Circular No. 146/2007/TT-BTC guiding the implementation of certain financial issues when converting state-owned enterprises with 100% state capital into joint-stock companies as prescribed in Government Decree No. 109/2007/NĐ-CP dated June 26, 2007.

CIRCULAR

Guidelines for implementing certain financial issues when converting state-owned enterprises with 100% state capital into joint-stock companies as stipulated in Decree No. 109/2007/NĐ-CP dated June 26, 2007 of the Government.

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Implementing Decree No. 109/2007/NĐ-CP dated June 26, 2007 of the Government on converting state-owned enterprises with 100% state capital into joint-stock companies (hereinafter referred to as Decree No. 109/2007/NĐ-CP), the Ministry of Finance provides guidelines for certain financial issues as follows:

This technical regulation sets out technical requirements, testing methods, sampling procedures; management requirements; responsibilities of organizations and individuals producing, trading, and importing cigarettes.

1. These Circular applies to entities implementing privatization as provided for in Article 2 of Decree No. 109/2007/NĐ-CP (hereinafter referred to as privatized enterprises).

2. Privatized enterprises must inventory, handle financial matters, and revalue the enterprise's value and the value of state capital at the enterprise. In cases where the value of state capital at the enterprise no longer exists, other appropriate restructuring methods shall be applied in accordance with the law; the State will not provide additional capital for privatization.

3. Based on the reassessment of the enterprise's value and the value of state capital, privatized enterprises must determine the charter capital, develop a privatization plan, organize the initial public offering of shares, convene the shareholders' meeting, continue to resolve remaining financial issues until the formal conversion into a joint-stock company, settle accounts with the State, and hand over to the joint-stock company.

4. The privatization process must ensure strictness, transparency, and fairness, without causing loss of State capital and assets. Organizations and individuals who fail to comply with State regulations, causing losses or loss of State assets, shall bear administrative responsibility, compensate for material losses, or be held criminally liable according to the law.

5. The authority deciding on privatization as stipulated in Article 54 of Decree No. 109/2007/NĐ-CP shall establish a Steering Committee to assist the authority deciding on privatization in organizing and implementing the privatization work according to prescribed regulations. The privatization steering committee shall be dissolved after the privatized enterprise has settled accounts and officially become a joint-stock company. Financial issues arising from privatization that occur after the enterprise officially becomes a joint-stock company (if any) shall be handled by the authority deciding on privatization.

6. Proceeds from privatization, after deducting related expenses, shall be remitted to the competent authority according to prescribed regulations. Strictly prohibited is the use of privatization proceeds by enterprises for business purposes or any other purpose of the enterprise. Late payment cases shall be subject to late payment penalties under current financial discipline.

II. INVENTORY AND CLASSIFICATION OF ASSETS AND LIABILITIES

A. TIME FOR INVENTORY AND DETERMINATION OF ENTERPRISE VALUE

1. Upon receiving notification or decision on privatization from the competent authority, privatized enterprises have the responsibility to inventory and classify assets under their management and use at the time of determining the enterprise's value.

2. The time for determining the enterprise's value is decided by the authority deciding on privatization, consistent with the accounting closing date, preparation of financial statements, and the selected method for determining the enterprise's value, specifically:

2.1. For cases applying the asset-based method to determine the enterprise's value, the inventory and determination of the enterprise's value time is the end of the nearest quarter to the date of the privatization decision.

2.2. For cases applying the discounted cash flow method to determine the enterprise's value, the inventory and determination of the enterprise's value time is the end of the nearest fiscal year to the date of the privatization decision.

3. Privatized enterprises use audited annual financial statements as the basis for determining monetary capital and debt items.

If the time for determining the enterprise's value does not coincide with the annual financial statement date, the enterprise must prepare financial statements at the time of determining the enterprise's value.

4. The announcement of the enterprise's value and the value of state capital at the enterprise should not exceed six months from the valuation date for the asset-based method and nine months for the discounted cash flow method.

If the announcement of the enterprise's value and the value of state capital at the enterprise cannot be made within the above periods, the authority deciding on privatization shall consider and decide to extend the valuation period but must ensure that the announcement of the enterprise's value and the value of state capital at the enterprise does not exceed twelve months from the valuation date.

B. INVENTORY AND CLASSIFICATION OF ASSETS AND LIABILITIES

1. Inventory and classification of assets:

1.1. Inventory and verify the actual quantity and quality of assets currently managed and used by the enterprise; check cash balances and reconcile bank account balances at the time of determining the enterprise's value; identify excess or shortage of assets and cash compared to accounting records, and analyze the reasons for excess or shortage.

1.2. Classify inventoried assets into the following groups:

a) Assets required for use by the enterprise.

b) Unused assets, surplus assets, and assets awaiting liquidation.

c) Assets formed from reward funds and welfare funds (if any).

d) Leased assets, goods and materials held for others, processed for others, agency sales, and consigned goods.

2. Reconciliation, confirmation, and classification of debt items, prepare detailed lists for each type of debt according to the following provisions:

2.1. Accounts payable:

a) Reconcile and confirm debts according to creditors (including tax debts and other debts to the State budget) based on which clearly analyze overdue debts, principal debts, interest debts, and debts that do not need to be paid.

b) Debts that do not need to be paid are debts where the creditor no longer exists, specifically as follows:

- Debts of enterprises that have been dissolved or declared bankrupt but no successor entity or individual has been identified.

- Debts of individual creditors who have died but no successor has been identified.

- Debts owed to other creditors that have been overdue for many years but the creditors have not come to reconcile and confirm. In this case, the enterprise undergoing corporatization must issue a notification letter sent directly to the creditors or announced through mass media before the inventory date.

2.2. Receivables:

a) Clearly analyze receivables that are recoverable and those that are not recoverable.

Receivables that are not recoverable must be supported by sufficient documentation proving they cannot be recovered according to current state regulations on handling outstanding debts.

b) Review economic contracts to determine prepayments made to suppliers that have been fully recorded as business expenses, such as rent for premises, land lease payments, purchase of goods, long-term insurance premiums, wages, etc.

3. For state-owned commercial banks, the inventory, evaluation, and classification of monetary assets, financial leasing assets, and accounts receivable and payable shall be carried out as follows:

3.1. Inventory and reconciliation of customer deposits, deposit certificates (bills, promissory notes, bonds) as follows:

a) Detail each item on the accounting books.

b) Reconcile and confirm the balance of corporate customers' deposits.

c) Savings deposits, individual deposits, and deposit certificates may not need to be reconciled with customers, but must be reconciled with the ledger cards. In specific cases where there are large deposit balances or discrepancies between accounting records and ledger cards, direct reconciliation with customers shall be conducted.

3.2. Reconciliation of credit balances (including off-balance sheet items) as follows:

a) Based on each customer's credit file at the commercial bank, prepare a list detailing the remaining credit balances and the amount of each customer's credit balance, itemized by each credit contract.

b) Compare the figures determined from the credit files with the accounting records of the commercial bank; reconcile the credit balances with each customer to obtain their confirmation of the credit balance.

For individual customers, if reconciliation with the customer cannot be organized, the commercial bank must reconcile with the ledger cards.

c) If there are discrepancies in figures between the credit files, accounting records, and customer confirmations, the commercial bank must clarify the reasons for the discrepancies and determine the responsibility of related organizations and individuals to handle them according to current state regulations.

3.3. Classify receivables that meet the conditions for disposal according to the guidelines of the State Bank of Vietnam.

3.4. For financial leasing assets: Reconciliation must be conducted with each customer, clearly identifying the remaining debt for each financial leasing asset.

4. During the inventory and reconciliation process, if assets and accounts receivable are overlooked, reducing the value of the enterprise and state capital in the corporatized enterprise, the General Director, Chief Accountant, and related organizations and individuals shall bear full responsibility for compensating the entire value of the aforementioned debts and assets according to the law.

C. FINANCIAL DISPOSITION

1. Prior to determining the enterprise value

1.1. Assets:

Based on the results of the inventory and classification of assets, the enterprise shall dispose of assets according to Article 14 of Decree No. 109/2007/NĐ-CP, wherein:

a) For excess or missing assets, the cause must be analyzed and handled as follows:

- Missing assets must identify the responsibility of organizations and individuals to compensate for material losses according to current regulations; the value of missing assets, after deducting compensation, shall be recorded as part of the business results.

- Excess assets, if the cause cannot be identified and the owner cannot be found, shall be disposed of by increasing state capital.

b) For unused assets approved in writing by the authority deciding on corporatization, accumulated assets, and assets awaiting liquidation shall be disposed of as follows:

- Liquidation and sale: The General Director of the enterprise shall be responsible for organizing the liquidation and sale of assets in accordance with current laws.

Revenue and costs associated with the liquidation and sale of assets shall be recorded as income and expenses of the enterprise.

