Circular No. 11712/TC/TCDN on guiding the process of state-owned enterprise shareholding

LETTER

DIRECTED BY THE MINISTRY OF FINANCE DECREE NO. 11712/TC-TCDN ON NOVEMBER 10, 2003 ON GUIDELINES FOR THE PROCEDURE OF CONVERTING STATE ENTERPRISES INTO JOINT-STOCK COMPANIES
STATE ENTERPRISES

Dear: - Ministries, ministerial-level agencies, government agencies

- PROVINCES AND URBAN AREAS UNDER THE CENTRAL GOVERNMENT

- State-owned Corporations

To implement Decree No. 64/2002/NĐ-CP dated June 19, 2002 of the Government on converting state-owned enterprises into joint-stock companies; to facilitate the implementation of the conversion process for enterprises, the Ministry of Finance provides guidelines for the procedure of converting state enterprises into joint-stock companies.

Based on these guidelines, ministries, localities, and state-owned corporations shall instruct enterprises to refer to specific guiding documents related to the process of converting state enterprises into joint-stock companies for implementation.

During the implementation process, if there are any difficulties, they are requested to promptly report to the Ministry of Finance for review, supplementation, and amendment to further perfect the process.

PROCEDURE

TRANSFORMATION OF STATE ENTERPRISES INTO JOINT-STOCK COMPANIES

(Annexed to Circular No. 11712/TC-TCDN
dated November 10, 2003 of the Ministry of Finance)

The procedure for transforming state enterprises into joint-stock companies (referred to as the stock conversion process) includes the following steps:

Step 1. Issuing a decision to carry out the stock conversion process and establishing a Management Reform Board at the enterprise.

1.1. Ministries, agencies equivalent to ministries, government agencies, People's Committees of provinces and centrally-administered cities (hereinafter referred to as the stock conversion decision-making agency) based on the overall restructuring plan for state-owned enterprises approved by the Prime Minister, issue decisions to convert state-owned enterprises under their management, including those under the State Corporation 91 established by the Prime Minister.

1.2. State-owned enterprises, upon receiving the decision to convert into joint-stock companies, propose a list of members of the Management Reform Board at the enterprise to be reported to the stock conversion decision-making agency for consideration and approval. The composition of the Management Reform Board of the enterprise includes:

+ Director (or Deputy Director) as Chairman;

+ Chief Accountant or head of the accounting department as Standing Member;

+ Heads of planning, production, human resources, and technical departments as Members;

+ Inviting the Secretary of the Party Committee (or Branch) and the Chairman of the Trade Union as Members.

1.3. Ministries, People's Committees of provinces and centrally-administered cities, Boards of Directors of State Corporations 90 and 91 (if authorized) issue decisions to establish the Management Reform Board at the enterprise.

Step 2. Propaganda on policies for the stock conversion process:

2.1. The stock conversion decision-making agency is responsible for disseminating documents on the stock conversion process and policies for employees to the Management Reform Board at the enterprise and key cadres of the enterprise being converted into a joint-stock company.

2.2. The Management Reform Board at the enterprise propagandizes and explains to employees in the enterprise the policies of the Party and the Government regarding the stock conversion of enterprises (especially the rights and responsibilities of the enterprise and its employees); the tasks that the enterprise must undertake and the participation of cadres and workers during the stock conversion process.

Step 3. Preparation of files and documents:

Based on the date of the stock conversion decision and the specific conditions of the enterprise, the Management Reform Board at the enterprise proceeds with:

1. Selecting the method for determining the value of the enterprise and the time point for determining the value of the enterprise according to the guidance provided in Circular No. 79/2002/TT-BTC dated September 12, 2002 of the Ministry of Finance, reporting to the stock conversion decision-making agency for consideration and approval.

2. Preparing the following documents:

a. Legal documents when establishing the state-owned enterprise;

b. Legal documents on the management and use of assets at the enterprise (including areas of land granted or leased);

c. Documents on accounts receivable and payable (especially outstanding debts);

d. Documents on stagnant materials and goods of poor quality or deteriorated;

đ. Documents on construction projects (including those with suspended decisions);

e. Financial statements of the enterprise up to the valuation date;

g. Compiling a list of regular employees of the enterprise at the time of the stock conversion decision; conducting classification of employees into categories such as indefinite-term contracts, fixed-term contracts from 1 to 3 years, short-term contracts...

