Circular No. 220/2013/TT-BTC guiding the implementation of certain provisions of Government Decree No. 71/2013/NĐ-CP dated July 11, 2013 on investment of state capital in enterprises and financial management for enterprises wholly owned by the state

CIRCULAR

Guidelines for Implementing Certain Provisions of Decree No. 71/2013/NĐ-CP

dated July 11, 2013 of the Government on State Capital Investment in Enterprises and Financial Management of Enterprises with 100% State-owned Charter Capital

 in which the State holds 100% of the charter capital

The Minister of Finance issues this Circular to provide guidelines for implementing certain provisions of Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government on State Capital Investment in Enterprises and Financial Management of Enterprises with 100% State-owned Charter Capital.

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

Pursuant to Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government on state capital investment in enterprises and financial management of enterprises wholly owned by the state;

3. Domestic and foreign organizations and individuals meeting the conditions to provide dredging and maintenance services for maritime channels according to the law.

This Circular provides guidance on certain provisions regarding State Capital Investment, Management of State Capital Investment in Enterprises, and Financial Management of Enterprises with 100% State-owned Charter Capital as stipulated in Decree No. 71/2013/NĐ-CP dated July 11, 2013 of the Government (hereinafter referred to as Decree No. 71/2013/NĐ-CP).

Part 1

GENERAL PROVISIONS

Article 1. Scope of Regulation

1. This Circular applies to the subjects specified in Article 2 of Decree No. 71/2013/NĐ-CP.

Article 2. Applicability

2. Enterprises with 100% State-owned Charter Capital operating in special sectors with specific financial regulations shall implement such regulations issued by competent authorities and also comply with other relevant provisions stipulated in Decree No. 71/2013/NĐ-CP and guided in this Circular.

3. Enterprises with 100% State-owned Charter Capital shall base their regulations on the provisions of the Enterprise Law, Decree No. 71/2013/NĐ-CP, and the guidance provided in this Circular to establish rules for State Capital Investment and Financial Management of wholly-owned subsidiaries.

In addition to the terms defined in Article 3 of Decree No. 71/2013/NĐ-CP, the following terms in this Circular are understood as follows:

Article 3. Explanation of Terms

1. "Enterprise-raised capital" refers to capital borrowed from credit institutions, financial organizations, individuals both domestically and internationally, issued bonds, received contributions, and other forms of capital raising as prescribed by law to serve business operations.

2. "Enterprise assets" refer to tangible and intangible assets under the management and use of the enterprise formed from State investment capital, raised capital, and other sources of capital reflected in the enterprise's balance sheet at a given point in time (excluding assets leased for operation, borrowed, held in custody, processed, sold on consignment, or stored).

3. "Other enterprises" are enterprises:

- Holding shares or contributions of State capital managed by Ministries, ministerial-level agencies, or government agencies (referred to hereafter as Sector Management Ministries), or People's Committees of provinces and centrally-administered cities (referred to hereafter as Provincial People's Committees).

- Holding shares or contributions of Limited Liability Companies with 100% State-owned Charter Capital.

STATE CAPITAL INVESTMENT AND MANAGEMENT

Part 2

SPECIFIC PROVISIONS

PART I

 INVESTMENT IN ENTERPRISES

 STATE CAPITAL INVESTMENT IN ENTERPRISES

PART 1

Article 4. State Capital Investment in Enterprises

State Capital Investment in Enterprises shall be carried out in accordance with the provisions of Section 1, Chapter II of Decree No. 71/2013/NĐ-CP and the following guidelines:

1. State Capital Investment in Enterprises to implement important national projects and other projects to establish new enterprises or expand the production and business scale of existing enterprises must align with overall economic development plans of regions and industries, land use plans, and ensure compliance with the procedures and formalities for investment construction projects as prescribed by laws on investment construction and related laws, approved by competent authorities.

2. Payment of State Capital Investment during project implementation and settlement of State Capital Investment upon completion of the project shall be conducted according to current State regulations on payment and settlement of investment capital from the State budget.

3. Investment of State Capital to maintain or increase the proportion of State Capital Investment in other enterprises must be approved by competent authorities and comply with procedures as prescribed by the Enterprise Law, Investment Law, Securities Law, and guiding documents of competent authorities.

4. Investment of State Capital to acquire part or all of another enterprise belonging to other economic sectors must follow a plan developed by the Sector Management Ministry or Provincial People's Committee with the review opinion of the Ministry of Finance and the Ministry of Planning and Investment, and approved by the Prime Minister.

 MANAGEMENT OF STATE CAPITAL INVESTMENT IN ENTERPRISES

PART 2

 OTHER ENTERPRISES MANAGED BY SECTOR MANAGEMENT MINISTRIES OR PROVINCIAL PEOPLE'S COMMITTEES AS SHAREHOLDERS

OTHERS UNDER THE MANAGEMENT OF SECTORS, PEOPLE'S COMMITTEES AT PROVINCE LEVEL AS SHAREHOLDERS

 PROVINCIAL PEOPLE'S COMMITTEES AS SHAREHOLDERS

Article 5. Implementation of rights and responsibilities of the owner regarding state capital invested in other enterprises

The sector management ministry, provincial People's Committee shall implement the rights and responsibilities of the owner regarding state capital invested in other enterprises through representatives as stipulated in Article 8 of Decree No. 71/2013/NĐ-CP. In this regard:

1. Establish regulations to inspect and supervise the activities of representatives with the aim of promptly identifying and addressing any errors or weaknesses in the representatives' performance of their duties as owners according to the law, serving as a basis for evaluating the completion of tasks assigned by the owner in managing state capital in other enterprises.

2. Require representatives to periodically, quarterly, annually, or at any time, compile and assess the business operation situation, financial status, and propose measures to address difficulties and enhance the effectiveness of state capital invested in other enterprises according to Appendix No. 02 issued together with this Circular, report to the owner of the capital, and send to the Ministry of Finance (Enterprise Financial Department). The deadline for representatives to submit reports shall be in accordance with the current deadlines for submitting enterprise financial reports.

