Circular No. 117/2010/TT-BTC guiding the financial mechanism of a joint-stock company with a single member owned by the State

CIRCULAR

Guidelines for the financial mechanism of a limited liability company with one member owned by the State

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Pursuant to the Enterprise Law No. 60/2005/QH11 dated November 29, 2005;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government on the conversion of state-owned enterprises into limited liability companies with one member and the organization of management of limited liability companies with one member owned by the State;

The Ministry of Finance hereby provides guidelines for the financial mechanism of a limited liability company with one member owned by the State as follows:

PART I

GENERAL PROVISIONS

Article 1. Scope of Regulation and Applicability

These Circulars regulate the financial mechanisms applicable to limited liability companies with one member owned by the State, including single-member limited liability companies under ministries, provincial people's committees, and city people's committees directly under the central government, mother companies of groups and corporations decided by the Prime Minister, ministers of ministries, and chairmen of provincial people's committees and city people's committees directly under the central government to convert and approve their articles of organization and operation (hereinafter referred to as the Company). These Circulars do not apply to credit organizations and lottery businesses.

Chapter II

FINANCIAL MANAGEMENT OF A LIMITED LIABILITY COMPANY WITH ONE MEMBER

PART I. MANAGEMENT AND USE OF CAPITAL AND ASSETS IN A LIMITED LIABILITY COMPANY WITH ONE MEMBER

Article 2. Registered Capital

Registered capital is the necessary amount of capital committed by the owner to invest for the company to fulfill its production and business tasks and is recorded in the Company's Articles of Association. The determination of the registered capital of the company shall be made according to the following provisions:

1. Registered capital of a limited liability company with one member at the time of conversion and new establishment:

1.1. The registered capital of a limited liability company with one member at the time of conversion is determined in accordance with Article 14 of Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government and Circular No. 79/2010/TT-BTC dated May 24, 2010 of the Ministry of Finance guiding the financial treatment of converting state-owned enterprises into limited liability companies with one member.

1.2. New limited liability company with one member:

The registered capital is determined in the company establishment plan approved by the competent authority. The level of registered capital is set at 30% of the total investment capital required to ensure normal operations of the company according to its scale and design capacity.

2. Limited liability company with one member currently operating and requiring an increase in registered capital: Based on the goals, tasks, development strategy, and sources of additional registered capital, the owner approves an increase in the registered capital of the company; for independent companies directly under ministries, provincial people's committees, and city people's committees directly under the central government, mother companies within groups and corporations, and companies operating under a parent-child model, the owner approves the registered capital after obtaining written agreement from the Ministry of Finance.

2.1. Method for determining additional registered capital:

Based on the capital needs to serve production and business tasks, industry scale, and the main business development strategy already approved by the competent authority, the company builds a plan to increase the registered capital to be submitted to the owner for approval according to the formula:

2.2. Procedure and formalities for adjusting the increase in registered capital:

a) For companies that need to adjust the increase in registered capital: Based on the approved registered capital, the scale and situation of additional production and business tasks assigned by the owner, the company prepares a report to submit to the owner regarding the new registered capital.

In cases of refusal, the State Bank will issue a document refusing approval to use foreign currency within the territory and clearly state the reasons.

- Plan for adjusting the increase in registered capital, explaining:

+ The necessary registered capital to implement new production and business tasks assigned by the owner.

+ Sources of additional registered capital: In principle, the enterprise must balance and supplement the registered capital from the following sources: Post-tax profit distributed according to state capital; Development Fund; difference in revenue from selling off state capital in joint-stock companies; Enterprise restructuring support fund after the Prime Minister's decision allows supplementation; Other supplementary capital sources (if any).

- Annual financial statements of the company in the previous fiscal year audited and the most recent quarterly financial statement at the time of increasing registered capital.

- Report on the establishment and use of funds in the previous fiscal year of the reporting year of the company (according to the attached Appendix Form No. 1 of this Circular).

b) After receiving all the documents, the owner has the responsibility to review and send a letter to the Ministry of Finance for agreement. Within ten working days from the date of receipt of complete and valid documents, the Ministry of Finance will issue a letter agreeing on the level of registered capital and sources of additional registered capital for the owner to make a decision to approve the registered capital for the company. If the documents do not meet the requirements, the Ministry of Finance will notify the owner to supplement the documents within five working days from the date of receipt.

c) Responsibilities of the owner in ensuring the registered capital of the company:

After balancing the additional registered capital needs and the sources of additional registered capital determined in Point 2.1 Clause 2 above, if there is a discrepancy, it will be handled as follows:

- If there is excess source of additional registered capital: The owner will coordinate with the Ministry of Finance to develop a plan to report to the Prime Minister to transfer to the Central Enterprise Restructuring Support Fund at the State Capital Investment Corporation.

- If there is insufficient source of additional registered capital: Within three years from the date the owner approves the registered capital, the enterprise must supplement the registered capital from its own resources. If after three years the enterprise still does not have sufficient sources to supplement the registered capital, the owner will reconsider the main production and business tasks of the enterprise:

+ If deemed unnecessary, the owner will adjust the production and business scale to match the current capital.

+ In special cases, if it is deemed necessary to carry out the approved production and business tasks, the owner will coordinate with the Ministry of Finance to report to the Prime Minister for consideration and decision.

