Decree No. 120-CP Issuing the Interim Regulation on the Issuance of Corporate Bonds and Shares of State-Owned Enterprises

DECREE

 OF THE GOVERNMENT DECREE NO. 120-CP OF SEPTEMBER 17, 1994 ISSUING TEMPORARY REGULATIONS

ON THE ISSUE OF BONDS AND SHARES OF STATE ENTERPRISES   

Pursuant to the Government Organization Law dated September 30, 1992;
At the request of the Minister of Finance and heads of relevant ministries,

DECREE:

Article 1.

NOW ISSUES HEREBY WITH THIS DECREE TEMPORARY REGULATIONS ON THE ISSUE OF BONDS AND SHARES OF STATE ENTERPRISES, EXCEPT FOR STATE-BASED COMMERCIAL BANKS, FOR TRIAL IMPLEMENTATION.

Article 2.

The Minister of Finance shall be responsible for guiding the implementation of these regulations issued with this Decree and selecting enterprises to conduct trial implementations.

The Governor of the State Bank shall select and guide commercial banks and state-owned investment and development banks to conduct trial bond issuances.

After one year of trial implementation, the Minister of Finance and the Governor of the State Bank shall summarize experiences and supplement and perfect regulatory documents for the Government's consideration to issue officially along with other regulatory documents on securities and the securities market.

Article 3.

This Decree takes effect from October 1, 1994.

Article 4.

The Minister, the head of a ministry-level agency, the head of a government agency, and the Chairperson of the provincial people's committee and municipal people's committee under central jurisdiction shall be responsible for implementing this Decree.

 

INTERIM REGULATION
ON THE ISSUE OF BONDS AND SHARES OF STATE ENTERPRISES
(ISSUED ALONG WITH GOVERNMENT DECREE NO. 120-CP OF SEPTEMBER 17, 1994)

Chapter 1:

GENERAL PROVISIONS

Article 1.

STATE ENTERPRISE BONDS ARE DEBT CERTIFICATES WITH A TERM AND INTEREST ISSUED BY STATE ENTERPRISES TO RAISE FUNDS FOR EXPANDING PRODUCTION AND BUSINESS SCALE AND UPGRADING EQUIPMENT AND TECHNOLOGY.

Article 2.

STATE ENTERPRISE SHARES ARE CAPITAL CERTIFICATES ACKNOWLEDGING SHAREHOLDER CAPITAL ISSUED BY STATE ENTERPRISES TO RAISE CAPITAL CONTRIBUTIONS TO OPERATING STATE ENTERPRISES OR TO ESTABLISH NEW ENTERPRISES WHERE THE STATE IS THE FOUNDER.

Article 3.

THE PURCHASE AND PAYMENT OF STATE ENTERPRISE BONDS AND SHARES SHALL BE UNIFIED IN VIETNAMESE DONG. IF THE PURCHASER HAS ONLY GOLD OR FOREIGN CURRENCY, IT SHALL BE CONVERTED INTO VIETNAMESE DONG AT THE EXCHANGE RATE AND GOLD PRICE ANNOUNCED BY THE STATE BANK AT THE TIME OF PURCHASE.

Article 4.

STATE ENTERPRISE BONDS AND SHARES MAY BE BOUGHT, SOLD, TRANSFERRED, INHERITED, AND USED AS COLLATERAL OR PLEDGE IN CREDIT RELATIONSHIPS; THEY SHALL NOT BE USED TO REPLACE CIRCULATING CURRENCY OR TO PAY TAXES TO THE STATE.

Article 5.

PERSONS ELIGIBLE TO PURCHASE STATE ENTERPRISE BONDS AND SHARES INCLUDE:

a) VIETNAMESE DOMESTIC AND FOREIGN RESIDENTS, FOREIGNERS WORKING AND LIVING IN VIETNAM.

b) VIETNAMESE ENTERPRISES IN VARIOUS ECONOMIC SECTORS AND COMPONENTS.

