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

CIRCULAR

Guidelines for transferring, receiving, and handling financial issues
of state-owned enterprises when merging or consolidating

Pursuant to Decision No. 1179/1997/QD-TTg dated December 30, 1997 of the Prime Minister on certain policies and measures to manage the socio-economic development plan and the State budget for 1998; Directive No. 20/1998/CT-TTg dated April 21, 1998 of the Prime Minister on accelerating the restructuring and renewal of state-owned enterprises; the Ministry of Finance hereby provides guidelines for transferring, receiving, and handling financial issues of state-owned enterprises when merging or consolidating as follows:

I. GENERAL PRINCIPLES:

1. General provisions on mergers and consolidations of enterprises.

1.1. 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. The enterprises being merged are called the merged enterprises, and they cease to exist as separate legal entities after the merger. The enterprise that receives the merged enterprises retains its original legal status. Civil rights and obligations of the merged enterprises are transferred to the receiving enterprise.

1.2. 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. The participating enterprises are called consolidated enterprises, and they cease to exist as separate legal entities after the consolidation. The newly established enterprise based on the consolidated enterprises is a new legal entity. Civil rights and obligations of the consolidated enterprises are transferred to the new enterprise.

1.3. Conditions for merging or consolidating state-owned enterprises:

The enterprises involved in the merger or consolidation must be included in the restructuring plan of state-owned enterprises approved by the competent authority of the ministries, sectors, provincial People's Committees, or municipal People's Committees.

The merger or consolidation shall not reduce the business efficiency and competitiveness of the receiving enterprise or the new enterprise.

Enterprises showing signs of bankruptcy (enterprises suffering losses for two consecutive years, with financial difficulties to the extent that they cannot pay their due debts or provide sufficient wages to employees according to labor agreements and contracts for three consecutive months) shall not be subject to merger or consolidation. These enterprises must be resolved in accordance with the Bankruptcy Law and Decree 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 or consolidation of enterprises shall be carried out 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-owned enterprises.

2. Principles for handling financial matters during mergers and consolidations.

2.1. Clearly define the responsibilities of the managers and operators of the merged enterprises and the receiving enterprise or the new enterprise.

2.2. The merged enterprises have the responsibility to transfer all assets, capital, including land use rights under their management and control, in full and in good condition up to the time of transfer to the receiving enterprise or the new enterprise.

2.3. The receiving enterprise or the new enterprise has the right and obligation to accept all assets, capital, receivables, and payables of the merged enterprises in full and in good condition.

2.4. The receiving enterprise or the new enterprise has the responsibility to inherit and handle 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 control, clearly identifying the actual quantity of assets, surplus assets, losses, and damages; reconcile receivables and payables, identify difficult-to-collect receivables, unclaimed payables, 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 requiring resolution to be transferred to the receiving 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 receiving 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 simultaneously with the inventory process. The inventory and classification of assets must involve representatives from the receiving enterprise or the new enterprise, and a record must be made with signatures from the authorized persons of the merged enterprises and the receiving enterprise or the new enterprise.

2. Transfer 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 transfer all assets (including land use rights) in full and in good condition to the receiving enterprise or the new enterprise, along with all relevant documentation.

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

2.3. After transferring assets and payables, the handling of remaining issues regarding assets, receivables, and accumulated losses falls under the responsibility of the receiving enterprise or the new enterprise.

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

2.5. The handover and acceptance must be documented in a record signed by the authorized representatives of the enterprise being merged or the consolidating enterprise and the accepting enterprise or the new enterprise. The authorized representative on the handing-over side is the General Director and Chief Accountant of the enterprise being merged or the consolidating enterprise; the authorized representative on the accepting side is the General Director and Chief Accountant of the accepting enterprise or the new enterprise.

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

3.1. Handling existing issues prior to handover:

During the process of inventorying, classifying assets, and verifying debts and receivables, the enterprise being merged or the consolidating enterprise must immediately address any issues within its scope and authority before handing over to the accepting enterprise or the new enterprise:

For receivables: recover immediately any due receivables that can be collected; identify the cause and responsibility of individuals or groups for difficult-to-collect receivables; promptly handle difficult-to-collect receivables with sufficient legal basis according to the current financial mechanism.

For depleted or lost assets: clearly identify the cause, responsibility of individuals or groups, and require the parties involved to compensate according to the law. For insured assets, work with the insurance agency to determine the compensation amount. The difference between the loss value and the compensation amount received shall be handled according to the current financial mechanism.

Immediately sell or liquidate substandard, non-useful, or pending-for-liquidation assets to recover capital. The procedures for selling or liquidating assets and handling the difference between the proceeds from the sale or liquidation and the remaining asset value and liquidation costs shall be carried out according to current regulations.

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

3.2. Handling issues after handover:

a) For depleted or lost assets: The accepting enterprise or the new enterprise shall continue to handle them according to the current financial mechanism:

The party causing depletion or loss must compensate.

Request insurance company compensation (for insured assets).

Use the financial reserve fund to cover losses.

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

b) For substandard, non-useful, or pending-for-liquidation assets: The accepting enterprise or the new enterprise shall immediately sell or liquidate them to recover capital. The procedures for selling or liquidating assets shall follow current regulations. The difference between the proceeds and the remaining asset value including liquidation costs shall be handled according to the current financial mechanism.

c) For liabilities: The accepting enterprise or the new enterprise shall be obligated to pay off debts to creditors according to agreements, including tax debts and budgetary debts, employee debts, or handle them according to the current system. Debts without claimants shall be recorded as extraordinary income.

d) For receivables: The accepting enterprise or the new enterprise shall be responsible for tracking and urging the recovery of receivables according to the reconciliation records and handover records. The enterprise may establish and record a provision for doubtful receivables in business expenses. Unrecoverable receivables shall be handled according to the current system.

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

III. RESPONSIBILITIES OF ENTERPRISES WHEN MERGING OR CONSOLIDATING

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

Upon receiving the merger or consolidation decision from the competent state agency, the enterprise being merged or the consolidating enterprise must immediately conduct an inventory, classify assets, verify debts and receivables, and complete necessary procedures according to regulations to timely hand over to the accepting enterprise or the new enterprise.

If the enterprise delays or prolongs the handover time by not conducting an inventory, classifying assets, or verifying debts and receivables, causing difficulties in management and operations of the accepting enterprise or the new 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 handover, the enterprise being merged or consolidated shall be responsible for preserving all assets 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 accepting enterprise, the new enterprise.

The accepting enterprise or the new enterprise must jointly with the enterprise being merged or the consolidating enterprise inventory and classify assets while accepting all assets handed over by the enterprise being merged or consolidated.

Shall be responsible for receiving in full and intact the capital, assets, receivables, and payables of the enterprise being merged or consolidated; at the same time, shall inherit and handle financial issues of the enterprise being merged or consolidated according to current regulations.

In case the asset handover reception does not match reality, causing property loss to the enterprise, the General Director, Chief Accountant of the receiving enterprise or the new enterprise, and related individuals shall bear responsibility for compensating the damage.

III. IMPLEMENTATION PROVISIONS

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