and paying enterprise income tax, the residual profit is distributed as follows:

1. Distributing profit among capital contributors in accordance with contracts (if any).

2. Offsetting the losses of the previous years which are no longer allowed to be deducted from pre-tax profit.

3. The residual profit after deducting the amounts specified in Clauses 1 and 2 of this Article, must be distributed as follows:

a/ 30% is contributed to the development investment fund;

b/ Contributing to the reward fund and welfare fund:

- Enterprises rated A may contribute no more than 3 months’ salary to the reward fund and welfare fund;

- Enterprises rated B may contribute no more than 1.5 months’ salary to the reward fund and welfare fund;

- Enterprises rated C may contribute no more than 1 month’s salary to the reward fund and welfare fund;

Enterprises that are not rated may not make contributions to the reward fund and welfare fund.

c/ Contributing to the manager bonus fund:

- Enterprises rated A may contribute no more than 1.5 months’ salary to the manager bonus fund;

- Enterprises rated B may contribute no more than 1 month’s salary to the manager bonus fund;

- Enterprises rated C and unrated enterprises may not make contributions to the manager bonus fund.

d/ If the enterprises have insufficient amounts of money for making contributions at the levels specified at Point b of this Clause, they may reduce the amount contributed to the development investment fund in order to supplement the reward fund and welfare fund, which must not exceed the amount contributed to the development investment fund in the fiscal year;

dd/ The residual profit after making the contributions at Points a, b, c and d of this Clause must be transferred to the Enterprise Arrangement and Development Support Fund.

4. The Ministry of Finance shall make plans on and report to the Prime Minister for decision the transfer of the development investment funds of the enterprises of which the equity is higher than the charter capital approved by competent authorities, to the Enterprise Arrangement and Development Support Fund. The enterprises shall send money to the Enterprise Arrangement and Development Support Fund within 5 days after the Prime Minister makes decisions.

The Ministry of Finance shall guide the profit distribution and transfer of development investment funds of enterprises to the Enterprise Arrangement and Development Support Fund.

Article 39. Use purposes of funds

1. Science and technology development funds of enterprises:

The establishment, management and use of the science and technology development fund must comply with the guidance of the Ministry of Finance.

2. The development investment fund is used for supplement charter capital of enterprises.

3. The reward fund is used for:

a/ Giving year-end rewards or periodic rewards based on the productivity and achievements of managers and employees in the enterprise;

b/ Giving unexpected rewards to individuals or collectives in the enterprise;

c/ Giving rewards to external individuals and units that have made many contributions to the business or management of the enterprise.

The levels of the rewards specified at Points a, b, and c of this Clause are decided by the general director or director. The level of rewards at Point a of this Clause must be discussed with the trade union before decision.

4. The welfare fund is used for:

a/ Building or repairing welfare facilities of the enterprise;

b/ Paying for welfare activities of employees in the enterprise;

c/ Making investment in common welfare facilities for the sector or with other units under contracts;

d/ Providing support of unexpected difficulties of employees, including employees who retire, face difficulties, are helpless, or do charitable work.

The use of the welfare fund must be decided by the Member s’ Council or the company president after consulting with the trade union.

5. The manager bonus fund is used for giving bonus to the chairperson and members of the Member s’ Council, the company president, the Board of Directors General (Board of Directors), the controller and the chief accountant of the enterprise. The level of bonus must be decided by the owner based on the criteria of these titles and efficiency of the enterprise at the proposal of the chairperson of the Members’ Council or the company president.

6. The setting up and use of the aforesaid funds must be approved by the owner and adhere to the principle of publicity according to financial publicity, grassroots democracy regulations and other regulations of the State.

7. Enterprises may only use the reward fund, welfare fund and manager bonus fund after paying all due debts and other financial obligations.

Section 3

FINANCIAL PLANS, ACCOUNTING, STATISTICS AND AUDIT REGIMES

Article 40. Financial plans

1. Based on its production and business development strategy and master plan that are approved by the owner, an enterprise shall make long-term production and business plans and financial plans that are conformable with the orientations decided by the owner.

2. Annually based on its long-term production and business plan and capacity and demand of the market, an enterprise shall make a production and business plan for the subsequent year and submit it to the Members’ Council or the company president for decision.

3. Based on the production and business plan decided by the Members’ Council or the company president, the enterprise shall assess the production and business performance of the current year, then make and send a financial plan for the subsequent year to the owner and finance agency before July 31.

4. The owner shall assume the prime responsibility for, and coordinate with the finance agency of the same level in, reviewing the financial plan made by the enterprise and giving official opinions in writing to the enterprise for finalizing the financial plan. The finalized financial plan is the official plan serving as the basis for the owner and the finance agencies of the same level to assess the management and operation of the enterprise.

Article 41. Financial statements and other reports

1. At the end of each accounting period (quarter and year), enterprises shall make and send financial statements and statistics reports in accordance with law. The Members’ Councils or company presidents are responsible for the accuracy and truthfulness of these reports.

The enterprises must have their financial statements audited in accordance with law.

2. The Ministry of Finance shall provide guidance on report forms, time, and places to which reports are sent by enterprises.

Chapter IV

IMPLEMENTATION PROVISIONS

Article 42. Effect

This Decree takes effect on September 1, 2013.

Article 43. Implementation responsibility

1. The Minister of Finance shall guide, inspect and supervise the implementation of this Decree. The guidance on special financial mechanisms applicable to lottery enterprises, stock exchanges and securities depository centers must be approved in writing by the Prime Minister.

2. Political organizations and socio-political organizations shall organize the investment and management of capital and assets of enterprises under their ownership.

3. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, chairpersons of provincial-level People’s Committees, chairpersons of the Members’ Councils, company presidents, directors of enterprises of which 100% charter capital is held by the State, and representatives of the state capital invested in other enterprises shall implement this Decree.-

On behalf of the Government
Prime Minister
NGUYEN TAN DUNG