3. Manage the implementation of the right to purchase additional shares and convertible bonds by representatives and bear responsibility when representatives violate the provisions on purchasing additional shares and convertible bonds as stipulated in Clause 2, Article 6 of this Circular.

Article 6. Rights and responsibilities of representatives

1. Representatives shall perform rights and responsibilities in managing state capital invested in other enterprises as prescribed in Clause 1, Clause 4, Article 9 and Clause 2, Article 10 of Decree No. 71/2013/NĐ-CP and the operational regulations of representatives issued by the Ministry of Finance.

2. Representatives have the right to purchase additional shares and convertible bonds according to the decision of the joint-stock company as stipulated in Sub-clause c, Clause 2, Article 9 of Decree No. 71/2013/NĐ-CP.

In cases where representatives are appointed as representatives in multiple joint-stock companies, they may only choose to exercise the right to purchase additional shares and convertible bonds in one joint-stock company where they are appointed as representatives. Representatives must report and obtain the owner's decision regarding the exercise of the right to purchase shares mentioned above; the right to purchase additional shares and convertible bonds of representatives in other joint-stock companies belongs to the owner of state capital in other enterprises (except in cases where representatives can purchase according to the rights of existing shareholders).

Article 7. Increase or decrease in state capital invested in other enterprises by the sector management ministry, provincial People's Committee as the owner

1. When other enterprises plan to increase their registered capital, representatives must develop a supplementary state capital investment plan for other enterprises to report to the owner for decision-making according to Article 7 of Decree No. 71/2013/NĐ-CP. The supplementary capital plan includes the following contents:

a) Legal basis for increasing the capital of other enterprises.

b) Financial situation and business results of other enterprises over the three years prior to implementing the supplementary capital plan.

c) Business strategy, production and business plans, development investment plans, and the use of increased capital by the enterprise.

d) Economic benefits obtained and the impact of increased state investment in other enterprises.

đ) Proposal for sources to supplement state capital in other enterprises.

2. In cases where the supplementary capital investment plan for other enterprises comes from the Enterprise Restructuring and Development Fund, the sector management ministry, provincial People's Committee shall prepare documents to send to the Ministry of Finance for review and submission to the Prime Minister for consideration and decision.

3. In cases where other enterprises operate in industries or sectors that do not require continued state investment according to the criteria and classification list of state-owned enterprises issued by the Prime Minister, the sector management ministry, provincial People's Committee shall consider and decide to transfer the right to purchase additional shares and convertible bonds to other organizations or individuals.

The principle of transferring the right to purchase shares and convertible bonds shall be carried out through public auction. The determination of the starting price shall be conducted through an appraisal organization according to the law on appraisal. In cases where the time allowed for shareholders to exercise the right to purchase shares and convertible bonds according to the issuance plan of the joint-stock company is short, not enough for the organization to conduct an auction transfer, the owner shall consider and decide on the transfer price according to the regulations and ensure efficiency.

The authority responsible for deciding on the transfer of the right to purchase shares and convertible bonds shall not decide to transfer to enterprises in which the spouse, parent, adopted parent, child, adopted child, brother, sister, or half-sibling who manages the enterprise is involved, nor shall they decide to transfer to individuals with such relationships.

4. Proceeds from the transfer of the right to purchase shares and convertible bonds in other enterprises, after deducting related transfer costs and completing tax obligations according to the law, shall be deposited into the Enterprise Restructuring and Development Fund.

5. The reduction of part of the capital or the recovery of all state capital invested in other enterprises by the sector management ministry, provincial People's Committee as the owner of the capital shall be implemented according to the transfer method stipulated in Article 8 of this Circular.

PART 3

TRANSFER OF STATE CAPITAL INVESTED IN ENTERPRISES

Article 8. Methods for transferring state capital invested in enterprises

The methods for transferring state capital already invested in enterprises shall be implemented in accordance with Article 14 of Decree No. 71/2013/NĐ-CP and the following guidelines:

1. The transfer of state capital at a limited liability company wholly owned by the state under the form of corporatization or selling the enterprise according to the restructuring and modernization plan approved by the Prime Minister shall be carried out in accordance with the Government's regulations on corporatization or selling enterprises owned by the state.

2. Transfer of state capital at a limited liability company to become a limited liability company with two or more members:

a) The partial transfer of state capital at a limited liability company wholly owned by the state must follow the restructuring and modernization plan approved by the Prime Minister.

b) Transfer of capital through public auction or direct negotiation:

- Public auction when transferring capital with a value of 10 billion VND or more shall be conducted at the Securities Exchange. In cases where the transferred portion of capital has a value below 10 billion VND, it may be entrusted to a financial intermediary organization to conduct the auction, self-organized auction within the enterprise, or conducted at the Securities Exchange.

- Direct negotiation sale between the capital owner (or the competent authority authorized in writing by the capital owner to carry out tasks) and the investor in cases where there is only one registered buyer or where direct negotiation sale is permitted by the Prime Minister.

When transferring capital through direct negotiation, the person authorized to decide on the transfer of capital shall not decide to transfer to an enterprise in which his spouse, parent, adopted parent, child, adopted child, brother, sister, or half-sibling who manages the enterprise is involved, nor shall they decide to transfer to individuals with such relationships.

- Determining the initial price for the state capital before organizing a public auction or direct negotiation must be carried out through an appraisal organization with appraisal functions in accordance with the law on appraisal, ensuring the principle of fully determining the actual value of the state capital in the enterprise, including the value created by the right to use land granted or legally transferred according to the law on land and the value of intellectual property rights (if any) of the enterprise according to the law at the time of transferring capital.

