Circular No. 138/2010/TT-BTC guides the profit distribution regime for limited liability companies with one member owned by the State.

CIRCULAR

Guidelines on profit distribution for single-member limited liability companies owned by the State

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Pursuant to the Enterprise Law No. 60/2005/QH11 dated November 29, 2005;

Pursuant to Decree No. 118/2008/NĐ-CP dated November 27, 2008 of the Government on the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to the Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government on the conversion of state-owned enterprises into single-member limited liability companies and the organization of management of single-member limited liability companies owned by the State;

Implementing the directive of the Prime Minister in Circular No. 181/VPCP-KTTH dated January 11, 2010 of the Government Office regarding the profit distribution of single-member state-owned limited liability companies; the Ministry of Finance issues guidelines on profit distribution for single-member limited liability companies owned by the State as follows:

Article 1. This Circular stipulates the profit distribution for single-member limited liability companies owned by the State, including single-member limited liability companies under Ministries, People's Committees of provinces and centrally-administered cities, parent companies of Groups and Corporations decided by the Prime Minister, Ministers of Ministries, Chairmen of People's Committees of provinces and centrally-administered cities to convert and approve their organizational charters (hereinafter referred to as the company).

For the State Capital Investment Corporation, Securities Exchanges, Central Depositories of Securities, credit institutions, and lottery businesses, separate guiding documents shall be applied.

Article 2. The realized profits of the company after covering previous years' losses according to the Corporate Income Tax Law and paying corporate income tax shall be distributed as follows:

1. Dividing profits among associated capital contributors according to the provisions of the contract (if applicable);

2. Covering previous years' losses that have exceeded the allowable period for deduction from pre-tax profits;

3. Allocating 10% into the financial reserve fund; when the balance of the fund reaches 25% of the charter capital, no further allocation will be made;

4. Establishing special funds from post-tax profits at the ratio prescribed by the State for specific companies required by law to establish such funds;

5. The remaining profits after deducting the contents specified in Clauses 1, 2, 3, and 4 of this Article shall be distributed according to the ratio between the owner's investment capital in the company and the average self-raised capital of the company during the year, wherein:

- The owner's investment capital in the company and the average self-raised capital during the year are determined based on the total end-of-quarter capital balances divided by four quarters.

- The end-of-quarter balance of the owner's investment capital includes the balances of Owner's Investment Capital - Account 411, Development Fund - Account 414, and Basic Construction Investment Capital - Account 441 as stipulated in Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance.

Self-raised capital by the company is the amount raised through bond issuance, borrowing from banks, credit organizations, other financial institutions, individuals, and organizations outside the company, borrowing from employees, and other forms of capital raising as prescribed by law, excluding government-guaranteed loans, Ministry of Finance-guaranteed loans, and loans with interest subsidies.

Article 3. Profits allocated according to the owner's investment capital in the company shall be used as follows:

1. For companies not yet fully invested with the approved charter capital, the portion of profits allocated according to the owner's investment capital in the company shall be used to supplement the company's charter capital to the approved level.

2. For companies with the owner's investment capital in the company greater than or equal to the approved charter capital, the owner shall coordinate with the Ministry of Finance to develop a plan and report.

Article 4. Profits allocated according to self-raised capital shall be distributed as follows:

1. Allocating a minimum of 30% into the company's development fund.

2. Allocating the management board incentive fund, specifically:

2.1. Based on the classification of the company's performance by the Board of Members or the Chairman of the company and the General Director according to current regulations, the management board incentive fund shall be established as follows:

In cases where the tasks are excellently completed, up to 5% of the profits allocated according to self-raised capital can be set aside for the management board incentive fund; the annual allocation does not exceed 500 million VND (for companies with a Board of Members), 200 million VND (for companies without a Board of Members);

In cases where the tasks are satisfactorily completed, up to 2.5% of the profits allocated according to self-raised capital can be set aside for the management board incentive fund; the annual allocation does not exceed 250 million VND (for companies with a Board of Members), 100 million VND (for companies without a Board of Members);

In cases where the tasks are not completed, no management board incentive fund shall be established even if the company has profits.

2.2. Specifically, for unique companies with more owner's investment capital in the company than self-raised capital or no self-raised capital, resulting in insufficient or no profits allocated according to self-raised capital to establish the management board incentive fund, if the management board completes or excels in completing its tasks, the management board incentive fund shall be established according to the provisions of Article 8 of this Circular; the allocation ratio is determined according to Clause 2.1 of this Article.

2.3. Ministries, People's Committees of provinces and centrally-administered cities, Boards of Directors of Groups and Corporations established by the Prime Minister shall determine the specific allocation ratio for the management board incentive fund based on the company's operational efficiency, business classification results, and the provisions of this Article.