3. For certain enterprises at the time of transition and enterprises operating in special sectors (such as national defense security, public utility product and service supply, infrastructure investment), if determining the registered capital according to the provisions of point 2.1, clause 2, Article 2 of this Law does not meet the required capital level for business operations, then the owner shall consider adjusting it after obtaining a written agreement from the Ministry of Finance.

Article 3. Capital Raising

1. Forms of capital raising: Issuing bonds; borrowing from banking and credit organizations, other financial organizations, individuals, and organizations outside the company; borrowing from employees, and other forms of capital raising as prescribed by law.

2. Principles of capital raising:

2.1. The raising of capital must ensure the ability to repay debts and have a plan approved by the competent authority. The person approving the capital-raising plan shall be responsible for inspecting, supervising, and ensuring that the raised capital is used for the intended purpose, for the intended recipient, and effectively.

2.2. Borrowing from individuals and economic organizations: The company must enter into a loan contract with the lending economic organization or individual in accordance with the law; the maximum interest rate on borrowed funds shall not exceed the interest rate on loans of the same term offered by the commercial bank where the company has its transaction account at the time of borrowing; in cases where the company has transaction accounts with multiple banks, the maximum direct borrowing interest rate shall not exceed the highest interest rate on loans of the same term offered by the commercial bank where the company has its transaction account.

2.3. The raising of capital from foreign organizations and individuals shall be carried out in accordance with current regulations on foreign debt management.

2.4. Issuing bonds to serve the main business activities shall be conducted in accordance with the laws on bond issuance. Companies engaged in financial investment, securities, banking, insurance, investment funds, etc., but not within their main business activities, shall not issue bonds to invest in these areas.

3. Authority to Approve Capital-Raising Plans:

3.1. The company has the right to independently raise capital to serve production and business operations within the limit of the debt-to-equity ratio of the company not exceeding three times. In this regard, the Board of Members or the Chairman of the Company (for companies without a Board of Members) decides on capital-raising plans with values not exceeding the value of the registered capital or a smaller percentage as stipulated in the Company's Charter, or not exceeding the maximum value specified in the Company's Charter.

3.2. For companies requiring capital raising beyond the limits set forth in point 3.1, clause 3 of this Article, they must report to the owner for consideration and decision based on effective capital-raising projects. After making the decision, the owner shall be responsible for notifying the Ministry of Finance to coordinate monitoring and supervision.

4. The parent company has the right to guarantee loans for wholly-owned subsidiaries from banks and credit organizations in accordance with the law. In cases where businesses with contributions from the parent company require guarantees, the parent company may provide guarantees in accordance with the law and ensure the following principles:

4.1. All contributing parties commit to jointly providing guarantees;

4.2. The percentage of guarantee for each loan shall not exceed the percentage of contribution of the parent company in the guaranteed business and the total amount of guaranteed loans shall not exceed the registered capital of the parent company.

5. The owner shall closely monitor the raising and use of capital in companies, and the Ministry of Finance shall carry out inspections and supervision in accordance with the law.

Article 4. Preservation of Capital in a Limited Liability Company with One Member

Any changes in capital increase or decrease at the company must be reported to the owner and the financial authority for monitoring and supervision.

Every six months and annually, the company must evaluate the effectiveness of capital usage through the capital preservation ratio indicator.

1. Capital Preservation Ratio:

The degree of capital preservation is determined according to the coefficient H:

If the coefficient H > 1, the company has developed its capital; H = 1, the company has preserved its capital; if H < 1, the company has not preserved its capital.

In cases where the company has not preserved its equity, the Board of Members, the Chairman of the company (for companies without a Board of Members) must provide a detailed report explaining the reasons for not preserving the capital, measures to address this issue in the future, and submit it to the owner, the Ministry of Finance, and bear responsibility for the company's financial situation.

2. Measures to Preserve Capital:

2.1. Implementing the system of management and use of capital, assets, profit distribution, other financial management systems, and accounting regulations as prescribed by law;

2.2. Purchasing insurance for assets as prescribed by law;

2.3. Timely handling of asset losses, unrecoverable debts, and setting aside provisions for the following risks:

a) Provision for reduction in inventory value;

b) Provision for difficult-to-collect receivables;

c) Provision for reduction in long-term financial investment value.

2.4. Other measures to preserve capital as prescribed by law.

3. The establishment and use of provisions for reduction in inventory value, provision for difficult-to-collect receivables, provision for loss of financial investments, product warranty, goods, construction projects at enterprises; handling exchange rate differences shall be carried out in accordance with the guidelines of the Ministry of Finance.

4. The transfer of losses shall be implemented in accordance with the provisions of the Law on Corporate Income Tax.

Article 5. Investment of Capital Outside the Limited Liability Company with One Member

1. The company has the right to use assets (including money, fixed assets, current assets, and other assets) under the company's management to invest outside the company. Investments involving land must comply with the laws on land.

2. The company's investment in other businesses must comply with the law, align with the company's strategy, planning, development plan, not affect the implementation of the main production and business tasks assigned by the owner, and ensure efficiency, preservation, and development of capital, and increased income.

