Circular No. 31/2018/TT-BTC guiding the handling of assets formed from multiple sources of capital when cooperatives or cooperative unions are dissolved or bankrupt

CIRCULAR

for use on the handling of assets formed from multiple sources when cooperatives and cooperative unions are dissolved or bankrupt 

Pursuant to the Law on Cooperatives dated November 20, 2012;

Pursuant to the Bankruptcy Law dated June 19, 2014;

Pursuant to Decree No. 87/2017/NĐ-CP dated July 26, 2017, issued by the Government, stipulating the functions, tasks, powers, and organizational structure of the Ministry of Finance;

Pursuant to Decree No. 193/2013/ND-CP dated November 21, 2013 of the Government detailing certain provisions of the Cooperative Law;

Pursuant to Decree No. 107/2017/ND-CP dated September 15, 2017 of the Government amending and supplementing certain provisions of Decree No. 193/2013/ND-CP dated November 21, 2013 of the Government detailing certain provisions of the Cooperative Law;

The Minister of Finance hereby issues this Circular amending and supplementing certain Articles of Circular No. 133/2015/TT-BTC dated August 31, 2015, issued by the Minister of Finance guiding the financial management mechanism for the Vietnam Chamber of Commerce and Industry (hereinafter referred to as Circular No. 133/2015/TT-BTC).

The Minister of Finance promulgates Circular guiding on the handling of assets formed from multiple sources when cooperatives and cooperative unions are dissolved or bankrupt,

Article 1. Scope of Regulation

This Circular guides on the handling of assets (including asset liquidation) formed from multiple sources (state support funds, subsidies; annual development investment funds; gifts or donations agreed upon as non-divisible assets; other assets defined as non-divisible assets in the charter and contributions of cooperative members) when cooperatives and cooperative unions are dissolved or bankrupt.

Article 2. Applicability

1. Cooperatives and cooperative unions (hereinafter referred to as cooperatives) are established and operate in accordance with the provisions of the Cooperative Law.

2. Agencies, organizations, and individuals related to the handling of assets formed from multiple sources when cooperatives are dissolved or bankrupt as stipulated in Article 1 of this Circular.

Article 3. Principles for Handling Assets Formed from Multiple Sources When Cooperatives Are Dissolved or Bankrupt

1. To use assets effectively and avoid waste, when cooperatives are dissolved or bankrupt, the handling of assets formed from multiple sources shall be carried out in the following sequence: first, transfer to cooperatives or state administrative agencies, public service units, state-owned enterprises (hereinafter referred to as state organizations), prioritizing transfers to other cooperatives within the same locality for the purpose of serving the interests of the local community; if such transfers cannot be made (including cases where the budget does not allocate funds to repay the cooperative according to the guidance at point d, Clause 1, Article 5 of this Circular), then transfer or liquidate the assets to all interested parties; liquidation shall be carried out in cases where the assets have been fully depreciated, are obsolete, damaged beyond repair, or where repairs would not be effective.

2. After dissolution, cooperatives, upon receipt of confirmation of dissolution and the decision to revoke the registration certificate (for voluntary dissolution) and the dissolution decision (for compulsory dissolution), based on the financial statements prepared by the cooperative at the time of dissolution and relevant documents, the Dissolution Council together with the financial agency at the same level as the issuing authority of the registration certificate and other relevant agencies shall carry out:

a) Inventory of assets; clearly identify the source of asset formation, separate the value of non-divisible assets; determine the proportion of state support funds, subsidies, cooperative development investment funds, gifts or donations agreed upon as non-divisible assets, other assets defined as non-divisible assets in the charter, and the proportion of member contributions on the original value of the assets; determine the remaining value of the assets according to the books.

b) Organize valuation of non-divisible assets (for assets not recorded in the accounting books in the case of asset transfer) and for those assets that adopt the method of transfer or liquidation through hiring an organization with the necessary conditions for appraisal activities or establishing an Appraisal Council (in cases where an organization with the necessary conditions for appraisal activities is not hired).

