Circular No. 130/1998/TT-BTC guides the transfer, acceptance, and handling of financial issues of state-owned enterprises when merging or consolidating.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 130/1998/TT-BTC DATED SEPTEMBER 30, 1998 GUIDING THE HANDOVER, ACCEPTANCE AND SETTLEMENT OF FINANCIAL REMAINDERS OF STATE ENTERPRISES WHEN MERGING OR CONSOLIDATING

Implementing Decision No. 1179/1997/QĐ-TTg dated December 30, 1997 of the Prime Minister on certain policies and measures to manage the economic and social development plan and state budget for 1998; Directive No. 20/1998/CT-TTg dated April 21, 1998 of the Prime Minister on accelerating restructuring and modernizing state enterprises; the Ministry of Finance guides the handover, acceptance, and settlement of financial remainders of state enterprises when merging or consolidating as follows:

I. GENERAL PRINCIPLES:

1. General provisions on the merger and consolidation of enterprises.

1.1. The merger of enterprises refers to the case where one or more enterprises are merged into another enterprise according to the decision of the competent state authority. Enterprises being merged into another enterprise are called merged enterprises, which cease to exist as separate legal entities after the merger. The enterprise accepting the merged enterprises retains its original legal status. Civil rights and obligations of the merged enterprises are transferred to the accepting enterprise.

1.2. The consolidation of enterprises refers to the case where two or more enterprises consolidate into a new enterprise according to the decision of the competent state authority. Participating enterprises are called consolidated enterprises, which cease to exist as separate legal entities after the consolidation. The newly established enterprise based on the consolidation is called the new enterprise and acquires a new legal entity. Civil rights and obligations of the consolidated enterprises are transferred to the new enterprise.

1.3. Conditions for the merger and consolidation of state enterprises:

- The enterprises subject to merger or consolidation must be included in the restructuring plan of state enterprises approved by the competent authority of the ministries, sectors, provincial people's committees, or municipal people's committees.

- The merger or consolidation should not reduce the business efficiency and competitiveness of the accepting enterprise or the new enterprise.

- Merger or consolidation shall not be carried out with enterprises showing signs of bankruptcy (enterprises that have incurred losses for two consecutive years, financial difficulties to the extent that they cannot pay off due debts or provide full wages to employees according to labor agreements and contracts for three consecutive months). Such enterprises must be resolved in accordance with the Bankruptcy Law and Circular No. 189/CP dated December 23, 1994 of the Government guiding the implementation of the Bankruptcy Law.

1.4. The person authorized to decide on the merger or consolidation of enterprises is the person who signed the decision to establish such enterprises. The procedures and steps for the merger and consolidation of enterprises shall be implemented in accordance with Decree No. 50/CP dated August 28, 1996 and Decree No. 38/CP dated April 28, 1997 of the Government on the establishment, reorganization, dissolution, and bankruptcy of state enterprises.

2. Principles for financial handling during the merger and consolidation.

2.1. Clearly define the responsibilities of the management and operation of the merged enterprises and the accepting enterprise or the new enterprise.

2.2. The merged enterprises are responsible for handing over all assets, capital, including land use rights under their management and use up to the time of handover to the accepting enterprise or the new enterprise.

2.3. The accepting enterprise or the new enterprise has the right and obligation to accept all assets, capital, receivables, and payables of the merged enterprises.

2.4. The accepting enterprise or the new enterprise is responsible for inheriting and settling financial issues, capital, assets, receivables, and payables of the merged enterprises.

II. SPECIFIC PROVISIONS

1. Inventory and classification of assets.

1.1. The merged enterprises must conduct a comprehensive inventory of all assets and capital under their management and use, clearly identifying the actual quantity of assets, surplus assets, losses, and damages; reconcile receivables and payables, identify difficult-to-collect receivables and unclaimed payables, determine the causes and responsibilities of collectives and individuals for asset losses and difficult-to-collect receivables according to current regulations; close accounting books, prepare financial statements, and clearly identify remaining financial issues to be settled for handover to the accepting enterprise or the new enterprise. The timing for inventory, reconciliation of receivables and payables, and preparation of financial statements is the date of the merger or consolidation of enterprises.

1.2. The merged enterprises must classify assets together with the accepting enterprise or the new enterprise: unused assets, unnecessary assets, assets awaiting liquidation, and assets of poor quality; clearly identify the causes and responsibilities of collectives and individuals for assets of poor quality according to current regulations.

Asset classification is conducted concurrently with the inventory process. The inventory and classification of assets must involve representatives from the accepting enterprise or the new enterprise, and a record must be made with signatures of the authorized representatives of the merged enterprise and the accepting enterprise or the new enterprise.

2. Handover and acceptance.

2.1. Based on the financial report accompanied by the inventory and classification records, and the reconciliation confirmation of receivables and payables, the merged enterprises must hand over all assets (including land use rights) in their original condition to the accepting enterprise or the new enterprise, along with all relevant documents and certificates.

2.2. The accepting enterprise or the new enterprise has the right and responsibility to accept all assets (including damaged and low-quality assets, unnecessary assets awaiting liquidation), receivables (including difficult-to-collect receivables), payables, and accumulated losses of the merged enterprises.

2.3. After the transfer of assets and debts, the handling of remaining issues regarding assets, accounts receivable and payable, and accumulated losses shall be the responsibility of the receiving enterprise or the newly established enterprise.