FOR STATE ENTERPRISES, COMMERCIAL BANKS, FINANCE COMPANIES, CREDIT ORGANIZATIONS, INSURANCE COMPANIES, INSURANCE FUNDS, AND INVESTMENT FUNDS, THE PURCHASE OF STATE ENTERPRISE BONDS AND SHARES SHALL BE CONDUCTED IN ACCORDANCE WITH THE MINISTRY OF FINANCE AND THE STATE BANK'S REGULATIONS.

c) ASSOCIATIONS AND POPULAR ORGANIZATIONS.

d) FOREIGN-INVESTED ENTERPRISES OPERATING UNDER THE FOREIGN INVESTMENT LAW OF VIETNAM PERMITTED BY THE VIETNAMESE GOVERNMENT TO PURCHASE STATE ENTERPRISE BONDS AND SHARES.

IT IS STRICTLY PROHIBITED FOR STATE AGENCIES, MILITARY FORCES, AND SOCIAL ORGANIZATIONS TO USE STATE BUDGET FUNDS TO PURCHASE STATE ENTERPRISE BONDS AND SHARES.

Article 6.

STATE ENTERPRISES ISSUING BONDS AND SHARES SHALL BE RESPONSIBLE FOR:

FULL AND TIMELY PAYMENT OF PRINCIPAL AND INTEREST TO BOND OWNERS.

PAYMENT OF DIVIDENDS TO SHARE OWNERS AND THE REMAINING VALUE OF SHARES IN CASES OF ENTERPRISE LIQUIDATION, MERGER, OR BANKRUPTCY.

Article 7.

STATE ENTERPRISE BONDS AND SHARES SHALL BE ISSUED THROUGH THE FOLLOWING METHODS:

a) DIRECTLY AT THE STATE ENTERPRISE.

b) THROUGH AGENTS WHICH ARE FINANCIAL INTERMEDIARIES SUCH AS COMMERCIAL BANKS, FINANCE COMPANIES, AND INSURANCE COMPANIES.

AGENTS ISSUING STATE ENTERPRISE BONDS AND SHARES SHALL RECEIVE A COMMISSION FOR ISSUANCE AS DIRECTED BY THE MINISTRY OF FINANCE.

c) THE ISSUE OF STATE ENTERPRISE BONDS MAY BE CONDUCTED THROUGH AUCTION IN ACCORDANCE WITH REGULATIONS ISSUED BY THE MINISTRY OF FINANCE. THE WINNING BIDDER MAY SELL THE BONDS TO OBJECTS SPECIFIED IN ARTICLE 5 OF THESE REGULATIONS.

Article 8.

STATE ENTERPRISES WISHING TO ISSUE BONDS AND SHARES MUST SATISFY THE CONDITIONS SET OUT IN ARTICLES 18 AND 25 OF THESE REGULATIONS AND SUBMIT APPLICATION DOCUMENTS FOR BOND AND SHARE ISSUANCE AS SET OUT IN ARTICLES 19 AND 26 OF THESE REGULATIONS TO THE MINISTRY OF FINANCE.

Article 9.

WITHIN 45 DAYS FROM RECEIPT OF THE APPLICATION DOCUMENTS FOR BOND AND SHARE ISSUANCE, THE MINISTRY OF FINANCE SHALL REVIEW AND ISSUE LICENSES TO ENTERPRISES FOR BOND AND SHARE ISSUANCE. IF AN ENTERPRISE DOES NOT MEET THE ISSUANCE CONDITIONS, THE MINISTRY OF FINANCE SHALL NOTIFY THE REASONS CLEARLY.

Article 10.

WITHIN 30 DAYS AFTER RECEIVING THE LICENSE FOR BOND AND SHARE ISSUANCE, STATE ENTERPRISES MUST PUBLICIZE INFORMATION RELATED TO THE BOND AND SHARE ISSUANCE ON MASS MEDIA AND IMPLEMENT THE ISSUANCE PLAN ACCORDING TO THE APPROVED SCHEME.

Article 11.

IF THE ISSUE PERIOD OF A SERIES OR MULTIPLE SERIES OF BONDS AND SHARES AS STATED IN THE LICENSE EXPIRES BUT THE FUNDS RAISED ARE NOT ENOUGH, THE STATE ENTERPRISE MAY BE CONSIDERED FOR EXTENSION BY THE MINISTRY OF FINANCE, BUT IT IS NOT NECESSARILY EXTENDED UNTIL THE FUNDS ARE RAISED.

