Circular No. 25-TC/TCDN guides the procedures, formalities, and principles for financial handling when state-owned enterprises are dissolved.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 25-TC/TCDN ON MAY 15, 1997 GUIDING THE PROCEDURES, PROCEDURAL REQUIREMENTS, AND PRINCIPLES FOR FINANCIAL SETTLEMENT WHEN DISSOLVING STATE ENTERPRISES

Pursuant to Article 15 of Decree No. 50/CP dated August 28, 1996 of the Government on the establishment, restructuring, dissolution, and bankruptcy of state enterprises, the Ministry of Finance guides the procedures, formalities, and principles for financial settlement when dissolving state enterprises as follows:

Production facilities under the Vietnam Import-Export Construction Corporation (Ministry of Construction) producing building components and materials for housing sold to households in flood-prone areas in the Mekong Delta on deferred payment terms (as per Decision No. 105/2002/QD-TTg dated August 2, 2002) and to ethnic minority households in place in the Central Highlands provinces on deferred payment terms (as per Announcement No. 144/TB-VPCP dated September 12, 2002 of the Government Office).

The subject of this circular is state enterprises declared dissolved, including state corporations, independent member enterprises of state corporations, and independent state enterprises (hereinafter referred to as enterprises) as defined in Articles 1 and 2 of the State Enterprise Law.

II. PROCEDURES FOR DISSOLVING ENTERPRISES:

1. Cases Subject to Consideration for Dissolution of Enterprises:

Enterprises shall be considered for dissolution in the following cases:

1.1: Continuing the operation of the enterprise is deemed unnecessary according to the planning and reorganization of enterprises by ministries, sectors, localities, and state corporations.

1.2: Upon expiration of the business term specified in the establishment decision and business registration certificate, the enterprise does not apply for extension or is not granted permission to extend its business operations.

1.3: The enterprise has been operating at a loss for two years or more with cumulative losses equaling three-quarters of the actual capital but has not reached the level of inability to pay maturing debts, despite having applied financial measures and organizational forms without improvement.

1.4: The enterprise has failed to fulfill state-assigned tasks for two years or more, despite applying necessary financial and organizational measures.

1.5: After applying financial measures, the registered capital of the enterprise remains below the statutory minimum capital required for its business sector.

2. Procedures for Dissolving Enterprises:

2.1: When an enterprise falls into any of the five aforementioned situations, the person proposing the establishment of the enterprise must submit a written request to the person deciding on the establishment of the enterprise to issue a dissolution decision. While performing their duties, state agencies that discover an enterprise in a situation requiring dissolution may propose the dissolution of the enterprise or request the person proposing the establishment of the enterprise to propose dissolution or request the person deciding on the establishment of the enterprise to issue a dissolution decision. In cases where the enterprise was established by the Prime Minister's authorization, the decision to dissolve the enterprise must also be made through the Prime Minister's authorization. The dissolution request must clearly state the reasons for dissolution along with the financial report of the last two years of the enterprise being proposed for dissolution.

2.2: Within fifteen days from receiving the dissolution request, the authorized person or the person authorized to make the dissolution decision must issue a dissolution decision. If there is insufficient basis to make a dissolution decision, the decision-maker must notify the person requesting dissolution in writing of the reasons for not making the dissolution decision.

2.3: The dissolution decision must include the following contents:

- Name and address of the enterprise being dissolved

- Date of declaration of dissolution of the enterprise

- Reasons for dissolution of the enterprise

- Plan for dissolution of the enterprise

2.4: The dissolution decision must be sent to the following entities:

- The person requesting dissolution of the enterprise

- The enterprise being dissolved

- Ministry of Planning and Investment

- The ministry managing the economic and technical sector

A copy of the dissolution decision must be sent to the following entities:

- The agency managing state capital and assets at the enterprise where the enterprise has its main office.

- The tax authority directly responsible for collecting corporate taxes.

- The provincial statistics bureau where the enterprise has its main office.

- The provincial department of planning and investment where the enterprise is registered for business.

- The provincial People's Committee where the enterprise has its main office if the enterprise is dissolved due to proposals from central ministries, sectors, or state corporations.

3. Liquidation Board of the Enterprise:

3.1: The person deciding on the dissolution of the enterprise establishes a liquidation board consisting of the following members:

- Representative of the agency deciding on the establishment of the enterprise (for enterprises established before Decree No. 50/CP) or representative of the agency proposing the establishment of the enterprise (for enterprises established under Decree No. 50/CP) as Chairman of the liquidation board.

