Circular No. 115/2007/TT-BTC guiding certain contents on supervision and evaluation of the effectiveness of state-owned enterprise operations

CIRCULAR

Guidelines on Certain Aspects of Supervision and Evaluation of State-Owned Enterprise Operations

_____________________________

Pursuant to Decision No. 224/2006/QĐ-TTg dated October 6, 2006 of the Prime Minister regarding the issuance of the Regulation on Supervision and Evaluation of State-Owned Enterprise Operations, the Ministry of Finance provides guidelines on certain aspects of supervision and evaluation of state-owned enterprise operations as follows:

I. APPLICABLE OBJECTS: 

This Circular applies to the objects specified in Article 3 of the Regulation on Supervision and Evaluation of State-Owned Enterprise Operations issued together with Decision No. 224/2006/QĐ-TTg dated October 6, 2006 of the Prime Minister (hereinafter referred to as the Regulation accompanying Decision No. 224/2006/QĐ-TTg).

Enterprises operating in the financial, banking, insurance, and securities sectors are not subject to this Circular.

II. SUPERVISION OF ENTERPRISES:

Integrated technical consulting services (CPC 8673). Internal supervision within enterprises

1. State-owned companies:

1.1. Supervision by the Board of Directors:

a. The Board of Directors (hereinafter referred to as the BOD) performs supervisory functions over all activities of the enterprise, focusing on supervising the activities of the General Director's Office in accordance with the Law on State-Owned Enterprises, the Company Charter, and other relevant laws.

b. The BOD supervises the contents stipulated in Clause 3, Article 5 of the Regulation accompanying Decision No. 224/2006/QĐ-TTg, focusing on the following key areas:

- Supervising the General Director's Office in performing its functions and responsibilities as prescribed in the Company Charter; implementing Resolutions, Decisions of the owner and the BOD; Article 41 of the Law on State-Owned Enterprises and other relevant laws.

- Supervising the feasibility and implementation status of basic construction investment projects; the effectiveness of capital-raising projects, construction investment projects, and capital investments in other enterprises.

- Supervising the implementation of production and business plans, the degree of completion of national targets for profit rates on state capital invested; the implementation of business cooperation plans between the company and other member enterprises; the use of post-tax profits; the use of enterprise funds.

- Verifying the reliability of financial report data (including assets, receivables, equity, revenue, expenses, profits, and obligations to the state), economic and financial information, and other reports of the enterprise.

c. The BOD implements supervision through:

- Information from Financial Reports, statistical reports, reports of the General Director's Office as prescribed by law and the owner; reports of the Audit Committee.

- Activities of the Audit Committee and the support staff of the BOD.

- Directly working with the General Director's Office, departments, divisions, specialized units, and employees.

1.2. Supervision by the General Director's Office:

a. The General Director's Office performs supervisory functions over all activities of the enterprise through departments, divisions, workshops, teams, or dependent units of the enterprise.

b. The General Director's Office supervises the contents stipulated in Clause 3, Article 5 of the Regulation accompanying Decision No. 224/2006/QĐ-TTg, focusing on the following main areas:

- Supervising and inspecting internal company units in implementing Resolutions, Decisions of the owner, the BOD, and other legal provisions.

- Supervising the progress of implementing production and business plans of the entire company and within each internal unit; the implementation status of internal units regarding business cooperation plans among internal units; business activities of enterprises in which the company has contributed capital to be reported to the BOD or decided upon within its authority regarding maintaining, selling off, or investing additional capital in such enterprises.

- Supervising the implementation of loan contracts and the use of borrowed capital by the enterprise; the supply and allocation of money, raw materials, goods, labor for enterprise departments during business operations and product or service consumption; the implementation of asset purchase and sale contracts and other economic contracts.

- Supervising internal enterprise units in implementing economic and technical norms; product standards; other cost management regulations within the enterprise.

- Supervising internal company units in implementing product wage rates, using and paying wages to employees; payment of bonuses, implementation of welfare rights; severance pay and other employee benefits from the reserve fund for unemployment assistance.

- Verifying and being responsible for the reliability of financial report data, economic and financial information, and other reports according to current regulations. Timely identifying and taking measures to address deficiencies and weaknesses in the management and operation system of the company.

c. The methods of supervision by the General Director's Office are as follows:

- Supervising through reports from internal company units.

- Through internal auditing, specialized and professional units of the enterprise to implement internal supervision.

- Directly inspecting the performance of tasks by departments, divisions, workshops, teams, factories, and  specialized units and employees.

1.3. Supervision by Employees:

a. Employees supervise the implementation of policies and systems related to employee interests and other supervisory functions prescribed in legal documents.

b. Employees supervise the following contents:

- Directions, tasks, plans, measures for developing production and business, restructuring production and business organization of the company.