- At the time of determining the enterprise value, unused assets, accumulated assets, and assets awaiting liquidation that have not been disposed of shall not be included in the enterprise value; the corporatized enterprise shall be responsible for preserving and transferring these assets to relevant authorities as stipulated in Clause 2, Article 14 of Decree No. 109/2007/NĐ-CP.

c) Assets that were welfare facilities previously funded by incentive funds and welfare funds shall be disposed of according to Clause 3, Article 14 of Decree No. 109/2007/NĐ-CP.

d) For production and business assets funded by incentive funds and welfare funds, the corporatized enterprise shall continue to use them in production and business operations according to Clause 4, Article 14 of Decree No. 109/2007/NĐ-CP.

The corresponding capital equivalent to the remaining value of these assets shall be returned to the Reward Fund and Welfare Fund to be distributed to employees working at the enterprise at the time of determining the enterprise's value according to their actual years of service at the shareholding enterprise.

d) Assets that are welfare facilities invested with state capital, if the shareholding enterprise continues to use them, shall be included in the value of the shareholding enterprise.

1.2. Accounts receivable:

Accounts receivable shall be handled in accordance with Article 15 of Decree No. 109/2007/NĐ-CP, including:

a) For accounts receivable for which there is sufficient documentation proving the inability to recover according to the current regulations of the State on handling overdue debts, the cause and individual and organizational responsibility must be clearly identified for compensation in accordance with current laws. The loss portion after processing shall be covered by the reserve fund for difficult-to-collect accounts receivable; if insufficient, it shall be recorded as business expenses of the enterprise.

b) For other overdue accounts receivable, the enterprise must continue to collect debts or negotiate selling debts to economic organizations with the function of buying and selling debts and surplus assets, but not directly sell debts to debtors. The loss from selling debts shall be recorded as business expenses.

By the time of determining the enterprise's value, the shareholding enterprise is responsible for transferring accounts receivable and payable not included in the enterprise's value (including those accounts receivable that have been processed using the reserve fund for difficult-to-collect accounts receivable, risk reserves, operational reserves... still being monitored outside the statement) to relevant agencies in accordance with Clause 2 of Article 14 of Decree No. 109/2007/NĐ-CP.

c) For amounts prepaid by the enterprise to suppliers for goods and services such as rent, land lease, purchase of goods, labor costs... if they have already been fully recorded as business expenses, the enterprise shall reconcile and record a reduction in expenses corresponding to the undelivered goods or services or unexecuted rental periods, and increase the prepaid expense account (or pending allocation expense account).

1.3. Accounts payable:

The principle for handling accounts payable shall be carried out in accordance with Article 16 of Decree No. 109/2007/NĐ-CP, including:

a) Accounts payable that do not need to be paid shall be recorded as an increase in state capital.

b) For tax debts and other payments to the state budget: The enterprise has the responsibility to declare and submit tax settlement reports up to the time of determining the enterprise's value to the tax authority for verification and determination of the amount of tax still due according to regulations. The tax authority is responsible for proactively arranging staff to conduct inspections of shareholding enterprises in accordance with the time for determining the enterprise's value that has been notified.

In cases where the inspection has not been completed by the time the enterprise's value is determined, the enterprise may use the financial statements prepared as the basis for determining the enterprise's value (including the determination of the enterprise's tax obligations and profit distribution). Any discrepancies regarding tax obligations to the state (if any) will be adjusted at the time the enterprise officially receives the business registration certificate to become a joint-stock company.

c) For overdue debts owed to state commercial banks and Vietnam Development Bank (collectively referred to as lending banks), the enterprise has the responsibility to reconcile and cooperate with the lending bank to handle according to the following principles:

- In cases where the shareholding enterprise incurs losses, has no state capital left, and cannot pay overdue debts, the enterprise is responsible for preparing and submitting procedures and documents to request the write-off, extension, or cancellation of interest on bank loans in accordance with current laws.

Within a maximum period of 20 working days from the date of receiving the enterprise's documents, the lending bank shall provide a written response on how to handle the matter and notify the enterprise.

- For principal and interest debts that cannot be written off, they shall be handled as follows:

+ The enterprise shall complete all necessary procedures to transfer the debt to the successor joint-stock company to repay the debt.

+ Negotiate with the lending bank to convert the debt into equity contributions. The conversion of debt into equity contributions shall be carried out based on the auction results. The lending bank must participate in the auction in accordance with regulations.

+ Cooperate with the lending bank to implement debt resolution through the sale of debts to the Company for Purchasing Debts and Surplus Assets of Enterprises (hereinafter referred to as the Debt Purchasing Company) at agreed prices. Based on the debt purchase and sale agreement, the shareholding enterprise shall be responsible for recognizing the debt with the Debt Purchasing Company; simultaneously, cooperate with the Debt Purchasing Company to develop a restructuring plan to be reviewed and approved by the decision-making body for shareholding transformation, and negotiate with the Debt Purchasing Company to approve the plan to transform the enterprise into a joint-stock company.

d) For overdue foreign loans with guarantees, the enterprise and guarantors must negotiate with creditors to develop a handling plan in accordance with the law on managing foreign borrowing and repayment.

d) For social insurance debts and employee debts, the enterprise is responsible for settling them completely before becoming a joint-stock company to ensure the rights and interests of employees.

1.4. Reserves, losses, and profits shall be handled in accordance with Article 17 of Decree No. 109/2007/NĐ-CP.

1.5. Long-term investments in other enterprises such as joint ventures, joint operations, equity contributions, establishment of limited liability companies, and other long-term investment forms shall be handled in accordance with Article 18 of Decree No. 109/2007/NĐ-CP.

1.6. Reward Fund and Welfare Fund:

a) The cash balance of the Reward Fund and Welfare Fund shall be used to distribute to employees working at the time of determining the enterprise's value according to their actual years of service at the shareholding enterprise. The General Director of the enterprise shall cooperate with the trade union organization at the shareholding enterprise to build a distribution plan and make a decision on the distribution.

The source of the Reward Fund and Welfare Fund is determined as follows: The balance of the fund (excluding sources that have already constituted welfare assets) plus (+) the actual value of assets currently being used for production and business operations invested with the Reward Fund and Welfare Fund.

b) In cases where the enterprise has spent more than the source of the Reward Fund and Welfare Fund, it shall be handled as follows:

- For amounts directly spent on employees listed in the regular roster at the time of the decision to equitize, such expenditures shall not be deducted from the state capital at the enterprise. The General Director of the enterprise shall cooperate with the trade union organization to handle this by recovering or converting it into receivables for the joint-stock company to inherit later.

- For expenditures exceeding the source of the Reward Fund and Welfare Fund where the object for recovery cannot be identified (such as spending on employees who have lost their jobs or resigned before the equitization decision...) then the Steering Committee for Equitization shall report to the agency deciding the enterprise's value to handle it as non-recoverable receivables.

2. Financial settlement from the time of determining the enterprise's value to the time of officially becoming a joint-stock company.

2.1. During the period from the time of determining the enterprise's value to the time of officially becoming a joint-stock company, the enterprise continues to handle financial issues according to the State regulations. At the time of announcing the enterprise's value, the equitized enterprise is responsible for handling financial issues and adjusting accounting books according to regulations. Simultaneously, transfer assets and debts not included in the enterprise's value to relevant agencies as stipulated in Clause 2, Article 14 of Decree No. 109/2007/NĐ-CP within a maximum of 30 days from the date of announcing the enterprise's value.

2.2. In cases where the period from the expiration date of the investor's payment for purchasing shares to the date the company receives the business registration certificate exceeds three months, the enterprise may calculate interest expenses to pay investors according to the principle:

- Interest is only calculated from the fourth month onwards on the total face value of purchased shares. For employee shares purchased at a discounted price, if the purchase price is below the face value, interest is only calculated on the actual amount paid.

- The interest rate shall not exceed the short-term loan interest rate of the commercial bank where the equitized enterprise maintains its account at the time of calculating interest.

- This interest expense is recorded as operating expenses by the enterprise and must ensure that the enterprise does not incur a loss.

2.3. Preparing financial statements, reports to determine the value of state capital at the time the joint-stock company receives the business registration certificate, and finalizing the cost of equitization:

a) Within 30 days from receiving the Business Registration Certificate, the enterprise must prepare financial statements and tax declarations at the time of receiving the business registration certificate and submit them to the agency deciding the enterprise's value, the tax authority, and the finance department at the same level for verification and determination of the state capital value again.

Within 30 working days from receiving the financial statements, the competent agency deciding the enterprise's value shall conduct inspections and handle any financial issues arising between the two periods; re-determine the state capital value and issue a decision determining the state capital value at the time the enterprise officially becomes a joint-stock company as the basis for handover between the equitized enterprise and the joint-stock company.

If the enterprise has submitted all required documents but the tax authority does not conduct inspections within the prescribed timeframe, the joint-stock company will not be liable for additional taxes generated compared to the figures in the financial statements approved and handed over by the authorized agency; the head of the tax authority must bear responsibility for any losses resulting from the delay.

b) The General Director and Chief Accountant of the equitized enterprise are responsible for preparing and signing the financial statements, reports to determine the value of state capital at the time of transferring to the joint-stock company, and the finalization of the cost of equitization, and they are responsible for the truthfulness and accuracy of the reports.