3. Companies must invest a minimum of 70% of their total investment capital in activities within the main business fields of the company. The total amount of investment outside the company (including short-term and long-term investments) shall not exceed the registered capital of the company (including the parent company in economic groups,总公司，公司制企业母公司；子公司独立核算的公司）。对于投资入股银行、保险、证券领域的活动，公司只能在每个领域投资一家企业；投资额不得超过被投资组织注册资本的20%，但必须确保母公司和集团内子公司的出资额不超过被投资组织注册资本的30%。特殊情况需要超出此规定的，公司须报请总理审批决定。

4. Adding new business operations or investing capital in member companies engaged in business operations outside the main business field of the company can only be implemented after obtaining approval from the owner.

5. The company may not participate in contributing capital or purchasing shares of other companies where the managers, operators, or major owners of such companies are the spouse, parents, children, or full siblings of members of the Board of Members, Supervisors, General Managers, or Chief Accountants of the company; nor may they contribute capital or purchase shares in venture capital funds, securities investment funds, or securities investment companies.

6. If the company's external investment exceeds the limit specified in Clause 3 of this Article or has invested in venture capital funds, securities investment funds, or securities investment companies, then within two years from the effective date of this Circular, the company must adjust its investment level in accordance with this Circular.

7. Forms of External Investment:

7.1. Contributing capital or purchasing shares to establish joint-stock companies, limited liability companies, partnerships; contributing capital for non-entity forming business cooperation contracts;

7.2. Purchasing shares or contributing capital in operating joint-stock companies, limited liability companies, partnerships;

7.3. Acquiring another company;

7.4. Purchasing government bonds or corporate bonds to earn interest;

7.5. Other forms of investment as prescribed by law.

8. Authority to Decide on External Investment Projects:

8.1. The Board of Members or the Chairman of the company (for companies without a Board of Members) decides on external investment projects within the scope of the company's total financial investment value being less than 50% of the registered capital or according to the classification in the Company Charter; for investment projects with a value of 50% of the registered capital or more, the company reports to the owner for decision-making.

8.2. The owner of the company decides on joint ventures with foreign investors; investment or contribution to establish companies abroad; decides on the acquisition of companies belonging to other economic sectors; external investments by the company mainly, regularly, and stably providing public goods; decides on other financial investment projects not within the authority of the Board of Members or the Chairman of the company (for companies without a Board of Members).

9. In addition to the restrictions on participating in capital contributions as stipulated in Clause 5 of this Article, the company is also restricted in the following forms of investment:

9.1. A subsidiary company shall not invest capital into its parent company;

9.2. Subsidiary companies and dependent accounting units of the parent company shall not contribute capital together with the parent company to establish a new business entity, nor shall they contribute capital to purchase shares when the unit within the same Group, Corporation, or Parent Company-Subsidiary Company combination is being equitized.

10. Annually, based on reports on the financial investment situation and effectiveness of the company, the Ministry of Finance shall cooperate with relevant ministries, provincial people's committees under the central government to inspect and supervise the management and utilization of the company's equity capital investment according to regulations; In cases where the company's external investment activities exceed the prescribed limits or are not directed at the correct targets but fail to adjust the investment structure as stipulated in Clause 3 and Clause 6 of this Article, the Ministry of Finance will report to the Prime Minister for consideration and decision on transferring the right to represent excess investment capital beyond the prescribed limit or not directed at the correct targets to the State Capital Investment Corporation in accordance with the principle of increasing or decreasing capital between parties.

The company subject to capital transfer shall be responsible for coordinating with the State Capital Investment Corporation and economic organizations with the company's contributed capital to complete all necessary procedures to implement the transfer of the right to represent contributed capital according to the Prime Minister's decision within a period not exceeding thirty working days from the date of the Prime Minister's decision.

Article 6. Management and Use of Assets

The company must establish a Regulation on Management to clearly define the responsibilities of each stage in the management process; organize accounting to fully, accurately, and promptly reflect; organize inventory and reconciliation periodically or upon the request of the owner; implement fixed asset investment, manage, and use assets in accordance with the following provisions:

1. Fixed assets of the company include tangible and intangible fixed assets.

1.1. Authority to decide on investment and construction projects: The Board of Members, the Chairman of the company (for companies without a Board of Members) shall implement in accordance with Clause 2 of Article 20 and Clause 2 of Article 27 of Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government on converting state-owned enterprises into limited liability companies wholly owned by the State.

Projects exceeding the decision-making authority of the Board of Members, the Chairman of the company (for companies without a Board of Members), the Board of Members, and the Chairman of the company shall report to the company owner for decision or submit to the competent authority for decision.

1.2. Procedures and formalities for investment shall be carried out in accordance with the laws on project management and construction.

2. Depreciation of fixed assets: The extraction of depreciation of fixed assets shall be implemented in accordance with the guidelines of the Ministry of Finance.

3. Leasing, mortgaging, and pledging of assets  

3.1. The company has the right to lease, mortgage, and pledge its assets according to the principles of efficiency, preservation, and development of capital in accordance with the law.

a) The Board of Members or the Chairman of the company (for companies without a Board of Members) decides on leasing contracts for assets valued below 50% of the total value of assets recorded in the company's most recent financial report or a lower ratio specified in the Company Charter or not exceeding the maximum value specified in the Company Charter.

b) The authority to decide on using the company's assets for mortgaging or pledging to borrow funds shall be implemented in accordance with Article 3 of this Circular.

3.2. For companies established to regularly and stably provide public goods, when leasing, mortgaging, or pledging assets directly serving public tasks, the consent of the owner is required.

3.3. The use of assets for leasing, mortgaging, or pledging must comply strictly with the provisions of the Civil Code and other relevant laws.

