Directive No. 33/2005/CT-TTg on Effectively Applying the Parent Company-Subsidiary Model

DIRECTIVE

On Effectively Applying the Parent Company-Subsidiary Model 

In nearly five years, along with restructuring, reforming, and enhancing the efficiency of state-owned enterprises, the pilot application of the parent company-subcompany model has achieved positive results, creating a new organizational management model based on market-based capital investment mechanisms; promoting the process of transferring ownership of state-owned enterprises and improving production and business efficiency; forming multi-shareholder enterprises linked together in economic interests... Although there are still some limitations, the results achieved allow for the expansion of this model in accordance with the spirit of Resolution No. 3 of the Ninth Plenum. To implement this, the Prime Minister issues the following directive:

1. Ministries, ministerial-level agencies, agencies under the Government, provincial people's committees, centrally-administered city people's committees, and state-owned holding companies need to perform the following tasks promptly:

a) Urgently implement the restructuring and reform of state-owned enterprises according to the plan approved by the Prime Minister. Strictly comply with the provisions of Decree No. 187/2004/NĐ-CP dated November 16, 2004 on converting state-owned companies into joint-stock companies.

b) Select additional state-owned holding companies for joint-stock conversion, with the State retaining controlling shares; organize a mid-year review of the joint-stock conversion of state-owned holding companies at the end of 2006.

c) Develop plans to convert all state-owned holding companies that meet the conditions to remain as state-owned holding companies (except those operating in national security and defense sectors) and select some large-scale enterprises with financial strength, diversified operations, and the ability to control other enterprises through capital, brand, technology, and market to operate under the parent company-subcompany model. Parent companies operating in industries and fields where the State does not need to hold 100% equity should be converted into joint-stock companies or limited liability companies with two or more members.

When drafting proposals to switch to the parent company-subcompany model, it is necessary to have a roadmap to convert most subsidiary companies into joint-stock companies or limited liability companies with two or more members, and a few into limited liability companies with one member. Companies operating in areas, industries, and regions where the State needs to control must be joint-stock companies with controlling shares from the parent company.

d) Complete the approval of the Charter of organization and operation and Financial Regulations of state-owned companies that have switched to the parent company-subcompany model in the first quarter of 2006 according to the division of responsibilities assigned by the Prime Minister.

đ) Continue piloting the Board of Directors signing contracts to hire General Managers and Directors who are skilled in managing enterprises; conduct a mid-year review and draw lessons from this model at the end of 2006.

e) Seriously implement Resolution No. 3 of the Ninth Plenum and Decision No. 180/2001/QĐ-TTg dated November 16, 2001 of the Prime Minister regarding the Board of Directors of state-owned holding companies selecting, signing contracts, or appointing, dismissing, rewarding, and disciplining Deputy General Directors and Chief Accountants of state-owned holding companies; approving appointments, dismissals, rewards, and punishments of General Managers of member units so that the General Director can issue decisions.

Do not directly intervene in the appointment of representatives of state-owned companies in other enterprises.

g) Strengthen propaganda and dissemination of policies to ensure that state-owned companies, management staff, and workers understand the purpose and requirements of transitioning state-owned holding companies and state-owned companies to the parent company-subcompany model in the process of accelerating restructuring, reforming, developing, and enhancing the efficiency of state-owned enterprises.

Organize training on the content and procedures for transition for managers in enterprises subject to transition.

2. Ministries need to study and perfect the legal basis for the formation and development of the parent company-subcompany model and monitor the implementation of legal regulations, specifically as follows:

a) The Ministry of Planning and Investment, in the first quarter of 2006, revise the transition procedures to ensure strictness but also speed and simplicity from the stage of drafting the Proposal, reviewing, and approving the Proposal.

b) The Ministry of Finance:

- Review and research to supplement regulations on financial mechanisms in the parent company-subcompany model to submit to the Prime Minister for issuance or issuance within their authority.

- Monitor the establishment and implementation of Financial Regulations, the preparation and submission of consolidated financial reports of the parent company, and other financial issues in the parent company-subcompany model.

- In the first quarter of 2006, submit to the Prime Minister regulations on converting state-owned companies and independent accounting subsidiaries of state-owned holding companies into limited liability companies with two or more members; converting state-owned limited liability companies with one member into joint-stock companies.

c) The Ministry of Labor, Invalids, and Social Affairs guide the implementation of salary classification for managerial personnel in companies switching to the parent company-subcompany model according to Circular No. 4532/VPCP-VX dated August 12, 2005 of the Government Office and guide companies to review their classification standards to implement from 2007.

d) The Ministry of Home Affairs, in the first quarter of 2006, guide the appointment of representatives of state-owned shares in joint-stock companies and limited liability companies; guide the arrangement of leaders in state-owned companies undergoing joint-stock conversion not to be appointed as representatives of state-owned shares in joint-stock companies.

3. State-owned companies switching to the parent company-subcompany model are responsible for:

a) Enterprises that have been approved for transition proposals need to urgently form the parent company-subcompany structure by intensifying the restructuring and ownership transfer of member units; complete the management structure of the parent company; appoint and issue regulations on the activities of representatives of the parent company at subsidiary companies according to the regulations on the parent company-subcompany model that have been issued.

b) Enterprises that have been selected, approved lists and restructuring plans, and organized according to the parent company - subsidiary model must promptly develop the restructuring proposal, clearly defining the structure, methods, and legal form of the parent company and each subsidiary and associated company, and submit it for approval by the competent authority.

c) Training and enhancing management capabilities for the managerial staff of the parent company, especially investment and financial management skills at other enterprises; improving business management skills of the parent company and subsidiaries.

4. The Steering Committee for Enterprise Renewal and Development shall be responsible for:

- Inspecting, urging, guiding, monitoring, and periodically reporting to the Prime Minister on the situation of transitioning state-owned companies to operate under the parent company - subsidiary model.

- Coordinating with ministries, sectors, localities, and enterprises to promptly identify issues and inconsistencies during implementation, and proposing solutions to the Prime Minister or recommending relevant agencies to resolve them within their jurisdiction.

- Participating in discussions with the Central Organization Commission and the Vietnam General Confederation of Labor regarding guidance on the operation of party organizations and trade unions within the parent company - subsidiary model.

- Monitoring and periodically reporting to the Prime Minister on the implementation of this Directive.

Ministers, heads of ministerial-level agencies, heads of government-affiliated agencies, chairpersons of provincial and municipal people's committees, the Steering Committee for Enterprise Renewal and Development, and boards of directors of state-owned holding corporations are responsible for implementing this Directive.