The Board of Directors of the new joint-stock company is responsible for creating conditions for the leadership of the equitized enterprise to complete their tasks and sign, affix seals to confirm the signatures of the positions in the equitized enterprise on the financial statements. If the General Director and Chief Accountant of the equitized enterprise have not completed the financial statements, they shall not be transferred or allowed to resign according to regulations.

c) If the time point for determining the enterprise's value is the previous year and the time point for officially becoming a joint-stock company is the following year, only one financial statement covering the entire period should be prepared, without separating two reports at the end of December and at the time of officially becoming a joint-stock company.

d) The distribution of profits generated during the period from the time of determining the enterprise's value to the time the enterprise officially becomes a joint-stock company shall be carried out according to current laws.

2.4. The difference between the actual value of state capital at the time the equitized enterprise transfers to the joint-stock company and the actual value of state capital at the time of determining the enterprise's value shall be handled as stipulated in Article 21 of Decree No. 109/2007/NĐ-CP. In cases where a decrease occurs (including due to business losses), the cause must be clarified objectively and subjectively before handling, including:

a) Decreases due to objective reasons include losses caused by natural disasters, enemy attacks; changes in state policies or market fluctuations internationally, and other unforeseeable factors.

b) Other cases are considered subjective reasons. The equitization decision-making agency shall not select or recommend individuals responsible for business losses leading to a decrease in the difference as representatives of state capital contributions to the joint-stock company.

3. Transfer of assets and capital.

Pursuant to the decision adjusting the value of the enterprise at the time of registration for business transfer to a joint-stock company, the Steering Committee for Joint-Stock Company Formation directs the enterprise to adjust accounting books, prepare handover files, and organize the handover between the enterprise and the joint-stock company.

The joint-stock company shall use all assets and capital received from the handover to organize production and business activities; inherit all rights, obligations, and responsibilities of the transferred joint-stock enterprise and have other rights and obligations as prescribed by law.

Any obligations and responsibilities of the joint-stock enterprise determined and supplemented after settlement and handover to the joint-stock company shall not be the responsibility of the joint-stock company. In cases where the handover is incomplete, leading to the joint-stock company not assuming the obligation to repay debts of the joint-stock enterprise, the General Director, Chief Accountant of the joint-stock enterprise, and related organizations and individuals shall fully bear the responsibility for debt repayment.

3.1. Handover files include:

a) Documents determining the enterprise's value and the decision to announce the enterprise's value.

b) Financial statements at the time of officially becoming a joint-stock company.

c) Decision determining the value of the state capital portion at the time of converting into a joint-stock company by the competent authority.

d) Handover protocol for assets and capital established at the time of handover (with detailed lists of receivables and payables handed over for the joint-stock company to continue inheriting and unresolved financial issues requiring continued handling - if any).

3.2. Handover components include:

a) Representatives of Ministries, agencies equivalent to Ministries, or People's Committees of provinces directly under the Central Government, and representatives of the Ministry of Finance (in cases of joint-stock formation of Economic Groups, State Corporations, or parent companies).

b) Representatives of Economic Groups, State Corporations, or parent companies (in cases of joint-stock formation of member enterprises of Economic Groups, State Corporations, or subsidiaries), the General Director, and Chief Accountant of the joint-stock enterprise representing the transferring party.

c) Chairman of the Board of Directors, General Director, Chief Accountant, and representatives of the trade union organization of the joint-stock company representing the receiving party.

d) Representatives of the State Capital Investment Corporation for joint-stock enterprises that fall within the scope of transferring state ownership representation rights to the State Capital Investment Corporation.

3.3. The minutes of the handover must contain signatures of all handover parties and must clearly record:

a) The situation of assets, capital, and labor at the time of handover.

b) Rights and obligations that the joint-stock company continues to inherit.

c) Issues that the joint-stock company has the responsibility to continue resolving.

III. METHODS FOR DETERMINING THE VALUE OF THE ENTERPRISE

A. ASSET METHOD

1. The asset method is a method of determining the enterprise's value based on evaluating the actual value of all current assets of the enterprise at the time of determining the enterprise's value.

2. The enterprise's value according to the accounting book is the total value of assets reflected in the Balance Sheet of the enterprise.

The value of state capital at the enterprise according to the accounting book equals the enterprise's value according to the accounting book minus (-) liabilities payable, surplus of Reward Fund, Welfare Fund, and operating fund balance (if any).

3. The actual value of the enterprise is the actual value of all current assets of the enterprise at the time of determining the enterprise's value, taking into account the profitability of the enterprise.

3.1. The actual value of the enterprise does not include the items specified in Article 28 of Decree No. 109/2007/NĐ-CP.

3.2. Basis for determining the actual value of the enterprise at the time of determining the enterprise's value:

a) Financial statements at the time of determining the enterprise's value;

b) Quantity and quality of assets according to actual inventory classification;

c) Technical capabilities of assets, usage needs, and market prices;

d) Value of land use rights, profitability of the enterprise (geographical location, brand,...).

For financial and credit organizations when determining the enterprise's value using the asset method, the results of auditing financial statements are used to determine monetary capital and receivables, but physical inventory and evaluation must be conducted for fixed assets, long-term investments, and the value of land use rights according to state regulations.

4. Determining the actual value of assets:

The actual value of assets is determined in Vietnamese Dong. Assets recorded in foreign currency are converted into Vietnamese Dong according to the average exchange rate on the inter-bank foreign exchange market published by the State Bank of Vietnam at the time of determining the enterprise's value.

4.1. For tangible assets:

a) Revaluation of those assets that the joint-stock company will continue to use.

b) The actual value of the asset equals (=) Original cost calculated based on the market price at the time of valuation multiplied (x) by the remaining quality of the asset at the time of valuation.

Where:

- Market price is:

+ Market price of new similar assets currently being bought and sold on the market including transportation and installation costs (if any). If it is a special asset not available on the market, the purchase price is calculated based on the price of a new similar asset from the same country of manufacture with the same capacity or technical features. In cases where there is no similar asset, the price recorded in the accounting books is used.

+ Basic construction unit price and investment quota prescribed by competent authorities at the time closest to the valuation date for assets that are basic construction products. In cases where there are no regulations, the book value is used, considering factors of inflation in construction.

For newly completed construction projects invested in within three years before determining the enterprise's value: the approved final settlement value of the project by the competent authority is used. In exceptional cases, if the project has been put into use without approval by the competent authority, the provisional value recorded in the accounting books is used.

- The quality of the asset is determined by the percentage ratio compared to the quality of newly purchased or newly constructed similar assets, in accordance with the State's regulations on safety conditions for the use and operation of assets; ensuring product quality; environmental hygiene according to the guidelines of the Ministries managing economic and technical sectors. If there are no State regulations, the quality of machinery, equipment, and transportation assets must be re-evaluated not lower than 20% of the quality of newly purchased similar assets; for factories and architectural structures, it must not be lower than 30% of the quality of newly constructed similar assets.

c) Fixed assets that have been fully depreciated to recover the initial investment; tools and management equipment whose value has been fully allocated to business costs but continue to be used by joint-stock companies must be re-evaluated to include in the enterprise value at a minimum of 20% of the value of new assets, tools, and equipment.

4.2. Monetary assets include cash, deposits, and securities (bills, bonds, etc.) of the enterprise and are determined as follows:

a) Cash on hand is determined based on the inventory reconciliation report.

b) Deposits are determined based on the confirmed balance with the bank where the enterprise maintains its account.

c) Securities are determined based on market transaction prices. If there are no transactions, they are determined based on their face value.

4.3. Accounts receivable included in the enterprise value are determined based on the actual balance on the accounting books after processing as stipulated in Point 1.2, Part C, Section II of this Circular.

4.4. Work-in-progress expenses: basic construction investments, production and business operations, public services are determined based on the actual occurrences recorded on the accounting books.

4.5. The value of collateral and short-term and long-term deposits is determined based on the actual balance on the accounting books after verification and confirmation.

4.6. The value of intangible assets (if any) is determined based on the remaining value recorded on the accounting books. Specifically, the value of land use rights is determined according to the provisions of Point 5, Part A, Section III of this Circular.

4.7. Business advantage value

a) The business advantage value of the enterprise is determined according to the following two methods:

- Determined based on the profit margin and government bond interest rate:

Where:

- Determined based on geographical location advantages and brand value:

Where:

+ The geographical location advantage value applies to enterprises undergoing shareholding reform (irrespective of industry and business results) using plots of urban land if they choose the land lease form, then the geographical location advantage value of the plot must be determined to include in the enterprise value.

The geographical location advantage value of the plot is determined by the difference between the land price determined closely to the actual market price for transferring land use rights (as stipulated in Clause 12, Article 1 of Decree No. 123/2007/ND-CP dated July 27, 2007 of the Government amending and supplementing some articles of Decree No. 188/2004/ND-CP dated November 16, 2004 on the method of determining land prices and the framework of land prices) and the price decided and announced by the People's Committees of provinces and centrally-administered cities on January 1 of the year when the enterprise value is being determined.

For central enterprises, the basis for the actual market price for transferring land use rights is the appraisal agency's assessment, and the shareholding reform decision-making body shall seek opinions from the provincial or centrally-administered city People's Committee where the enterprise is located before making the decision.