4. Liquidation and Sale of Fixed Assets and Financial Investments

4.1. The company has the right and responsibility to actively sell or liquidate fixed assets that are damaged, technologically obsolete, unused, or unnecessary; financial investments that are no longer needed for continued investment to recover capital on the principle of transparency, capital preservation.

4.2. Authority to decide on the liquidation and sale of fixed assets:

a) The Board of Members, the Chairman of the company (for companies without a Board of Members) decides on liquidation and sale plans for fixed assets with remaining values less than 50% of the total value of assets reported in the company's latest quarterly financial statement; specific levels are recorded in the Company Charter. The Board of Members, the Chairman of the company may authorize or delegate to the General Director, the Director of the company to decide on selling assets within their authority.

Plans for the liquidation and sale of fixed assets with values exceeding the delegation level for the Board of Members, the Chairman of the company shall be reported to the company owner for decision.

b) For companies designed to regularly and stably provide public goods or services, when selling assets directly serving public tasks, the consent of the owner is required.

c) If the plan for selling fixed assets of the company does not have the ability to recover sufficient capital, the company must report to the owner and the same-level finance agency before selling fixed assets to carry out supervision.

d) In the case of newly invested fixed assets that do not generate economic benefits as initially approved, if the company has no need to continue utilizing them and selling these assets does not have the ability to recover sufficient investment capital leading to the company being unable to repay loans according to promissory notes or loan agreements, then the responsibility of those involved must be clarified and reported to the owner for handling in accordance with the law.

đ) For the sale and liquidation of assets in certain special industries (tobacco production, shipping, aviation...), in addition to complying with the provisions of this Circular, they must also follow the provisions of specialized regulatory legal documents.

4.3. Method of liquidation and sale of fixed assets: The sale of fixed assets shall be carried out through public auction via an organization with the function of selling auctioned assets or by the company organizing it publicly in accordance with the procedures and formalities prescribed by the Law on Auctioning Assets. In cases where the remaining value of fixed assets recorded in the accounting books for sale is under VND 100 million or lower (recorded in the Articles of Association and Financial Regulations of the company), the General Director or Director shall decide to sell through auction or negotiation but not below market price. For fixed assets without transactions on the market, the company may hire an organization with the function of valuation to determine the price as the basis for selling assets according to the above methods.

4.4. Transfer of financial investment shares

The sale of financial investment shares shall be carried out in accordance with the provisions of the Enterprise Law and Securities Law, including:

a) Sale method:

Depending on the form of capital contribution, the company may transfer financial investment shares in compliance with the laws, articles of association of the enterprise with the company's capital contribution, and commitments in joint venture and cooperation contracts.

- For the transfer of financial investment shares at listed joint-stock companies on the stock market or registered for trading on the UPCOM exchange, the company may proactively implement sales through matching orders, auctions, negotiations, or competitive bidding but not below the market price at the time of sale.

- For the transfer of financial investment shares at unlisted joint-stock companies, the company actively chooses the auction or direct negotiation method to transfer on the principle of transparency, preservation of capital, and not below market price. In this regard:

+ For the transfer of financial investment shares valued at more than VND 10 billion face value, the company must conduct an auction through the Stock Exchange. For financial investment shares valued at less than VND 10 billion face value, the company may choose to hire intermediary financial organizations (securities companies) to auction, or organize an auction within the company, or conduct an auction through the Stock Exchange.

+ Negotiated sales can only be implemented after a public auction but only if there is one buyer registered and the sale price must be close to the market value at the time of sale; in this case, the market price at the time of sale should be based on quotations from at least three securities companies that have conducted securities transactions of the enterprise with the company's capital contribution, and if there is no transaction, the sale price cannot be lower than the book value recorded in the accounting books of the unit with the company's capital contribution.

b) Proceeds from the sale of part or all of the remaining investment capital in limited liability companies, joint-stock companies converted from state-owned enterprises (according to the decision on restructuring and shareholding conversion of state-owned enterprises, obtaining a business registration license for the first time), including deposits that are not refunded to investors after deducting the recorded investment capital on the accounting books, issuance guarantee fees, sales costs, and remaining differences shall be accounted for as financial income.

c) Authority to decide on the sale of financial investment shares:

- The owner decides on the sale of financial investment shares in joint-stock companies converted from State-owned Groups, State-owned Corporations, or parent companies.

- The owner, Board of Members, or Chairman of the Company (for Companies without a Board of Members) decides on the transfer of financial investment shares within their investment authority as stipulated by law.

5. Management of inventory goods

5.1. Inventory goods are goods purchased for sale still in stock, raw materials, materials, tools, equipment in stock, goods in transit, unfinished products during production, completed products not yet warehoused, finished products in stock, finished products sent for sale.

5.2. The company has the right and responsibility to immediately handle poor-quality, deteriorated, outdated, technologically obsolete, stagnant, slow-turning inventory goods to recover capital. The authority to decide on handling is regulated in Point 4.2 Clause 4 of this Article.

5.3. At the end of the accounting period, when the original cost of inventory goods recorded in the accounting books is higher than the recoverable net value, the company must establish a provision for reduction in value of inventory goods in accordance with Clause 3 of Article 4 of this Circular.

