Circular No. 109/2005/TT-BTC guiding certain contents regarding finance in transferring, selling, leasing state-owned companies.

CIRCULAR

Guidelines on certain financial matters concerning the transfer, sale, lease, and management contracting of state-owned enterprises

business operation, leasing of state-owned enterprises

Pursuant to Decree No. 80/2005/NĐ-CP dated June 22, 2005 of the Government on the transfer, sale, management contracting, and leasing of state-owned enterprises (hereinafter referred to as Decree No. 80/2005/NĐ-CP),

The Ministry of Finance issues guidelines on certain financial matters concerning the transfer, sale, management contracting, and leasing of state-owned enterprises as follows:

I. Object and Conditions for Application of Transfer, Sale, Management Contracting, and Leasing of State-Owned Enterprises (hereinafter referred to as enterprise): as stipulated in Article 2 and Article 4 of Decree No. 80/2005/NĐ-CP.

II. Actual, Reasonable, and Necessary Costs for Organizing the Transfer, Sale, Management Contracting, and Leasing of Enterprises: as provided in Article 7 of Decree No. 80/2005/NĐ-CP, including:

1. Costs for the transfer, sale, management contracting, and leasing of enterprises: these are expenses related to the transfer, sale, management contracting, and leasing of enterprises from the time of the decision to transfer, sell, manage contract, or lease until the completion of the handover of the enterprise to the receiving party.

Including:

- Expenses for inventory and valuation of assets;

- Expenses for preparing plans for the transfer, sale, management contracting, and leasing of enterprises;

- Expenses for organizing company meetings to implement the transfer, sale, management contracting, and leasing of enterprises;

- Expenses for promotional activities, advertising, and public information dissemination;

- Expenses for organizing auctions and tenders;

- Expenses for hiring auditing and consulting services to determine the value of the enterprise (if applicable);

- Expenses for the Reform Board at the enterprise;

- Other expenses related to the transfer, sale, management contracting, and leasing of enterprises.

The level of expenses is determined based on the value of the enterprise recorded in the accounting books but shall not exceed VND 50 million for enterprises with a value under VND 1 billion; VND 100 million for enterprises with a value between VND 1 billion and VND 5 billion; VND 150 million for enterprises with a value between VND 5 billion and VND 10 billion, and VND 200 million for enterprises with a value over VND 10 billion. For large and complex enterprises, if necessary costs for the transfer, sale, management contracting, and leasing exceed the maximum limit, the authority deciding the transfer, sale, management contracting, and leasing of enterprises shall proactively review and decide on the amount and bear responsibility for their decision, while also notifying the Ministry of Finance in writing.

The General Director or Director of the enterprise decides on the content and necessary expenses within the maximum limit to organize the implementation of the transfer, sale, management contracting, and leasing of enterprises and is responsible for the legality and validity of these expenses.

2. Costs for the transfer, sale, management contracting, and leasing are covered by the following sources:

- Transfer costs are deducted from the state capital value at the enterprise; if there is no remaining state capital, it will be supported from the Enterprise Restructuring Support Fund at the Ministry of Finance (if transferring an independent state-owned enterprise) or supported from the capital of the Holding Company (if transferring an independent accounting unit of a subsidiary).

- Selling costs or parts of the enterprise (hereinafter referred to as selling the enterprise) are deducted from the proceeds from selling the enterprise; if insufficient, the shortfall will be supported from the Enterprise Restructuring Support Fund at the Ministry of Finance (if it is an independent state-owned enterprise) or from the capital of the Holding Company (if it is a dependent unit or an independent accounting unit of a subsidiary of the Holding Company), or from the capital of the enterprise (if it is a dependent unit of a state-owned enterprise).

- Management contracting costs are included in the regular operating expenses of the enterprise receiving the management contract.

- Leasing costs are deducted from the proceeds from leasing the enterprise.

3. Documents for requesting support for costs in cases of transferring or selling enterprises:

- A request letter for financial support signed by the competent authority deciding the transfer or sale of the enterprise. The content of the letter includes the total amount received, the costs for transferring or selling the enterprise, and the amount still needed for support;

- Decision on the transfer or sale of the enterprise by the competent authority (original or certified copy);

- Contract for the transfer or sale of the enterprise (certified copy);

- Certificate of asset value (certified copy);

- Detailed list of costs for transferring or selling the enterprise (with verification by the competent authority deciding the transfer or sale of the enterprise).