For local enterprises, the Shareholding Reform Steering Committee shall report to the provincial or centrally-administered city People's Committee for approval.

+ The brand value (including trademarks and trade names) is determined based on the actual costs incurred by the enterprise for creating, building, and protecting trademarks and trade names in the ten years prior to the valuation time or since the establishment date for enterprises operating for less than ten years (including advertising and promotional costs both domestically and internationally to promote products and the company; website development...).

b) The business advantage value included in the enterprise value of a shareholding reform is the higher value when comparing the results determined by the above two methods.

4.8. The value of long-term investments in other enterprises is determined according to the provisions of Article 32 of Decree No. 109/2007/ND-CP.

- For shares of enterprises listed on the stock exchange, the value is determined based on the stock trading price on the stock exchange at the time of enterprise value determination.

- For shares of unlisted enterprises, the value is determined based on the results of the consulting agency, reviewed by the Shareholding Reform Steering Committee, and submitted to the competent authority for approval.

5. Value of land use rights.

The calculation of the value of land use rights to be included in the enterprise value is carried out according to the provisions of Article 30 of Decree No. 109/2007/ND-CP and Decree No. 123/2007/ND-CP dated July 27, 2007 of the Government amending and supplementing some articles of Decree No. 188/2004/ND-CP dated November 16, 2004 on the method of determining land prices and the framework of land prices, including:

5.1. In cases where the enterprise implements the land lease form:

a) For joint-stock enterprises that pay land lease fees annually, the value of the land lease fee shall not be included in the enterprise's value. In cases where the enterprise uses plots of land classified as urban land, the enterprise must determine the value of the geographical advantage of the plot to include it in the enterprise's value as prescribed in paragraph a point 4.7 Section A Part III of this Circular.

b) For joint-stock enterprises that have paid land lease fees in one lump sum for the entire lease period or have prepaid land lease fees for several years before July 1, 2004 (the date on which the Land Law came into effect), the joint-stock enterprise shall base its valuation of the enterprise on the land price issued by the Provincial People's Committee on January 1 of the year when the enterprise's value is determined, and shall base the recalculation of the land lease fee unit price on the percentage stipulated by the Provincial People's Committee to determine the remaining value of the land lease fee. The increase in value due to the recalculation of the land lease fee unit price at the time of valuation for the remaining period of the land lease contract or the remaining period for which the land lease fee has been paid shall be added to the state capital portion of the enterprise. The difference between the land price determined closely with the actual market transfer price of land use rights under normal conditions compared to the price decided and announced by the provincial or centrally-administered city People's Committee on January 1 of the year when the enterprise's value is determined shall be considered the geographical location advantage and included in the enterprise's value according to the aforementioned point 4.7.

The joint-stock company is responsible for inheriting (or signing again the land lease contract) and using the land for the intended purpose as prescribed by the law on land. The joint-stock company does not need to pay the land lease fee for the remaining period of the land lease contract or the remaining period for which the joint-stock enterprise has already paid the land lease fee.

c) For joint-stock enterprises that were granted land with payment of land use fees and have paid the land use fees to the state budget, now transferring to the form of being granted land with annual payment of land lease fees, the value of the land use rights granted shall not be included in the enterprise's value.

Joint-stock enterprises must complete the procedures for transferring from land grant to land lease before the formal conversion to a joint-stock company.

5.2. In cases where enterprises implement the form of granting land with payment of land use fees, the determination of the value of land use rights to calculate the enterprise's value shall be carried out as follows:

a) For joint-stock enterprises currently implementing the form of land lease now transferring to the form of granting land with payment of land use fees, the value of land use rights must be included in the enterprise's value.

The land price for determining the value of land use rights in the joint-stock enterprise's value is the land price specified by the provincial People's Committee closely aligned with the actual market transfer price of land use rights under normal conditions as stipulated in Clause 12 Article 1 of Decree No. 123/2007/ND-CP dated July 27, 2007 of the Government amending and supplementing some articles of Decree No. 188/2004/ND-CP dated November 16, 2004 on methods for determining land prices and price ranges for various types of land.

The procedures for granting land, paying land use fees, and issuing certificates of land use rights shall be implemented in accordance with the provisions of the Land Law and guiding documents for the implementation of the Land Law.

b) For joint-stock enterprises that have been granted land and have paid land use fees to the state budget or legally received the transfer of land use rights (including areas allocated to the enterprise for building houses for sale or rental for hotel business, commercial service business; construction of infrastructure for transfer or rental), the value of land use rights must be included in the enterprise's value.

The land price for determining the value of land use rights in the joint-stock enterprise's value is the land price specified by the provincial People's Committee closely aligned with the actual market transfer price of land use rights under normal conditions as stipulated in Clause 12 Article 1 of Decree No. 123/2007/ND-CP dated July 27, 2007 of the Government amending and supplementing some articles of Decree No. 188/2004/ND-CP dated November 16, 2004 on methods for determining land prices and price ranges for various types of land. If the recalculated value of land use rights is higher than the actual cost of land use rights recorded in the accounting books, the increased amount shall be included in the actual value of the state capital portion of the enterprise.

c) In cases where joint-stock enterprises are granted land to build housing projects, construct infrastructure for transfer or rental, and use part of the land area for public welfare works and have handed over management and use to local authorities, the value of land use rights included in the value of the joint-stock enterprise shall be based on the land area granted to the enterprise for housing and infrastructure development (excluding the land area for public welfare works already handed over to local authorities).

d) In cases where joint-stock enterprises are granted land to build housing and infrastructure for transfer or rental and have transferred part of the high-rise buildings to other agencies for office use or business operations, the value of land use rights included in the enterprise's value shall be calculated as follows:

The value of land use rights allocated to the transferred building area shall be determined based on the selling price of each floor or the floor coefficient stipulated by the provincial or centrally-administered city People's Committee.

e) In cases where joint-stock enterprises are granted land to build houses for sale and have sold houses, the area of houses sold corresponding to the revenue from house sales already recorded in income, determined as annual business results, and subject to tax in accordance with state regulations shall be excluded from revaluation.

5.3. Joint-stock enterprises shall engage consulting organizations with relevant functions to determine the value of land use rights as the basis for reporting to the provincial People's Committee for examination and decision.

6. The actual value of the state capital portion in the enterprise:

The actual value of the State capital at the enterprise is equal to the total actual value of the enterprise minus (-) the actual debts that must be paid, the surplus welfare and reward fund, and the surplus operating funds (if any). Among these, the actual debts that must be paid are the total value of the enterprise's debts that must be paid minus (-) the debts that do not need to be settled.

7. The actual value of economic groups, state-owned corporations, and parent companies:

In the case of the full privatization of state-owned economic groups, state-owned corporations, and parent companies, in addition to implementing general regulations, they must also follow the guidelines below:

7.1. For economic groups, state-owned corporations established by the State's decision to invest and set up:

a) The actual value of the economic group, state-owned corporation includes the actual value of all assets of the parent company of the economic group, the state-owned corporation office (including dependent accounting units), independent accounting subsidiary companies, and public service units (if any).

b) The actual value of the State capital in the economic group, state-owned corporation includes the actual value of the State capital in the parent company of the economic group, the state-owned corporation office, independent accounting subsidiary companies, and public service units (if any).

7.2. For parent companies:

a) The actual value of the parent company for privatization is the actual value of all current assets of the parent company.

b) The actual value of the State capital is the actual value of the State capital at the parent company.

7.3. The determination of the enterprise value of state-owned economic groups, state-owned corporations, and parent companies must be carried out strictly according to the provisions in Part A Section III of this Circular, noting the following points:

a) The capital of the economic group, state-owned corporation, and parent company in a limited liability company with one member converted from a subsidiary company of the economic group, state-owned corporation, or parent company, or established by the economic group, state-owned corporation, or parent company shall be determined as a long-term investment of the economic group, state-owned corporation, or parent company according to Article 18 of Decree No. 109/2007/NĐ-CP.

b) The business advantage value of the economic group, state-owned corporation, and parent company includes the business advantage value of the state-owned corporation office, the parent company of the economic group, and independent accounting subsidiary companies.

Profit and State capital for calculating the profit rate shall be determined according to the Government's financial management regulations for enterprises and the management of State capital invested in other enterprises issued together with Decree No. 199/2004/NĐ-CP dated December 3, 2004.

B. DISCOUNTED CASH FLOW METHOD

1. The discounted cash flow method (DCF) is a method for determining the enterprise value based on the profitability of the enterprise in the future.

2. The applicable objects are enterprises whose main business activities are in the financial services, banking, trade, consulting, construction design, information technology, and technology transfer sectors, with an average post-tax profit rate on State capital over the five consecutive years immediately preceding privatization higher than the interest rate of government bonds with a term of five years at the time closest to the valuation date.

The handling of reserve accounts as stipulated in Article 17 of Decree No. 109/2007/NĐ-CP shall be implemented at the time when the enterprise officially becomes a joint-stock company.