- Representative of the planning and investment agency.

- Representative of the agency managing state capital and assets at the enterprise where the enterprise has its main office.

- Representative of the provincial branch of the State Bank where the enterprise has its main office.

- Representative of the trade union of the enterprise being dissolved.

- Representative of the enterprise being dissolved.

3.2: The liquidation board sets up a team of experts to assist in the work, comprising staff from agencies with representatives participating in the liquidation board. The Chairman of the liquidation board decides on the list of experts based on recommendations from agencies with representatives participating in the liquidation board.

4. Tasks of the Liquidation Board:

4.1: Review the dissolution proposal file submitted to the authorized decision-maker for dissolution of the enterprise.

4.2: Receive and manage the books, documents, and assets of the enterprise being dissolved upon transfer, ensuring consistency between records and reality. In cases where there are discrepancies between records and reality, a record must be established detailing the cause and responsibility of each individual or collective for specific cases.

4.3: Compile a list of creditors and the amount owed to each creditor based on the evidence provided by creditors, categorizing them into secured debt, partially secured debt, and unsecured debt.

4.4: Proceed to recover the assets of the enterprise being dissolved, including receivables, leased, rented, or held-in-trust assets, and assets as stipulated in Point 7 of Section III below.

4.5: Return assets that the enterprise being dissolved had leased, borrowed, or held in trust from other enterprises, organizations, and individuals outside the enterprise, if the owners present sufficient legal evidence proving ownership of the assets.

4.6:- Disposal of assets of the enterprise being dissolved according to the approved plan.

In cases where assets are sold at auction, a valuation team must be established to determine the standard price before the auction.

4.7:- Repayment of debts owed to creditors with the proceeds from the sale of assets of the dissolved enterprise.

4.8:- Settlement of the dissolution process of the enterprise.

III. PRINCIPLES FOR HANDLING FINANCIAL ISSUES WHEN DISSOLVING AN ENTERPRISE

1. Assets of the enterprise being dissolved: Are those assets under the lawful management and use of the enterprise, including: fixed assets, current assets, unfinished construction projects, joint venture capital contributions, joint operation capital contributions, receivables.

State reserve assets held by the enterprise, leased, borrowed, or held for safekeeping assets do not belong to the assets of the enterprise being dissolved.

2. From the date of declaring the dissolution of the enterprise, all debts that have not yet matured shall be considered mature, and interest on such debts shall cease to accrue.

3. All assets of the enterprise being dissolved transferred to units or individuals must be settled at market prices prevailing at the time of transfer.

4. Secured creditors shall receive secured assets at the price determined by the valuation team; if the creditor does not accept the asset, it may be sold at auction according to current regulations. The proceeds from selling the secured asset shall be used to repay the secured creditor; any surplus belongs to the assets of the dissolved enterprise, and any shortfall is treated as unsecured debt and handled like other unsecured debts.

5. Guarantors who have repaid the enterprise's debts shall be treated as unsecured debt and settled like other unsecured debts.

6. The entire amount received from the assets of the dissolved enterprise shall be processed in the following sequence:

6.1: Cover all dissolution expenses of the enterprise (costs of recovering assets, transferring, selling assets, allowances for members of the Dissolution Board, and staff assisting the Dissolution Board).

6.2: Repay wages, social insurance debts, severance pay, and other benefits due to employees of the dissolved enterprise according to contracts or collective labor agreements.

6.3: Repay tax debts.

6.4: Any remaining funds after deducting items 6.1, 6.2, and 6.3 shall be paid to unsecured creditors. If the remaining funds are sufficient to repay all unsecured creditors, they will receive their full debt. If insufficient, unsecured debts will be settled based on the ratio between the remaining funds and the total unsecured debt of the enterprise.

Example:

- Amount received from the assets of the dissolved enterprise: 1.6 billion VND

- Dissolution expenses: 100 million VND

- Employee wage debts: 400 million VND

- Tax debts: 300 million VND

- Unsecured debts: 1 billion VND

- Remaining funds available for repayment of unsecured debts are:

1.6 billion - (100 million + 400 million + 300 million) = 800 million VND

- Ratio between remaining funds and unsecured debt is:

800: 1000 x 100 = 80%

Creditor A with an unsecured debt of 100 million VND will be repaid:

100 million x 80% = 80 million VND

6.5: Any remaining funds after deducting items 6.1, 6.2, 6.3, and 6.4 shall be remitted to the state budget by the Dissolution Board.