3. Transfer of part of the state capital invested in a limited liability company with two or more members or in a joint-stock company:

a) The sector management ministry or provincial People's Committee, based on the investment portfolio in enterprises not belonging to sectors or fields where the state holds capital, directs the representative to develop a capital transfer plan to report to the capital owner to decide on the capital transfer plan after receiving comments from the Ministry of Finance and the Ministry of Planning and Investment as stipulated in Article 15 of Decree No. 71/2013/NĐ-CP.

b) The capital transfer plan includes the following contents:

- Legal basis, purpose of transferring capital.

- Evaluation of benefits obtained and the impact of transferring state capital invested in other enterprises.

- Form of transferring capital.

c) Transfer of state capital invested in a limited liability company with two or more members:

- In case the state capital owner requests a limited liability company with two or more members to repurchase their share, the determination of the transfer price shall be carried out in accordance with Article 43 of the Enterprise Law 2005.

- In case the state capital owner transfers their share to another member or transfers it to an organization or individual who is not a member of the company, it must be carried out in accordance with Article 44 of the Enterprise Law 2005, wherein:

+ If transferring to other members of the company, the state capital owner agrees on the transfer price with other members. The determination of the negotiated sale price is based on the results of the appraisal by an organization with appraisal functions as stipulated in Clause 2 of this Article.

+ If transferring to an organization or individual who is not a member of the company, it must be carried out through public auction or direct negotiation as stipulated in Clause 2 of this Article.

d) Transfer of state capital at a joint-stock company:

- For listed joint-stock companies or those registered for trading on the Upcom exchange, the transfer of capital (transfer of shares) shall be carried out through trading methods (matching orders, negotiations) in accordance with the Securities Law. In cases of transfer through negotiation, the negotiated price must fall within the trading range of the stock code on the transfer date.

- For unlisted joint-stock companies or those not registered for trading on the Upcom exchange, the transfer of capital shall be carried out in accordance with Clause 2 of this Article.

Chapter II

FINANCIAL MANAGEMENT FOR ENTERPRISES

 WHOLLY OWNED BY THE STATE

PART 1

CAPITAL MANAGEMENT OF ENTERPRISES

Article 9. Determining the Registered Capital

The determination of registered capital and investment in registered capital for enterprises shall be carried out in accordance with the provisions of Article 18 of Decree No. 71/2013/NĐ-CP, specifically:

1. For newly established enterprises:

a) Documents for determining registered capital:

- Investment project, Enterprise establishment proposal approved by the competent authority;

- Decision on enterprise establishment by the competent authority.

b) Method for determining registered capital:

- If an enterprise is newly established based on an investment project for construction works that have been completed and put into operation, the maximum level of registered capital of the enterprise will be equal to 30% of the total investment capital for construction works approved by the competent authority.

In cases where the investment project has state investment capital exceeding 30% of the total investment capital forming assets of the enterprise, the level of registered capital will be determined by the amount of state investment capital.

- For newly established enterprises not linked to investment projects for construction works, the initial level of registered capital must be decided based on the scale, tasks, and business sectors specified in the enterprise establishment proposal to ensure normal operations of the enterprise.

- For newly established enterprises operating in business sectors requiring statutory capital according to the law, while also engaging in business sectors without such requirement, the registered capital at the time of enterprise establishment must be no less than the statutory capital according to the enterprise's business sector.

2. For operating enterprises:

a) Principles for adjusting increased registered capital:

- The determination of the need and adjustment of increased registered capital for operating enterprises must be based on the objectives, tasks, development strategy, and expansion of scale and business sectors of the enterprise according to plans and master plans already approved by the competent authority.

- The adjustment of increased registered capital for enterprises must be based on the capital needs to implement investment projects, purchase assets serving the main production and business activities of the enterprise; capital needs for producing products, trading goods, and providing services; and capital needs for external investments according to approved plans.

- The adjusted increased registered capital applies for a minimum of three years from the date of approval by the owner and must be guaranteed to be tied to the plan of sources of capital to supplement the registered capital from the annual development investment fund extracted from post-tax profits or other lawful sources as prescribed.

- In cases where the enterprise still lacks sufficient sources to supplement the approved registered capital after three years, the owner may adjust the objectives, tasks, and development strategy according to the plan assigned to the enterprise or, if necessary, implement the approved production and business tasks, the owner shall provide additional registered capital to the enterprise in accordance with Clause 4, Article 18 of Decree No. 71/2013/NĐ-CP.

b) Method for determining the adjustment of increased registered capital: enterprises determine it according to the general formula as follows:

Where:

- V (VND/year): is the total investment capital allocated annually for the usable area of social housing for rent, ensuring the preservation of capital, calculated according to the following formula:_sxsp-kdhhdv sxsp-

- The total capital needs for investment and procurement to form assets serving the main business activities of the enterprise include:

+ Total investment amounts of investment projects approved by the competent authority within the five-year development investment plan or industry development master plan already approved by the competent authority. For projects with implementation periods over three years, the investment amount used as the basis for determining the enterprise's registered capital adjustment is only calculated based on the capital needs to implement the project during the three-year period of registered capital adjustment (not based on the total project investment amount).

+ In cases where completed investment projects have not yet been included in the previous registered capital adjustment, they will be included in this registered capital adjustment.

+ For projects and construction works invested with mixed capital including state budget investment, the amount of state budget investment in the project serves as the basis for increasing the enterprise's registered capital.

+ In cases where construction projects (invested by other agencies or units) are transferred to the enterprise for management, exploitation, and use, the entire state investment capital of the project according to the final settlement of the construction investment project approved by the competent authority will be included in the increased registered capital adjustment.

+ In cases where ongoing investment projects are temporarily suspended or their scale is adjusted by the competent authority, the enterprise must base its determination (adjustment) of the registered capital on the capital needs for the project according to the competent authority's decision.

+ In cases where the enterprise has approved external investment plans, the enterprise must base its calculation of the total investment amount of projects when determining the registered capital on the contribution ratio of the enterprise in subsidiaries or associated companies.