3. Basis for determining enterprise value:

3.1. Financial statements of the enterprise in the five consecutive years immediately preceding the determination of enterprise value.

3.2. Business operation plans of the privatized enterprise from three to five years after becoming a joint-stock company.

3.3. Interest rate of government bonds with a term of five years at the time closest to the valuation date and the enterprise's cash flow discount factor.

3.4. Land use rights value for the allocated land area.

4. The actual value of the State capital at the enterprise is determined as follows:

Where:

- The difference in land use rights value is determined according to Point 5 of Part A Section III of this Circular.

: is the present value of dividend year i

: is the present value of State capital year n

i : Order of subsequent years starting from the year of enterprise value determination (i:1).

Domestic air passenger transport service on regular basic economy class_{i : Dividend amount for year i.} : Profit after tax used for dividends in year i.

n : Number of future years selected (3 - 5 years).

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:_{For power plants invested under the Build-Operate-Transfer (BOT) model, n is determined according to the operational period of the power plant stipulated in the BOT contract.}: Value of State capital year n and is determined by the formula:

"5. The pre-tax weighted average cost of capital i (%) is determined according to the formula below:_{For power plants invested under the Build-Operate-Transfer (BOT) model, n is determined according to the operational period of the power plant stipulated in the BOT contract.} =

Domestic air passenger transport service on regular basic economy class_n+1: Expected dividend amount for year n + 1

K : Discount rate or required rate of return for investors purchasing shares and is determined by the formula:

K = R_f + R_{session number}

R_f: Risk-free return rate obtained from government bonds with a term of five years at the time closest to the valuation date.

R_{session number}: Additional risk premium for investing in shares of companies in Vietnam, determined according to the international stock market risk premium index in the valuation yearbook or by valuation companies for each enterprise but not exceeding the risk-free return rate (R_f).

g : Annual dividend growth rate and is determined as follows:

g = b x R

Where:

b is the post-tax profit retention ratio.

R is the average post-tax profit rate on equity for future years.

5. The actual value of the enterprise at the valuation point using the DCF method is determined as follows:

Where:

Actual payable debt = Total payable debt on accounting books minus (-) The value of debts not required to be paid plus (+) The value of land use rights for allocated land area (determined according to the provisions at point a, clause 5.2, Part A, Section III of this Circular).

6. The increase in state capital between the actual value and the recorded value on accounting books shall be accounted for as a business advantage of the enterprise, recognized as an asset and gradually allocated into production and business costs not exceeding 10 years from the official date of conversion to a joint-stock company.

7. For State-owned corporations and commercial banks meeting the conditions to determine enterprise value using the discounted cash flow method, profits and state capital shall be determined according to current laws governing financial management for State-owned corporations and state-owned commercial banks.

C. OTHER METHODS

In addition to the two methods of determining enterprise value specified in Parts A and B, Section III of this Circular, the authority deciding the enterprise value and the valuation organization may apply other valuation methods to determine the value of enterprises undergoing shareholding transformation. These valuation methods must ensure scientific validity, reflect the true value of the enterprise, and be widely applied internationally.

D. SELECTION AND USE OF ENTERPRISE VALUE DETERMINATION RESULTS

1. The results of determining enterprise value using the discounted cash flow method or another method must be compared with the results of determining enterprise value using the asset-based method to select according to the principle:

The determined and announced enterprise value cannot be lower than the enterprise value determined by the asset-based method.

2. The enterprise value determined and selected according to the above principles serves as the basis for determining the scale of registered capital, the structure of initial share issuance, and the starting price for auctioning shares.

IV. ORGANIZATION OF ENTERPRISE VALUE DETERMINATION

1. Selection of evaluation method: The principle of selecting the method for determining enterprise value is implemented according to the provisions of Clause 1 and Clause 2, Article 22 of Decree No. 109/2007/ND-CP.

2. Selection and hiring of consulting valuation organizations.

2.1. Consulting valuation organizations include auditing companies, securities companies, appraisal organizations, investment banks with valuation functions and capabilities that meet the standards and conditions stipulated in the Regulation on the Selection and Supervision of Consulting Valuation Organizations issued by the Ministry of Finance.

2.2. Based on the list of consulting valuation organizations published, the authority deciding on shareholding transformation selects the consulting valuation organization and bears responsibility for its selection.

In cases where two or more consulting valuation organizations register to participate in providing valuation services, the authority deciding on shareholding transformation shall organize a restricted tender to select the consulting organization.

2.3. Based on the decision of the authority deciding on shareholding transformation, the General Director of the enterprise signs a contract to hire the consulting valuation organization. The consulting contract for determining enterprise value must include the following contents:

a) The valuation method used by the consulting organization to determine the enterprise value.

b) Completion time: Maximum not exceeding 60 days from the date of signing the contract and being provided with all relevant information for the economic group, corporation, parent company's shareholding transformation; not exceeding 30 days for other cases.

In cases where the enterprise undergoing shareholding transformation has a large scale and special characteristics (multiple branches, complex financial processing...) requiring extended time, it must obtain approval from the authority deciding on shareholding transformation.

c) Responsibilities of the enterprise undergoing shareholding transformation: The enterprise undergoing shareholding transformation is responsible for performing tasks related to valuation such as inventory, classification of assets, financial processing, preparation of production and business plans, provision of relevant documents... and bears legal responsibility for the accuracy and legality of the provided documents.

d) Responsibilities of the consulting valuation organization: The consulting valuation organization is responsible for implementing the regulations on determining enterprise value; clearly explaining situations where the re-determined asset value is lower than the recorded asset value on accounting books and addressing other issues related to determining enterprise value as requested by the competent authority; completing within the agreed timeframe; bearing responsibility for the results of determining enterprise value. If the results of determining enterprise value do not comply with state regulations, the enterprise undergoing shareholding transformation has the right to refuse payment for the service and the organization will be considered ineligible to participate in future consulting valuations. If causing losses to the state, the consulting valuation organization must compensate according to the law.

đ) Consulting valuation fees and payment, settlement:

Consulting valuation fees are agreed upon by the enterprise and the consulting organization, not higher than the tender result. In cases without tendering, the Shareholding Transformation Steering Committee negotiates with the consulting valuation organization regarding fees and reports to the authority deciding on shareholding transformation for approval.

Payment of consulting valuation fees is made after the decision announcing the enterprise value is issued.

2.4. During the implementation of the shareholding transformation plan, the consulting valuation organization is responsible for coordinating with the enterprise to explain matters related to valuation.

3. Documents for determining enterprise value:

3.1. The consulting valuation organization together with the enterprise undergoing shareholding transformation prepare documents for determining enterprise value, including:

a) Financial statements of the enterprise at the valuation date.

b) Report on inventory results and determination of asset values of the enterprise.

c) Minutes of enterprise value determination (Annexes 2 and 3).

d) Copies of detailed files of issues requiring resolution when determining enterprise value.

đ) Other necessary documents (depending on the application of different methods when determining enterprise value).

3.2. The Shareholding Transformation Steering Committee is responsible for reviewing the valuation results and reporting to the authority deciding on enterprise value.

4. Determining and announcing the enterprise value:

4.1. Determining and announcing the enterprise value:

a) For independent enterprises under Ministries, People's Committees of provinces and centrally governed cities: Within no more than 10 working days from the date of receiving the report of the State Capitalization Steering Committee and the valuation documentation, the enterprise value determination authority shall issue a decision to announce the enterprise value (Annex No. 4).

b) For Economic Groups, State-owned Corporations, and enterprises operating in special fields such as insurance, banking, telecommunications, aviation, rare mineral extraction: The State Capitalization Steering Committee shall submit the report and valuation documentation to the Ministries, People's Committees of provinces and centrally governed cities for the decision to announce the enterprise value; simultaneously, it shall send to the Ministry of Finance for supervision.

c) For independent accounting units, dependent accounting units of Economic Groups and Special Corporations (listed in the Annex issued together with Decree No. 86/2006/NĐ-CP dated August 21, 2006 of the Government): After issuing the decision to announce the enterprise value, the Boards of Directors of Economic Groups and Special Corporations shall submit the results of the enterprise value determination to the Ministry of Finance for supervision.

4.2. Determining and announcing the state capital value at the time when the enterprise officially transforms into a joint-stock company:

The enterprise value determination authority must settle all financial issues arising from the time of determining the enterprise value until the time the enterprise officially transforms into a joint-stock company, and issue a decision to re-determine the state capital value according to Point 2, Part C, Section II of this Circular.

5. Adjusting the enterprise value:

5.1. Enterprises undergoing capitalization may be reviewed and adjusted for the announced enterprise value according to Article 26 of Decree No. 109/2007/NĐ-CP.

5.2. Responsibilities of the authority with jurisdiction to decide on capitalization and enterprises undergoing capitalization:

a) In cases where external factors affect the enterprise value, the enterprise undergoing capitalization must proactively organize an inventory, determine the extent of loss, and promptly report in writing to the authority with jurisdiction over capitalization for review and decision to adjust the enterprise value.