III. Transfer of Enterprises to Groups of Workers:

1. The Reform Board at the enterprise conducts an inventory, categorizes assets, and handles financial matters when transferring enterprises according to Article 11 of Decree No. 80/2005/NĐ-CP, including:

a) Inventory and determination of the quantity, quality, and value of assets managed and used by the enterprise; checking cash balances, reconciling bank account balances, and long-term and short-term investments at the time of inventory.

Categorize inventoried assets into the following groups:

- Assets owned by the enterprise, including assets contributed to joint ventures.

- Assets received from joint venture contributions, leased assets, financed assets, borrowed, held in trust, processed, sold on behalf of others, and other assets not belonging to the enterprise.

- Assets formed from Reward and Welfare Funds (if any).

b) Conduct a detailed inventory of each receivable on the accounting books, reconcile, confirm, and categorize receivables, prepare a detailed list for each type of receivable according to the following regulations:

- Receivables: clearly distinguish recoverable receivables and non-recoverable receivables. Review economic contracts to identify prepaid amounts for goods and services that have been fully recorded as business expenses such as rent, land lease payments, purchase payments, long-term insurance payments, salaries, wages, and adjust accounting entries to reduce expenses corresponding to unsupplied services or unexecuted rental periods or unused raw materials and record increases in prepaid expenses.

- Payables: clearly analyze each payable, distinguishing payables that do not need to be paid.

Non-payable debts are debts where the creditor no longer exists (the enterprise has been dissolved or declared bankrupt, the creditor has died) or the creditor does not come to reconcile and claim the debt despite being overdue.

c) Handling of assets:

For missing, depleted, or lost assets, the cause must be clearly identified, and collective and individual responsibilities determined to process compensation according to the law. The company's General Director decides on the amount of compensation. In cases where depleted or lost assets have insurance, work with the insurance agency to determine the compensation level. The difference between the value of the missing assets and the compensation amount will be covered by the financial reserve fund; if insufficient, it will be recorded in the company's business results.

For excess asset values that cannot be attributed to a cause and whose owners cannot be found, they shall be recorded as an increase in state capital at the company.

d) Handling receivables:

For uncollectible receivables, handle according to current regulations. If, at the time of transfer, they remain unhandled but the receiving party agrees to accept them, they will be included in the transferred asset value; if not accepted, they will be excluded from the company's value and transferred to the debt-buying company for enterprise surplus assets.

e) Handling payables:

- For payable debts that do not need to be paid, record them as an increase in state capital at the company.

- For tax debts and other amounts payable to the state budget, they will be handled as follows:

+ In cases of losses where payment is impossible, the company will prepare documentation to request deferred payment or debt cancellation up to the cumulative loss amount until the valuation date according to current laws.

+ If the company meets the conditions for debt cancellation and has submitted the necessary documents but has not received the cancellation decision from the competent authority by the time of the company transfer, the transferring authority may consider temporarily reducing the debt and loss for valuation purposes.

The company is responsible for continuing to cooperate with the financial authorities to handle these matters. When the Ministry of Finance issues a decision, any discrepancies compared to the temporarily reduced debt amount will be adjusted in the financial statements at the official transfer date.

- For overdue bank loans and development funds that the company cannot repay due to losses, the company will follow legal procedures to request debt write-off, deferral, or cancellation according to current laws.

For unpaid interest (including accrued interest) from state commercial banks and development funds, the maximum cancellation amount will not exceed the remaining loss (after handling tax arrears and other state budget payments). Within twenty working days of receiving the company's application, the lending bank and development fund must provide a written response. If no response is given within twenty days, the company can temporarily exclude the unpaid interest from total liabilities and record it as corresponding income. Upon receipt of the cancellation decision, any discrepancy compared to the temporarily excluded amount will be adjusted in the financial statements at the transfer date.

2. Determining the value of the company to be transferred: based on the plan to determine the company's value established by the company's General Director and Reform Board, the company's General Director organizes the determination of the company's value:

a) For state-owned companies listed in the overall restructuring plan for state enterprises approved by the Prime Minister:

Based on accounting books, financial reports, tax settlement reports, and inventory reports at the transfer date, organize the determination of enterprise value according to the principle that all company assets at the time of transfer are valued in their actual value and in Vietnamese currency. Among which:

- Tangible assets: the remaining value on the accounting books.