- Internal rules and regulations of the company directly related to the rights and obligations of employees.

- Measures for labor protection, improving working conditions, material and spiritual life, environmental hygiene, vocational training and retraining, and enhancing the qualifications of employees in the company.

- Voting surveys of trust in positions of Chairman of the BOD, BOD members (if any), and the General Director of the company.

- Implementing Resolutions of the Workers' and Staff Congress, trade union organizations on issues:

+ Contents or amendments and supplements to collective labor agreements.

||| The regulations on the use of welfare funds, reward funds, and production and business plan indicators of the company directly relate to the rights and obligations of employees in accordance with state regulations.

||| c. The monitoring methods of employees are as follows:

||| - Participate in discussions and provide opinions before the competent authority makes decisions, and supervise and promptly provide opinions during the implementation process.

||| - Through the People's Inspectorate, trade unions, and Workers' Congresses at teams, workshops, and the company level.

||| - Directly work with the Board of Directors regarding issues related to grassroots democracy regulations and internal company regulations.

||| 2. For independent accounting member companies: ||| The Director and employees shall implement supervision according to the provisions set out in points 1.2, 1.3, Clause 1, Part A, Section II of this Circular.

||| 3. Other State-owned Enterprises ||| (hereinafter referred to as SOEs)

||| 3.1. Board of Directors of State-owned Joint Stock Companies holding more than 51% of the charter capital:

||| a. The Board of Directors shall perform supervisory functions over the Management Board in accordance with the Enterprise Law, Company Bylaws, and other relevant legal documents.

||| b. The Board of Directors shall supervise according to the contents stipulated in sub-item b, point 1.1, Clause 1, Part A, Section II of this Circular, Company Bylaws, and enterprise-related laws and regulations, focusing on the following main aspects:

||| - Supervise the implementation of production and business plans, the degree of completion of efficiency targets as per the Resolution of the Shareholders' Meeting; the implementation of business cooperation plans between the company and enterprises with the company's capital; the capacity and effectiveness of management, production, and business units of the company; the effectiveness of the company's operations.

||| - Supervise the payment of dividends to shareholders and the use of enterprise funds.

||| - Supervise the Management Board in implementing Resolutions and Decisions of the Shareholders' Meeting and the Board of Directors; rights and duties prescribed in the Company Bylaws, Article 116 of the Enterprise Law, and other relevant legal documents.

||| c. Methods of supervision by the Board of Directors are as follows:

||| - Supervise  through information in Financial Reports, statistical reports, reports from the Internal Audit Board, and other reports as prescribed by law and the owner's regulations for the enterprise.

||| - Directly work with the Management Board, departments, boards, specialized units, and employees.

||| 3.2. Supervision by the Management Board: The Management Board shall implement supervision according to the provisions set out in point 1.2, Clause 1, Part A, Section II of this Circular, Company Bylaws, and enterprise-related laws and regulations.

||| 3.3. Internal Audit Board:

||| a. The Internal Audit Board shall supervise the Board of Directors of joint stock companies; the Board of Members or Chairman of limited liability companies with one member; the Director or General Director (hereinafter collectively referred to as the director) in managing and operating the company.

||| b. Content of supervision:

||| - For limited liability companies with one member and joint stock companies:

||| + Check the reasonableness, legality, honesty, and prudence in managing and operating business activities; in organizing accounting and statistical work and preparing financial statements.

||| + Review annual and semi-annual business situation reports and financial statements of the company; evaluate the management performance report of the Board of Directors and the company's director.

||| + Inspect the company's accounting books and other documents; manage and operate the company's activities at any time if deemed necessary; upon request of the Shareholders' Meeting or shareholders or groups of shareholders as prescribed by the Enterprise Law.

||| - For Limited Liability Companies with two or more members: supervise according to the Company Bylaws.

||| c. Methods of supervision:

||| - Indirect supervision through information in reports from the Board of Directors, Management Board, and other documents and materials about the company's business activities.

||| - Through independent consulting to carry out supervision.

||| - Directly work with the Board of Directors and the Management Board of the company.

||| 3.4. Employees:

||| a. Supervise the implementation of policies and systems related to employee benefits and other supervisory functions prescribed in legal documents.

||| b. Employees supervise the contents prescribed in labor contracts or collective labor agreements, Labor Code, and grassroots democracy regulations (if applicable).

||| c. Methods of supervision by employees: Through trade unions (if available), supervise according to the contents prescribed in labor contracts or collective labor agreements, Labor Code, and grassroots democracy regulations (if applicable).

||| B. Supervision by the Owner:

||| 1. Board of Directors of State-Owned Enterprises:

||| a. The Board of Directors shall perform the supervisory function of the owner towards limited liability companies with one member, independent accounting member companies (collectively referred to as member companies); representatives of state capital in other enterprises or authorized representatives in performing assigned functions and tasks.

