Circular No. 38/2005/TT-BTC guides the procedures and financial handling when establishing new state-owned enterprises, restructuring, and liquidating state-owned enterprises.

CIRCULAR

Circular No. 38/2005/TT-BTC of the Ministry of Finance

dated May 18, 2005 guiding the procedures and financial handling when establishing new state-owned enterprises, reorganizing, and liquidating state-owned enterprises

Implementing Government Decree No. 180/2004/NĐ-CP dated October 28, 2004 on establishing new state-owned enterprises, reorganizing, and liquidating state-owned enterprises;

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The Ministry of Finance guides the procedures and financial handling when establishing new state-owned enterprises, reorganizing, and liquidating state-owned enterprises as follows:

I. CAPITAL CONTRIBUTION FOR THE ESTABLISHMENT OF NEW STATE-OWNED ENTERPRISES:

When drafting the proposal for establishing new state-owned enterprises, the proposer must reach consensus with the Ministry of Finance regarding the projected registered capital of the state-owned enterprise, investment progress, sources of capital, and measures to form the registered capital.

The amount of registered capital is stipulated in Article 4 of Government Decree No. 180/2004/NĐ-CP dated October 28, 2004 on establishing new state-owned enterprises, reorganizing, and liquidating state-owned enterprises (hereinafter referred to as Decree No. 180/2004/NĐ-CP).

The method for determining the registered capital and the time frame for investing registered capital into newly established state-owned enterprises is regulated in Article 6 of the Financial Management Regulations for State-Owned Enterprises and Management of State Capital Invested in Other Enterprises issued together with Government Decree No. 199/2004/NĐ-CP dated December 3, 2004 (hereinafter referred to as the Financial Regulations accompanying Decree No. 199/2004/NĐ-CP).

II. FINANCIAL HANDLING IN CASES OF MERGER AND CONSOLIDATION OF STATE-OWNED ENTERPRISES:

1. Conditions for merging and consolidating state-owned enterprises as stipulated in Article 21 of Government Decree No. 180/2004/NĐ-CP. State-owned enterprises suffering losses and having lost all state capital shall not be merged or consolidated with other state-owned enterprises.

2. Documents required for proposing mergers and consolidations according to Articles 26 and 27 of Government Decree No. 180/2004/NĐ-CP.

3. Inventory, classification of assets, and financial handling during mergers and consolidations of state-owned enterprises.

Within thirty days from the date of the merger or consolidation decision, the merged company, the companies being consolidated must lock their accounting books; organize inventory, classify assets under management and use, and prepare financial statements at the time of merger or consolidation:

3.1. Inventory to determine the actual quantity, quality, and value of assets under management and use; classify inventoried assets into the following groups:

+ Assets needed.

+ Unneeded assets, surplus assets, assets awaiting liquidation.

+ Assets formed from reward and welfare funds (if any).

+ Leased assets, goods and materials held for others, sold on behalf of others, consigned goods.

3.2. Determine excess and shortage of assets compared to accounting records and handle as follows:

- For missing, depleted, or lost assets, the cause and responsibility of the collective and individuals must be clearly identified for compensation according to the law. The General Director of the merged company, the company being consolidated decides the compensation amount. For depleted or lost assets that were insured, work with the insurance agency to determine the compensation amount. The difference between the value of the missing assets and the compensation amount is covered by the financial reserve fund, if insufficient, it is recorded in the operating results of the merged company, the company being consolidated.

- For excess asset values that cannot be attributed to a cause and whose owners cannot be found, they are recorded in the operating results of the merged company, the company being consolidated.

3.3. Prepare a list of creditors and debtors, reconcile, confirm, and classify receivables and payables, and detail each type of account receivable and payable according to the following regulations:

- Receivables: identify recoverable receivables and non-recoverable receivables and handle according to Article 5 of Government Decree No. 69/2002/NĐ-CP dated July 12, 2002 on managing and handling overdue debts of state-owned enterprises and Circular No. 85/2002/TT-BTC dated September 26, 2002 of the Ministry of Finance guiding the implementation of Government Decree No. 69/2002/NĐ-CP dated July 12, 2002.

For non-recoverable receivables, the cause and responsibility of the collective and individuals must be clearly identified for compensation. The General Director of the merged company, the company being consolidated decides the compensation amount. The difference between the value of non-recoverable receivables and the compensation amount is covered by the bad debt reserve fund, financial reserve fund, if insufficient, it is recorded in the operating results of the merged company, the company being consolidated.