- Cash assets including cash, deposits, and securities (bills, bonds, etc.) of the company are determined according to the cash count report (for cash), the bank reconciliation balance (for deposits), and the face value of securities.

- Collectible receivables, short-term and long-term collateral, and investments are determined according to the actual balances on the reconciled accounting records.

- Uncompleted expenses (unfinished construction projects, unfinished production and business activities) are determined according to the actual entries on the accounting books.

- Intangible asset value (if any) is determined according to the remaining value recorded on the accounting books. Specifically, the land use right value is determined according to Clause 2, Article 23 of Decree 80/2005/NĐ-CP. In this case, if the receiving party chooses the land transfer method, the land use right value will be included in the company's value but will not increase state capital but instead be recorded as an increase in state budget liabilities.

The company's transfer value does not include leased, borrowed, joint venture, entrusted, consigned, or stored assets; assets formed from welfare and reward funds; housing for employees (transferred to local real estate management agencies); uncollectible receivables that the receiving party does not accept.

The transfer price of the company is determined based on the remaining value of the state capital in the company after deducting the costs of transferring the enterprise. The value of the state capital in the company equals the company's value minus the actual debts to be paid, welfare and reward fund balances, and operating fund balances (if any). If, after determination, the company no longer has state capital but the receiving party still requests acceptance, the receiving party must propose a plan to assume debts and losses and a repayment plan consistent with the production and business plan. If the receiving party does not accept, the company will be transferred through sale or bankruptcy proceedings.

b) For companies listed in the privatization plan that have completed privatization steps but do not meet privatization conditions: if transferred according to this Circular, the company's value will be based on the previously determined enterprise value during the privatization process.

3. Transfer and acceptance of the company in accordance with Article 12 of Decree No. 80/2005/NĐ-CP. In this regard:

a) Based on the transfer agreement, the transferring party (the General Director of the company, the Chief Accountant, and the representative of the Reform Board at the company) must fully and intact transfer all assets, capital, debts, land use rights, economic contracts, and other rights and obligations to the receiving party (representative of the labor collective) along with relevant files and documents.

b) During the period before the transfer, the transferring company is responsible for managing all assets and capital of the company, preventing damage, loss, or depletion. The General Director and related individuals of the transferring company shall be held legally accountable for any loss or depletion of assets and capital during the period before the transfer.

c) The transfer must be recorded in a protocol signed by the General Director, Chief Accountant, representative of the Reform Board at the transferring company, and the representative of the labor collective receiving the transfer.

Any unresolved issues prior to the transfer must be clearly noted in the transfer protocol.

4. Ownership rights after the transfer:

All assets of the company after the transfer belong to the collective ownership of the workers. Workers participating in the transfer are granted ownership corresponding to the number of shares allocated from state capital at the time of transfer or the equivalent contribution based on years worked in the state sector, entitled to dividends, and have the right to inheritance but cannot transfer the allocated shares within three years after the transfer of the company.

IV. Sale of State-Owned Companies:

1. Inventory, classification, and handling of assets and finances are carried out according to Articles 19, 20, and 21 of Decree No. 80/2005/NĐ-CP, including:

a) For missing, depleted, or lost assets, the cause and responsibility of the collective and individual must be clearly identified for compensation in accordance with the law. The General Director of the company decides the amount of compensation. For assets that were insured against depletion or loss, work must be done with the insurance agency to determine the compensation amount. The difference between the value of the missing asset and the compensation amount is covered by the financial reserve fund, if insufficient, it is recorded in the company's business results.

For excess asset values where the cause cannot be determined and the owner cannot be found, they are recorded as state capital in the company.

b) Handling of payable debts is carried out according to point e, Clause 1, Section III of this Circular.

c) For debts owed by employees, the company has the responsibility to settle them completely before transferring to the buyer to ensure the rights of the workers. If the company lacks funds for settlement, the shortfall can be supported from the proceeds of selling the enterprise.

2. Determining the minimum price according to Article 23 of Decree No. 80/2005/NĐ-CP, including:

a) For tangible assets: only those assets that the company can continue to use should be revalued.

- The actual value of the asset equals the market price at the time of sale multiplied by the remaining quality ratio of the asset at the valuation date.

For special assets not available on the market, their value is calculated based on the new purchase price of similar assets of the same brand and production country, with the same capacity or equivalent features. If there are no equivalent assets, the value is determined based on the book value of the asset.