||| b. Content of supervision:

||| - For member companies as stipulated in Clause 3, Article 6 of the accompanying Regulations of Decision No. 224/2006/QĐ-TTg; sub-item b, point 1.1, Clause 1, Part A, Section II of this Circular, in accordance with the Company Bylaws and enterprise-related laws and regulations.||| - For representatives of state capital in other enterprises or authorized representatives in performing assigned functions and tasks according to the provisions of Article 46 of the Financial Management Regulations of State-Owned Enterprises and Management of State Capital Invested in Other Enterprises issued together with Decree No. 199/2004/NĐ-CP dated December 3, 2004 of the Government (hereinafter referred to as the Financial Management Regulations); perform the functions of shareholders or contributing members as prescribed in the Enterprise Law, Company Bylaws, and other relevant legal documents.

||| - Supervise through information in reports from the Management Board of independent accounting member companies, Board of Members or Chairman of limited liability companies with one member, and reports from representatives of state capital in other enterprises or authorized representatives on the performance of assigned functions and tasks; reports on business operation situations, financial statements, and other reports.

||| c. Methods of supervision:

||| - Through the Internal Audit Board of state-owned enterprises to

assist the Board of Directors in carrying out supervision according to the supervisory content of the Board of Directors of state-owned enterprises over member companies.  ||| help the Board of Directors carry out supervision according to the supervisory content of the Board of Directors of state-owned enterprises over member companies.

- Directly work with the Management Board of independent accounting member companies, the Board of Members or the Chairman of the company and the General Director of a single-member limited liability company, the State Capital Representative at other enterprises or the authorized representative.

2. The Ministries managing industries, agencies equivalent to ministries, and agencies under the Government (hereinafter referred to as the Ministry managing industry), People's Committees of provinces directly under the Central Government (hereinafter referred to as Provincial People's Committee) and the Ministry of Finance:

a. Supervision Objectives:

- The Ministries managing industries supervise State-owned Corporations and independent State-owned companies established by the Prime Minister or the Ministry managing industry.

- The Provincial People's Committee supervises State-owned Corporations and State-owned companies established by the Provincial People's Committee.

- The Ministry of Finance supervises State-owned Corporations and independent State-owned companies established by the Prime Minister, the Ministry managing industry, or the Provincial People's Committee.

b. Content of supervision for State-owned companies shall be carried out in accordance with Clause 3, Article 6 of the Regulation attached to Decision No. 224/2006/QĐ-TTg. In particular:

- The Ministries managing industries and the Provincial People's Committee shall carry out supervision according to the contents stipulated in Points a, b, and c, Clause 3, Article 6 of the Regulation attached to Decision No. 224/2006/QĐ-TTg; focusing on the following contents:

 + Supervise the legality, accuracy, and honesty in the performance of duties and powers of the Board of Directors and the Management Board of State-owned companies as prescribed in the Law on State-Owned Enterprises; Article 26, Article 27 (for the General Director of companies without a Board of Directors), Article 30 (for the Board of Directors), Article 41, and Article 43 (for the General Director or the General Director of companies with a Board of Directors); provisions on the powers and responsibilities of the Board of Directors, the General Director or the General Director at Articles 31, 32, 33, and 34 of the Financial Management Regulation.

+ Supervise the State Capital Representative at other enterprises or the authorized representative in performing their functions and tasks as prescribed in Article 46 of the Financial Management Regulation; performing the functions of shareholders or capital contributors as prescribed in the Enterprise Law, the Company Charter, and other legal documents.

- The Ministry of Finance carries out its supervisory function according to the contents stipulated in Point d, Clause 3, Article 6 of the Regulation attached to Decision No. 224/2006/QĐ-TTg. Specifically, for companies directly implementing tasks of stability and regularity in areas and regions directly serving national defense, security, and ensuring state secrets ordered by the state or assigned plans as specified in Appendix A issued together with Decree No. 31/2005/NĐ-CP dated March 11, 2005 of the Government regarding production and supply of public goods services implemented by the Ministry of National Defense and the Ministry of Public Security, the Ministry of Public Security performs the function of supervision.- Supervise through information in reports from the Board of Directors and the General Director of State-owned companies on the implementation of management and operation functions; reports from the State Capital Representative at other enterprises or the authorized representative on the implementation of assigned functions and tasks; reports on business operations, financial statements, and other reports.

||| c. Methods of supervision:

- Through Departments, Bureaus, and Sectors of the Provincial People's Committee or Departments within the Ministry to assist the Chairman of the Provincial People's Committee or the Minister or head of the agency equivalent to a ministry in carrying out supervision according to the supervision content of the State-owned enterprise owner.