Drafting a list of employees eligible for preferential shares and deferred payment shares;

h. Preparing a budget for the costs of the stock conversion process according to prescribed regulations.

Step 4. Inventory and handling financial issues:

Based on the prepared documents, the Management Reform Board at the enterprise organizes inventory, categorization of assets, and financial settlement, tax settlement to handle financial issues at the valuation date according to the regulations stipulated in Circular No. 76/2002/TT-BTC dated September 9, 2002 and Circular No. 85/2002/TT-BTC dated September 26, 2002 of the Ministry of Finance.

Step 5. Determination of the enterprise's value:

5.1. Based on accounting records and asset inventory results, the Management Reform Board at the enterprise organizes the determination of the value of assets that the enterprise intends to use after transitioning to a joint-stock company.

Completing the enterprise value determination file according to the provisions of Circular No. 79/2002/TT-BTC dated September 12, 2002 of the Ministry of Finance and submitting it to the stock conversion decision-making agency for review, issuing a decision to organize the determination of the enterprise's value.

5.2. The stock conversion decision-making agency: Issuing a decision to establish a Board to determine the enterprise's value or selecting an auditing company or economic organization with valuation functions to determine the enterprise's value.

5.3. The Management Reform Board at the enterprise collaborates with the Board to determine the enterprise's value or the organization hired to determine the enterprise's value: implementing the determination of the enterprise's value, preparing a Record of Enterprise Value Determination (according to the guidance in Circular No. 79/2002/TT-BTC of the Ministry of Finance). Submitting the results of the enterprise value determination to the stock conversion decision-making agency for review and issuance of a decision to announce the enterprise's value.

5.4. Based on the decision announcing the enterprise's value, the enterprise adjusts accounting books and balance sheets according to the national accounting regulations, while continuing to monitor and handle debts and assets excluded in the determination of the enterprise's value for stock conversion, recording expenses related to the implementation of the stock conversion process.

Step 6. Formulating plans for selling preferential shares and reorganizing labor:

Based on the list of regular employees of the enterprise at the time of shareholding reform, the Enterprise Management Reform Board shall cooperate with the trade union:

6.1. Identify the list of poor workers according to the guidelines of the Ministry of Labor, Invalids and Social Affairs in Circular No. 15/2002/TT-BLDTBXH; Develop a plan for selling preferential shares to eligible recipients as stipulated in Decree No. 64/2002/NĐ-CP dated June 19, 2002 of the Government and the guidance of the Ministry of Finance in Circular No. 76/2002/TT-BTC dated September 9, 2002.

6.2. Develop a labor restructuring plan: estimate the number of employees continuing to work at the joint-stock company (including the number of employees requiring retraining for new positions within the joint-stock company), the surplus number of employees.

Classify and develop plans for handling surplus employees and funding for retraining according to Decree No. 64/2002/NĐ-CP, Decree No. 41/2002/NĐ-CP, and Decision No. 174/2002/QĐ-TTg of the Prime Minister for review by the authority responsible for approving the shareholding reform.

6.3. Publicly post and announce the preferential share sale plan and the labor restructuring plan at the enterprise.

Step 7. Develop the shareholding reform plan for the enterprise and draft the Articles of Organization and Operation of the joint-stock company:

Based on the results of determining the enterprise's value and the approved labor restructuring plan, based on the criteria for classifying state-owned enterprises as stipulated in Decision No. 58/2002/QĐ-TTg, Directive No. 01/2003/CT-TTg of the Prime Minister, and related policies and regulations on the shareholding reform of state-owned enterprises, the Enterprise Management Reform Board shall proceed to:

7.1. Develop the shareholding reform plan for the enterprise with the following main contents:

a. Introduction to the enterprise, including a general description of the enterprise's formation process and organizational model; The situation and results of production and business operations of the enterprise in the three to five years immediately preceding the shareholding reform.

b. Evaluate the current status of the enterprise at the time of determining its value, including:

- Current status regarding capital and assets (including the area of land allocated and leased);

- Current status regarding labor;

- Issues that need continued consideration and resolution.

c. Labor restructuring plan, specifying:

- The number of employees listed in the regular roster at the time of the shareholding reform decision;

- The number of employees to be recruited;

- The number of surplus employees and the resolution plan for each category (including the retraining plan for surplus employees to be assigned new jobs in the joint-stock company).

d. Business operation plan for the next three to five years, specifying:

- Plan for investment in technological innovation and enhancement of production and business capacity (if applicable);

- Production and business plans for subsequent years (product plans, production volumes, markets...) and solutions regarding capital, raw materials, market organization, labor, and wages...