6. Management of receivables and payables:

6.1. Receivables

a) Responsibilities of the Company:

- Establishing and promulgating regulations on the management of receivables, assigning and clearly defining the responsibilities of collectives and individuals in tracking, recovering, and settling debts;

- Maintaining ledgers to track receivables by debtor category; regularly classifying receivables (current receivables, difficult-to-collect receivables, unrecoverable receivables), and urging their recovery.

- The Board of Members, Chairman of the Company, General Director, and Director of the Company are responsible for promptly handling difficult-to-collect receivables and unrecoverable debts. If these debts are not handled promptly as stipulated herein, the Board of Members, Chairman of the Company, General Director, or Director will be relieved of their positions as if they had reported false financial conditions of the company two or more times. If failure to handle promptly leads to loss of capital of the owner in the company, they must bear responsibility before the owner and the law.

- Difficult-to-collect receivables are overdue payments according to the terms recorded in the contract or other commitments or not yet due but the debtor has difficulty paying. The company must establish a provision for difficult-to-collect receivables in accordance with Clause 3 of Article 4 of this Circular.

Unrecoverable receivables, the company has the responsibility to handle: After deducting compensation from related individuals or groups, the remainder is covered by the provision for difficult-to-collect receivables, financial reserve fund. If there is still a shortage, it is accounted for as operating expenses of the company.

Unrecoverable debts after such handling, the company must continue to monitor outside the balance sheet account and organize recovery. Recovered amounts are accounted for as company income.

b) Rights of the Company:

The company has the right to sell receivables according to the provisions of the law, including both current receivables, difficult-to-collect receivables, and uncollectible receivables to recover capital. The sale of debts can only be carried out with economic organizations that have the function of buying and selling debts, and cannot be sold directly to debtors. The selling price of receivables is agreed upon by the parties involved and they bear responsibility for the decision to sell receivables. In cases where selling debts leads to the company suffering losses, losing capital, or losing its ability to pay, leading to the dissolution or bankruptcy of the company, the Board of Members, the Chairman of the company (for companies without a Board of Members), and those directly related to the occurrence of difficult-to-collect receivables must compensate according to the provisions of the law and the company's charter.

6.2. Management of payable debts:

a) Maintaining complete ledgers for all payables including interest payable;

b) Paying payable debts according to the committed deadlines. Regularly reviewing, evaluating, and analyzing the company's ability to pay debts, identifying early signs of difficulties in paying debts to promptly address them and prevent the emergence of overdue debts.

7. Inventory of assets

The company must organize an inventory to determine the quantity of assets (fixed assets and long-term investments, current assets and short-term investments), reconcile payable and receivable accounts when closing the accounting books to prepare annual financial reports; when implementing decisions on division, separation, merger, ownership conversion; after natural disasters or enemy attacks; or due to reasons causing asset fluctuations in the company; or according to the State's policy. For excess, shortage, uncollectible debts, and overdue debts, the causes must be clearly identified, the responsibilities of those involved determined, and material compensation levels established according to regulations.

8. Handling asset losses:

Asset losses refer to assets that are lost, missing, damaged, deteriorated in quality, outdated in fashion or technology, and stagnant in inventory during regular and sudden inventories. The company must determine the value of the loss, the cause, responsibility, and handle it as follows:

8.1. If the cause is subjective, the person responsible for the loss must compensate. The Board of Members or the Chairman of the company (for companies without a Board of Members) decides on the level of compensation according to the law and bears responsibility for their decision.

8.2. Insured assets, if there is a loss, will be handled according to the insurance contract.

8.3. The value of the loss after compensating with personal or collective compensation, and insurance organization compensation, if insufficient, will be covered by the company's financial reserve fund. If the financial reserve fund is insufficient, the shortfall will be recorded as production and business expenses for the period.

8.4. In special cases caused by natural disasters or force majeure resulting in severe damage that the company cannot overcome, the Board of Members or the Chairman of the company (for companies without a Board of Members) will develop a plan to handle the loss and submit it to the owner and the competent financial authority. After receiving comments from the financial authority, the owner will decide on handling the loss within their authority.

8.5. The company is responsible for promptly handling asset losses; if asset losses are not addressed, the Board of Members, General Director, and Company Manager will be held accountable to the owner as if they had reported false financial conditions of the enterprise.

9. Revaluation of assets

9.1. The company shall conduct revaluation of assets in the following cases:

a) Pursuant to the decision of a competent state agency;

b) Implementing ownership conversion of the company: shareholding, selling the company, diversifying ownership forms;

c) Using assets to invest outside the company.

d) Other cases as prescribed by law.

9.2. The revaluation of assets must comply with the relevant provisions of the State. Any increases or decreases in value due to revaluation of assets as stipulated in Point 9.1 Clause 9 of this Article shall be implemented according to the State's regulations for each specific case.

PART II. MANAGEMENT OF REVENUE, EXPENSES AND BUSINESS OPERATIONS RESULTS

Article 7. The determination of revenue, expenses, cost, business operations results, and tax obligations shall be carried out in accordance with tax laws and current legal documents.

Article 8. Management of Expenses

The company must strictly manage all expense items to reduce costs and product prices in order to increase profits through the following main management measures: 

1. Establishing, issuing, and implementing economic and technical standards that are suitable for the economic and technical characteristics, industry, business activities, management model, and equipment level of the company. These standards must be disseminated down to the implementers, publicly announced to the employees of the company for implementation and supervision. In cases where the standards cannot be met, leading to increased expenses, the reasons and responsibilities must be clearly analyzed and handled according to the law. If it is due to subjective reasons, compensation for losses must be provided. The Board of Members or the Chairman (for companies without a Board of Members) decides on the compensation amount according to the law and bears responsibility for their decision.