- Directly work with the Board of Directors, the General Director of State-owned companies, the State Capital Representative or the authorized representative at other enterprises.  - Based on reports from the Board of Directors and the Management Board of the company and through information collected during the supervision process, the Ministry of Finance provides written opinions to the Ministry managing industry, the Provincial People's Committee about the situation of capital management, distribution of income, establishment and use of funds of State-owned companies.

3. Tasks and powers of the owner in supervision activities:

carried out in accordance with Article 10 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, in which to carry out supervision effectively, the Ministry managing industry, the Provincial People's Committee, and the Ministry of Finance need to implement the following contents:

- Organize the construction of a complete, continuous, and updated database on companies. - Regularly organize analysis and evaluation of companies and managers according to the supervision content stipulated in Clause 3, Article 6 of the Regulation attached to Decision No. 224/2006/QĐ-TTg.

- Implement classification of companies based on scale, nature of business operations, level, and capacity of managers and directors, and the current status of business operations of the company to build inspection programs and plans.

- Clearly define requirements, content, scope, objects, and time for inspections.

- Coordinate between the owners' representatives and state functional agencies in inspections. Inspections at companies must comply with legal regulations on inspections and audits.

- Continuously provide and exchange information among owners, especially information related to the supervision content of owners, performance indicators of the company, and the results of the Board of Directors and Management Board's operations as stipulated in Article 12 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, and solutions to help the company overcome difficulties. On the basis of these solutions, units coordinate to select and agree on optimal solutions for the company to improve business production efficiency.

III. ANALYSIS AND EVALUATION OF ENTERPRISES:

1. Evaluation of Business Operations:  Annually, the owner organizes a comprehensive analysis and evaluation of the business operations of the enterprise, proposing measures to address existing issues to enhance the effectiveness of the enterprise's business operations. Among which, the content of evaluating the financial situation and debt repayment capability of State-owned companies focuses on the following issues:

+ Preservation of State capital. 

+ Debt-to-equity ratio, ability to repay maturing debts, overdue debts, causes, and solutions.

+ Idle assets and handling of idle assets, causes, and solutions.

+ Preservation of state capital.

+ The debt-to-state-capital ratio, ability to repay maturing debts, overdue debts payable, causes and remedial measures.

+ Idle assets and the handling of such idle assets, causes and remedial measures.

+ Accounts receivable, doubtful accounts receivable, and uncollectible debts; handling of uncollectible debts, reasons for non-resolution.

+ Provisioning for doubtful accounts receivable, reduction in inventory value, financial investment losses, product warranty provisions, exchange rate differences for liabilities, financial reserve fund provisioning, unemployment compensation reserve fund as prescribed by law.

+ Business operation results include revenue, expenses, and profit.

2. Evaluation of the management and operation results of the Board of Directors and General Director of state-owned enterprises:

In addition to the indicators stipulated in Clause 4, Article 14 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, the evaluation of management results for the Board of Directors and operational leadership of the state-owned enterprise's general director also relies on the actual performance of functions and tasks and supervisory results of the owner as specified in Part B, Section II of this Circular. Annually, the Board of Directors and the enterprise’s general director prepare reports on management and operational results, propose solutions to address existing issues, and outline directions for management and operation of the enterprise in the coming year.

3. Consolidation of evaluation results and reporting: The owner is responsible for consolidating the evaluation results of the activities of subordinate enterprises and reporting to relevant state agencies. The report content includes: business production and operation situation, financial status of the enterprise, and data according to the form prescribed in Clause 6, Section III of this Circular; implementation status of management and operational tasks of the organizational structure and recommendations for handling existing issues of the enterprise.

4.  System of evaluation criteria for the effectiveness of enterprise operations and the results of the Board of Directors, Management Board: 4.1. System of evaluation criteria for the effectiveness of enterprise operations:

The evaluation of the effectiveness of enterprise operations is based on the indicators stipulated in Clause 1, Article 12 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, including:

a. Revenue and other income:

- Revenue and other income: The revenue and other income indicator is determined in the Report on Business Operation Results (Form B02-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance regarding the issuance of Accounting Regulations for Enterprises).

It includes Gross Revenue from Sales and Services (Code 10) + Financial Activity Revenue (Code 21) + Other Income (Code 31). - For enterprises producing mainly products of the national economy such as electricity, coal, oil and gas, cement, the assessment is based on the quantity of products sold during the period; the unit of measurement for oil and gas, coal, and cement production is tons, and for electricity it is kWh. b. Realized profit and profit margin on state capital:

- Realized profit: Includes net profit from business operations and other profits. This indicator is determined in the Report on Business Operation Results - Code 50 (Form B02-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

+ Adequate accounting of all costs into the cost of products and services consumed during the period according to current regulations to ensure the principle of prudence in business, such as provisioning for inventory write-downs, bad debts, financial investment losses, unemployment benefits, product warranties, exchange rate differences, interest expenses on loans payable arising during the period, sales and administrative expenses incurred during the period.

