Circular No. 132/1999/TT-BTC guiding the sale of shares to foreign investors (as per Decision No. 145/1999/QĐ-TTg dated June 28, 1999 of the Prime Minister).

CIRCULAR

Gradually sell shares to foreign investors

(Pursuant to Decision No. 145/1999/QĐ-TTg

dated June 28, 1999 of the Government Prime Minister)

_______________________

Implementing Decision No. 145/1999/QĐ-TTg dated June 28, 1999 of the Government Prime Minister on issuing the Regulation on selling shares to foreign investors, the Ministry of Finance guides financial issues as follows:

I. GENERAL PROVISIONS:

1. The objects eligible for selling shares to foreign investors include state-owned enterprises implementing shareholding reform and joint-stock production and trading companies belonging to industries specified in the Appendix attached to Decision No. 145/1999/QĐ-TTg dated June 28, 1999 of the Government Prime Minister.

2. Foreign investors purchasing shares of Vietnamese enterprises include:

- Foreign economic and financial organizations operating outside the territory of Vietnam, including economic organizations currently having investment capital in Vietnam.

- Foreign individuals not permanently residing in the territory of Vietnam.

- Vietnamese individuals residing abroad.

- Foreign individuals permanently residing in Vietnam.

3. The amount of shares sold to foreign investors:

The total value of shares sold to foreign investors shall not exceed 30% of the charter capital of the company. In cases where the joint-stock company has not yet raised the required charter capital, the total number of shares sold to foreign investors shall not exceed 30% of the shares already raised.

In cases where only one foreign investor registers to purchase shares of the company, that foreign investor may also purchase up to a maximum of 30% of the charter capital or the total number of shares already raised.

4. Selling shares to foreign investors shall be carried out directly at the enterprise or through underwriting organizations or issuing agents.

In cases where shares are sold through underwriting organizations or issuing agents, the enterprise and the underwriting organization must have an underwriting agreement; the fee and conditions for underwriting shall be agreed upon by both parties but shall not exceed the maximum ratio of underwriting fees prescribed by the State.

5. Enterprises with a decision from the Government Prime Minister allowing them to sell shares to foreign investors must publicly announce on mass media at least five consecutive issues of a central newspaper and a local newspaper before organizing the sale or in cases where auction is required as stipulated in Section 2.2 Part II below. The announcement content includes: the Government Prime Minister's decision on selling shares to foreign investors, the enterprise value, the state capital value at the enterprise announced by the competent authority, the charter capital, the total number of shares sold to foreign investors, the total number of shares sold to domestic investors, business performance indicators, and debts of the enterprise before selling shares to foreign investors.

6. Selling shares to foreign investors shall be conducted in Vietnamese currency. If foreign investors purchase shares in foreign currency, they must convert it into Vietnamese currency according to the current foreign exchange management regime of the State Bank of Vietnam.

Foreign investors wishing to purchase shares of Vietnamese enterprises are permitted and must open accounts at financial organizations or commercial banks operating within the territory of Vietnam. All activities of buying and selling shares, receiving and using dividends, and transferring money from share investments out of the territory of Vietnam must go through this account.

II. SPECIFIC PROVISIONS

1Determining the enterprise value for selling shares to foreign investors:

1.1- For state-owned enterprises implementing shareholding reform:

State-owned enterprises implementing shareholding reform that are allowed to sell shares to foreign investors shall determine the enterprise value in accordance with Circular No. 104/1998/TT-BTC dated July 18, 1998, and other documents of the Ministry of Finance guiding financial matters when converting state-owned enterprises into joint-stock companies.

The result of determining the enterprise value announced by the finance agency serves as the basis for calculating the preferential share price for employees in the enterprise according to the current system, which is the minimum price for organizing an auction (referred to as the floor price).

1.2- For joint-stock companies: The determination of the enterprise value for selling shares to foreign investors shall be organized by the company's Valuation Board. The Board may invite organizations or experts knowledgeable about determining enterprise value for consultation or hire independent auditing agencies within the country that meet the necessary conditions and are trustworthy to determine the enterprise value.

2. Share selling price to foreign investors:

2.1- The price of selling shares to foreign investors, in principle, corresponds to the price sold to domestic investors. The enterprise owner and foreign investors may agree on a different price, but it cannot be lower than the price sold to domestic investors.

2.2- Organizing meetings with foreign investors and determining the share selling price:

After announcing the sale of shares to foreign investors, the enterprise together with the underwriting organization, issuing organization, organizes individual meetings with each foreign investor to understand their technological, financial capabilities, market, and willingness to participate in management.

