Circular No. 40-TC/TCT/CS guiding the implementation of Decision No. 196-CT dated June 9, 1992 of the Chairman of the Council of Ministers

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 40-TC/TCT/CS ON AUGUST 22, 1992 GUIDING THE IMPLEMENTATION OF RESOLUTION NO. 196/CT ISSUED BY THE CHAIRMAN OF THE STATE COUNCIL ON JUNE 5, 1992

On June 5, 1992, the Chairman of the State Council issued Resolution No. 196/CT regarding the transfer of economic organizations that have been registered and are operating under Decision No. 268/CT dated July 30, 1990 to registration and operation under new types of enterprises in accordance with current laws. The Ministry of Finance guides the implementation as follows:

I - SUBJECTS OF IMPLEMENTATION

According to Article 1, 3, and 4 of Resolution No. 196/CT dated June 5, 1992 of the State Council, the following economic organizations must compare their operations with the current legal provisions on types of enterprises for re-registration:

- Economic organizations established and operating according to Decision No. 268/CT dated July 30, 1990.

- Economic organizations established according to Decision No. 92/TC dated April 22, 1989 but not yet re-registered under Decision No. 268/CT.

- Economic organizations under the Ministry of National Defense and the Ministry of Interior or any other agency established based on applying Decisions No. 92/TC and No. 268/CT.

II - ARRANGEMENTS FOR TRANSITION OF ECONOMIC ORGANIZATIONS

1. Article 5 of Decision No. 268/CT dated July 30, 1990 of the Chairman of the State Council stipulates: "Leaders of mass organizations, people's associations, heads of administrative agencies, scientific research institutes, and schools are responsible to the State for the organization and operation of economic organizations they propose to establish." Therefore, the heads of agencies and units, including state agencies, mass organizations, People's Committees, and people's associations, which have economic organizations established and operating over the past period according to Decision No. 268/CT, Decision No. 92/TC, or applied based on these two decisions, now have the responsibility to rearrange their economic organizations in accordance with the spirit of Resolution No. 196/CT of the Chairman of the State Council.

To assist the heads of agencies and units in this task, it is necessary to establish a committee for rearranging economic organizations consisting of the following members:

- Deputy assisting the head of the agency or unit.

- Person in charge of the economic organization within the agency or unit.

- Head of the organizational personnel department of the agency or unit.

- Accountant in charge of the economic organization within the agency or unit.

- Representative of the Party Committee, trade union, and youth organization of the agency or unit.

2. The committee for rearranging economic organizations has the responsibility:

a) Closing accounting books, inventorying and evaluating assets, capital, and determining the sources of formation of the economic organization's capital.

The objects of inventory are:

- Fixed assets.

- Current assets, including:

+ Various raw materials, spare parts, tools, and goods.

+ Goods in transit, stored in warehouses, entrusted for sale or processing, or involved in joint ventures and cooperatives.

+ Work-in-progress, semi-finished products, and finished products.

- Various forms of capital and funds recorded in formal and informal accounting books: bank deposits (including foreign currency), cash reserves, funds in transit, securities, promissory notes, bills of exchange...

Inventory methods:

- Before inventory, close the accounting books and determine the quantity and value of assets and capital according to the accounting books at the time of inventory.

- Cash fund inventory must be classified and the total amount and each type of money in the fund must be determined (including foreign currency). Inventory of securities, promissory notes, bills of exchange must be as thorough as cash inventory.

- Bank deposits must be directly verified and confirmed by the bank.

- For goods, inventory must be conducted item by item and type by direct measurement, weighing, and counting. An inventory report must clearly specify the actual quantity and value of goods and any surplus or shortage compared to the accounting records.

Based on accounting books and accounting vouchers, classify assets and capital according to their sources of formation as follows:

- Assets funded by the State Budget or originating from the State Budget.

- Assets and capital self-supplemented by the economic organization.

- Assets and capital borrowed from banks.

- Assets and capital borrowed from individuals and other economic organizations.

- Occupied and occupied funds, debts to the budget... (verified and confirmed by creditors and debtors).