+ For actual loss values of assets, including uncollectible debts after deducting compensation attributable to individuals, organizations, insurance companies (if any), the remaining amount is included in administrative expenses incurred during the period. For enterprises whose financial statements have been audited or reviewed by state agencies, the revenue and profit indicators are taken from the audited or reviewed figures. In cases where financial statements have not been audited or reviewed, the revenue and profit indicators are taken from the figures recorded in the financial statements. The enterprise's general director is responsible for the accuracy and truthfulness of the financial statement figures. - Profit margin on state capital:).

When calculating the profit indicator, the enterprise must:

Calculated as the ratio between realized profit and average state capital of the enterprise in the year.

The determination of realized profit is as prescribed in Subpoint b, Point 4.1, Clause 4, Section III of this Circular.

State capital at the enterprise is determined in the Balance Sheet (Form B01-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

It includes Owner Investment Capital (Code 411), Development Fund (Code 417), Construction Investment Capital (Code 421). Average annual state capital is calculated by dividing the total end-of-quarter balances of state capital by four quarters.  

c. Overdue liabilities and ability to pay maturing debts:

- Overdue liabilities: These are debts that have exceeded the agreed payment terms with creditors. The determination of overdue liabilities is based on the payment terms recorded on loan agreements, economic contracts, or other commitment documents.

- Ability to pay maturing debts: The ability to pay maturing debts of the enterprise is the current ability to pay, determined by the ratio of current assets to short-term liabilities and calculated using the following formula:

Current Assets + Current assets are determined as the end-of-period balance of all current assets and short-term investments (Code 100 in the Balance Sheet - Form B01-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance). + Short-term liabilities: Include short-term and long-term liabilities due (Code 310 in the Balance Sheet - Form B01-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance).

d. Compliance with systems, policies, and laws:

- Overdue debts payable: are amounts owed that have exceeded the agreed payment deadlines for creditors. The determination of overdue debts payable is based on the repayment terms recorded in loan agreements, economic contracts, or other commitment documents.

- Ability to repay maturing debts: The ability of an enterprise to repay maturing debts is its current ability, determined by the ratio of current liquid assets to short-term liabilities, calculated according to the following formula:

Where:                                                                      

+ Current liquid assets are defined as the end-of-period balance of all current assets and short-term investments (account number 100 Balance Sheet - Model B01-DN). + Current assets are determined as the end-of-period balance of all current assets and short-term investments (Code 100 in the Balance Sheet - Form B01-DN issued pursuant to Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance)..

+ Short-term liabilities: include short-term and long-term liabilities due (account number 310 Balance Sheet - Model B01-DN). issued pursuant to Decision No. 15/2006/QD-BTC dated March 20, 2006, of the Minister of Finance.).

d. Compliance with regulations and policies:

The regime, policies, and laws as stipulated in Point d, Clause 1, Article 12 of the Regulation attached to Decision No. 224/2006/QĐ-TTg include areas such as tax, budget revenue collection, credit, insurance, environmental protection, labor, wages, financial regulations, accounting, auditing, financial reporting, and other reports. Compliance with the regime, policies, and laws means adhering strictly to the provisions without any acts of implementation errors, omissions, incomplete execution, untimely execution, or non-execution, whether unintentional or intentional. Violations include actions by collectives, individuals under the name of units, or representatives of enterprises (Board of Directors, Management Board) that cause breaches. Enterprises subject to administrative penalties or concluded by competent authorities to have violated mechanisms, policies in any of the aforementioned areas, even if not reaching the level for administrative penalties, will be classified low in this indicator.

d. Implementation of public goods and services:

            Implementing public goods and services refers to directly carrying out national defense and security tasks or producing public goods and providing public services according to state policy through tendering or receiving orders or assignments from the state. Evaluation of this indicator is based on the degree of completion regarding quantity and quality of products and services.

            When calculating the indicators in Sections a, b, d, and đ, Point 4.1, Clause 4, Section III of this Circular, the following factors are excluded:

            - Due to force majeure such as natural disasters, fires, unexpected accidents, beyond control despite preventive measures being taken.

            - Due to investment expansion affecting profits in the first two years since the investment project is put into operation. Considering the exclusion of this factor is based on the enterprise's approved investment plan which calculates the impact on profits.

            - Due to state price adjustments (for products with state-set prices) affecting the enterprise's revenue.