Article 12.

AFTER THE ISSUE PERIOD OF BONDS AND SHARES, THE STATE ENTERPRISE SHALL REPORT THE ISSUE RESULTS TO THE MINISTRY OF FINANCE AND THE DIRECT GOVERNMENT MANAGEMENT AUTHORITY OF THE ENTERPRISE.

Article 13.

ALL REVENUE FROM THE ISSUE OF STATE ENTERPRISE BONDS AND SHARES MUST BE ACCOUNTED FOR IN ACCORDANCE WITH CURRENT GOVERNMENT REGULATIONS, USED FOR THE APPROVED PROJECT PURPOSES, AND REGULARLY REPORTED TO THE MINISTRY OF FINANCE.

Article 14.

BOND AND SHARE OWNERS SHALL BE RESPONSIBLE FOR ANY DAMAGE OR LOSS OF THE BONDS AND SHARES THEY HAVE PURCHASED. FOR REGISTERED BONDS THAT ARE LOST, IF THE OWNER CAN PROVE OWNERSHIP AND THE BONDS HAVE NOT BEEN MISUSED FOR PAYMENT, THEY WILL BE PAID WHEN DUE.

BOND AND SHARE OWNERS MAY DEPOSIT THEIR BONDS AND SHARES WITH COMMERCIAL BANKS FOR SAFEKEEPING AND MUST PAY SAFEKEEPING FEES AS DIRECTED BY THE MINISTRY OF FINANCE.

Article 15.

ANY ACT OF MAKING AND CIRCULATING FAKE BONDS AND SHARES SHALL BE HANDLED ACCORDING TO LAWS AS THE ACT OF MAKING AND CIRCULATING FAKE MONEY.

Chapter 2:

ISSUE OF STATE ENTERPRISE BONDS

Article 16.

State-owned enterprise bonds include registered and bearer bonds with terms of one year or longer. The buyer of state-owned enterprise bonds may choose to purchase any type of bond without quantity restrictions.

Article 17.

The interest rate on state-owned enterprise bonds must ensure that the buyer receives the actual interest rate plus (+) the inflation index and the business efficiency of the enterprise.

The Ministry of Finance shall consult with the State Bank to determine the interest rate for state-owned enterprise bonds according to the following methods:

1- A fixed interest rate applicable throughout the term of the bond.

2- A fixed annual interest rate during the term of the bond.

3- An interest rate to direct the organization conducting auctions to select the bond interest rate.

Article 18.

State-owned enterprises wishing to issue bonds must meet the following conditions:

1- Having been granted a production and business license.

2- Investment projects being effective and approved by guarantor organizations.

3- The enterprise's production and business activities having been profitable over the three years preceding the issuance of the bonds, with sound financials and prospects for development.

4- Not violating state laws and financial discipline.

5- Being guaranteed by the Ministry of Finance or a reputable financial intermediary organization.

6- Must deposit a security deposit with the guarantor organization. The form and refund procedures for the security deposit are regulated by the Ministry of Finance.

Article 19.

State-owned enterprises wishing to issue bonds must submit the following documents to the Ministry of Finance:

1- Approved investment project by the competent authority.

2- Plan for issuing state-owned enterprise bonds.

3- Application for issuing bonds.

4- Request for the Ministry of Finance guarantee according to the prescribed form of the Ministry of Finance or a guarantee contract with a financial organization.

5- Three consecutive years of financial reports prior to applying for bond issuance, certified by the auditing agency or the competent authority approving the final accounts.

Article 20.

The transfer of ownership rights for registered bonds and the payment of matured bonds can be conducted at the place of issuance or at convenient locations for bondholders. The principal of the bond will be paid on time. Interest on the bond will be paid periodically or in full upon maturity.

Article 21.

The source of payment for state-owned enterprise bonds is derived from depreciation and profits from investment projects funded by bond issuance, after tax payments as required by law. In cases where the aforementioned revenue sources are insufficient at maturity, the state-owned enterprise must use various funds and legitimate sources to make payments; new bond issuance is not allowed to settle maturing bonds. If these sources are still insufficient, the guarantor organization will ensure timely payment to the bondholder.

Article 22.