7. During the six months prior to the declaration of dissolution of the enterprise, the following actions of the enterprise shall be deemed ineffective:

- Dividing up the enterprise's assets in any form;

- Repaying debts that have not yet matured;

- Abandoning claims for receivables;

- Converting unsecured debts into secured debts;

- Selling assets below their actual value.

The Dissolution Board has the right to recover these assets and include them in the assets of the enterprise being dissolved.

When recovering these assets, the Dissolution Board must present the decision of the Chairman of the Dissolution Board and clearly explain the reasons for recovering the assets to the parties involved. Any disputes over the recovery of assets of the dissolved enterprise shall be resolved by the court.

IV. PROCEDURE FOR DISSOLUTION OF AN ENTERPRISE:

1. Upon receiving a dissolution decision, the enterprise being dissolved must publish in a central daily newspaper and a local newspaper for three consecutive days. The content published includes:

- Name and address of the enterprise being dissolved;

- Number, date, month, year, and authority issuing the dissolution decision;

- Date the enterprise ceases operations (date of dissolution announcement);

- Request creditors to verify debts.

2. From the date of dissolution announcement, the enterprise being dissolved must:

2.1: Cease all business activities, sales, payment of debts, leasing, lending, and holding assets for others.

2.2: Close accounting books, inventory assets, reconcile debts (including receivables and payables). Prepare financial statements up to the date of dissolution announcement. Within thirty days after the dissolution announcement, the enterprise being dissolved must complete the financial statements and submit them to the Dissolution Board.

2.3: Prepare a list of creditors and amounts owed, categorized as secured, partially secured, and unsecured debts; a list of debtors and amounts receivable, categorized as collectible and non-collectible debts.

2.4: Recover leased, lent, and held-for-safekeeping assets, and receivables.

2.5: Hand over to the Dissolution Board:

- Accounting books and other records and documents of the enterprise;

- All assets under the enterprise's management and use (including unrecovered assets), assets held for safekeeping, lent, and leased.

- List of creditors and debtors of the enterprise.

Asset handover must take place immediately after the enterprise completes its asset inventory. Accounting books and creditor lists must be handed over immediately after completing the financial statements.

3. Within sixty days from the first publication date regarding the dissolution of the enterprise, creditors must send the Dissolution Board a claim letter accompanied by evidence proving the debt. Debts must specify whether they are secured, partially secured, or unsecured.

Within fifteen days from the expiration date of sending the debt demand letter, the Business Dissolution Council must complete the list of creditors, compare it with the creditor list handed over by the dissolved business, and publicly post it at the main office of the dissolved business.

Within ten days from the posting, the Business Dissolution Council shall finalize the list of creditors to serve as the basis for distributing assets of the dissolved business.

4. Within thirty days from the publication of the first notice about the dissolution of the business, creditors who have property leased, rented, or held in custody by the dissolved business must present documents proving their ownership or lawful management rights (for state-owned enterprises) to reclaim their property. If the property was leased by the dissolved business but the lease period has not yet expired and all rental fees have been paid, the lessor must refund the excess amount before reclaiming the property.

5. The Business Dissolution Council shall proceed to recover the assets of the declared-dissolved business. When recovering, the Business Dissolution Council must present the decision declaring the dissolution of the business. If illegal occupation of assets of the dissolved business that are not included in the handover inventory is discovered, the chairman of the Business Dissolution Council shall issue a decision to recover such assets and organize the recovery process.

The Business Dissolution Council may request relevant state agencies to assist in the recovery of assets.

6. The Business Dissolution Council shall establish an appraisal team to appraise all assets of the dissolved business, including those pledged or mortgaged, as the basis for auctioning the assets. The appraisal team consists of:

- The chairman of the Business Dissolution Council as the team leader.

- A representative from the Department of Finance and Prices where the business is headquartered.

- A representative from the State Capital and Asset Management Agency at the enterprise where the dissolved business is headquartered.

- Representatives from other related agencies upon the proposal of the chairman of the Business Dissolution Council.

The chairman of the Business Dissolution Council shall invite creditors with secured debts to participate in the appraisal team for the assets serving as collateral for their respective debts.

The appraisal team shall decide by majority vote. In case of a tie, the opinion of the appraisal team member holding the deciding vote shall prevail.

7. The assets of the dissolved business shall be organized for public auction according to the Auction Regulations issued together with Decree No. 86/CP dated December 26, 1996 of the Government. In cases where there is no specialized auction organization, the Business Dissolution Council shall organize the auction in accordance with the "Auction Regulations." Sales of prohibited or restricted items must comply with relevant state regulations.