4.2. System of indicators to evaluate the management performance of the Board of Directors and the operational performance of the Management Board:

Evaluating the performance of the Board of Directors and the Management Board as stipulated in Clause 3, Article 12 of the Regulation attached to Decision No. 224/2006/QĐ-TTg is based on the results of achieving state-set profit rate indicators on state capital invested (or capital invested by the owner for other enterprises), enterprise classification results, and compliance with legal regulations, specifically:

            a. Degree of achievement of state-set profit rate indicators on state capital invested: This is the ratio of actual achievement compared to the profit rate set by the owner at the beginning of the year.

            b. Enterprise classification result: This is the result assessed and announced by the owner. For State-owned Corporations and Parent Companies of Economic Groups, it is the overall classification result of the Corporation or Group.

            c. Compliance with the owner's regulations, Company Charter, and current legal regulations:

- Compliance with the owner's regulations, Company Charter, and current legal regulations: This means adhering strictly to the provisions without any acts of implementation errors, omissions, incomplete execution, overstepping authority, untimely execution, or non-execution, whether unintentional or intentional.

- Non-compliance with current legal regulations when:

+ The Board of Directors or Management Board commits acts of violating the law during the execution of duties to the extent of being criminally prosecuted or fails to instruct the enterprise to submit classification reports as required by Section 6, Part III of this Circular or allows the enterprise to be administratively penalized in compliance with regimes and policies, including violations from previous years but reported in the current year by the competent state authority issuing the administrative penalty decision.

+ The State-owned Corporation's Board of Directors does not fully comply with Resolutions, Decisions of the owner, Company Charter, and provisions of Article 30 of the Law on State-Owned Enterprises or the State-owned Corporation's Management Board does not comply with Resolutions, Decisions of the owner, Board of Directors, and Company Charter, and provisions of Articles 26, 27, and 41 of the Law on State-Owned Enterprises.

+ For other enterprises: The Board of Directors or Members' Council does not fully comply with the Company Charter, provisions of Articles 47, 49, 68, and 108 of the Law on Enterprises, Resolutions, and Decisions of the Shareholders' Meeting (for joint-stock companies) or the representative of the owner (for limited liability companies); the Management Board does not comply with the Company Charter, provisions of Articles 55, 56, 70, 71, 72, and 116 of the Law on Enterprises, Resolutions, and Decisions of the Shareholders' Meeting, Board of Directors (for joint-stock companies) or Members' Council (for limited liability companies).

5. Enterprise Classification:

5.1. Evaluation Method: As stipulated in Article 13 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, which includes:

a. Indicator 1: Revenue and other income applies to all enterprises engaged in product and service business operations (excluding oil, coal, electricity, cement production and trading enterprises).

Evaluate the increase or decrease in revenue compared to the previous year. The evaluation is divided according to the National Economic Industry Classification (NEIC) Level II issued by Decision No. 143 TCTK/PPCĐ dated December 22, 1993, by the General Statistics Office Director-General, and detailed as follows:

- For agriculture (NEIC code 01); Forestry (NEIC code 02); Fisheries (NEIC code 05); Mining Industry (NEIC codes 10, 12, 13, 14); Machinery Industry (production of metal products, machinery and equipment NEIC codes 27, 28, 29, 30, 31, 32, 33, 34, 35, 37):

            Increase of 5% or more: Class A;

            Increase or decrease less than 5%: Class B;

Decrease of 5% or more: Class C.

            For industries in processing (industry code KTQD 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26); electricity production and distribution, gas, water (industry code KTQD 40, 41); construction (industry code KTQD 45); oil and gas extraction (industry code KTQD 11); transportation, warehousing, telecommunications (industry code KTQD 60, 61, 62, 63, 64); commerce (industry code KTQD 50, 51, 52); hotels (industry code KTQD 55), tourism, and other industries:

            Increase of 7% or more: classified as type A;

            Increase below 7%, decrease below 3%: classified as type B;

            Decrease of 3% or more: classified as type C.

b. Indicator 2: Actual profit realization and actual profit rate on state capital implemented in accordance with Clause 2, Article 13 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, wherein:

For enterprises with planned losses, based on the approved plan to determine the level of achievement of this indicator for classification of enterprises as follows:Implement classification of enterprises as follows:

- Enterprises with actual losses lower than planned losses: classified as type A;

- Enterprises with actual losses equal to planned losses: classified as type B;

- Enterprises with actual losses higher than planned losses: classified as type C.