- Payables: identify current payables, overdue payables, and payables that do not need to be paid.

For payables that do not need to be paid, they are recorded in the operating results of the merged company, the company being consolidated.

4. Prepare financial statements and settle taxes with tax authorities at the time of merger or consolidation according to current regulations of the State.

5. If the merged company, the company being consolidated does not conduct inventory, classification of assets, reconciliation, confirmation of receivables and payables, preparation of financial statements, and tax settlement to delay or prolong the transfer process leading to asset loss or operational difficulties for the receiving company, the General Director of the merged company, the company being consolidated shall bear full legal responsibility for the resulting losses.

6. Transfer and Acceptance:

6.1. Within forty-five days from the date of the merger or consolidation decision, the merged company, the company being consolidated must fully transfer assets, capital, receivables and payables, land use rights, economic contracts, and other rights and obligations to the receiving company along with related documents and vouchers.

6.2. During the period before transfer, the merged company, the company being consolidated must manage all assets and capital of the company without causing damage, depletion, or loss. The General Director and relevant individuals of the merged company, the company being consolidated are responsible for any depletion or loss of assets and capital during this period.

6.3. The handover must be documented with signatures of the General Director and Chief Accountant of the merged company, the company being consolidated; the receiving company.

6.3. The handover shall be documented with a protocol bearing the signatures of the General Director and the Chief Accountant of the company being merged or consolidated, and the company receiving the merger or consolidation.

Any unresolved issues prior to the transfer must be clearly noted in the transfer protocol.

After the transfer, the General Director, Chief Accountant, and related persons of the company being merged shall continue to be jointly liable for substandard assets, unused assets, and difficult-to-collect receivables that have been transferred.

7. The procedures for increasing state capital in the receiving company in the case of merger shall be carried out in accordance with the provisions of Article 7 of the Financial Regulation attached to Decree No. 199/2004/ND-CP.

8. After receiving the transfer, the receiving company and the merged company shall be responsible for continuing to handle financial issues of the company being merged and the company being consolidated (arising before the date of the merger decision) which have not yet been resolved according to the Financial Regulation attached to Decree No. 199/2004/ND-CP.

After receiving the transfer, the receiving company and the merged company shall have the right and responsibility to accept and inherit all assets (including damaged substandard assets, unused assets awaiting liquidation), receivables (including uncollectible receivables that have been written off from the balance sheet), liabilities, accumulated losses, labor contracts, and other obligations of the company being merged.

9. Archiving accounting documents of the company being merged: the receiving company and the merged company shall be responsible for accepting and archiving the accounting documents of the company being merged. The archiving of accounting documents shall be carried out in accordance with the regulations on accounting laws.

III. FINANCIAL TREATMENT FOR THE CASE OF SPLITTING STATE ENTERPRISES:

1. Conditions for splitting state enterprises as stipulated in Article 21 of Decree No. 180/2004/ND-CP. The companies to be split must meet the conditions specified in Article 2 of Decree No. 180/2004/ND-CP and still be able to continue normal production and business operations.

2. Documents for requesting the split of the enterprise as stipulated in Articles 26 and 27 of Decree No. 180/2004/ND-CP.

3. Inventory, classification of assets; financial treatment, preparation of financial statements, tax settlement at the time of splitting the enterprise as stipulated in Points 3, 4, 5, and 6 of Section II of this Circular.

4. The company being split shall prepare a plan for dividing assets and debts among the companies resulting from the split and submit it to the person deciding on the establishment of the company for approval, including the following contents:

4.1. Dividing all assets of the company being split among the resulting companies, including: tangible and intangible assets, investments outside the company, inventory, receivables, land, and other assets.

4.2. Dividing all liabilities of the company being split among the resulting companies based on the principle that debts arising from a particular department shall be borne by the company receiving that department, but the total value of the liabilities shall correspond to the proportionate value of the assets received.

4.3. Dividing accumulated profits, losses, and other equity among the resulting companies according to the proportionate value of the assets received.

4.4. The resulting companies shall continue to inherit the rights and responsibilities of the company being split according to the proportionate value of the assets received.

5. Procedures for reducing state capital in the company being split and receiving state capital in the resulting companies shall be carried out in accordance with the provisions of Article 7 of the Financial Regulation attached to Decree No. 199/2004/ND-CP.