3. The remaining profits shall be allocated to the reward and welfare funds according to the business classification results, wherein:

- Companies classified as Class A may allocate up to three months' salary for both the reward and welfare funds;

- Companies classified as Class B may allocate up to one and a half months' salary for both the reward and welfare funds;

- A company classified as Category C may allocate a maximum of one month's salary for the two reward funds and welfare funds;

- If a company does not classify according to the regulations, it shall not establish the two reward funds and welfare funds.

The amount allocated to each fund shall be decided by the Board of Members or the Chairman of the company after consulting the opinions of the Trade Union Executive Board of the company.

4. The remaining profit after fully allocating the reward fund and welfare fund as stipulated in Clause 3 of this Article shall continue to be supplemented to the company's development investment fund.

Article 5. For newly established companies (not converted from state-owned enterprises), within two consecutive years from when they start making profits, if distributing profits as prescribed above but the two reward and welfare funds do not reach two months' actual salary for companies classified as Category A; do not reach one and a half months' actual salary for companies classified as Category B; and do not reach one month's actual salary for companies classified as Category C, then the company may reduce the allocation to the development investment fund to ensure that the two reward and welfare funds meet the prescribed levels. The maximum reduction equals the entire amount allocated to the development investment fund from post-tax profits generated in the fiscal year. In subsequent years, the company shall distribute post-tax profits according to the provisions of Article 4 of this Circular.

Article 6. For companies designed and invested in to primarily, regularly, and stably produce and supply public goods and services ordered or planned by the state, when distributing profits according to this mechanism and not having enough to allocate to the management board reward fund and the two reward and welfare funds as specified in this Circular, the company may reduce the allocation to the development investment fund and reduce the portion of profits distributed according to the owner's investment at the company to allocate sufficiently to the management board reward fund and the two reward and welfare funds as prescribed. If reducing all the aforementioned amounts still does not suffice, the State will consider and provide support:

- 100% of the shortfall in the allocation to the fund if the company is classified as Category A and has a proportion of revenue from supplying public goods and services reaching or exceeding 50% of total revenue.

- 50% of the shortfall in the allocation to the fund if the company is classified as Category A but has a proportion of revenue from supplying public goods and services below 50% of total revenue or is classified as Category B.

Post-tax profits for allocating to the management board reward fund and the two reward and welfare funds include: profits from activities of supplying public goods and services ordered or planned by the state or through bidding, and profits from other business activities.

Article 7. Allocation to the reward fund and welfare fund for special companies:

Special companies with more capital belonging to the owner's investment than self-raised capital or without self-raised capital; Companies that have decisions from competent authorities regarding corporate shareholding but have not officially converted ownership (not yet issued a new Business Registration Certificate); Companies currently undertaking certain economic and social tasks assigned by the State in border areas, islands, strategic regions; combining economic tasks with national defense; providing employment for ethnic minorities... When implementing the profit distribution system after tax as stipulated in Articles 2 and 4 of this Circular, if the two reward and welfare funds are low due to little or no post-tax profits distributed according to self-raised capital, then the allocation to the reward and welfare funds shall be as follows:

- May allocate a maximum of three months' actual salary to the two funds if the company is classified as Category A and the amount payable to the budget in the current year is higher than or equal to the previous year;

- May allocate a maximum of one and a half months' actual salary to the two funds if the company is classified as Category A and the amount payable to the budget in the current year is lower than the previous year or is classified as Category B and the amount payable to the budget in the current year is higher than or equal to the previous year;

- May allocate a maximum of one month's actual salary to the two funds for the remaining companies (that implement classification);

- If a company does not classify according to the regulations, it shall not establish the reward and welfare funds.

Article 8. The procedure for supplementing the reward fund of the company's management board and two incentive welfare funds for special companies shall be as follows:

- Reduce the investment development fund allocated according to regulations to supplement the reward fund of the company's management board and two incentive welfare funds to meet the levels specified in Clause 2.1, Article 4 and Article 7 of this Circular;

- If the portion allocated to the investment development fund is exhausted and the reward fund of the company's management board and two incentive welfare funds have not reached the specified level, the enterprise may use part of the profit distributed according to the capital owned by the investor at the company to supplement the reward fund of the company's management board and two incentive welfare funds, but the maximum usage level shall be equal to 50% of the profit distributed according to the capital owned by the investor at the company.

Article 9. The classification results of enterprises A, B, C and the degree of completion of tasks by the Board of Members or the Chairman of the company and the General Director shall be determined in accordance with the provisions of the law.

Article 10.

1. This Circular takes effect from November 5, 2010 and applies to the fiscal year 2010. Previous regulations on profit distribution of limited liability companies with a single state-owned shareholder that contradict the provisions of this Circular are hereby abolished.

2. Parent companies belonging to Groups, Corporations, parent companies in the parent company - subsidiary model shall apply the provisions of this Circular to implement profit distribution at subsidiary companies which are wholly-owned limited liability companies.

3. In the course of implementation, if there are difficulties, the companies shall report to the Ministry of Finance for consideration and resolution./.