The remaining quality ratio of the asset is determined as a percentage between the remaining quality of the revalued asset and the quality of newly purchased or newly constructed similar assets, in compliance with national regulations on safety conditions for use and operation of assets; product quality; environmental hygiene, following the guidance of the relevant economic and technical management ministries. If there are no national regulations, the assessed asset quality shall not be less than 20%.

- Fixed assets that have been fully depreciated and recovered capital; tools and management equipment that have been fully allocated to operating costs but are still in use must be revalued according to the above provisions.

b) Monetary assets including cash, deposits, and securities (bills, bonds, etc.) of the company are determined based on the cash count record (for cash), bank reconciliation balance (for deposits), and securities are valued based on market transaction prices, if there are no transactions, they are valued based on their face value.

c) Receivables with recoverable potential, short-term and long-term guarantees and deposits are determined based on the actual balances on the accounting books confirmed through reconciliation.

d) Investments are determined based on the net asset value of the invested enterprise (if the enterprise is profitable). If the enterprise incurs losses, the value is determined based on the company's accounting records.

đ) Uncompleted expenses (unfinished construction investments, unfinished production and business activities) are determined based on the actual occurrences recorded in the accounting books.

e) The value of intangible assets (if any) is determined based on the remaining value recorded in the accounting books. Specifically, the value of land use rights is determined according to Clause 2, Article 23 of Decree No. 80/2005/NĐ-CP.

g) The total actual value of the company is the actual value of all current assets of the company at the time of valuation.

h) The actual value of state capital in the company is the total actual value of the company minus the actual payable debts, surplus welfare and reward funds, surplus operating funds (if any), and the value of assets formed from welfare and reward funds (in cases where the buyer does not intend to use them for production and business operations and the company has already reduced the welfare and reward funds and increased state capital).

i) The minimum selling price of the company is determined as follows:

- In the case of selling without assuming debt, the minimum price is determined by subtracting the surplus welfare and reward funds, surplus operating funds (if any), and the value of welfare and public assets (in cases where the buyer does not need to use them and the company has already reduced the welfare and reward funds and increased state capital) from the actual value of the company.

- In the case of selling with debt inheritance, the minimum price is determined as the actual value of the state capital portion in the company. If the actual value of the state capital portion is negative (less than zero) and the buyer agrees to purchase, the minimum price is set at zero. If the buyer does not agree to purchase, the company will be transferred to bankruptcy proceedings.

k) For companies listed in the privatization program, which have carried out privatization steps but do not meet the conditions for privatization: they shall be transferred to the form of selling the company, and the sale price of the company shall be based on the company's value determined during the privatization process and adjusted downward by the value of assets that the buyer does not purchase from the company's determined value.

3. Management and use of the proceeds from selling the company: implemented according to the provisions of Clause 1, Article 6 of Decree No. 80/2005/NĐ-CP.

4. Handover and acceptance: implemented according to the provisions of Clause 7, Article 19, Clause 2, Article 25 of Decree No. 80/2005/NĐ-CP and the provisions at point b, point c, Clause 3, Section III of this Circular.

V. Entrusting Business Management of the Company:

1. Inventory and classification are carried out according to the provisions of point a, b, Clause 1, Section III of this Circular. Among them:

For assets contributed to joint ventures or received through joint venture contributions; assets leased externally, assets rented out; assets borrowed, held in custody, and other assets not belonging to the company: the entrustee and the asset owner agree on whether the entrustee will inherit or not inherit these assets.

2. The contents, indicators, and conditions for entrusting business management are stipulated in Article 31 of Decree No. 80/2005/NĐ-CP, including:

a) Preservation of state capital: the entrusting party must be responsible for preserving the state capital already allocated. The entrusted party has the responsibility to preserve the capital received according to the entrustment contract. The preservation of state capital must ensure compliance with the regulations on the management and use of capital, assets, profit distribution, financial management, accounting systems prescribed by the state, setting up risk reserves, purchasing insurance for assets...

b) The entrusting party needs to clearly specify the conditions for implementing state policies and systems in production and business activities and the inheritance of contracts signed before the entrustment, including: material and raw material purchase and sales contracts, product consumption contracts, receivables, payables, and must obtain the consent of the entrusted party to sign in the entrustment contract. The entrusted party commits to organizing production and business activities and managing the enterprise according to the provisions of the entrustment contract and not contrary to current laws.

c) Both parties to the entrustment agree on the annual profit (or loss) target. The profit target can be stable throughout the duration of the entrustment contract or can be specifically defined for each year. The profit target cannot be lower than the average profit achieved by the enterprise in the three years prior to the entrustment. Companies that suffered continuous losses before entrustment shall be entrusted with a reduction in losses, conditions, and time to end losses, but must ensure that the loss reduction in the following year is greater than the previous year. After the loss period, there will be a period of entrusting the achievement of annual profits as stipulated above.