IV. FINANCIAL TREATMENT FOR THE CASE OF SPINNING OFF STATE ENTERPRISES:

1. Conditions for spinning off state enterprises as stipulated in Article 21 of Decree No. 180/2004/ND-CP. The spun-off companies must meet the conditions specified in Article 2 of Decree No. 180/2004/ND-CP and still be able to continue normal production and business operations.

2. Documents for requesting the spin-off of the enterprise as stipulated in Articles 26 and 27 of Decree No. 180/2004/ND-CP.

3. Inventory, classification of assets; financial treatment, preparation of financial statements, tax settlement at the time of spinning off the enterprise as stipulated in Points 3, 4, 5, and 6 of Section II of this Circular.

4. The company being spun off shall prepare a plan and submit it to the person deciding on the establishment of the spun-off company for approval, including the following contents:

4.1. Spinning off a dependent accounting unit: based on the assets and debts of the dependent accounting unit, the person deciding on the establishment of the spun-off company shall decide on the division of debts and equity for the spun-off company.

4.2. Spinning off a non-dependent accounting unit shall be carried out in accordance with the provisions of Point 4, Section III of this Circular.

5. Procedures for reducing state capital in the company being spun off and receiving state capital in the spun-off company shall be carried out in accordance with the provisions of Article 7 of the Financial Regulation attached to Decree No. 199/2004/ND-CP.

V. FINANCIAL TREATMENT WHEN DISSOLVING STATE ENTERPRISES:

1. The company subject to dissolution review as stipulated in Article 29 of Decree No. 180/2004/ND-CP.

Dissolution shall not be carried out for state-owned enterprises operating at a loss and having lost all state capital, or companies that have entered a state of bankruptcy.

2. Within thirty days from the effective date of the dissolution decision, the dissolved company shall be responsible for inventorying, handling assets and debts, preparing financial statements, and transferring them to the Liquidation Council in accordance with the provisions of Article 36 of Decree No. 180/2004/ND-CP.

3. Liquidation Committee:

3.1. The Liquidation Committee shall be established by the person deciding on the dissolution of the company to assist the Liquidation Council, including:

The General Director of the dissolved company or a person designated by the person deciding on the dissolution of the company as the Head of the Committee.

- Members of the Liquidation Committee include:

+ The Chief Accountant of the company or a person in charge of accounting work.

+ A representative of the company's trade union.

+ A representative of the corporate finance authority: The Corporate Finance Department (Ministry of Finance) for central enterprises; the Provincial Finance Department for local enterprises.

+ Some specialized staff members of the dissolved company selected by the Liquidation Council.

- Some experts (if necessary) invited by the Liquidation Council.

3.2. The Liquidation Committee shall be responsible for assisting the Liquidation Council in performing the following tasks:

a. Preparing a dissolution plan for the company and a plan for handling surplus labor, reporting to the Liquidation Council for examination and submission to the person deciding on the dissolution for approval.

b. Direct, coordinate with the company to dissolve the organization to conduct inventory, handle assets, accounts receivable and payable, prepare financial statements to hand over to the Dissolution Council within thirty days from the date the dissolution decision takes effect.

c. Implement the dissolution plan that has been approved by the competent authority:

+ Review the list of creditors and debtors;

+ Organize the collection of debts;

+ Organize the liquidation and sale of the company's assets and accounts receivable and payable;

+ Pay off the debts owed to creditors according to the principle stipulated in point 8 of this section.

+ Liquidate ongoing economic contracts. In cases where ongoing contracts can be completed during the dissolution period without affecting the liquidation and handling of assets, the Liquidation Board continues to organize the implementation of these contracts.

d. Organize payments of severance benefits and resolve policies for employees in the company. Settle and report on the payment of severance benefits according to state regulations.

e. Report periodically to the Dissolution Council on the progress of the company's dissolution and propose measures to ensure the dissolution schedule. When issues arise outside the dissolution plan, they must be reported to the Dissolution Council for approval before implementation.

f. Prepare a report on the results of the liquidation and submit any surplus funds remaining after paying off creditors to the State Enterprise Restructuring Support Fund.