3. In the event of bankruptcy, the Board of Directors of the cooperative shall cooperate with the financial agency at the same level as the issuing authority of the registration certificate and other relevant agencies, along with the trustee or enterprise managing the assets of the bankrupt cooperative, to accept, inventory, classify, and evaluate assets according to the guidance provided in Clause 2, Article 3 of this Circular.

4. For non-divisible assets of cooperatives which are land use rights granted or leased by the State, they shall be handled in accordance with the laws on land.

5. In cases where there are no documents to determine the origin of the assets or the proportion of each type of capital forming the assets, such assets shall be treated as non-divisible assets formed from state support funds and subsidies and handled according to the provisions of point a, Clause 1, Article 21 of Decree No. 193/2013/ND-CP of the Government.

6. The transfer or liquidation of assets must comply with tax obligations as prescribed by law.

Article 4. Handling Assets when a Cooperative or Cooperative Federation Dissolves or Becomes Bankrupt

1. Transfer of Assets

a) Authority to decide on asset transfer:

The People's Committee at the same level as the agency issuing the cooperative registration certificate shall issue a decision to transfer assets to the cooperative or state organization within the district based on the proposal of the Liquidation Council of the cooperative or the Management Board of the bankrupt cooperative. For assets transferred to cooperatives or organizations in other districts, the Provincial People's Committee shall make the decision (or authorize another agency to issue the decision to transfer assets).

b) Parties involved in asset transfer:

The parties involved in asset transfer include the transferring party, the receiving party, and the witnessing agency (the agency issuing the cooperative registration certificate, the financial agency at the same level as the agency issuing the cooperative registration certificate, and the trustee or business managing and liquidating the assets of the bankrupt cooperative).

c) Procedure for asset transfer:

Based on the decision to transfer assets under point a, Clause 1 of this Article, the transfer of assets shall be carried out, and a Transfer Record according to Model No. 01 issued together with this Circular shall be established, including details about the parties involved in the asset transfer; detailed documentation of the assets; remaining value of the assets according to the books or re-evaluated value of the assets (for assets not recorded in the cooperative's accounting system); determination of the portion of the asset value formed from state subsidies, support funds, donations, and other assets defined by the charter as non-divisible assets and the share capital contributions of cooperative members.

- Implement accounting entries to reduce or increase assets and capital according to current accounting regulations;

- Register ownership and usage rights of the assets according to the law.

2. Sale and Liquidation of Assets

a) Authority to sell and liquidate assets:

The People's Committee at the same level as the agency issuing the cooperative registration certificate shall issue a decision to sell or liquidate assets based on the proposal of the Liquidation Council of the cooperative or the Management Board of the bankrupt cooperative.

b) Method of selling and liquidating assets:

c) Report on the results of selling and liquidating assets:

The Liquidation Council of the cooperative or the Management Board of the bankrupt cooperative shall report the results of the asset sales to the People's Committee at the same level as the agency issuing the cooperative registration certificate to serve as the basis for handling the proceeds from the sale of assets, including the proceeds from the sale, sale expenses (including inventory costs, appraisal costs, auction organization costs, and other related costs), and tax payments according to regulations, and distribute the remaining proceeds according to the sources of capital forming the assets.

The liquidation council of the Cooperative; the management board of the bankrupt Cooperative shall report the results of transferring assets to the People's Committee at the same level as the agency issuing the cooperative registration certificate for the basis to handle the amount of money received from the transfer of assets, including determining the revenue from the asset transfer, transfer costs (including inventory costs, asset valuation costs, auction organization costs, and other related costs), and paying taxes in accordance with regulations, and distributing the remaining proceeds according to the sources of capital forming the assets.

Article 5. On the handling of financial obligations when transferring, assigning, liquidating assets formed from multiple sources of capital upon dissolution or bankruptcy of the Cooperative

1. Handling of financial obligations between the parties transferring and receiving assets

The Cooperative transferring assets shall record a decrease in assets and capital (allocated according to state subsidies and support funds, development fund, gifts and donations agreed upon as non-divisible assets, other capital assets defined by the charter as non-divisible assets, and contributions from cooperative members) in accordance with the Law on Cooperatives and the current accounting regulations for cooperatives. The handling of financial obligations between the parties transferring and receiving assets upon dissolution or bankruptcy of the Cooperative shall be specified as follows:

a) For the value of assets formed from non-repayable state subsidies and support:

- In the case where the receiving organization is another Cooperative, it shall record an increase in assets and state capital according to the Law on Cooperatives and the current accounting regulations for cooperatives.