Any surplus or shortage of goods, capital, and funds; any funds outside the accounting books; any concealment or dispersion of assets, goods, and capital during the inventory process must be handled according to current regulations and the responsibilities of individuals or groups must be clearly defined.

b) Determine and classify labor in the economic organization: labor within the agency or unit's establishment transferred to the economic organization, labor recruited after the establishment of the economic organization, contractual labor in the economic organization, working hours, wages, and qualifications of each type of labor.

c) Develop plans to convert into suitable enterprises or dissolve based on reviewing the purpose, functions, business efficiency of the economic organization, comparing with current regulations on establishing or dissolving enterprises; propose measures to handle assets, capital, labor when transferring to a new enterprise or dissolving. Complete all procedures to submit to the competent authority for approval to re-establish or dissolve the enterprise according to current regulations.

3. Economic organizations are arranged and organized into one of the following enterprises:

a) Economic organizations established by the State, funded for operation, and meeting the conditions specified in point 4 of Circular Jointly Issued by the National Planning Commission and the Ministry of Finance No. 01-TT/LB dated February 13, 1992, guiding the implementation of the Charter on the establishment and dissolution of state enterprises (annexed to Decree No. 388/HĐBT dated November 20, 1991 of the Council of Ministers), shall complete the procedures to submit to the competent authority for examination and issuance of the establishment decision. These conditions include:

- The entire capital provided by the State Budget or from the State Budget sources.

- A request for enterprise establishment by the agency or unit (according to Form Appendix No. 2 of the Circular).

- An argument for establishing a state enterprise (according to Form Appendix No. 3 of the Circular).

- Agreement of the relevant ministry or sector managing economic technology regarding planning development and technological level.

- Agreement of the Chairman of the provincial or municipal People's Committee where the economic organization is located regarding environmental protection, infrastructure, production and business premises, office space (for centrally-managed state enterprises).

- Certification by the Ministry of Finance for centrally-managed state enterprises, and by the Department of Finance for locally-managed state enterprises regarding the source and level of statutory capital provided by the budget or from the State Budget sources. The minimum statutory capital required to establish a state enterprise must not be lower than that stipulated for limited liability companies in the same industry in Decree No. 222/HĐBT dated July 23, 1991 of the Council of Ministers.

The procedure and formalities for examining and issuing the establishment decision and re-registering business operations shall comply with the provisions in Decrees No. 388/HĐBT, 156/HĐBT, and the accompanying documents.

After the state enterprise is established, the agency submitting the establishment request will become the direct supervisory state management agency of the enterprise.

b) Economic organizations meeting the conditions to convert into a limited liability company or joint stock company under the Enterprise Law dated December 21, 1990, and Decree No. 222/HĐBT dated July 23, 1991 of the Council of Ministers, shall complete the procedures and submit to the competent authority for examination and issuance of the establishment decision. These conditions are as follows:

- Various types of capital belonging to different forms of ownership.

- For the portion of capital from other economic sectors participating, the founders must not be civil servants working in administrative state agencies, nor those holding positions in the government machinery at various levels through elections, nor managers of industrial unions and state-owned enterprises, nor officers on active duty in the Vietnam People's Army and the Vietnam People's Public Security Force. If there are capital sources from the budget or from the State Budget, or from collective agencies and units participating, the founder of the enterprise shall be appointed by the agency or unit.

- Clear business objectives and initial business plans, with a registered business address.

- By-laws appropriate to the scale and industry of business. The registered capital must not be lower than the statutory capital prescribed by the Council of Ministers for each industry in Decree No. 222/HĐBT dated July 23, 1991 of the Council of Ministers.

- Managers and operators of business activities must have the corresponding professional qualifications required by law for certain industries.

- Other conditions as stipulated in the Enterprise Law and Decree No. 222/HĐBT dated July 23, 1991.

c) Organizations meeting the conditions to convert into a private enterprise under the Private Enterprise Law dated December 21, 1990, and Decree No. 221/HĐBT dated July 23, 1991 of the Council of Ministers, shall complete the procedures and submit to the competent authority for examination and issuance of the establishment decision. These specific conditions are as follows:

- All types of capital belong to private ownership.