Interest on state-owned enterprise bonds and costs associated with issuing state-owned enterprise bonds are included in the value of investment projects funded by bond issuance.

Chapter 3:

ISSUE OF STATE-OWNED ENTERPRISE SHARES

Article 23.

Shareholders (shareholders) enjoy rights and responsibilities:

1- Participate in the shareholders' meeting, nominate and elect members to the Board of Directors, vote on important issues, and amend and supplement the Articles of Association, business plans, profit distribution...

2- Receive dividends based on the results of the enterprise's production and business operations.

3- Enjoy tax benefits on income from dividends according to current tax laws.

4- Bear risks when the enterprise is dissolved (or bankrupt) according to the enterprise's Articles of Association and the Law on Enterprise Bankruptcy.

Article 24.

Each shareholder may purchase one or more shares but cannot exceed the limit set forth in the enterprise's Articles of Association.

Article 25.

State-owned enterprises permitted to issue shares must satisfy the following conditions:

1- For operating enterprises, those wishing to issue shares must have obtained a production and business license and been authorized for shareholding reform according to state regulations.

2- For newly established enterprises, they must have a founding decision by the competent authority according to current state regulations and ensure that the state share capital does not fall below 30% of the total capital of the enterprise.

Funds raised from shares that are not yet utilized must be deposited at the National Treasury. In cases where the amount raised through share issuance is insufficient for the scale of the project, the principal and interest must be refunded to the purchasers of shares at the treasury bill interest rate.

Article 26.

State-owned enterprises wishing to issue shares must submit the following documents to the Ministry of Finance:

1- Application for issuing shares.

2- Articles of Association of the enterprise.

3- Production and business plan or economic and technical feasibility study approved by the competent authority.

4- Plan for issuing shares.

5- Draft announcement of share issuance according to the content prescribed by the Ministry of Finance.

Article 27.

State-owned enterprises permitted to issue shares must:

Comply with current laws and regulations regarding financial management and financial reporting.

Announce the issuance of shares, the Articles of Association of the enterprise, financial performance results, the quality of the management board, and other information through mass media.

Pay printing costs for shares, licensing fees, agency issuance and custody fees for shares as prescribed by the Ministry of Finance.

Chapter 4:

RESPONSIBILITIES AND LIMITATIONS OF THE AUTHORITIES

Article 28.

The Ministry of Finance shall have the responsibility:

Coordinate with relevant ministries and sectors managing production and business operations and the Chairman of the People's Committee of provinces and centrally-administered cities to select state-owned enterprises meeting the conditions for issuing bonds and shares and issue permits for the issuance of state-owned enterprise bonds and shares.

Prescribe the form and procedures for issuing bonds and shares.

Specify the content and verify the authenticity of information provided by enterprises issuing bonds and shares.

Supervise the process of using issued capital and settling bond payments.

Inspect and supervise the distribution of dividend income and the payment of share interest.

Manage the printing of bonds and shares.

Prescribe agency issuance fees (Article 7), bond and share custody fees (Article 14), and specify issuance and settlement costs for state-owned enterprise bonds and shares.

Suspend the issuance of bonds and shares for enterprises violating this Regulation;

Consider extending the issuance period for bonds and shares for enterprises;

Examine the guarantee for payment of state enterprise bonds;

Agree with the State Bank of Vietnam to announce the interest rate for state enterprise bonds.

Article 29.

The direct state management agency of the enterprise shall be responsible for:

Examining and deciding or submitting to the competent authority for decision on the investment project for production and business of state enterprises;

Approving the plan for issuing state enterprise bonds submitted to the Ministry of Finance;

Supervising the issuance and use of capital for its intended purpose and effectively;

Inspecting and supervising the recovery of capital and settlement of due state enterprise bonds; distributing dividends of state enterprise shares;

Participating with the Ministry of Finance and the State Bank in summarizing and drawing lessons from the trial issuance of state enterprise bonds and shares.

Article 30.

The State Bank shall be responsible for:

Guiding commercial banks and finance companies in performing agency services for issuing bonds and shares;

Specifying the purchase of bonds and shares by commercial banks and finance companies;

Provisions regarding mortgage and pledge of bonds and shares in credit relationships.