Circular No. 26/2002/TT-BTC guides the financial handling when converting state-owned enterprises and enterprises of political and social organizations into limited liability companies with one member.

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 26/2002/TT-BTC DATE MARCH 22, 2002 GUIDING THE FINANCIAL HANDLING WHEN CONVERTING STATE ENTERPRISES AND ENTERPRISES OF POLITICAL ORGANIZATIONS, POLITICAL-SOCIAL ORGANIZATIONS INTO A JOINT STOCK COMPANY WITH ONE MEMBER
NATIONAL ENTERPRISE, ENTERPRISES OF POLITICAL ORGANIZATIONS, POLITICAL-SOCIAL ORGANIZATIONS INTO A JOINT STOCK COMPANY WITH ONE MEMBER
Pursuant to Decree No. 63/2001/NĐ-CP dated September 14, 2001 of the Government on converting state enterprises and enterprises of political organizations, political-social organizations into a joint stock company with one member, the Ministry of Finance guides the financial issues related to the process of converting state enterprises and enterprises of political organizations, political-social organizations into a joint stock company with one member as follows:

State-owned enterprises and enterprises under political organizations, political-social organizations engaged in business operations (hereinafter referred to as enterprises) shall be decided by the State or political organizations, political-social organizations to convert into a joint stock company with one member (hereinafter referred to as the company).

I. SCOPE AND APPLICABLE SUBJECTS

II. FINANCIAL HANDLING WHEN CONVERTING

ENTERPRISES INTO COMPANIES
1. When there is a notice from the competent authority regarding the plan to convert the enterprise into a company, the enterprise has the responsibility to inventory assets, sources of capital, and existing funds of the enterprise at the time of converting the enterprise into a company to record in the conversion decision. Specifically:

1.1 Inventory and determine the quantity of assets (fixed assets and long-term investments, current assets and short-term investments), compare with accounting records to identify excesses and shortages, clarify the causes, responsibilities of those involved, and propose handling measures for excess and shortage assets. Evaluate the current status and classify assets into those needed for use and those not needed for use to recommend handling measures for each type of asset.

1.2 Inventory and reconcile receivables, payables, sources of capital, funds, bank account balances... Assess and classify debts according to current regulations:

- For receivables, it must clearly identify recoverable debts, difficult-to-collect debts, and unrecoverable debts. In which, analyze the causes and responsibilities of individuals and collectives for each difficult-to-collect debt and unrecoverable debt and propose handling measures.

- For payables, it must clearly identify each payable. In which, analyze the causes and responsibilities of individuals and collectives for each payable without a debtor and overdue payable to propose solutions.

2. Based on the results of inventory, classification of assets, capital, and financial statements at the nearest point in time, the enterprise prepares a financial handling plan (in the conversion plan) to report to the competent authority for approval. After the conversion plan (including the financial handling plan) is approved, the enterprise proactively implements financial handling matters according to the following provisions:

2.1 Regarding assets:

- Assets not needed for use, stagnant assets awaiting liquidation: the enterprise may sell off or liquidate according to current regulations applicable to state-owned enterprises. The difference between the proceeds from selling off or liquidating and the remaining value of the assets and liquidation costs, sale costs shall be recorded as income of the enterprise.

- Leased, borrowed, held-in-trust, consigned assets: depending on the needs, the enterprise agrees with the lessor, lender, consignor to continue to inherit or liquidate lease, loan contracts before conversion.

- Asset inventory discrepancies: the enterprise must clearly identify the reasons for excesses and shortages and handle as follows:

+ For surplus assets where the enterprise cannot determine the cause and owner: the enterprise records an increase in state capital corresponding to the actual value of the surplus assets.

+ For missing assets, losses, and other asset losses: the difference between the remaining value of the assets according to the books and compensation from individuals, collectives responsible or insurance agencies (if any) shall be covered by the financial reserve fund; if insufficient, the shortfall will be deducted from state capital or capital of political organizations, political-social organizations present in the enterprise before conversion.

2.2 Regarding receivables and payables:

- For payables: the company is responsible for inheriting and paying off all payables to creditors according to agreements, including tax debts and budget debts, employee debts.

Payables that have no debtor are recorded as an increase in shareholders' equity.