2. For companies operating in monopoly sectors, they must report annually to the owner and financial authority at Appendix No. 2 attached to this Circular (the Department of Finance for local enterprises and the Ministry of Finance for central enterprises) on the situation of production and business expenses. The report content must analyze and compare actual performance against standard expense items such as depreciation of fixed assets, labor wages, raw materials, management fees, advertising, marketing, transactions, hospitality, and other expenses, identifying clear reasons and responsibilities of collectives and individuals for exceeding the standards.

3. Regularly organize the analysis of production costs and product prices of the company to identify weak and poor management stages, factors increasing costs and product prices, and develop timely solutions to address them.

Article 9. Profit Distribution

The company shall follow the guidance of the Ministry of Finance.

Article 10. Purpose of Using Funds

1. Financial reserve fund is used for:

1.1. Compensating losses and damages to assets and uncollectible debts occurring during business operations;

1.2. Compensating the company's losses according to the decision of the Board of Members, the Chairman of the company (for companies without a Board of Members) or the owner.

2. Development investment fund is used for:

2.1. Supplementing the registered capital of the company;

2.2. Investing in forming the company's assets.

3. The incentive fund shall be used for:

3.1. Year-end or regular bonuses based on the productivity and work achievements of each employee in the company;

3.2. Special bonuses for individuals and groups within the company;

3.3. Bonuses for individuals and units outside the company who have made significant contributions to the company's business activities and management.

The bonus levels specified in points 3.1, 3.2, and 3.3 of this clause are decided by the General Director or Director. Specifically, point 3.1 of this clause requires the opinion of the Company Trade Union before making a decision.

4. The welfare fund shall be used for:

4.1. Investing in building or repairing welfare facilities of the company;

4.2. Spending on public welfare activities for the collective of company workers, social welfare;

4.3. Contributing part of the capital to invest in building common welfare projects in the industry or with other units according to contracts.

4.4. Using part of the welfare fund to provide emergency assistance to workers, including those retiring, losing strength, falling into difficult circumstances, having no support, or engaging in charitable social work.

The use of the welfare fund is decided by the Board of Members or the Chairman of the company (for companies without a Board of Members) after consulting the opinion of the company trade union.

5. The enterprise scientific and technological development fund operates according to Decision No. 36/2007/QD-BTC dated May 16, 2007 of the Ministry of Finance on the organization and operation of the scientific and technological development fund of organizations, individuals, and enterprises.   

6. The company management board bonus fund is used to reward the Board of Members, the Chairman of the company (for companies without a Board of Members), and the company’s management board. The bonus level is decided by the owner based on the company's business performance, upon the proposal of the Chairman of the Board of Members or the Chairman of the company (for companies without a Board of Members).

7. The use of the above funds must be transparent according to the financial transparency regulations, grassroots democracy regulations, and state regulations.

8. The company can only allocate the incentive, welfare, and management board bonus funds after settling all due debts and other property obligations.

PART III. FINANCIAL PLAN, ACCOUNTING REGIME, STATISTICS AND AUDIT 

Article 11. Financial Plan

1. Based on strategic orientation, development planning for production and business operations of the enterprise that has been approved by the owner, the company shall develop a long-term production and business plan and financial plan consistent with the company's strategic direction plan decided by the owner.

2. Annually, based on the long-term production and business plan, taking into account the company's capacity and market demand, the company shall develop the next year's production and business plan to be submitted to the Board of Members or the Chairman of the company for decision.

3. Based on the production and business plan decided by the Board of Members or the Chairman of the company, the company shall conduct an assessment of the production and business situation of the reporting year and prepare the financial plan for the following year (in accordance with Appendix No. 3 attached hereto) to be sent to the owner, the financial authority (Ministry of Finance for companies owned by the Prime Minister or specialized ministries; Department of Finance for companies owned by provincial People's Committees or municipal People's Committees directly under the Central Government) before July 31 each year.

4. After receiving the company's financial plan, the owner shall coordinate with the corresponding level financial authority to review the financial plan prepared by the company. Thereafter, they shall provide comments to help the company complete the financial plan. The completed financial plan shall be the official plan serving as the basis for the owner and the corresponding level financial authority to supervise, evaluate, and manage the company's business operations.

Article 12. Financial Reports and Other Reports

1. At the end of the accounting period (quarterly or annually), the company must prepare, present, and submit financial reports and statistical reports as prescribed by law. The Board of Members or the Chairman of the company (for companies without a Board of Members) shall be responsible for the accuracy and truthfulness of these reports.

The company must conduct an audit of the annual financial report in accordance with the provisions of the law.