Based on the results of these meetings, the enterprise selects suitable foreign investors according to the enterprise's requirements. The share selling price cannot be lower than the price sold to domestic investors.

In cases where multiple foreign investors register to purchase shares exceeding the controlled ratio of 30%, an auction will be organized according to the current regulations. The selling price is the highest bid made by an investor.

2.3- The authority to decide the share selling price to foreign investors is determined by the enterprise according to the principle stated in point 2.1 above. For state-owned enterprises implementing shareholding reform, if the price can only be adjusted below the floor price, the adjustment of the share selling price to foreign investors shall be implemented according to the分级授权规定在《1999年第104号通知》（1998年7月18日财政部发布）第二部分第二章第8.2点的规定。

3. Provisions on selling shares:

- The sale of shares to foreign investors must comply with the provisions set forth in Decree No. 48/1998/NĐ-CP dated July 11, 1998 of the Government on securities and the Securities Market, and Circular No. 01/1998/TT-UBCK dated October 13, 1998 of the State Securities Commission. Depending on the issuance form (directly or through underwriting organizations, agents), the enterprise may require investors to perform registration activities, deposit payments; sign underwriting or agency contracts. In the case of direct sales, the enterprise has the right to require foreign investors to deposit a maximum of 10% of the value of the shares registered for purchase.

- In cases where multiple independent organizations simultaneously register for underwriting, the enterprise must organize a bidding process or request the underwriting organizations to cooperate to establish a joint underwriting group as stipulated in Section VII of Circular No. 01/1998/TT-UBCK dated October 13, 1998 of the State Securities Commission.

4. Management of proceeds from the sale of shares to foreign investors:

4.1- State-owned enterprises implementing shareholding reform; joint-stock companies selling state-owned capital at the enterprise to foreign investors shall manage the entire proceeds from the sale of shares belonging to state capital according to Section V Part II of Circular No. 104/1998/TT-BTC dated July 18, 1998 on guiding financial issues when converting state-owned enterprises into joint-stock companies; after deducting underwriting fees (if any) corresponding to the state-owned shares sold to foreign investors, the remaining amount shall be deposited into the state's privatization revenue account according to current regulations.

4.2- For the issuance of additional shares to raise capital by joint-stock companies: Joint-stock companies issuing shares to foreign investors to raise additional capital shall deposit the proceeds into the company's account.

5. Shares of foreign shareholders: These are named ordinary shares with a nominal value of one hundred thousand Vietnamese dong per share. The Treasury uniformly prints, manages, and provides blank share certificates to enterprises.

Enterprises process the procedures to purchase blank share certificates for foreign investors concurrently with those for domestic investors. The Chairman of the Board of Directors of the joint-stock company is responsible for managing and implementing tasks related to recording share certificates and providing them to shareholders.

6. Rights and benefits of employees and state-owned enterprises implementing shareholding reform that sell shares to foreign investors: Shall be applied as state-owned enterprises implementing shareholding reform according to Decree No. 44/1998/NĐ-CP dated June 29, 1998 of the Government and guiding circulars.

7. Rights and obligations of foreign investors as shareholders:

7.1- Have the right to participate or not participate in the management of joint-stock companies according to the provisions of the Company Law and the Articles of Organization and Operation of the joint-stock company.

7.2- Can use shares as collateral in credit relationships in Vietnam.

7.3- Can transfer shares after one year if they do not participate in the management of the company, after three years if they participate in the management of the company from the date of ownership of shares in the joint-stock company according to the guidance of the State Securities Commission.

7.4- Can convert dividends and proceeds from the transfer of shares received in Vietnamese dong into foreign currency according to the current foreign exchange management regime guided by the State Bank of Vietnam to be transferred abroad after fulfilling tax obligations as prescribed in the Foreign Investment Law and the current Tax Law.

If foreign investors use dividends received for reinvestment in Vietnam, they shall be subject to the provisions of the Law on Encouraging Domestic Investment.

Enjoy other rights like domestic shareholders in the company and rights prescribed by law.

7.5- Fulfill obligations prescribed in the Company Law, the Foreign Investment Law, the Law on Encouraging Domestic Investment, and the Articles of Organization and Operation of the joint-stock company.

7.6- Implement obligations prescribed in the Company Law, the Foreign Investment Law, the Law on Encouraging Domestic Investment, and the Articles of Organization and Operation of the joint-stock company.

III. IMPLEMENTATION PROVISIONS

This Circular takes effect from the date the Prime Minister's Decision No. 145/1999/QĐ-TTg dated June 28, 1999 comes into force. During implementation, if there are difficulties, enterprises and foreign investors are requested to report to the Ministry of Finance for study and resolution.