- V (VND/year): is the total investment capital allocated annually for the usable area of social housing for rent, ensuring the preservation of capital, calculated according to the following formula:_{is the level of charter capital already approved by the competent authority before adjustment.} sxsp-hhkd

= maximum 50% x

The difference in increase between the total capital needs for producing products, trading goods, and providing services up to the third year from the year of re-determining the registered capital compared to the capital needs for producing products, trading goods, and providing services implemented in the immediately preceding year before the year of re-determining the registered capital is calculated based on the actual revenue from production and business activities in the audited financial report of the enterprise in the immediately preceding year before the year of re-determining the registered capital and the average annual revenue growth rate according to the five-year production and business plan approved by the competent authority up to the third year from the year of re-determining the registered capital.

Example:

In 2014, the enterprise proposed to determine and increase the registered capital; in 2013 (the year immediately preceding the year of re-determining the registered capital), the actual revenue from production and business activities recorded on the enterprise's financial statements was 1,000 billion VND.

According to the five-year production and business plan of the enterprise that has been approved, the average annual growth rate of revenue for the five-year plan is 5% per year.

In 2016 (the third year since the re-determination of the registered capital and within the period of the approved five-year production and business plan).

Determine the level of difference in the increased demand for production working capital, goods trading, and service provision for each year up to the third year (2016) from the year of re-determination of the registered capital as follows:

In 2014: 1,000 billion VND x 5% = 50 billion VND.

In 2015: (1,000 billion VND + 50 billion VND) x 5% = 52.5 billion VND.

In 2016: (1,000 billion VND + 50 billion VND + 52.5 billion VND) x 5% = 55.12 billion VND.

The level of difference in the total demand for working capital for production, goods trading, and service provision up to the third year (2016) compared to the year immediately preceding the year of re-determination of the registered capital (2013), serving as the basis for increasing the registered capital of the enterprise is: 157.62 billion VND (50 billion VND + 52.5 billion VND + 55.12 billion VND).

The amount of registered capital adjusted for the enterprise's production, goods trading, and service provision activities over three years from 2014 to 2016 is: V_{is the level of charter capital already approved by the competent authority before adjustment.} = 30% x 157.62 billion VND = 47.2 billion VND.

c) Documents and approval procedures:

The documents include:

- Decision approving the level of registered capital by the competent authority before adjusting the registered capital of the enterprise.

- The adjustment plan for the registered capital of the enterprise includes:

+ An explanatory document detailing the method of determining the adjusted registered capital and related supporting documents (such as decisions approving the five-year plan; decisions related to the approval of investment construction projects or decisions regarding the suspension of investment projects, decisions to adjust production and business plans, state-assigned tasks...).

+ Explanation of sources of funds to supplement the registered capital (as stipulated in Clause 4, Article 18 of Decree 71/2013/NĐ-CP).

- Financial reports for the quarter and year at the time of adjustment of the registered capital and the year immediately preceding the year of adjustment of the registered capital, which have been audited.

Approval procedure:

- For enterprises established by the Prime Minister, prepare the documents according to regulations and submit them to the relevant ministry within 15 days from the date of receipt of the enterprise's documents. The relevant ministry is responsible for reviewing the documents to ensure compliance and submitting a proposal (along with the enterprise's documents) to the Ministry of Planning and Investment for comments and the Ministry of Finance for review. Within 15 days from the date of receipt of the relevant ministry's proposal and the enterprise's documents, the Ministry of Planning and Investment and the Ministry of Finance will provide written comments to the relevant ministry to complete the report for the Prime Minister's decision to adjust the registered capital of the enterprise.

- For enterprises established by the relevant ministry, prepare the documents according to regulations and submit them to the relevant ministry within 15 days from the date of receipt of the enterprise's documents. The relevant ministry is responsible for reviewing the documents to ensure compliance and submitting a proposal (along with the enterprise's documents) to the Ministry of Finance for agreement. Within 15 days from the date of receipt of the relevant ministry's proposal and the enterprise's documents, the Ministry of Finance will provide an agreement on the enterprise's registered capital and sources of supplementary registered capital, which will be submitted to the relevant ministry to decide on the adjustment of the enterprise's registered capital within its authority.

- For enterprises established by the provincial People's Committee, prepare the documents according to regulations and submit them to the provincial People's Committee. Within 15 days from the date of receipt of the enterprise's documents, the provincial People's Committee is responsible for reviewing the documents to ensure compliance, verifying the data, and deciding on the adjustment of the enterprise's registered capital within its authority.

During the process of receiving and processing the documents for the adjustment of the enterprise's registered capital, if the enterprise's documents do not comply with the regulations, within 15 days from the date of receipt of the documents, the relevant ministry (for centrally-managed enterprises) and the provincial People's Committee (for locally-managed enterprises) and related agencies shall issue a request for the enterprise to complete the documents in accordance with the regulations. If the competent authority and related agencies do not accept the enterprise's application for adjustment of the registered capital, they must issue a written response (specifying the reasons) to the enterprise.

Article 10. Capital Mobilization of Enterprises

1. The capital mobilization of enterprises shall be carried out in accordance with the provisions of Article 19 of Decree No. 71/2013/NĐ-CP.

2. An enterprise has the right to guarantee loans for wholly-owned subsidiaries or subsidiaries with controlling equity stakes that borrow from banks or credit institutions in accordance with the provisions of the law. In this regard:

a) Subsidiaries guaranteed by the enterprise must have sound financial conditions and no overdue debts; guarantees for loans to implement investment projects must be based on the assessment of project effectiveness; the guaranteed subsidiary must commit to ensuring the ability to repay the guaranteed loan.

b) The enterprise may guarantee individual loans of subsidiaries according to the percentage of its contribution to the registered capital of the subsidiary, and the total value of guarantees for a single subsidiary shall not exceed the actual capital contribution of the enterprise in the subsidiary.