2. The company has the responsibility to prepare and submit the following reports:

2.1. Prepare the following reports:

a) Quarterly and annual financial reports (as stipulated in Decision No. 15/2006/QD-BTC dated March 20, 2006 of the Minister of Finance and supplemented with Form 2b-DN "Payments to the State Budget" in Appendix No. 4 (Implementation of State Budget Obligations) attached hereto);

b) Report on financial investment status (in detail) according to Appendix No. 5 (Detailed Report on Financial Investments in ...) attached hereto;

c) Report on monitoring and evaluating the effectiveness of the company's operations (as prescribed by the Ministry of Finance);

d) Public financial status report according to Appendix No. 7 (Report on Certain Financial Indicators for the Quarter ... Year ...) attached hereto;

đ) Report on capital raising and utilization of raised capital according to Appendix No. 6 attached hereto.

e) Report on post-tax profit distribution according to Appendix No. 1 (Annual Summary of Reserve Fund) attached hereto;

g) Payroll settlement report according to Appendix No. 8 attached hereto.

2.2. Deadline and place for submitting reports:

For the reports listed in point 2.1 of this Article, the company must send them to the owner and the financial authority (Ministry of Finance for companies owned by the Prime Minister or specialized ministries, Ministry of Labor, Invalids and Social Affairs for payroll settlement reports; Department of Finance for companies owned by provincial People's Committees or municipal People's Committees directly under the Central Government, Department of Labor, Invalids and Social Affairs for payroll settlement reports).

The time limit for submitting the above reports is once a year at the same time as the settlement report as prescribed. The quarterly report submission period follows the current regulations.

3. The company must organize accounting and statistical work in accordance with the provisions of the law.

4. The company is subject to inspection, examination, and supervision by the competent financial authority regarding the company's financial work in accordance with the provisions of the law.   

Chapter III

MANAGEMENT OF CAPITAL INVESTED IN OTHER ENTERPRISES

Article 13. Management of investment capital in other enterprises

The management of investment capital in other enterprises shall be carried out in accordance with the following provisions:

1. Groups, Corporations, parent companies, independent companies manage investment capital at:

1.1. Investment capital in a limited liability company with one member converted from a member enterprise of the Group, Corporation, or parent company, or newly established by the Corporation, parent company, or a limited liability company with one member.

1.2. Investment capital in a joint-stock company established based on the full privatization of a member enterprise of the Group, Corporation, or parent company, or the privatization of a part of an independent state-owned company;

1.3. Investment capital in a joint venture formed based on the total contribution of the Corporation's member enterprise to the joint venture and the loss of legal entity status of the Corporation's member enterprise, or the independent contribution of the Corporation, parent company, or a limited liability company with one member to the joint venture;

1.4. Capital invested by the Corporation, parent company, or a limited liability company with one member into another enterprise.

Rights and obligations of the owner of investment capital in other enterprises

2.1. For organizations that are owners of companies, they exercise the rights and obligations of the owner as prescribed by the Enterprise Law.

2.2. For organizations that are owners of investment capital in other enterprises, they have the following rights:

a) The rights of shareholders, contributing members, joint venture parties as prescribed by law and the charter of the other enterprise;

b) Appoint representatives of investment capital or authorized representatives to exercise the rights of shareholders, contributing members, joint venture parties at general meetings of shareholders, contributing members, and joint venture parties.

c) Appoint, dismiss, reward, and discipline representatives of investment capital or authorized representatives at other enterprises (hereinafter referred to as representatives) to decide on salaries, allowances, bonuses, and benefits for representatives, except when representatives have already received salaries from other enterprises;

d) Request representatives to report periodically or urgently on business results and financial conditions of other enterprises;

đ) Assign tasks and direct representatives to protect the legitimate rights and interests of the company in other enterprises. Request representatives to report on the implementation of their duties, powers, and responsibilities, especially in guiding enterprises with controlling shares or contributions to achieve the company's goals and strategies;

e) Inspect and supervise the activities of representatives, identify shortcomings and weaknesses of representatives to prevent and correct them promptly;

g) Decide or submit to the competent authority for decision on increasing investment capital or recovering investment capital in other enterprises in accordance with the law and the charter of the other enterprise;

h) Be responsible for the effectiveness of the use, preservation, and development of investment capital;

i) Supervise the recovery of investment capital in other enterprises and the distribution of profits from other enterprises;

k) Perform other rights and obligations as prescribed by law.

3. Rights and obligations of representatives

3.1. Participate in the election to the management and operation body of other enterprises according to the charter of these enterprises.

3.2. When authorized to exercise the rights of shareholders, contributing members, joint venture parties at general meetings of shareholders, contributing members, and joint venture parties, representatives must use such rights carefully in accordance with the instructions of the owner.

3.3. Monitor and supervise the business operations, financial situation, and business results of other enterprises according to the laws and charters of the enterprises. Report regularly or upon request of the owner about the situation, results of business operations, financial issues of other enterprises, and the implementation of tasks assigned by the owner.

3.4. Representatives participating in the management and operation board of other enterprises must study and propose directions and measures for their activities in other enterprises to submit to the owner for approval. For important issues of the enterprise discussed in the Board of Directors, Management Board, General Meeting of Shareholders, contributing members, or joint venture parties such as directions, strategies, business plans, additional share issuance, profit distribution... representatives must proactively report to the owner for comments in writing, representatives are responsible for speaking up in meetings and voting according to the owner's instructions. In cases where multiple representatives participate in the Board of Directors, Management Board of other enterprises, they must implement the owner's instructions uniformly.

3.5. Representatives in enterprises with controlling shares or contributions must have the responsibility to guide those enterprises towards the company's goals and directions; use controlling or veto power to decide on the addition of business sectors. Upon discovering that enterprises deviate from the company's goals and directions, representatives must immediately report to the capital owner and propose solutions to rectify the situation. After being approved by the capital owner, they must organize immediate implementation to quickly guide enterprises back to the determined goals and directions.