- For receivables: the company is responsible for receiving and recovering receivables of the converted enterprise within the due date that can be recovered.

Unrecoverable receivables (including receivables from debtors who have completed dissolution, bankruptcy, deceased without heirs, debtors currently serving sentences or absconded for over two years without payment, debts written off by authorized agencies, loss differences from selling receivables) shall be covered by the bad debt reserve fund and financial reserve fund after deducting compensation from responsible individuals or collectives. If these funds are insufficient, the shortfall will be deducted from state capital or capital of political organizations, political-social organizations present in the enterprise before conversion.

2.3 Reserves for inventory write-downs, reserves for investment securities write-downs, reserves for difficult-to-collect receivables, financial reserve funds, unemployment reserves, after covering asset losses and unrecoverable receivables, any remaining balance shall be transferred to the company for continued use.

2.3 The reserve for inventory write-downs, the reserve for investment securities write-downs, the reserve for doubtful accounts receivable, the financial reserve fund, the unemployment reserve, after offsetting losses on assets and uncollectible accounts receivable, if there is still a balance remaining, the enterprise shall transfer such balance to the company for continued use.

3. Within thirty days from the completion of the conversion process, the enterprise shall prepare financial statements at the time of conversion for submission to the competent authority for approval and as the basis for transferring to the company. The financial statements shall be prepared in accordance with current regulations. The enterprise must clearly explain the handling of lost assets, uncollectible debts which should reduce capital; surplus assets, non-payable debts which should increase capital.

- Competent authority to approve the financial statements of the enterprise at the time of conversion:

+ For state-owned enterprises directly under ministries and central agencies, the Minister or Head of an equivalent agency.

+ For enterprises established by provincial People's Committees or municipal People's Committees directly under the Central Government, the Chairman of the Provincial People's Committee or Municipal People's Committee.

+ For enterprises managed by political organizations or political-social organizations, the leadership of such organizations.

+ For enterprises that are members of State-owned Corporations established by the Prime Minister, the Board of Directors of the State Corporation.

4. The actual paid-in capital of the company at the time of conversion shall be determined based on the approved financial statements at the time of conversion by the competent authority, including the balances of the following accounts: Account 411 - operating capital, Account 441 - investment capital for basic construction, and Account 414 - development fund.

The registered capital of the company shall be determined based on the requirements, scale of development, and the ability to mobilize capital of the company, including the actual paid-in capital at the time of conversion, additional capital gradually supplemented during the company's business operations, and committed additional capital of the owner (if any).

For political organizations or political-social organizations that have not yet been transferred ownership rights over state capital invested in enterprises by the State, it is necessary to clearly define the capital belonging to political organizations or political-social organizations and the actual state capital in the enterprise (if any). The State authorizes political organizations or political-social organizations to represent the owner's portion of state capital in the enterprise.

For industries or businesses where the law requires a minimum capital, the registered capital of the company shall not be lower than the minimum capital.

In cases where additional capital is provided to the company, the amount of additional capital and the commitment period must be clearly stated. The company's owner is responsible for investing the full registered capital for the company according to the agreed timeframe. If the owner fails to contribute the committed capital fully and on time, they shall bear responsibility as stipulated in Clause 1, Article 27 of the Enterprise Law.

5. The enterprise shall transfer all assets, capital up to the time of conversion, along with related documents and files to the company. The transfer of assets, capital, funds, receivables... from the enterprise to the company must be recorded in a protocol as the basis for management, monitoring, inspection, and supervision.

Assets that are not needed, stagnant, or awaiting liquidation, as defined in the conversion plan, if not yet resolved by the enterprise, shall be transferred to the company for continued resolution.

All assets of the enterprise at the time of conversion shall be valued.

6. Ministries, agencies equivalent to ministries, government agencies, provincial People's Committees, municipal People's Committees directly under the Central Government, Boards of Directors of State Corporations, political organizations, and political-social organizations authorized as representatives of the owner. The owner of a limited liability company with one member has the responsibility to manage state capital and capital of political organizations or political-social organizations in accordance with the current system.

III. IMPLEMENTATION PROVISIONS

This Circular shall take effect fifteen days from the date of signature. During implementation, if there are difficulties, the relevant ministries, sectors, localities, and enterprises are requested to promptly report to the Ministry of Finance for research and guidance on solutions.