At the same time, the total value of guarantees for all subsidiaries shall not exceed the enterprise's owner's equity and within the range of the debt-to-equity ratio prescribed in Clause 3, Article 19 of Decree No. 71/2013/NĐ-CP.

c) The actual capital contribution of the enterprise in the subsidiary is determined as follows:

- For wholly-owned subsidiaries, the actual value of the enterprise's capital contribution is determined based on the owner's equity (code 410) on the balance sheet in the most recent quarterly financial report at the time of guarantee.

- For subsidiaries with controlling equity stakes, the actual value of the enterprise's capital contribution is determined based on the owner's equity (code 410) on the balance sheet of the most recent quarterly financial report at the time of guarantee, multiplied by the enterprise's contribution ratio according to the registered capital of the guaranteed subsidiary.

d) In cases where the enterprise guarantees beyond the prescribed limit or the guarantee decision leads to loss of capital or assets of the enterprise, the person authorized to decide on the guarantee shall bear responsibility in accordance with the law.

đ) Guarantees contracts for loans of enterprises for subsidiaries being implemented in accordance with Circular No. 117/2010/TT-BTC dated August 5, 2010 of the Ministry of Finance shall continue to be implemented until the expiration of the guarantee contract signed by the enterprise.

3. An enterprise without the functions of a credit institution as stipulated in the Law on Credit Institutions shall not use its own capital to carry out lending activities for other enterprises, organizations, or individuals. In special cases, the enterprise shall report to the owner for approval by the Prime Minister.

Article 11. Investment Activities Outside the Enterprise

1. Enterprises shall conduct investment activities outside the enterprise in accordance with Articles 29, 30, 31, 32, and 33 of Decree No. 71/2013/NĐ-CP. Specifically:

a) Enterprises shall not use assets leased, borrowed, held in custody, processed, sold on commission, or consigned by the enterprise for external investments.

b) In cases where enterprises receive shares issued by joint-stock companies without payment (including shares received and recorded in periodic financial reports), enterprises must record and account for them in their books, specifically:

- For shares received as dividends (dividends paid in shares), enterprises shall increase financial income and the value of external investments corresponding to the dividend amount.

- For remaining shares received without payment (shares not received as dividends), enterprises shall increase financial income and the value of external investments based on the number of shares received and their par value.

2. Enterprises shall transfer investment capital outside the enterprise in accordance with Article 30 of Decree No. 71/2013/NĐ-CP and the following guidelines:

a) Methods for transferring investment capital outside the enterprise:

- Transferring investment capital in a wholly-owned subsidiary (limited liability company) to become a limited liability company with two or more shareholders shall be conducted through public auction or direct negotiation as stipulated in Clause 2, Article 8 of this Circular.

- Transferring investment capital in a limited liability company with two or more shareholders shall be conducted in accordance with Point c, Clause 3, Article 8 of this Circular.

- Transferring investment capital in joint-stock companies shall be conducted in accordance with Point d, Clause 3, Article 8 of this Circular. However, the hiring of organizations to conduct public auctions and determine selling prices in negotiated sales shall be conducted in accordance with Point c, Clause 1, Article 30 of Decree No. 71/2013/NĐ-CP.

According to Clause 2, Article 30 of Decree No. 71/2013/NĐ-CP, the transfer of investment capital outside the enterprise must follow market prices at the time of sale. Specifically:

+ If the expected selling price is close to the market price (as assessed according to legal regulations on valuation and Vietnamese valuation standards), but still lower than the book value on the enterprise's books, and if the enterprise has established reserves as required and the reserve amount is equal to or greater than the difference between the expected selling price and the book value, then the Board of Directors or the Chairman of the company may decide to sell to recover the investment capital.

+ If the reserve amount is still lower than the difference between the book value of the investment and the expected selling price, the Board of Directors or the Chairman of the company must report to the owner for consideration and decision before implementing the transfer.

- For the transfer of various types of bonds and securities that enterprises have invested to earn interest, the transfer shall be carried out according to the provisions at issuance or the issuance plan of the issuing entity (subject). In cases where enterprises transfer bonds before their maturity date, the transfer price must ensure the principle of recovering the full investment value and earning profit.

As for the transfer of registered and listed bonds traded on the securities market, enterprises shall comply with the provisions of securities laws.

b) Accounting for proceeds from transferring investments outside:

The proceeds from transferring investments outside, after deducting the recorded investment capital on the enterprise's accounting books, transfer costs, and taxes paid as prescribed, the remaining amount shall be accounted for in the enterprise's business results.

Article 12. Capital Preservation at Enterprises

Enterprises are responsible for implementing capital preservation and development in accordance with the provisions of Article 34 of Decree No. 71/2013/NĐ-CP, specifically:

1. Capital Preservation:

Based on the profit and loss indicators of the enterprise according to quarterly and annual financial reports to assess the degree of capital preservation of the enterprise.

a) For enterprises with profits or without losses, the degree of capital preservation of the enterprise is determined based on the coefficient H:

Where:

- The enterprise's owner's equity for determining the degree of capital preservation includes the owner's investment capital (code 411), development fund (code 417), basic construction capital (code 421) on the Balance Sheet according to the quarterly or annual Financial Report (Form B 01-DN issued together with Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance and any subsequent amendments, supplements, or replacements).

- When determining the capital preservation coefficient as prescribed above, the enterprise must exclude objective factors affecting changes in capital during the reporting period such as additional state investment in the enterprise, state capital transferred from other places.

Method of assessing the degree of capital preservation: if the coefficient H = 1, the enterprise preserves its capital, and if the coefficient H > 1, the enterprise has developed its capital.

b) In cases where enterprises suffer losses (unable to preserve capital), the Board of Members or the Chairman of the company must report to the owners and the Ministry of Finance on the reasons for the losses and inability to preserve capital. Owners will decide to implement financial supervision or special financial supervision of the enterprise based on the loss situation of the enterprise according to current regulations.