Within 15 days from the date of receipt of the report from the enterprise undergoing capitalization, the authority with jurisdiction over capitalization has the responsibility to organize inspections, re-determine the enterprise value, and direct the State Capitalization Steering Committee to coordinate with the enterprise to adjust the capitalization plan.

b) If within 12 months from the date of determining the enterprise value, the enterprise has not implemented the sale of shares, the authority deciding on capitalization must require the enterprise to suspend the implementation of the approved capitalization plan, clarify the reasons, handle the responsibility of relevant collectives and individuals, and direct the State Capitalization Steering Committee to organize the re-determination of the enterprise value and adjustment of the capitalization plan (if necessary). The costs for re-determining the enterprise value and adjusting the capitalization plan (after deducting compensation payments to related individuals) shall be deducted from the proceeds from the capitalization of the enterprise.

V. SELLING SHARES FOR THE FIRST TIME

A. PURCHASERS, SHARE STRUCTURE AND SALE PRICE:

1. Purchasers:

1.1. Employees listed in the regular roster of the enterprise at the time of announcing the enterprise value for capitalization.

1.2. Trade unions at the enterprise purchasing preferential shares according to Point c, Clause 2, Article 35 of Decree No. 109/2007/NĐ-CP. The trade union designates authorized persons to carry out procedures related to the purchase of shares.

1.3. Domestic and foreign investors according to Clause 1 and Clause 2, Article 6 of Decree No. 109/2007/NĐ-CP, including:

a) Strategic investors are domestic and foreign investors according to Clause 3, Article 6 of Decree No. 109/2007/NĐ-CP, excluding employees of the enterprise undergoing capitalization, trade unions at the enterprise, and legal entities within the same Economic Group, Corporation, or parent company.

b) Ordinary investors include organizations and individuals, both domestic and foreign, including employees participating in public auctions.

2. Persons not eligible to participate in the first round of share purchases through auction:

2.1. Members of the State Capitalization Steering Committee of the enterprise, except members representing the enterprise undergoing capitalization;

2.2. Financial intermediaries involved in advising on the determination of enterprise value and individuals from these organizations who participated in the determination of enterprise value;

2.3. Organizations selling shares of the enterprise undergoing capitalization and individuals from these organizations who are related;

2.4. Stock exchanges, securities trading centers, and staff directly involved in the share auction committee.

3. Determining the registered capital:

3.1. The determination of the registered capital is carried out according to Clause 1, Article 35 of Decree No. 109/2007/NĐ-CP. If the actual state capital value exceeds the expected registered capital (due to adding the land use value to the state capital value at the enterprise), the authority deciding on capitalization shall review and decide. The difference between the actual state capital value at the enterprise and the registered capital determined shall be considered as state revenue from the capitalization.

3.2. Based on the registered capital, the enterprise undergoing capitalization shall determine the total number of shares by dividing the registered capital of the enterprise by the par value of one share. The par value of one share is uniformly set at 10,000 VND.

4. Determining the initial share structure:

The initial share issuance structure is carried out according to Clause 2 and Clause 3, Article 35 of Decree No. 109/2007/NĐ-CP.

The number of shares expected to be sold to the enterprise trade union shall be determined by the State Steering Committee for Shareholding Reform in coordination with the enterprise trade union based on the capital availability, but not exceeding 3% of the registered capital, subject to approval by the competent authority in the privatization plan.

5. Initial share selling price:

5.1. The initial share selling price to investors through auction is the winning bid price that the investor commits to purchase. Investors bid at what price they will buy shares at that price.

5.2. The initial share selling price to employees and the enterprise trade union is determined at 60% of the average successful auction price.

In cases where enterprises in remote areas face particularly difficult conditions and employees cannot afford to purchase shares at this price, the State Steering Committee for Shareholding Reform proposes a preferential selling price for employees to report to the agency deciding on shareholding reform for approval by the Prime Minister.

5.3. The selling price to strategic investors must not be lower than the average successful auction price. If an organization conducts a separate auction to select strategic investors, it must be approved by the Prime Minister in accordance with point c, Clause 3, Article 6 of Decree No. 109/2007/NĐ-CP.

5.4. The average successful auction price of the public auction serves as the basis for determining the preferential share selling price to employees and the enterprise trade union or for selling through negotiation based on the actual prices and quantities of shares purchased by participating investors.

6. Based on the registered capital and the initial share structure, the State Steering Committee for Shareholding Reform develops the privatization plan to submit to the competent authority for decision (as per Appendix 5 attached to this Circular).

B. ORGANIZING SHARE SALES:

1. Sale through auction:

1.1. The auction method is applied to sell shares to ordinary investors, involving price competition without distinction between organizational and individual investors, domestic and foreign investors.

1.2. Auction organizing body:

a) Auctions conducted by intermediary organizations (securities companies), if the value of shares sold through auction is less than 10 billion VND (face value).

In case there is no intermediary organization willing to conduct the auction, the State Steering Committee for Shareholding Reform considers and decides to conduct the auction at the Stock Exchange, Securities Trading Center, or directly organize the auction at the enterprise.

b) Auctions conducted at the Stock Exchange, Securities Trading Center, if the value of shares sold through auction is 10 billion VND or more (face value).

In cases where the enterprise undergoing shareholding reform has a share issuance value below 10 billion VND and wishes to conduct the auction at the Stock Exchange, Securities Trading Center, the State Steering Committee for Shareholding Reform makes the decision.

1.3. Preparing for the auction:

a) The State Steering Committee for Shareholding Reform decides to publish information about the enterprise at least 20 days before the auction in accordance with Clause 1, Article 36 of Decree No. 109/2007/NĐ-CP. The content of the enterprise information is prepared according to Appendix 6 issued together with this Circular.

b) The agency deciding on shareholding reform examines and decides or authorizes the State Steering Committee for Shareholding Reform to decide on the starting price of the auctioned shares and publishes the starting price along with the enterprise information. The starting price of the auctioned shares is determined based on the results of the enterprise valuation and its future potential, and the retained risk reserve fund value (if any).

c) The State Steering Committee for Shareholding Reform coordinates with the auction organizing body to present information about the enterprise to investors (if necessary).

1.4. Conducting the auction:

a) Within the time limit stipulated in the auction regulations, investors register the quantity to be purchased and deposit a 10% down payment based on the starting price. The auction organizing body provides the Bid Participation Form to investors.

b) Within the time limit stipulated in the auction regulations, investors record their bid prices (bids) on the Bid Participation Form and submit them to the auction organizing body via:

- Direct submission at the enterprise (if the auction is organized by the State Steering Committee for Shareholding Reform at the enterprise); direct submission at the financial intermediary organization (if the auction is conducted by the financial intermediary organization) and direct submission at the Stock Exchange, Securities Trading Center, and agents (if the auction is organized by the Stock Exchange, Securities Trading Center).

- Submission through postal service as specified by the auction organizing body.

1.5. Determining the auction results:

a) The determination of the auction results follows the principle of selecting bids from highest to lowest until the total offered shares are fully allocated. At the lowest successful bid price, if multiple investors place the same bid price but the remaining shares are fewer than the total registered purchase, the number of shares each investor can purchase is determined as follows:

b) Based on the auction results, the State Steering Committee for Shareholding Reform and the auction organizing body prepare the Minutes according to Appendix 10 issued together with this Circular.

The auction Minutes are sent to the agency deciding on shareholding reform, the State Steering Committee for Shareholding Reform, the enterprise, and the auction implementing body.

c) The State Steering Committee for Shareholding Reform and the auction organizing body jointly announce the auction results and the purchase price of shares.

1.6. Violations of auction rules and handling violations:

a) Violations of auction rules include:

- Bidding below the starting price.

- Abandoning the right to purchase shares for which the bid was successful.

- Other cases as stipulated in the auction rules.

b) In case of violation of auction rules, the investor will not be refunded the deposit.

1.7. Handling unsold shares in the auction:

a) If the number of shares refused by investors is less than 30% of the total shares offered for sale, the State Steering Committee for Shareholding Reform will continue to sell the remaining shares to participating investors through negotiation, not lower than the average successful auction price.

In the case where investors purchase at a higher price than the average successful bid price, the determination of subsequent purchasers shall be made in descending order from the highest price to the average successful bid price of the auction.

If after negotiation the sale is still not completed, the Committee for Corporate Shareholding shall handle according to the provisions of point 2 of this section.

b) If the number of shares refused by the winning bidder exceeds 30% of the total number of shares offered for sale, the Committee for Corporate Shareholding shall consider and decide to organize another auction to sell the refused shares (second auction). In this case, the Committee for Corporate Shareholding shall reconsider and determine a new starting price that is appropriate but not lower than the lowest successful bid price.

After the second auction (second auction), if the sale is still not completed, the Committee for Corporate Shareholding shall handle according to the provisions of point 2 of this section.

2. Guarantee method for issuance:

2.1. The guarantee method for issuance is applied in the case of selling the remaining shares that were not sold in the first auction as stipulated in points a and b of item 1.7 above.

2.2. Issuance guarantee is the commitment of financial intermediaries with issuance guarantee functions to purchase all the shares offered for sale to resell to investors.