2.4. The transfer time for assets shall be based on the asset inventory date (the signing of the handover certificate may be delayed but not more than one month after the inventory date). During the period before the handover, the enterprise being merged or the consolidating enterprise shall be responsible for preserving all assets intact to prevent damage, loss, or depletion.

2.5. The handover and acceptance must be documented with a certificate signed by the authorized representatives of the enterprise being merged or the consolidating enterprise and the receiving enterprise or the newly established enterprise. The authorized representative on the handover side is the General Director and Chief Accountant of the enterprise being merged or the consolidating enterprise; the authorized representative on the receiving side is the General Director and Chief Accountant of the receiving enterprise or the newly established enterprise.

3. Handling the remaining issues of the enterprise being merged, the consolidating enterprise.

3.1. Handling remaining issues prior to handover:

During the process of asset inventory, classification, and verification of accounts receivable and payable, the enterprise being merged or the consolidating enterprise must immediately address any remaining issues within its scope and authority before handing over to the receiving enterprise or the newly established enterprise:

- For accounts receivable: promptly recover overdue receivables that can be collected; clearly identify the reasons and responsibilities of groups and individuals for difficult-to-collect receivables; immediately handle difficult-to-collect receivables based on current financial mechanisms and legal grounds.

- For depleted or lost assets: clearly identify the causes, group and individual responsibilities, and request compensation from the parties involved according to the law. For insured assets, work with insurance agencies to determine the compensation amount. The difference between the loss value and the compensation received shall be handled according to current financial mechanisms.

- Immediately sell or liquidate substandard, unused, or pending-for-liquidation assets to recover capital. Liquidation and sale procedures, including the handling of the difference between proceeds from sales and liquidations minus residual asset values and related costs, shall follow current regulations.

Depleted or lost assets, substandard assets, and difficult-to-collect receivables without sufficient grounds for handling shall be handed over to the receiving enterprise or the newly established enterprise. Responsibility for these remaining issues lies with the General Director, Chief Accountant, and relevant personnel of the enterprise being merged or the consolidating enterprise.

3.2. Handling remaining issues after handover:

a) For depleted or lost assets: The receiving enterprise or the newly established enterprise shall continue to handle them according to current financial mechanisms:

- The party causing depletion or loss must compensate.

- Request insurance companies to compensate (for insured assets).

- Use financial reserve funds to offset.

- Record as business expenses if the above sources are insufficient.

b) For substandard, unused, or pending-for-liquidation assets: The receiving enterprise or the newly established enterprise shall immediately sell or liquidate them to recover capital. Liquidation and sale procedures shall follow current regulations. The difference between proceeds and residual asset values, including liquidation and sale costs, shall be handled according to current financial mechanisms.

c) For liabilities: The receiving enterprise or the newly established enterprise shall fulfill the obligation to pay off debts to creditors as committed, including tax debts and budgetary debts, employee debts, or handle them according to current regulations. Unclaimed debts shall be recorded as extraordinary income.

d) For receivables: The receiving enterprise or the newly established enterprise shall be responsible for tracking and urging the recovery of receivables according to the reconciliation and confirmation certificates and handover certificates. The enterprise may establish and record a provision for doubtful receivables in business expenses. Unrecoverable receivables shall be handled according to current regulations.

đ) For losses: The receiving enterprise or the newly established enterprise may continue to carry forward the losses received from the enterprises being merged or consolidated to the next year as prescribed by law. The loss carryforward period starts from the handover date. During the carryforward period, losses are offset by pre-tax profits. Remaining losses after the carryforward period are offset by post-tax profits.

III. RESPONSIBILITIES OF ENTERPRISES WHEN MERGING OR CONSOLIDATING

1. For the enterprise being merged, the consolidating enterprise.

- Upon receipt of the merger or consolidation decision from the competent state agency, the enterprise being merged or the consolidating enterprise must immediately conduct asset inventory, classification, account reconciliation, and necessary procedures as prescribed to timely hand over to the receiving enterprise or the newly established enterprise.

- If the enterprise delays or prolongs the handover time by not conducting asset inventory, classification, and account reconciliation, causing difficulties for the management and operation of the receiving enterprise or the newly established enterprise, resulting in asset losses, the General Director of the enterprise being merged or the consolidating enterprise shall bear full legal responsibility for the losses caused by the delay.

- Before the handover, the enterprise being merged or consolidated shall be responsible for preserving all assets intact to prevent damage, depletion, or loss. Any depletion or loss of assets during this period shall be the legal responsibility of the General Director of the enterprise being merged or the consolidating enterprise.

2. For the receiving enterprise, the newly established enterprise.

- The enterprise receiving or the new enterprise must simultaneously inventory and classify assets while taking over all assets of the enterprise being merged or consolidated handed over.

- Be responsible for taking over entirely and in their original state the capital, assets, receivables, and payables of the enterprise being merged or consolidated; at the same time, they must inherit and handle financial issues of the enterprise being merged or consolidated according to current regulations.

- If the asset handover acceptance does not match reality and causes asset loss for the enterprise, the General Director, Chief Accountant of the enterprise receiving or the new enterprise, and related individuals shall be liable for compensation.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days from the date of signature. During implementation, if there are any difficulties, agencies and enterprises are requested to promptly reflect them to the Ministry of Finance for research, consideration, and supplementary guidance.