Sales involving land use rights must comply with the Land Law.

8. Not later than five days from the date of the dissolution decision, the chairman of the Business Dissolution Council must open an account at the state treasury where the business is headquartered to deposit proceeds from the sale of the dissolved business's assets. This account shall be managed by the chairman of the Business Dissolution Council.

All proceeds from the sale of the dissolved business's assets must be deposited into the Business Dissolution Council's account on the day they are received. If the end of the working day is reached, the funds must be deposited immediately after the next working day. Any person delaying the deposit shall compensate at the interest rate for non-fixed-term deposits announced by the bank and shall bear administrative disciplinary action depending on the severity of the offense.

9. The distribution of the value of the dissolved business's assets must follow the order specified in point 6, Section III above.

Payment can be made in multiple installments based on fairness and reasonableness according to the ratio between the actual recovered asset value (after deducting priority claims) and the total amount of unsecured debt. Each creditor shall receive an equal share of the total debt. If the debt amount is too small and making multiple payments is deemed unnecessary, the chairman of the Business Dissolution Council may decide to make one or two payments but must ensure fairness and take responsibility for the decision.

10. For creditors with accounts at banks or state treasuries, the chairman of the Business Dissolution Council shall process the transfer of payment into the creditor's account. If there is no account, the chairman of the Business Dissolution Council shall notify the creditor to collect directly or send the payment through the post office. Postage fees shall be deducted from the payment to the creditor.

11. Any remaining proceeds from the sale of the dissolved business's assets after deducting priority claims and fully paying off creditors must be fully remitted to the state budget within no more than five days.

12. Seven days after completing payments to creditors, the Business Dissolution Council must prepare a financial report on the dissolution of the business. The report shall be submitted to the agency that decided to dissolve the business, the state capital and asset management agency at the enterprise where the dissolved business is headquartered, and the superior management agency of the dissolved business (if applicable).

The state capital and asset management agency at the enterprise shall review the Business Dissolution Council's financial report. If there are no issues, it shall issue a decision recognizing the report. If there are unclear issues, it shall require the Business Dissolution Council to provide explanations before making a decision.

13. The Business Dissolution Council and its assisting staff shall be subject to administrative discipline or criminal liability pursuit, and if causing damage to the dissolved business's assets, they must compensate if they violate the following issues, depending on the nature and degree of violation:

- Preparing an asset inventory that does not match reality or failing to follow the prescribed legal procedures;

- Compile creditor lists and amounts incorrectly without basis;

- Establishing an appraisal team or organizing auctions in violation of legal provisions;

- Dividing the assets of the dissolved enterprise in accordance with the approved plan and the priority order of payment to creditors unfairly;

- Using the assets of the dissolved enterprise improperly;

- Failing to implement protective measures leading to loss of the dissolved business's assets or engaging in actions that cause loss of the dissolved business's assets;

- Preparing a financial report at the end of the business dissolution process that does not reflect the truth.

- Abandoning duties or performing duties inadequately, causing difficulties for the liquidation board's activities or leading to the loss of assets of the dissolved enterprise;

14. Prior to the completion of the dissolution process of the enterprise, the director and chief accountant of the dissolving enterprise shall not be transferred from their positions.

V. LIQUIDATION COSTS OF THE ENTERPRISE:

The liquidation costs of the enterprise shall be deducted from the value of the assets of the dissolved enterprise before settling other amounts, including:

1. Costs for inventory, transportation, recovery, appraisal, storage, organization of auction sales of assets, and other related expenses incurred in implementing the liquidation decision. These expenditures shall be reimbursed based on actual expenses approved by the Chairman of the liquidation board.

2. The daily remuneration for each member of the liquidation board, valuation team, specialized staff assisting the liquidation board, and individuals involved in recovering the assets of the dissolved enterprise shall be calculated at the rate of one day's accommodation allowance under the State travel expense regulations.

VI. IMPLEMENTATION PROVISIONS:

This Circular takes effect fifteen days after the date of issuance and replaces Circular No. 54 TC/CN dated January 13, 1990, issued by the Ministry of Finance, guiding financial handling during the dissolution of state-owned enterprises. Any provisions contrary to this Circular shall have no force of law.

This Circular does not apply in cases of merger, division of enterprises, or conversion of enterprises into public service units pursuant to the decision of the competent authority.

Any difficulties encountered during implementation should be reported to the Ministry of Finance for study and resolution.

Pham Van Trong (Signed)