2.3. The share selling price under the guarantee method shall be agreed upon by the Committee for Corporate Shareholding and the guarantor organization but shall not be lower than the average successful bid price.

2.4. The issuance guarantor organization shall be entitled to a guarantee fee according to the agreement between the Committee for Corporate Shareholding and the guarantor organization but shall not exceed the maximum guarantee fee prescribed by the Ministry of Finance. The guarantee fee shall be included in the cost of corporate shareholding.

3. Direct negotiation method:

3.1. The direct negotiation method is applied in the case of selling to strategic investors or selling to investors as provided for in Article 42 of Decree No. 109/2007/NĐ-CP.

3.2. The Committee for Corporate Shareholding directly negotiates with investors but the price shall not be lower than the average successful bid price.

4. Selling shares to strategic investors:

4.1. Based on the criteria for strategic investors approved by the competent authority, the Committee for Corporate Shareholding compiles a list of potential investors and selects investors who meet the conditions. The selection criteria shall be established by the Committee for Corporate Shareholding and submitted for approval by the decision-making body for corporate shareholding.

4.2. Based on the approved list of qualified strategic investors, the Committee for Corporate Shareholding negotiates with the strategic investor regarding the quantity of shares to be purchased and the selling price of the shares. The selling price of the shares shall not be lower than the average successful bid price.

When a strategic investor commits to purchasing, the strategic investor must deposit a down payment equal to 10% of the value of the quantity purchased calculated based on the starting price.

4.3. Based on the auction results, the Committee for Corporate Shareholding and the strategic investor sign a share purchase/sale contract.

If a strategic investor renounces the right to purchase, the down payment will not be refunded.

4.4. The Committee for Corporate Shareholding may use a competitive bidding process to determine the priority purchase rights for strategic investors who meet the conditions. The bids of strategic investors only serve to rank the priority purchase rights among strategic investors; they are not used to determine the purchase/selling price of the shares.

4.5. An auction conducted separately to select a strategic investor must be decided by the Prime Minister.

5. Management of down payments and payment for share purchases.

5.1. Management of down payments:

a) Within five working days from the end of the share sale, the agency responsible for conducting the share auction shall be responsible for refunding the down payment to investors who participated in the auction but did not purchase shares.

b) For investors who purchase shares according to the auction results or through negotiation, the down payment shall be deducted from the total amount due for payment corresponding to the actual percentage of shares purchased.

c) The down payment shall not be returned to the investor; the agency responsible for selling the shares shall transfer it to the enterprise for handling according to regulations on managing and using funds from corporate shareholding.

5.2. Payment for share purchases:

a) Within ten working days from the date of announcing the first share sale results, investors and guarantors shall be responsible for completing the share purchase and transferring the purchase money to the account of the share seller.

b) If beyond the deadline, investors or guarantors have not paid, or have not paid the full amount due for share purchases, the unsold shares shall be considered as shares refused by the investor and shall be handled according to the provisions of point 1.7 of Part B Section V of this Circular.

c) Five working days after the payment deadline for investors, the agency responsible for selling the shares shall be responsible for transferring the proceeds from the share sale to the enterprise undergoing shareholding.

5.3. Share purchases shall be settled in Vietnamese Dong. Settlement shall be made in cash or by bank transfer.

6. Handling of unsold shares:

6.1. Situations where shares are not fully sold include:

a) Not selling all shares through the auction method (in cases where there is no financial intermediary accepting issuance guarantee).

b) Cases where employees or trade unions do not purchase all preferential shares.

6.2. For unsold shares, the Committee for Corporate Shareholding shall report to the decision-making body for corporate shareholding to adjust the scale and capital structure of the enterprise.

7. Auction plan for selling shares:

7.1. The decision-making body for corporate shareholding bases on the implementation plan for corporate shareholding of enterprises under its management, estimates the time for selling shares through auctions for enterprises conducting auctions at the Stock Exchange, Securities Trading Center, registers the auction plan (quantity offered for sale and the expected sale time) with the Stock Exchange, Securities Trading Center, and simultaneously sends it to the Ministry of Finance.

7.2. The Ministry of Finance, based on the registered auction plans of enterprises, the quantity of shares expected to be sold in the period, establishes the auction plan for selling shares and notifies the Stock Exchange, Securities Trading Center, and the decision-making body for corporate shareholding of the enterprise.

7.3. The enterprise undergoing shareholding reform shall coordinate with the Securities Exchange and the Securities Trading Center to specifically determine the auction schedule for shares and publish it on the electronic information network (website) of the Securities Exchange, the Securities Trading Center, and the enterprise undergoing shareholding reform.

8. Responsibilities of the Shareholding Reform Steering Committee in organizing and implementing the auction sale of shares:

8.1. Submit to the authority deciding on the shareholding reform to decide on the number of shares to be sold at auction and the starting price.

8.2. Check and complete all information related to the shareholding reform as stipulated in Clause 1 of Article 36 of Decree No. 109/2007/ND-CP. In cases where the information published to the public is inaccurate or misrepresents the situation of the enterprise, causing losses to the State or investors, the Shareholding Reform Steering Committee shall bear administrative disciplinary responsibility or compensation according to the provisions of the law.

8.3. Send relevant documents related to the shareholding reform and the application form for organizing the auction sale (Annex No. 7 attached hereto) to the Securities Exchange and the Securities Trading Center (if registering to sell through the Securities Exchange and the Securities Trading Center) or sign a contract with financial intermediaries if selling through these organizations.

8.4. Coordinate with the organization conducting the auction to publicly announce to investors all information related to the enterprise and the auction not later than 20 days before the date of the auction.

8.5. Supervise the implementation of the auction sale of shares.

8.6. Summarize and report the results of the auction sale of shares.

9. Responsibilities of the auction implementation agency (Shareholding Reform Steering Committee, financial intermediary organizations, Securities Exchange, Securities Trading Center):

9.1. Require the enterprise to provide complete documentation and information about the shareholding reform as prescribed and bear responsibility for the information related to the enterprise published prior to the auction. In cases where the published information is inaccurate or misrepresented due to errors of the Shareholding Reform Steering Committee, the Securities Exchange, the Securities Trading Center, or financial intermediary organizations, these agencies shall bear administrative disciplinary responsibility or compensation according to the provisions of the law.

9.2. Notify the Shareholding Reform Steering Committee and the enterprise of the time and location for organizing the auction sale.

9.3. Publicly announce at the enterprise, the auction site, and in mass media (on three consecutive issues of a national newspaper and one local newspaper where the enterprise's headquarters is located) regarding information related to the sale of shares at least 20 days before the auction (Annex No. 8 attached hereto).

9.4. Provide information related to the shareholding enterprise (as per Annex No. 6 attached hereto), the shareholding reform plan, draft articles of association for the joint-stock company; Application forms for participating in the auction (Annexes No. 9a, 9b attached hereto) and other information related to the auction to investors.

9.5. Receive application forms for participating in the auction, check the conditions for participating in the auction, and issue participation certificates to investors who meet the conditions.

In cases where investors do not meet the conditions for participating in the auction, the auction organization must notify them and refund the deposit (if the investor has made a deposit).

9.6. Organize the implementation of the auction, prepare minutes (Annex No. 10) and report the results to the Shareholding Reform Steering Committee.

9.7. The auction organizing agency must keep confidential the purchase prices offered by investors until the official results are announced.

10. Responsibilities of investors participating in the auction:

10.1. Submit the application form according to the model to the auction implementation agency and proof of full civil capacity (for individuals) and legal status (for organizations). For foreign investors, they must comply with the provisions of Clause 2 of Article 6 of Decree No. 109/2007/ND-CP.

10.2. Pay a deposit equal to 10% of the value of the shares registered for purchase based on the starting price.

10.3. The submission of applications and deposits must be at least five days before the auction date.

10.4. Participate in the auction in accordance with regulations. Violations will result in disqualification from the auction and no refund of the deposit.

10.5. Fully pay the purchase price of the shares promptly if awarded.

VI. MANAGEMENT AND USE OF FUNDS FROM SHAREHOLDING REFORM

1. Funds from the sale of shares (including both the sale of state-owned shares in enterprises and newly issued shares) shall be retained by the enterprise equivalent to the value of the newly issued shares based on their par value. The remaining funds after deducting shareholding reform costs (as stipulated in Point 2 of Section VI of this Circular) shall be managed and used as follows:

1.1. To support the enterprise in implementing labor policies in accordance with current laws when implementing shareholding reform.

If the funds from the shareholding reform are insufficient to support the enterprise in implementing labor policies, it shall be implemented in accordance with Clause b of Item 1 of Article 45 of Decree No. 109/2007/ND-CP and related guiding documents.

1.2. The remaining funds shall be handled as provided in Article 45 of Decree No. 109/2007/ND-CP, wherein the difference left with the joint-stock company from selling additional issued shares (denoted as A) shall be determined as follows:

a) In the case of maintaining the state-owned capital for additional share issuance to increase the charter capital:

b) In the case of partially selling state-owned capital combined with issuing additional shares:

1.3. The difference from selling additional issued shares left with the joint-stock company is surplus capital belonging to shareholders, which can be used to increase business capital. The joint-stock company is responsible for accounting in accordance with the State's regulations.