All contents regarding entrusting business management, entrustment conditions, specific rights and responsibilities of both parties are recorded in the contract and must be negotiated and agreed upon between the entrusting and entrusted parties.

3. Handover and acceptance: the entrusting party and the entrusted party implement according to the provisions of Clause 3, Section III of this Circular.

4. Liquidation of the entrustment contract:

When the entrustment period expires, the entrusting and entrusted parties must complete the liquidation procedures according to the terms stipulated in the contract.

Before liquidating the contract, the entrusted party must take the lead, with the participation and supervision of all parties, in conducting inventory, determining the quantity and value of assets, and settlement matters between the entrusting and entrusted parties.

Principles for handling when liquidating the contract.

- Based on the clauses already recorded in the contract.

- Based on agreements and documents between the entrusting and entrusted parties regarding the handling of assets during operations such as sale, liquidation, additional investment...

- Based on the results of the inventory before handing over the company.

Any discrepancies in surplus or shortage, value differences (due to changes in the structure and quality of assets as committed when entrusting) need to be resolved based on the contract and according to current financial regulations.

- In cases where there is damage, deterioration, or loss of assets due to objective reasons such as natural disasters, enemy attacks during the operation of the entrusted company, these will be considered without compensation but deducted from the company's return value.

- Disputes that the two parties cannot resolve themselves shall be brought to court for judgment.

5. Rights and obligations of the entrusted party are implemented according to the provisions of Article 34 of Decree No. 80/2005/NĐ-CP, including:

a) The entrusted party has the right to invest additional funds to improve and modernize technology from its own capital or raised capital (bank loans and other sources of funding).

These assets belong to the entrusted party and have the right to withdraw them when the contract is liquidated. In cases where additional investments change the asset structure, the entrusted party must obtain written approval from the entrusting party.

b) The entrusted party enjoys and independently decides on the distribution of income exceeding the quota as stipulated in Clause 3, Article 34 of Decree No. 80/2005/NĐ-CP. In cases where the company reduces losses compared to the loss quota, the reduced loss amount will be considered as excess profit and recorded. When the company becomes profitable, the increased excess profit will be recognized and used as stipulated above.

VI. Leasing the Company:

1. Inventory, classification, and handling of assets and finances are carried out according to the provisions of Articles 39 and 40 of Decree No. 80/2005/NĐ-CP, including:

a) Inventory and classification of assets are carried out according to the provisions of point a, b, Clause 1, Section III of this Circular.

b) Handling of the company's assets and finances when leasing shall be carried out in accordance with the Financial Management Regulations of State-owned Enterprises and the Management of State Capital Invested in Other Enterprises issued together with Decree No. 199/2004/NĐ-CP dated December 3, 2004 of the Government. For assets taken for joint venture contribution or receiving joint venture contribution; assets leased out, assets rented in; borrowed or held-in-custody assets and other assets not belonging to the company: the lessee and the owner agree on whether the lease will include succession or not.

2. Determining the rental price for the company: carried out in accordance with Article 42 of Decree No. 80/2005/NĐ-CP.

3. Handover and acceptance: the lessor and the lessee shall carry out handover and acceptance based on the lease contract in accordance with Clause 3, Section III of this Circular.

4. Managing the rental proceeds of the company: carried out in accordance with Clause 2 of Article 6 of Decree No. 80/2005/NĐ-CP.

VII. Implementation Organization:

This Circular takes effect fifteen days from the date of publication in the Official Gazette and replaces Circular No. 47/2000/TT-BTC dated May 24, 2000 of the Ministry of Finance guiding financial issues in transferring and selling state-owned enterprises; Circular No. 51/2000/TT-BTC dated June 2, 2000 of the Ministry of Finance guiding financial issues in business contracting and leasing of state-owned enterprises as stipulated in Decree No. 103/1999/NĐ-CP dated September 10, 1999 of the Government. Any provisions contrary to this Circular shall be implemented in accordance with the guidance provided in this Circular.

In the course of implementation, any difficulties encountered should be reported to the Ministry of Finance for study and resolution./.