The handling of enterprise losses shall be carried out in accordance with the current Corporate Income Tax Law.

2. Measures to Implement Capital Preservation:

Enterprises shall implement capital preservation measures as stipulated in Clause 2, Article 34 of Decree No. 71/2013/NĐ-CP, including the establishment of reserve funds, which include inventory write-down reserves; doubtful debt reserves; long-term financial investment loss reserves; product, goods, and construction warranty reserves, implemented in accordance with Circular No. 228/2009/TT-BTC dated December 7, 2009, and Circular No. 89/2013/TT-BTC dated June 28, 2013 of the Ministry of Finance (hereinafter referred to as the reserve establishment regulations of the Ministry of Finance). For external investment capital, the reserve shall be established according to the long-term financial investment loss reserve regulations in the aforementioned circular.

PART 2

MANAGEMENT AND USE OF ENTERPRISE ASSETS

Article 13. Management and use of fixed assets

1. Enterprises shall implement investment, construction, procurement, management, use, and depreciation of fixed assets during business operations in accordance with Articles 20, 21, 22, and 23 of Decree No. 71/2013/ND-CP, Circular No. 45/2013/TT-BTC dated April 25, 2013, issued by the Ministry of Finance guiding the regime for managing, using, and depreciating fixed assets, and any subsequent amendments, supplements, or replacements thereof (if applicable).

2. For special industries with specific regulations on investment, procurement, management, and use of fixed assets according to their respective sectors, in addition to implementing the aforementioned provisions, they must also comply with the relevant sectoral laws.

3. The liquidation and sale of fixed assets by enterprises shall be carried out in accordance with Clause 2 and Clause 3 of Article 23 of Decree No. 71/2013/ND-CP and the following guidelines:

a) Assets subject to liquidation and sale:

Enterprises have the right to proactively liquidate or sell fixed assets that are damaged, technologically obsolete, not needed, or unusable in order to recover capital.

b) Procedures and formalities for liquidation and sale of fixed assets:

- The Chairman of the Board of Members or the Company Chairman decides to establish a Liquidation and Sale Committee for fixed assets at the enterprise. The committee consists of: General Director or Director, Chief Accountant, heads of relevant departments, and some experts knowledgeable about the technical features of fixed assets (if necessary).

- Tasks of the Liquidation and Sale Committee for fixed assets of the enterprise:

+ Determine the current technical status and residual value of the assets to be liquidated or sold.

+ Identify the causes and responsibilities of collectives and individuals related to cases where newly invested fixed assets do not generate economic benefits and must be sold but cannot recover sufficient investment capital, or fixed assets that have not been fully depreciated and are irreparably damaged must be liquidated or sold, and report to the owner for handling in accordance with regulations.

+ Organize the determination or hire an organization with appraisal functions to determine the potential value of the assets to be liquidated or sold.

+ Organize public auctions or hire organizations with auction functions to sell the types of assets to be liquidated or sold in accordance with relevant laws.

- The Liquidation and Sale Committee for fixed assets shall conclude its activities after completing the liquidation and sale of fixed assets of the enterprise.

c) Accounting for revenue and expenses from the liquidation and sale of fixed assets of the enterprise shall be carried out in accordance with Clause 3 of Article 35 and Clause 2 of Article 36 of Decree No. 71/2013/ND-CP.

d) In cases where an enterprise implements an approved investment construction project and must dismantle or cancel old fixed assets, the handling and accounting of old fixed assets when dismantled or canceled shall be treated as in the case of liquidation and sale of fixed assets.

Article 14. Management of inventory goods of enterprises

The management of inventory goods of enterprises shall be carried out in accordance with Article 24 of Decree No. 71/2013/ND-CP. Specifically:

1. Enterprises must establish regulations on managing various types of inventory goods, raw materials, materials, tools, equipment; work-in-progress during production; finished products not yet warehoused; finished goods in stock; finished goods awaiting sale. The regulations must clearly define the cooperation of each management department within the enterprise and the responsibilities of each department and individual involved in monitoring and managing the aforementioned enterprise assets.

2. For inventory goods subject to provision for impairment, the establishment and use of provisions for reducing inventory values shall be carried out in accordance with the guidance on establishing provisions issued by the Ministry of Finance.

Article 15. Management of Accounts Receivable

1. The management and handling of accounts receivable of enterprises shall be carried out in accordance with the provisions of Clause 1, Article 25 of Decree No. 71/2013/NĐ-CP and Decree No. 206/2013/NĐ-CP dated December 9, 2013 of the Government on the management of debt of enterprises wholly owned by the State.

2. For accounts receivable that fall within the scope of provision for impairment, the establishment and reversal of the provision for doubtful debts shall be conducted in accordance with the guidelines on provision for impairment issued by the Ministry of Finance.

Article 16. Handling of Exchange Rate Differences

The recording, evaluation, and handling of exchange rate differences in enterprises shall be carried out in accordance with the provisions of Article 26 of Decree No. 71/2013/NĐ-CP and Circular No. 179/2012/TT-BTC dated October 24, 2012 of the Ministry of Finance on the recording, evaluation, and handling of exchange rate differences in enterprises, and any subsequent amendments, supplements, or replacements thereof.

PART 3

MANAGEMENT OF REVENUE, EXPENSES AND DISTRIBUTION OF PROFITS

Article 17. Management of Revenue, Other Income and Expenses

The management of revenue, other income, and expenses of enterprises shall be carried out in accordance with the provisions of Articles 35, 36, and 37 of Decree No. 71/2013/NĐ-CP. In particular:

1. The Board of Members or the Chairman of the Company, General Director, or Director of the enterprise shall be responsible before the owner and the law for strictly managing to ensure the accuracy and legality of all revenue, other income, and production and business operation expenses of the enterprise.