đ. Shareholding reform plan for state-owned enterprises:

- Forecast the form of shareholding and registered capital according to the requirements of the joint-stock company's production and business activities;

- Determine the structure of registered capital including: the number of state-held shares; the number of shares to be sold to employees in the enterprise (including details on the quantity and value of preferential shares sold at deferred payment); the number of shares to be sold to external entities.

- Types of shares to be issued and methods of issuing shares (to be carried out by the enterprise or through intermediary organizations)

7.2. Draft the Articles of Organization and Operation of the joint-stock company in accordance with the provisions of the Enterprise Law and current legal documents.

7.3. Organize an extraordinary meeting of workers and staff to gather opinions to perfect the shareholding reform plan. To ensure the success of the meeting, before organizing the meeting, the Enterprise Management Reform Board must send the draft to various departments within the enterprise for discussion and consolidation of issues requiring feedback.

7.4. Based on the opinions received at the workers and staff meeting, the Enterprise Management Reform Board shall perfect the shareholding reform plan for submission to the authority responsible for approving the shareholding reform for review.

Step 8. Review and approve the shareholding reform plan:

8.1. For enterprises under State-owned Corporations:

The Boards of Directors of State-owned Corporations shall review and instruct member enterprises to complete their shareholding reform plans before submitting them to the Ministries, Provincial People's Committees for approval.

8.2. Upon receiving the shareholding reform plans from enterprises, the Enterprise Reform and Development Boards of Ministries, Provincial People's Committees shall convene meetings to review and submit to the Ministers, Chairmen of Provincial People's Committees for approval in accordance with the State's regulations. In cases where state-owned enterprises participating in the shareholding reform retain special shares, they must report to the Prime Minister for examination and decision.

Step 9. Implement the shareholding reform plan:

Based on the approved shareholding reform plan, the Enterprise Management Reform Board shall implement:

9.1. Open a register for shareholders to purchase shares.

9.2. Announce publicly the financial situation of the enterprise at the time of shareholding reform and information about the sale of shares in accordance with the State's regulations.

9.3. Organize the sale of shares to registered buyers (for shares sold outside the enterprise, this must be conducted in accordance with Circular No. 80/2002/TT-BTC dated September 12, 2002 of the Ministry of Finance and supplementary guidance from the Ministry of Finance).

9.4. Report the results of the share sale and the list of proposed individuals directly managing the state capital portion in the joint-stock company (in cases where the state participates in capital contribution) to the authority responsible for approving the shareholding reform for formal comments.

9.5. Based on the directives of the authority deciding on corporatization and the list of investors contributing capital to purchase shares, the Corporate Management Reform Board shall convene the first shareholders' meeting to approve the Articles of Organization and Operation of the joint-stock company, the business plan of the joint-stock company for the following years, elect the Board of Directors, the Supervisory Board, and the management structure of the joint-stock company.

Step 10. Launching the joint-stock company and registering for business operations:

10.1. The Board of Directors of the joint-stock company shall direct the registration of business operations with the Department of Planning and Investment, submit the seal of the state-owned enterprise, and apply for the seal of the joint-stock company.

10.2. Prepare the financial statements at the time the joint-stock company receives the business registration certificate and settle taxes with the tax authority, then send the documents to the authority deciding on corporatization to determine the actual value of the state capital and carry out the handover between the state-owned enterprise and the joint-stock company according to Circular No. 76/2002/TT-BTC of the Ministry of Finance.

10.3. Process the purchase or printing of blank share certificates according to the model share certificate guidelines issued by the Ministry of Finance (Circular No. 86/2003/TT-BTC dated September 11, 2003) to distribute to shareholders.

10.4. Organize the launch ceremony of the joint-stock company and announce it through mass media as prescribed.

The phased process of corporatizing an enterprise as described above is relative; the authority deciding on corporatization and the Corporate Management Reform Board may simultaneously conduct multiple steps to complete the corporatization schedule.