3.3. The Liquidation Board shall be subject to administrative disciplinary action or criminal prosecution if they violate the following issues, depending on the nature and degree of violation, and must compensate for any damage to the company's assets:

- Compile creditor lists and amounts incorrectly without basis;

- Organize auctions contrary to legal provisions;

- Dispose of the company's assets for dissolution improperly, not in accordance with the approved plan, not in the prescribed priority order, and pay creditors unfairly;

- Illegally use the company's assets for dissolution;

- Fail to implement protective measures leading to loss of the company's assets for dissolution;

- Prepare financial statements at the end of the dissolution process inaccurately;

- Abandon duties or perform them inadequately, causing difficulties in the liquidation process or loss of the company's assets for dissolution.

3.4. Until the company's dissolution is completed, the General Director and Chief Accountant of the company being dissolved may not be transferred to other positions.

4. The dissolution plan for the company:

a. Within forty (40) days from the date the dissolution decision becomes effective, the Liquidation Board must complete the dissolution plan for the company (including the financial settlement plan and labor adjustment plan), report to the Dissolution Council, and submit it for approval by the person who made the dissolution decision.

b. The main contents of the company's dissolution plan are specified in the appendix attached to this Circular.

5. Financial settlement when dissolving the company:

5.1. The assets of the company being dissolved are those under the lawful management and use of the company (excluding entrusted, rented, or borrowed assets).

5.2. From the date the dissolution decision becomes effective: all outstanding debts are considered due.

5.3. Creditors with collateral may receive the collateral asset for disposal according to current regulations. If the creditor does not accept the collateral, it will be auctioned according to current regulations. The proceeds from the auction of the collateral, after deducting costs, are used to immediately repay the secured creditor (excluding interest accrued from the date of the dissolution decision); any surplus belongs to the company being dissolved, and any shortfall is treated as unsecured debt and handled like other unsecured debts.

A guarantor who repays the company's debt is considered unsecured debt and is settled like other unsecured debts.

5.4. Assets and capital contributed to joint ventures or invested outside the company are recovered through the transfer of equity or shares to other entities. If the dissolution period expires and the joint venture equity cannot be transferred to other partners, the person making the dissolution decision designates another company to replace it after negotiating with the joint venture partner. The designated company or the person making the dissolution decision must pay the company being dissolved the joint venture equity contribution. The value of the joint venture equity contribution is determined according to point 1.5, Clause 1, Section B, Part II of Circular No. 126/2004/TT-BTC dated December 24, 2004, issued by the Ministry of Finance guiding the implementation of Decree No. 187/2004/NĐ-CP dated November 16, 2004, of the Government on converting state-owned companies into joint-stock companies.

6. Organization of asset disposal:

6.1. For leased, borrowed, or held assets: within thirty days from the date of the first publication of the notice of the company ceasing business operations and dissolution procedures, the owner of the assets leased, borrowed, or held by the company being dissolved must present documents proving their lawful ownership or management rights to reclaim the assets. If the company being dissolved has leased assets but the lease period has not expired and all rental fees have been paid, the lessor must refund the excess amount according to the agreement in the contract before reclaiming the asset.

6.2. For leased, held, or borrowed assets: the Liquidation Board implements the liquidation of the lease contract and recovers leased, borrowed, or held assets...

6.3. The assets of the company being dissolved are auctioned through professional auction organizations or organized openly by the Liquidation Board in accordance with the current Auction Regulations. In cases where multiple parties, including creditors of the company being dissolved, bid equally, the creditor of the company being dissolved is given priority to purchase the asset. When multiple creditors want to buy, the creditor with the larger total debt has the right to purchase first.

The sale of assets related to land use rights must comply with the Land Law.

6.4. The remaining amount after all debts have been paid off shall belong to the State Budget. Within 5 (five) days from the date of completion of payment to creditors, the Liquidation Committee shall be responsible for depositing the entire amount into the Enterprise Restructuring Support Fund.

7. Management and use of funds from the dissolution of the company:

7.1. Not later than 5 (five) days from the date the decision to establish the Liquidation Committee becomes effective, the Head of the Liquidation Committee must open an account at the Treasury where the company's main office is located to deposit funds received from liquidation, sale of assets, and recovery of the company's debts. This account shall be managed by the Head of the Liquidation Committee.

7.2. All funds received from the dissolution of the company, including cash capital, proceeds from asset sales and liquidation, and recovery of the company's debts, must be deposited into the Liquidation Committee's account on the day they are received. In case it is after working hours, the funds must be deposited on the next working day. Any person intentionally delaying the deposit of funds shall be liable for compensation at the interest rate for non-fixed-term deposits published by the Bank and shall be subject to administrative disciplinary action as prescribed.