2. All revenue, other income, and production and business operation expenses of the enterprise arising must have complete accounting vouchers in accordance with the accounting laws and must be fully reflected in the enterprise's accounting books according to the current enterprise accounting regulations.

3. Revenue and other income shall be determined in Vietnamese Dong; in cases where income is received in foreign currency, it must be converted into Vietnamese Dong in accordance with the provisions of the law.

4. The enterprise must accurately calculate all production and business operation expenses, cover all expenses from its revenues, and bear full responsibility for the results of its business operations.

Article 18. Distribution of Profits

The distribution of profits of enterprises shall be carried out in accordance with the provisions of Article 38 of Decree No. 71/2013/NĐ-CP. In particular:

1. The basis for establishing the bonus fund, welfare fund, and management staff bonus fund is as follows:

a) Regarding the classification of enterprises into categories A, B, and C as the basis for establishing these funds, this shall be implemented in accordance with the guidance provided in the Financial Supervision Regulation and Evaluation of Business Effectiveness and Disclosure of Financial Information for Enterprises Owned by the State and Enterprises with State Capital issued together with Decree No. 61/2013/NĐ-CP dated June 25, 2013 of the Government and Circular No. 158/2013/TT-BTC dated November 13, 2013 of the Ministry of Finance.

b) Regarding monthly salary as the basis for establishing these funds:

- For the establishment of the bonus fund and welfare fund of the enterprise: based on the actual wage fund of employees in the financial year of the enterprise as stipulated in Decree No. 50/2013/NĐ-CP dated May 14, 2013 of the Government on Labor Management, Wages, and Bonuses for Employees Working in Limited Liability Companies Wholly Owned by the State, divided by 12 months.

- For the establishment of the management staff bonus fund: based on the actual wage and remuneration fund of management staff (both dedicated and non-dedicated), as stipulated in Decree No. 51/2013/NĐ-CP dated May 14, 2013 of the Government on Wage, Remuneration, and Bonus System for Members of the Board of Members or the Chairman of the Company, Supervisors, General Directors or Directors, Deputy General Directors or Deputy Directors, and Chief Accountants of Limited Liability Companies Wholly Owned by the State, divided by 12 months.

2. The Chairman of the Board of Members or the Chairman of the Company shall decide on the allocation of the bonus fund and welfare fund after reaching consensus with the Trade Union Executive Committee of the enterprise.

3. The remaining profit after distribution and establishment of the funds as prescribed shall be submitted to the Enterprise Restructuring and Development Fund in accordance with Point d, Clause 3, Article 38 of Decree No. 71/2013/NĐ-CP.

The Board of Members or the Chairman of the Company is responsible for directing the General Director or Director to complete the submission of profits to the Enterprise Restructuring and Development Fund no later than June 30 of the following year after the reporting year. In case the enterprise delays the submission (after June 30) or fails to comply with the submission, in addition to evaluating the failure to fulfill tasks of management staff, the enterprise must pay late interest and penalties, and compulsory measures will be applied in accordance with the Management and Use Regulation of the Enterprise Restructuring and Development Fund issued together with Decision No. 21/2012/QĐ-TTg dated May 10, 2012 of the Prime Minister.

Specifically, the remaining profit of the years 2013 and 2014 after establishing the funds as prescribed by Decree No. 71/2013/NĐ-CP and the guidance in this circular, the enterprise shall submit in accordance with the provisions of Decree No. 204/2013/NĐ-CP dated December 5, 2013 of the Government detailing and guiding the implementation of the National Assembly's Resolution on some solutions for state budget implementation in 2013 and 2014, and the guidance in Circular No. 187/2013/TT-BTC dated December 2, 2013 of the Ministry of Finance.

4. For enterprises directly serving national defense and security, enterprises established to perform main and stable production and supply of public goods and services assigned by the State, in addition to implementing the profit distribution as prescribed in this circular, the enterprise shall enjoy a special support system for the bonus fund and welfare fund as prescribed by the Government.

Article 19. Use of funds

1. The use of the development investment fund, award fund, welfare fund, and management staff bonus fund shall be carried out in accordance with the provisions of Clauses 2, 3, 4, 5, 6, and 7 of Article 39 of Decree No. 71/2013/ND-CP and the following guidelines:

a) The development investment fund may be used to supplement the registered capital of the enterprise. In cases where enterprises have more owner's equity than the approved registered capital, the Ministry of Finance shall develop a plan to report to the Prime Minister for transferring the enterprise’s development investment fund to the Enterprise Restructuring and Development Fund in accordance with Clause 4 of Article 38 of Decree No. 71/2013/ND-CP.

- The transfer of the enterprise’s development investment fund can only be determined after the enterprise has used the fund to fully supplement the registered capital approved by the competent authority up to December 31 of the financial reporting year.

- Within five days from the date of the Prime Minister's decision on the transfer, the enterprise is responsible for remitting the money to the Enterprise Restructuring and Development Fund while reducing the development investment fund correspondingly with the amount remitted to the Enterprise Restructuring and Development Fund. If the enterprise delays or fails to comply with the payment, in addition to evaluating the failure to complete tasks by the enterprise management staff, the enterprise must pay late interest penalties, and the enterprise will be subject to compulsory measures under the Management and Use Regulations of the Enterprise Restructuring and Development Fund issued together with Decision No. 21/2012/QĐ-TTg dated May 10, 2012 of the Prime Minister.

b) For the use of the award fund, welfare fund, and management staff bonus fund, the enterprise must establish management and usage regulations in accordance with the law, ensuring democracy, transparency, and participation of the Trade Union Executive Board of the enterprise, and publicizing within the enterprise before implementation.

- The enterprise's award fund is used to pay bonuses according to the content and correct recipients specified in Clause 3 of Article 39 of Decree No. 71/2013/ND-CP. Among which:

+ The recipients of the award fund are all employees of the enterprise including General Directors or Directors, Deputy General Directors or Deputy Directors, Chief Accountants working under labor contracts.