- In the case where the receiving organization is a state-owned enterprise, it shall record an increase in assets and state capital according to the laws governing the management and use of state capital invested in production and business activities at enterprises and the current accounting regulations for enterprises.

- In the case where the receiving organization is an administrative agency or a public service unit, it shall record an increase in assets according to the current accounting regulations for administrative and public service units.

b) For the value of assets formed from the development fund; gifts and donations agreed upon as non-divisible assets; other capital assets defined by the charter as non-divisible assets of the Cooperative, the receiving organization shall be responsible for paying the Cooperative to handle them in accordance with point b, Clause 1, Article 21 of Decree No. 193/2013/ND-CP and Clause 3, Article 1 of Decree No. 107/2017/ND-CP of the Government.

c) For the value of assets formed from the contributions of Cooperative members, the receiving organization shall be responsible for paying the Cooperative and this amount shall be included in the dissolution or bankruptcy revenue to be handled in accordance with the Law on Cooperatives and the Bankruptcy Law.

d) In the case where the receiving organization is an administrative agency or a public service unit, the local budget at the same level shall pay the Cooperative the value of assets corresponding to the remaining value of assets formed from the development fund; gifts and donations agreed upon as non-divisible assets; other capital assets defined by the charter as non-divisible assets of the Cooperative and the contributions of Cooperative members to be handled in accordance with points b and c of Clause 1 of this Article and must comply with the laws on state budget.

If the local budget at the same level cannot allocate funds to pay the Cooperative, then the transfer of assets shall not be carried out, and the disposal of assets shall be conducted through assignment or liquidation in accordance with the guidance provided in Clause 2, Article 4 of this Circular.

đ) Reasonable costs directly related to the transfer and receipt of assets shall be paid by the receiving entity in accordance with the provisions.

2. On the handling of proceeds from the transfer or liquidation of assets: After deducting the costs of transferring or liquidating assets and paying taxes as prescribed, the remaining value of the transferred or liquidated assets shall be distributed according to the ratio of state subsidies and support capital; capital from the development fund; gifts and donations agreed upon as non-divisible assets; other capital assets defined by the charter as non-divisible assets of the Cooperative and contributions from Cooperative members to be handled in accordance with the following specific provisions:

a) The portion of proceeds from assets formed from state subsidies and support capital shall be transferred to the local budget at the same level as the registration authority of the Cooperative or the Federation of Cooperatives in accordance with point a, Clause 1, Article 21 of Decree No. 193/2013/ND-CP of the Government.

b) The portion of proceeds from assets formed from the development fund of the Cooperative; gifts and donations agreed upon as non-divisible assets; other capital assets defined by the charter as non-divisible assets of the Cooperative shall be handled in accordance with point b, Clause 1, Article 21 of Decree No. 193/2013/ND-CP and Clause 3, Article 1 of Decree No. 107/2017/ND-CP of the Government.

c) The portion of proceeds from assets formed from the contributions of Cooperative members shall be included in the dissolution or bankruptcy revenue to be handled in accordance with the Law on Cooperatives and the Bankruptcy Law.

3. In cases of dissolution or bankruptcy where the Cooperative's capital and assets are insufficient to settle debts, the Cooperative may use the proceeds from the transfer, assignment, or liquidation of assets formed from multiple sources of capital as stipulated in Clauses 1 and 2 of this Article to settle debts in accordance with Clause 2, Article 21 of Decree No. 193/2013/ND-CP of the Government.

Article 6. Effectiveness

1. This Circular takes effect from May 14, 2018.

2. During implementation, if there are any difficulties, please report to the Ministry of Finance for research and appropriate amendments and supplements.