In cases where additional tasks are undertaken, they are excluded from determining the actual loss compared to the planned loss assigned.  planned losses.

c. Indicator 4: Compliance with current laws and regulations:

- Enterprises without conclusions from competent authorities regarding violations of current laws and regulations: classified as type A;

- Enterprises submit classification reports incorrectly or late as stipulated in Clause 6, Section III of this Circular, or enterprises have conclusions from competent authorities regarding violations of current laws and regulations but not yet at the level of administrative penalties in compliance with laws and regulations (including conclusions for previous years): classified as type B;

- Enterprises fail to submit classification reports as stipulated in Clause 6, Section III of this Circular, or are subject to administrative penalties in compliance with policies and regulations, including violations from previous years, but in the reporting year, the competent authority has only issued decisions on administrative violations or managers and executives of enterprises have committed criminal offenses during the execution of tasks: classified as type C.

5.2. Classification of enterprises for multi-industry enterprises:

Based on the nature and operational situation of each enterprise, relevant ministries and provincial People's Committees decide on the classification of industries for enterprises. The industry of an enterprise is determined according to the industry with the highest revenue share averaged over three years: two consecutive preceding years and the current year.

Example: Company X engages in poultry farming and livestock feed trading. In 2003, 2004, and 2005, the company's revenues were as follows:

Therefore, Company X is classified in the commerce sector and evaluated according to paragraph a, point 5.1, clause 5 of this Circular.

5.3. Classification of enterprises and classification of board of directors' performance:

a. Classification of enterprises:

- For enterprises engaged in business operations, classification is carried out in accordance with Clause 1, Article 14 of the Regulation attached to Decision No. 224/2006/QĐ-TTg.

- For enterprises established and actually operating regularly and mainly providing public goods and services, classification is carried out in accordance with Clause 2, Article 14 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, wherein if the enterprise's revenue share from public goods and services provided by the State is less than 70% of the total revenue of the enterprise, it is classified as a business operation enterprise.

- For State-owned Corporations, based on the classification results of all member enterprises including wholly-owned companies, independent accounting companies, Corporation offices (also considered as independent enterprises), and companies with controlling shares or capital contributions from the Corporation to classify the Corporation in accordance with Clause 3, Article 14 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, wherein:

+ Type A: Corporation with member enterprises classified as type A accounting for more than 50% of the Corporation's total revenue and the Corporation's overall business results must be profitable (after offsetting profits and losses between subsidiaries).

+ Type C: Corporation with member enterprises classified as type C accounting for more than 50% of the Corporation's total revenue;

+ Type B: Other Corporations.

The parent company is classified independently.

- For enterprises that have been classified and announced the classification results but after auditing, inspection, and verification, the figures on financial statements change, then the classification results must be adjusted accordingly.

b. Classification of Board of Directors: Implemented in accordance with Clause 4, Article 14 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, wherein:

- Outstanding completion of tasks when meeting all of the following conditions:

The enterprise achieves or exceeds the national targets set for profit rate on capital and the enterprise is classified as type A; the Board of Directors complies fully with current laws and regulations as stipulated in paragraph c, point 4.2, clause 4, Section III of this Circular.

- Failure to complete tasks when falling under one of the following circumstances:

+ For state-owned enterprises:

The enterprise fails to achieve the national target for profit rate on state capital invested;

The enterprise is classified as type C;

The Board of Directors or General Director violates one of the circumstances specified in paragraph c, point 4.2, clause 4, Section III of this Circular.

+ For other enterprises:

Failure to achieve the target for profit rate on capital investment by shareholders as set by the Shareholders' Meeting, Board of Members, or shareholder representatives;

The enterprise is classified as type C;

The Board of Directors, Board of Members, or General Director violates one of the circumstances specified in paragraph c, point 4.2, clause 4, Section III of this Circular.

- Completion of tasks when falling under one of the following circumstances:

+ Enterprises that achieve or exceed profit margin targets or are classified as type A enterprises but the Board of Directors and General Director do not instruct the enterprise to submit classification reports as prescribed or within the stipulated time frame under Clause 6, Section III of this Circular or enterprises that have conclusions from competent authorities regarding violations of current laws but have not yet reached the level of administrative penalties for compliance with legal provisions;  + Other cases shall not be classified as having excellently fulfilled their tasks or failed to fulfill their tasks.

- For the Boards of Directors and General Directors of State-owned Corporations and Parent Companies of Economic Groups, the basis for evaluation is the classification results of the Corporation specified in item a, Point 5.3, Clause 5, Section III of this Circular.

5.4. Announcing the classification results of state-owned enterprises: In accordance with Article 15 of the Regulation attached to Decision No. 224/2006/QĐ-TTg, including:

a. Based on the classification criteria for enterprises stipulated in this Circular and guidance documents issued by relevant Ministries, the Ministry of Finance, Provincial People's Committees, each year enterprises self-assess and classify themselves; submit classification reports to relevant agencies for review and announcement according to the following procedures:

- State-owned Corporations retain control over member enterprises, review and announce classifications for member enterprises.