+ The enterprise's award fund cannot be used to pay bonuses to management staff.

- The welfare fund is used to pay for welfare items and recipients specified in Clause 3 of Article 39 of Decree No. 71/2013/ND-CP, including management staff.

- The management staff bonus fund:

+ The Board of Members or the Chairman of the company bases on the management staff bonus fund that has been established to determine the amount of the fund to be paid to the Owner and the Ministry of Finance (in case the enterprise has a controller appointed by the Ministry of Finance) to pay bonuses to Controllers (full-time and part-time) in accordance with the regulations.

+ The amount deducted from the management staff bonus fund (after deducting the bonus amount for controllers as mentioned above) is used to pay bonuses to other management staff members of the enterprise.

+ The payment of bonuses from the fund to management staff of the enterprise shall be carried out in accordance with Decree No. 51/2013/ND-CP dated May 14, 2013 of the Government and Circular No. 19/2013/TT-BLDTBXH dated September 9, 2013 of the Ministry of Labor, Invalids, and Social Affairs.

2. Handling residual balances of the financial reserve fund and profits distributed according to owner's equity:

When preparing the 2013 annual financial report, the entire balance of the financial reserve fund up to December 31, 2013, and the balance of the profit distributed according to owner's equity up to December 31, 2012 (if any), the enterprise may transfer to the enterprise's development investment fund to supplement the insufficient registered capital approved by the competent authority in accordance with the regulations.

PART 4

FINANCIAL PLAN, ACCOUNTING REGIME,

STATISTICS, AUDIT AND REPORTING

Article 20. Financial Plan

Enterprises shall establish long-term and annual financial plans in accordance with Article 40 of Decree No. 71/2013/NĐ-CP. Indicators and forms for annual financial planning shall be carried out in accordance with guidelines issued by the Ministry of Finance.

1. For enterprises established by decision of the Prime Minister or by decision of the sectoral ministry managing the industry:

a) Based on the production and business plan approved by the Board of Members or the Chairman of the company, the enterprise shall assess its production and business situation in the reporting year and prepare the next year's financial plan to be submitted to the sectoral ministry managing the industry and the Ministry of Finance before July 31 each year.

b) The sectoral ministry managing the industry shall take the lead in coordinating with the Ministry of Finance to review the financial plan prepared by the enterprise and provide formal comments in writing to enable the enterprise to complete the financial plan. After completion, the financial plan shall be decided upon by the Board of Members or the Chairman of the company as the basis for the sectoral ministry managing the industry and the Ministry of Finance to monitor and evaluate the enterprise’s production and business activities.

2. For enterprises established by decision of the provincial People's Committee:

a) Based on the production and business plan approved by the Board of Members or the Chairman of the company, the enterprise shall assess its production and business situation in the reporting year and prepare the next year's financial plan to be submitted to the Provincial Department of Finance before July 31 each year.

b) The Provincial Department of Finance shall review the financial plan prepared by the enterprise and report to the provincial People's Committee to provide formal comments in writing to enable the enterprise to complete the financial plan. After completion, the financial plan shall be decided upon by the Board of Members or the Chairman of the company as the basis for the Provincial Department of Finance to assist the provincial People's Committee in monitoring and evaluating the enterprise’s production and business activities.

Article 21. Accounting System, Statistics, and Audit

Enterprises must organize the implementation of accounting and statistical systems in accordance with the provisions of the law, record all original vouchers fully, update accounting books, reflect all financial activities fully, promptly, truthfully, accurately, and objectively; conduct annual financial statement audits in accordance with the provisions of the law.

Article 22. Financial Reports and Other Reports

Enterprises shall implement financial reports and other reports in accordance with Article 41 of Decree No. 71/2013/NĐ-CP. In particular:

1. At the end of the fiscal year, enterprises must prepare and submit within the prescribed time limit financial reports, supervisory reports, and statistical reports to relevant agencies as stipulated currently. Financial transparency shall be implemented in accordance with the regulations.

2. The annual financial report of the enterprise shall be prepared according to the form specified in Decision No. 15/2006/QĐ-BTC dated March 20, 2006, of the Minister of Finance, along with any subsequent amendments, supplements, or replacements, and shall include Form No. 02b-DN "Report on the Implementation of Obligations to the State Budget in Year..." attached as Appendix No. 01 to this Circular.

3. In addition to preparing and submitting the annual financial report, when completing the supervisory and evaluation report and ranking of enterprises as stipulated in Circular No. 158/2013/TT-BTC dated November 13, 2013, of the Ministry of Finance, enterprises must submit it to the Owner and the Ministry of Finance (for central enterprises) and the Provincial Department of Finance (for local enterprises).

4. In addition to regular financial reports as prescribed above, enterprises must also prepare and submit ad hoc reports when requested by the Owner and state management agencies. For enterprises with domestic and foreign loans guaranteed by the Government, they must submit reports in accordance with current laws on the management of government-guaranteed debt.

Chapter III

IMPLEMENTATION

Article 23. Effectiveness of Implementation

1. This Circular takes effect from February 15, 2014, and applies to fiscal years starting from 2013 onwards.

2. This Circular replaces Circular No. 117/2010/TT-BTC dated August 5, 2010, of the Ministry of Finance guiding the financial mechanism of limited liability companies with one member owned by the State and Circular No. 138/2010/TT-BTC dated September 17, 2010, of the Ministry of Finance guiding profit distribution mechanisms for limited liability companies with one member owned by the State. All contents of guidance on capital investment, state capital management in enterprises, and financial management of enterprises held 100% by the State that are inconsistent with the provisions of Decree No. 71/2013/NĐ-CP and the guidance provided in this Circular shall be abolished.

3. During the implementation process, if there are difficulties or obstacles, units shall report to the Ministry of Finance for research and resolution./.