1.4. After obtaining the business registration certificate to become a joint-stock company, the enterprise undergoing shareholding reform shall officially determine the amount payable, settle the expenses for employees and shareholding reform, and report to the authority deciding on the shareholding reform.

The Ministries, ministerial-level agencies, and agencies under the Government (for central enterprises), People's Committees of provinces and centrally governed cities (for provincial enterprises) shall be responsible for directing and urging the payment of proceeds from the sale of shares to the Enterprise Restructuring Support Fund at the State Capital Investment Corporation. In case of late payment, the enterprise undergoing shareholding reform must pay additional interest calculated at the prevailing commercial bank loan rate for the same period where the enterprise has its account opened.

1.5. The proceeds from the shareholding reform belonging to the State shall be managed and utilized according to the provisions of Article 46 of Decree No. 109/2007/ND-CP.

The management and utilization of the Enterprise Restructuring Support Fund at economic groups, corporations, parent companies (including the State Capital Investment Corporation) shall be carried out in accordance with the regulations stipulated by the State.

2. Shareholding reform costs: are expenses related to the shareholding reform of enterprises from the date of the decision on shareholding reform to the date of handover between the enterprise and the joint-stock company.

2.1. Shareholding reform costs include:

a) Direct expenses at the enterprise:

- Expenses for training on shareholding reform procedures;

- Expenses for inventory and valuation of assets;

- Expenses for preparing the shareholding reform plan and drafting the Articles of Association;

- Expenses for the Workers' and Staffs' Congress to implement the shareholding reform;

- Expenses for publicity and information dissemination about the enterprise;

- Expenses for organizing the sale of shares;

- Expenses for the first General Meeting of Shareholders;

- Other expenses related to the shareholding reform of the enterprise.

b) Fees for auditing and consulting services to determine the value of the enterprise and sell shares, decided by the agency deciding on the shareholding reform or the Shareholding Reform Steering Committee (if authorized).

Payment of consulting fees for selling shares shall be based on the Contract signed between the parties and the auction results.

c) Expenses for the Shareholding Reform Steering Committee and the Working Group.

2.2. The maximum total cost shall be determined according to the enterprise's value on the accounting books as follows:

- Not exceeding 200 million VND for enterprises with a value below 30 billion VND.

- Not exceeding 300 million VND for enterprises with a value from 30 billion to 50 billion VND.

- Not exceeding 400 million VND for enterprises with a value from 50 billion to 100 billion VND.

- Not exceeding 500 million VND for enterprises with a value above 100 billion VND.

In the case of the full shareholding reform of an economic group or state corporation, the budget for shareholding reform costs shall be compiled within the shareholding reform plan of the economic group or state corporation approved by the agency deciding on the shareholding reform.

The General Director or Director of the enterprise shall decide on the content and level of necessary expenses within the maximum control limit to carry out the shareholding reform process and bear responsibility for the legality and validity of these expenses.

In special cases, if the necessary expenses for the shareholding reform process of large and complex enterprises exceed the maximum control limit, the agency deciding on the enterprise's value shall proactively review and decide, and notify the Ministry of Finance.

At the end of the shareholding reform process, the enterprise must settle the shareholding reform costs and report to the agency deciding on the enterprise's value for approval.

2.3. Shareholding reform costs shall be taken from the proceeds from the sale of shares. In cases where enterprises maintain the existing state capital and issue additional shares, if the difference from the sale of additional issued shares is insufficient to cover the shareholding reform costs, the agencies specified in Point c Clause 1 Article 45 of Decree No. 109/2007/ND-CP shall be responsible for providing funds from the proceeds of the shareholding reform or reducing the actual value of the state capital at the enterprise.

VII. IMPLEMENTATION

1. The implementation of shareholding reform shall follow the specific steps of work as detailed in Appendix 1 attached to this Circular.

These steps of work must be completed within a maximum period of 9 months from the date of the Decision on Shareholding Reform issued by the competent authority. For large and complex enterprises (including economic groups, state corporations, commercial banks...), the implementation shall follow the approved shareholding reform schedule by the agency deciding on the shareholding reform.

2. The Shareholding Reform Steering Committee of the enterprise:

2.1. Assists the agency deciding on the shareholding reform in directing and organizing the shareholding reform of one or more enterprises. The rights and responsibilities of the Steering Committee are stipulated in Clause 5 Article 54 of Decree No. 109/2007/ND-CP (Model decision on establishing the Shareholding Reform Steering Committee as detailed in Appendix 11 attached to this Circular).

2.2. The composition of the Shareholding Reform Steering Committee includes:

a) Leadership of the agency deciding on the shareholding reform (or the authorized representative) - Chairperson.

In the case of the shareholding reform of an economic group or corporation, the leadership of the Ministry or People's Committee of the province/city shall be the Chairperson.

b) Representatives of functional units of the agency deciding on the shareholding reform - Member.

c) Representative of the Ministry of Finance in the case of the full shareholding reform of an economic group or corporation pursuant to the Prime Minister's Decision.

d) Representative of the State Capital Investment Corporation in the case of enterprises that are subject to transferring state ownership representation to the State Capital Investment Corporation.

đ) Leadership of the enterprise undergoing shareholding reform (Board of Directors, General Director, Director or authorized representative) - Member.

In the case of the shareholding reform of subsidiaries of state corporations, the Chairman of the Board of Directors may be appointed as the Chairperson of the Steering Committee.

The Deputy Chairperson of the Steering Committee, the number and structure of members of the Steering Committee shall be decided by the Head of the agency deciding on the shareholding reform.

The number and structure of members of the Steering Committee shall be decided by the Head of the agency deciding on the shareholding reform.

2.3. The Working Group assisting the Steering Committee:

a) The Shareholding Reform Steering Committee shall establish a working group to assist the Steering Committee in carrying out tasks related to the shareholding reform of the enterprise.

b) The composition of the Working Group includes:

- Enterprise leadership - Team Leader.

- Chief Accountant or head of the accounting department - Team Member.

- Heads and deputy heads of functional departments - Team Members.

In the case of the shareholding reform of dependent units of state-owned enterprises, the leadership of those units must participate in the Working Group.

The number and structure of members of the Working Group shall be decided by the Chairman of the State Committee for Corporate Shareholding.

2.4. The operating costs of the State Committee and the Working Group shall be included in the corporate shareholding expenses. Members shall receive allowances at a rate not less than five hundred thousand dong per person per month but not exceeding their respective basic salaries. The specific amount shall be decided by the Chairman of the State Committee.

In cases where multiple enterprises participate in the State Committee, they shall only receive allowances from one enterprise at the highest level.

3. Ministries, agencies equivalent to ministries, government agencies, People's Committees of provinces and centrally governed cities, Boards of Directors of economic groups, and state-owned corporations have the responsibility to report to the State Committee for Enterprise Reform and Development and the Ministry of Finance on matters related to the process of corporate shareholding of enterprises, specifically:

3.1. Results of handling financial issues when they arise.

3.2. Results of determining the enterprise value, including: Minutes of the determination of enterprise value; Decision to announce the enterprise value (within five days from the date of the decision to announce the enterprise value by the competent authority).

3.3. Decision approving the corporate shareholding plan (within five days from the date of approval).

3.4. Results of selling shares (within five days from the completion of the share sale).

3.5. Settlement of corporate shareholding costs.

3.6. Decision to re-determine the state capital value at the time of officially becoming a joint-stock company.

3.7. Minutes of the handover from the shareholding enterprise to the joint-stock company.

4. Handling certain issues arising before Decree No. 109/2007/ND-CP takes effect (August 1, 2007).

4.1. Enterprises that have been approved for the corporate shareholding plan before August 1, 2007 shall continue to implement according to the approved plan. In cases where there has been no auction sale of shares, the State Committee for Corporate Shareholding shall conduct the auction in accordance with the provisions in Part B, Section V of this Circular.

4.2. Enterprises that have had decisions to announce the value before August 1, 2007 do not need to re-determine the enterprise value but must develop the corporate shareholding plan and sell shares in accordance with Decree No. 109/2007/ND-CP and this Circular.

The transfer of unused assets, stagnant assets, assets awaiting liquidation, and difficult-to-collect receivables of these enterprises shall still be carried out in accordance with Decree No. 187/2004/ND-CP dated November 16, 2004 of the Government on the conversion of state-owned companies into joint-stock companies.

The management and use of shares sold to grassroots trade unions at enterprises shall be implemented in accordance with separate guidance documents issued by the Ministry of Finance and the Vietnam General Confederation of Labor.

This Circular shall take effect fifteen days after its publication in the Official Gazette and shall replace Circulars: 126/2004/TT-BTC dated December 24, 2004, Circular No. 95/2006/TT-BTC dated October 12, 2006, and other documents of the Ministry of Finance guiding Decree No. 187/2004/ND-CP dated November 16, 2004 of the Government on the conversion of state-owned companies into joint-stock companies.

During implementation, if there are any difficulties, please reflect them to the Ministry of Finance for study and amendment./.