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

CIRCULAR

Guidelines on the sequence, procedures, and principles for financial handling when state-owned enterprises are dissolved

I. APPLICABLE OBJECTS:

The Circular applies to state-owned enterprises declared for dissolution, including state-owned corporations, independent member enterprises of state-owned corporations, and independent state-owned enterprises (hereinafter referred to as enterprises) as stipulated in Articles 1 and 2 of the State-Owned Enterprise Law.

II. DISSOLUTION PROCEDURES FOR ENTERPRISES:

1. Circumstances leading to the declaration of enterprise dissolution:

Enterprises will be considered for dissolution under the following circumstances:

1.1. Continuing the operation of the enterprise is deemed unnecessary according to the planning and restructuring 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, if the enterprise does not apply for extension or is not granted permission to extend its business term.

1.3. Persistent losses for two years or more with cumulative losses equaling three-quarters of the actual capital of the enterprise but not reaching the level of inability to pay maturing debts, despite having applied financial measures and restructuring methods without improvement.

1.4. Failure to fulfill state-assigned tasks for two years or more, even after applying necessary financial and organizational measures.

1.5. After applying financial measures, the registered capital of the enterprise remains below the legally prescribed minimum capital for its business sector.

2. Dissolution procedures for enterprises:

2.1. When an enterprise falls into any of the above five 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 have the right to request the proposer of the enterprise's establishment to propose dissolution or to request the person deciding on the establishment 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 enterprise's financial report for the last two years.

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 decide on dissolution, the decision-maker must notify the requester in writing of the reasons for not deciding on dissolution.

2.3. The dissolution decision must include the following contents:

Name and address of the dissolved enterprise

Date of declaring the dissolution of the enterprise

Reasons for dissolving the enterprise

Dissolution Plan of the Enterprise

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

The person requesting the dissolution of the enterprise

The dissolved enterprise

Ministry of Planning and Investment

The department managing the economic and technical sector

Copies of the dissolution decision must be sent to the following entities:

The agency managing state capital and assets at the enterprise's main office location.

The tax authority directly responsible for collecting corporate taxes.

The Provincial Statistics Office at the enterprise's main office location.

The Department of Planning and Investment at the enterprise's business registration location.

The People's Committee of the province at the enterprise's main office location if the enterprise is dissolved due to establishment requests from central ministries, sectors, or state corporations.

3. Liquidation Council for Dissolved Enterprises:

3.1: The person deciding on the dissolution of the enterprise establishes a Liquidation Council consisting of the following members:

A representative of the agency deciding on the establishment of the enterprise (for enterprises established before Decree No. 50/CP) or a representative of the agency proposing the establishment of the enterprise (for enterprises established under Decree No. 50/CP) serves as the Chairman of the Liquidation Council.

A representative of the planning and investment agency.

A representative of the agency managing state capital and assets at the enterprise's main office location.

A representative of the provincial branch of the State Bank at the enterprise's main office location.

A representative of the trade union of the dissolved enterprise.

A representative of the dissolved enterprise.

3.2. The Liquidation Council establishes a team of specialized staff to assist in their work, comprising personnel from agencies with representatives participating in the Liquidation Council. The Chairman of the Liquidation Council decides on the list of specialized staff based on recommendations from agencies with representatives in the Liquidation Council.

4. Tasks of the Liquidation Council:

4.1. Review the dissolution application file submitted to the authorized decision-maker for enterprise dissolution.

4.2. Receive and manage books, documents, and assets handed over by the dissolved enterprise, ensuring consistency between records and reality. In cases where discrepancies exist, a detailed record must be created identifying the cause and responsibility of individuals or groups involved.

4.3. Compile a list of creditors and their respective debts based on creditor documentation, categorizing them into secured debt, partially secured debt, and unsecured debt.

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

4.5. Return assets borrowed, rented, or held in trust by the dissolved enterprise to other enterprises, organizations, or individuals outside the enterprise, provided the asset owners present valid legal evidence.

4.6. Dispose of the assets of the dissolved enterprise according to the approved plan.

In cases where assets are sold through auction, a valuation team must be formed to determine the fair value prior to the auction.

4.7. Payment of debts owed to creditors from the proceeds obtained from the 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: These are assets under the lawful management and use of the enterprise, including: fixed assets, current assets, unfinished construction projects, joint venture capital contributions, associated capital contributions, receivables.

State reserves held at the enterprise, leased, borrowed, or held-in-custody assets do not belong to the assets of the enterprise being dissolved.

2. From the date of declaring the dissolution of the enterprise, all outstanding debts that have not yet matured shall be considered as matured, 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 according to market prices at the time of transfer.

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

5. If a guarantor has repaid the debt on behalf of the enterprise, the amount repaid shall be treated as unsecured debt and settled like other unsecured debts.