- Relevant Ministries, Provincial People's Committees announce and classify State-owned Corporations and independent state-owned enterprises established by themselves or authorized by the Prime Minister to represent ownership.

- The classification of State-owned Corporations and independent state-owned enterprises is announced after receiving written comments from the Ministry of Finance.

Owners, Members of the Board of Members, or Shareholders' Meeting

- announce and classify other state-owned enterprises. b. By the second quarter of the following year, relevant Ministries, Provincial People's Committees, and Boards of Directors of State-owned Corporations report annual classification results of enterprises to the Ministry of Finance for consolidation and reporting to the Prime Minister.

6. Reporting System:

6.1. Quarterly Reports:

- State-owned enterprises, based on monitoring results, are responsible for submitting quarterly estimated reports on business operation and financial status of the enterprise according to Form 1. Submission deadlines and addresses are as follows:

+ Member enterprises of State-owned Corporations and other state-owned enterprises must submit reports to the Corporation. The submission deadline is no later than 20 days after the end of the quarter.

+ Independent state-owned enterprises and State-owned Corporations must submit reports to agencies designated by the Government as owners, including relevant Ministries, Provincial People's Committees, and the Ministry of Finance (Enterprise Financial Department), no later than 45 days after the end of the quarter.

+ Joint Stock Companies with 100% state-owned capital must submit reports to the owner agency. The submission deadline is no later than 20 days after the end of the quarter.

- No later than 60 days after the end of the quarter, relevant Ministries and Provincial People's Committees must submit consolidated quarterly business operation reports of subordinate enterprises according to Form 1 to the Ministry of Finance (Enterprise Financial Department).

6.2. Annual Reports:

Each year, enterprises base their self-assessment and classification on supervision regulations and performance evaluation indicators stipulated in this Circular, and the management results of the Board of Directors.

1. Supplementing Point 6a following Article 6 of Circular No. 02/2019/TT-BVHTTDL dated July 5, 2019 of the Minister of Culture, Sports and Tourism on the procedures for legal expertise regarding copyright and related rights as follows: Each year, enterprises base their supervision and evaluation index system to self-assess and classify their own enterprises, the management results of the Board of Directors.  This Circular takes effect 15 days from the date of publication in the Official Gazette and replaces Circular No. 42/2004/TT-BTC dated May 20, 2004, of the Ministry of Finance guiding the supervision and evaluation of state-owned enterprise operations. For matters not covered in this Circular, implement the provisions of the Supervision and Evaluation Regulations for State-Owned Enterprise Operations issued together with Decision No. 224/2006/QD-TTg dated October 6, 2006, of the Prime Minister./., The management shall implement and submit the enterprise classification report according to Table 2 (for businesses engaged in trading activities), Table 3 (for enterprises implementing state public products and services), Table 4 (for State-owned Corporations), and Table 6 (for Boards of Directors and Management Boards) to the agencies authorized by the Government as the owners, including the industry-managing Ministries, provincial People's Committees, and the Ministry of Finance (Enterprise Financial Department) for review. For a Joint Stock Company with 100% state capital, the report shall only be submitted to the authorized unit representing the owner.

The enterprise classification report shall be submitted simultaneously with the financial report as currently prescribed.

For the 2006 classification report, it shall be implemented according to the provisions of Circular No. 42/2004/TT-BTC dated May 20, 2004, issued by the Ministry of Finance.

By June 30 of the following year, the industry-managing Ministries, provincial People's Committees, and Boards of Directors of State-owned Corporations shall submit the annual enterprise restructuring results report according to Table 5 to the Ministry of Finance (Enterprise Financial Department) for consolidation and reporting to the Prime Minister, and publishing the classification results according to Table 7 on the electronic news website of the unit or in central newspapers for three consecutive issues.

IV. IMPLEMENTATION PROVISIONS:

This Circular takes effect fifteen days from the date of publication in the Official Gazette and replaces Circular No. 42/2004/TT-BTC dated May 20, 2004, issued by the Ministry of Finance, guiding supervision and evaluation of the effectiveness of state-owned enterprise operations. Matters not covered in this Circular shall be carried out in accordance with the Supervision and Evaluation Regulation of State-Owned Enterprise Operations issued together with Decision No. 224/2006/QĐ-TTg dated October 6, 2006, of the Prime Minister./.

This Circular takes effect fifteen days after its publication in the Official Gazette and replaces Circular No. 42/2004/TT-BTC dated May 20, 2004, of the Ministry of Finance on supervising and evaluating the effectiveness of state-owned enterprises' operations. For matters not provided for in this Circular, the regulations set forth in the Supervision and Effectiveness Evaluation Regulation for State-Owned Enterprises issued together with Decision No. 224/2006/QĐ-TTg dated October 6, 2006, of the Prime Minister shall be followed./.