7.3. Payment of dissolution costs and payment to creditors according to Point 8 Section V of this Circular.

7.4. The remainder shall be deposited into the Enterprise Restructuring Support Fund.

8. Payment of dissolution costs and debts:

8.1. After paying off secured debts, the total amount received from the dissolution of the company shall be handled in the following sequence:

a. Payment of dissolution costs, including:

+ Costs associated with the liquidation of economic contracts, costs for the recovery, transportation, storage, and preservation of the dissolved company's assets;

+ Costs related to organizing the auction of assets;

+ Costs for arranging, storing, and preserving the dissolved company's documents, and other costs related to the implementation of the company's dissolution. These expenses shall be reimbursed based on actual expenditures approved by the Head of the Liquidation Committee. The Head of the Liquidation Committee shall be responsible for their decisions.

+ Wages for employees mobilized to participate in the Dissolution Liquidation Committee and assisting organizations.

Expenses must be supported by complete vouchers in accordance with the current accounting regulations.

b. Payment of wages, social insurance debts, and other benefits due to employees of the dissolved company according to the terms of employment contracts or collective labor agreements and current regulations.

The system and sources of funding for employee assistance in the dissolved company shall be implemented in accordance with Decree No. 41/2002/NĐ-CP dated April 11, 2002, and Decree No. 155/2004/NĐ-CP dated August 10, 2004, of the Government regarding policies for surplus labor due to enterprise restructuring, and other current documents.

c. The remaining amount after paying the above two items shall be paid to unsecured creditors (excluding interest calculated from the date of the dissolution decision). Payments to creditors may be made in multiple installments, with each installment based on the ratio between the total amount paid in each round and the total outstanding debt. The Liquidation Committee has the right to prioritize payments to small unsecured debts not in proportion to the said ratio and is responsible for its decisions.

Example: The amount received from the first round of the dissolved company's assets is 5,000 million VND. The company's debts include: unsecured debts of 5,000 million VND, dissolution costs, and wage and social insurance debts of 1,000 million VND.

The remaining amount to pay unsecured creditors is: 5,000 million - 1,000 million = 4,000 million VND.

The ratio of the total amount paid in this round to unsecured debts is: 4,000 million VND / 5,000 million VND = 0.8 (80%).

Payments to creditors will be carried out as follows:

Creditor A with a debt of 800 million VND will be paid: 80% x 800 million = 640 million VND.

Creditor B with a debt of 1,500 million VND will be paid: 80% x 1,500 million = 1,200 million VND.

...

Funds received from subsequent rounds will be paid out in the same manner.

For creditors with accounts at banks or the State Treasury, the Head of the Liquidation Committee shall process the transfer of debt repayment to the creditor's account. If there is no account, the Head of the Liquidation Committee shall notify the creditor to collect directly or send through the post office to the creditor. Postage fees shall be included in the dissolution costs of the company.

d. Tax debts and other government debts.

8.2. If the amount received from the dissolution of the company is insufficient to cover dissolution costs and debts, the person deciding to dissolve the company shall inform creditors and relevant authorities about the company's inability to pay and proceed with bankruptcy procedures.

9. Conclusion of the company's dissolution:

9.1. At the end of the dissolution period, if there are unresolved issues, the Liquidation Committee shall report to the Dissolution Council to submit to the person deciding to dissolve the company for review and resolution.

9.2. Within 7 (seven) working days after the conclusion of the dissolution, the Dissolution Council must prepare a financial report on the company's dissolution to submit to the person deciding to dissolve the company; return the company's seal to the police authority and the business registration certificate of the dissolved company to the provincial business registration department where the company registered; publish in one central newspaper and three consecutive local newspapers about the conclusion of the company's dissolution.

9.3. After the conclusion of the company's dissolution process, all files, accounting books of the dissolved company, and records related to the dissolution process must be stored at the agency that established the company in accordance with the regulations on document storage.

VI. IMPLEMENTATION ORGANIZATION:

This Circular takes effect fifteen days after its publication in the Official Gazette and replaces Circular No. 130/1998/TT-BTC dated September 30, 1998 of the Ministry of Finance on guiding the transfer, receipt, and handling of financial issues of state-owned enterprises when merging or consolidating, and Circular No. 66/2002/TT-BTC dated August 6, 2002 of the Ministry of Finance on guiding the procedures, formalities, and financial handling when dissolving state-owned enterprises. All previous provisions that conflict with this Circular shall no longer be effective.

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