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

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

6.2. Repaying wages, social insurance debts, severance benefits, and other entitlements to employees of the dissolved enterprise according to contracts or collective labor agreements.

6.3. Repaying 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 pay off 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:

Proceeds from the assets of the enterprise being dissolved: 1.600 billion VND

Dissolution expenses: 100 billion VND

Wages debts of officials and employees: 400 billion VND

Tax debts: 300 billion VND

Unsecured debts: 1000 billion VND

Remaining funds to settle unsecured debts are:

1600 - (100 + 400 + 300) = 800 billion VND

The ratio between the remaining funds and unsecured debts is:

800 : 1000 x 100 = 80%

Creditor A with unsecured debt of 100 billion VND will be settled as:

100 billion VND x 80% = 80 billion 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. Within six months prior to the declaration of dissolution of the enterprise, the following actions of the enterprise shall be deemed invalid:

Dispersing the enterprise's assets in any form;

Paying 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 regarding the recovery of the enterprise's assets shall be resolved by the court.

IV. PROCEDURE FOR DISSOLVING AN ENTERPRISE:

1. Upon receiving a dissolution decision, the enterprise being dissolved must publish in the central daily newspaper and local newspapers for three consecutive issues. The content to be 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, purchases, sales, payment of debts, leasing, lending, and custody of assets.

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

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 custodial assets, as well as 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), custodial, lent, and leased assets.

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 about 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 deadline for submitting claim letters, the Dissolution Board must complete the creditor list, compare it with the creditor list provided by the enterprise, and publicly post it at the main office of the dissolved enterprise.

Within ten days from the date of posting, the Liquidation Board shall complete the list of creditors to serve as the basis for distributing the assets of the dissolved enterprise.

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

5. The Liquidation Board shall proceed to recover the assets of the enterprise declared for dissolution. When recovering, the Liquidation Board must present the decision declaring the dissolution of the enterprise. If illegal occupation of the enterprise's assets not included in the handover inventory is discovered, the Chairman of the Liquidation Board shall issue a decision to recover such assets and organize the recovery process.

The Liquidation Board may request relevant state agencies to assist in the recovery of assets.

6. The Liquidation Board shall establish an appraisal team to appraise all assets of the dissolved enterprise, including those that have been pledged or mortgaged, to serve as the basis for auctioning the assets. The composition of the appraisal team includes:

The Chairman of the Liquidation Board serves as the team leader.

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

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

Representatives from related agencies as proposed by the Chairman of the Liquidation Board.

The Chairman of the Liquidation Board invites creditors with secured debts to participate in the appraisal team for the assets serving as collateral for their debts.

The appraisal team decides by majority vote. In case of a tie, the opinion of the appraisal team member holding the deciding vote prevails.

7. The assets of the dissolved enterprise 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 professional auction organization, the Liquidation Board 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 Liquidation Board must open an account at the national treasury where the enterprise is headquartered to deposit proceeds from the sale of the dissolved enterprise's assets. This account shall be managed by the Chairman of the Liquidation Board.

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

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

Payments 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 unsecured debt. Each creditor receives an equal share in the total debt. If the amount of debt is too small and multiple payments are deemed unnecessary, the Chairman of the Liquidation Board 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 national treasuries, the Chairman of the Liquidation Board shall process the transfer of payment to the creditor's account. If there is no account, the Chairman of the Liquidation Board shall notify the creditor to collect directly or send the payment through the post office. Postage fees are deducted from the payment to the creditor.

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

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

The agency managing state capital and assets at the enterprise shall review the Liquidation Board's financial report. If there are no issues, it shall issue a decision recognizing the report. If there are unresolved issues, it shall require the Liquidation Board to provide explanations before making a decision.

13. The Liquidation Board and its assisting staff shall be subject to administrative disciplinary action or criminal prosecution if they violate the following matters, depending on the nature and degree of violation, and must compensate for any damage caused:

Preparing an asset inventory that does not reflect reality or does not comply with prescribed legal procedures;

Listing creditors and debts inaccurately without proper grounds;

Establishing an appraisal team or organizing auctions contrary to legal provisions;

Distributing the assets of the dissolved enterprise incorrectly according to the approved plan, failing to follow the priority sequence, and making unfair payments to creditors;

Illegally using the assets of the dissolved enterprise;

Failing to implement protective measures leading to loss of the dissolved enterprise's assets or engaging in actions causing loss of the dissolved enterprise's assets;

Submitting a false financial report upon completion of the dissolution process.

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. Before 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, preservation, organization of auction sales of assets, and other related expenses incurred in implementing the dissolution decision. These expenditures shall be settled 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, technical assistance team for 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 when state-owned enterprises are dissolved. 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.

In the course of implementation, any difficulties encountered should be reported to the Ministry of Finance for study and resolution./.