3.6. Perform other rights and obligations as prescribed by law, the enterprise charter, and the capital owner.

3.7. Be responsible to the capital owner for the tasks assigned. If they fail to fulfill their responsibilities, abuse their duties and powers causing losses to the capital owner, they must bear responsibility and compensate material losses according to the law.

4. Salary, bonuses, and benefits of representatives

4.1. Representatives of investment capital in other enterprises who are dedicated members of the management and operation board or employees of other enterprises receive salaries, responsibility allowances (if applicable), bonuses, and other benefits as stipulated in the charter of those enterprises and paid by those enterprises. Additionally, they also receive representative allowances paid by the owner according to regulations. The source of representative allowances is derived from profits distributed from investment capital contributed to other enterprises.

4.2. The representative who concurrently serves as a member without being专职管理人员的薪酬、责任津贴（如有）、奖金及其他按规定应享有的权益由出资人支付。此外，还应享有代表职务津贴，该津贴由出资人按规定支付。

如果代表从其他企业获得报酬，则代表有义务将上述报酬上交出资人。

4.3. 当投资于其他企业的代表根据股份有限公司的决定有权购买增发股票或可转换债券（不包括根据现有股东权利购买的情况）时，必须书面报告出资人。出资人应书面决定代表根据其贡献程度和任务完成情况可以购买的股份数量。剩余部分则归出资人所有。

若代表被指派为多个单位的投资代表，则优先选择在一个单位行使购买权。在股份有限公司担任投资代表的人应将其剩余的购买股份的权利转让给出资人。

若投资于其他企业的代表未报告其有权购买股份有限公司的股票或可转换债券的情况，则被视为丧失投资代表资格，并须按发行价格将违规购买的股票或可转换债券转让回出资人。若代表已出售这些股票，则需向出资人退还出售价格与购买价格及费用（如有）之间的差额。

第五条 代表人的标准

代表人应当具备以下条件：

5.1. 是中华人民共和国公民，且在中国境内有常住户口。

5.2. 具备良好的道德品质，身体健康，能够胜任工作。

5.3. 熟悉法律，具有遵守法律法规的意识。

5.4. 拥有企业管理财务专业知识或所投资企业的业务领域的专业技能，具备经营能力和企业管理能力。对于直接管理与外国公司合资企业的代表，应具备足够的外语水平以直接与合资公司的外国人沟通，无需翻译。

5.5. 不得是出资人、董事会成员或所投资企业总经理的父母、配偶、子女、兄弟姐妹；不得与出资人、董事会成员或所投资企业总经理存在资本投入、贷款或买卖合同关系，除非持有国有企业的股份，该国有企业已经进行了股份化改革。

代表人参与其他企业的董事会或总经理职位竞选，必须符合有限责任公司董事会成员或总经理的相关规定。

5.6. 具备完全的行为能力。

5.7. 不属于被禁止管理企业的对象。

第六条 投资于其他企业的代表人的报告制度如下：

6.1. 根据其他企业的财务报表和其他报告，每季度和年终定期汇总财务指标，详见本通知附件七；分析和评估企业的经营成果、资金管理和使用情况、偿债能力、利润分配及其他权益，提出解决困难和问题的建议，以提高其他企业的投资效益。

报告应在其他企业提交财务报表（季度或年度）后的十五天内提交给出资人。

6.2. 除上述定期报告外，代表人在遇到重大事项影响其他企业的经营结果或需要出资人指示的情况下，或者出资人要求时，应及时向出资人报告。

第七条 分配利润

代表人负责要求其他企业分配利润。

将其转交给根据本条第一款规定投资于其他企业的公司。

第八条 决定增加或减少对其他企业的投资

增加或减少对其他企业的投资的规定如下：

8.1. 对于由总理授权的出资人，由该机构审议并作出决定。

8.2. 对于根据本条第一款规定作为其他企业出资人的经济集团、总公司或独立公司，由该经济集团或总公司审议并决定：投资于其他企业的决策者同时决定补充对该企业的投资；或决定减少对该企业的投资。

8.3. 增加或减少对其他企业的投资的方式应遵循法律规定和企业的章程。

8.4. 当其他企业增加投资而本公司没有补充投资的需求时，应报告出资人审议并决定是否转让购买权或出资权，按照法律规定执行。

第九条 处理从其他企业收回的投资

减少对其他企业的投资或因其他企业解散、破产而收回的投资金额，应转回根据本条第一款规定进行投资的公司。

Chapter IV

IMPLEMENTATION

Article 14. Effective Date

本通知自2010年7月1日起生效，并取代财政部于2007年3月27日发布的第24/2007/TT-BTC号通知，该通知指导了国有独资有限责任公司和政治组织、社会政治组织关于实施政府2006年9月8日第95/2006/NĐ-CP号决定的规定，该决定关于将国有企业转变为国有独资有限责任公司。

2. The parent company belonging to Groups and Corporations shall base on the financial mechanism stipulated in this Circular to organize the financial management work of the limited liability company with one member converted from member enterprises and dependent accounting units of the parent companies of Groups and Corporations.

3. During the implementation process, if there are any difficulties, agencies and units are requested to promptly reflect them to the Ministry of Finance for consideration and resolution./.