- The founder of the enterprise must not be a civil servant working in administrative state agencies, nor those holding positions in the government machinery at various levels through elections, nor managers of industrial unions and state-owned enterprises, nor officers on active duty in the Vietnam People's Army and the Vietnam People's Public Security Force.

- Clear business objectives and initial business plans, with a registered business address.

- Adequate initial investment capital suitable to the scale and industry of business. The initial investment capital must not be lower than the statutory capital prescribed by the Council of Ministers for each industry in Decree No. 221/HĐBT dated July 23, 1991 of the Council of Ministers.

- The founder or the person hired to manage and operate business activities must have the corresponding professional qualifications required by law for certain industries.

- In addition, there are other conditions stipulated in the Private Enterprise Law and Decree No. 221/HĐBT dated July 23, 1991 of the Council of Ministers.

d) Economic organizations whose capital belongs to individuals and business groups but is lower than the statutory capital prescribed in Decree No. 221/HĐBT dated July 23, 1991 of the Council of Ministers shall operate according to Decree No. 66/HĐBT dated March 2, 1992 of the Council of Ministers.

g) Economic organizations formed from collective capital in essence being cooperatives or cooperative groups shall operate according to Decree No. 28/HĐBT dated March 19, 1988, Decree No. 146/HĐBT dated September 24, 1988, and Decision No. 49/HĐBT dated May 22, 1989 of the Council of Ministers.

- Economic organizations without sufficient conditions to convert into any of the above types of enterprises shall be dissolved.

4. The restructuring of economic organizations must be completed before November 5, 1992. Beyond this deadline, economic organizations that have not completed the procedures for establishment and registration under the new appropriate enterprise type and continue to operate shall have their business licenses, including import and export permits, revoked by the competent state economic management agencies and local People's Committees, the Ministry of Home Affairs shall direct the confiscation of seals, and the Arbitration Court shall issue a decision to freeze bank accounts and assets of these economic organizations.

The Central Market Management Board is requested to uniformly direct the inspection nationwide; if any economic organization is found to be operating illegally, it must be resolutely referred to the law for handling.

III- RESOLUTION OF LABOR AND FINANCIAL ISSUES
WHEN TRANSFORMING INTO A NEW BUSINESS

1. Labor issues shall be resolved as follows:

- Employees belonging to the establishment's staff of agencies, mass organizations, armed forces, research institutes, schools... when transferred to work in newly established economic organizations must be thoroughly reviewed to resolve according to either returning to their original agency or unit (if required) or transferring to the state-owned enterprise's staff. If the enterprise is converted into a state-owned enterprise, the remaining employees transferred to non-state-owned enterprises will be provided with subsistence allowances according to Decision No. 111/HĐBT dated April 12, 1991 of the Council of Ministers and related implementing guidelines. After the transfer, employees will work and receive wages according to the regulations of the new enterprise.

- Employees not belonging to the state's establishment currently working in economic organizations, if transferred to work in a new business, will work and receive wages according to the regulations of the new business. If employees are laid off, they will receive subsistence allowances depending on the financial capacity of the agency or unit establishing the business.

2. Financial issues:

a) The head of the agency or unit with an economic organization must report to the immediate superior management authority and the same-level finance authority on the plan to convert the economic organization into an appropriate business entity, inventory of assets and capital, and plans for asset and capital disposal suitable for the conversion of the economic organization into a business entity.

b) The superior management authority of the agency or unit with an economic organization, together with the same-level finance authority and other relevant organizations (with the participation of tax authorities and banks), will examine and decide on the plans for asset and capital disposal suitable for the conversion into an appropriate business entity.

c) For economic organizations converted into state-owned enterprises, assets and capital will be handled as follows:

- Agencies or units with economic organizations may retain necessary assets serving the operation of the agency or unit from state budget funds or through additional purchases. If the new enterprise needs to use these assets in its production and business activities, the agency or unit may lease them for a certain period. The minimum rental price for fixed assets must equal the basic depreciation rate of the fixed assets and must be fully remitted to the state budget.

- Remaining assets and capital will be handed over to the new enterprise. The new enterprise is responsible for receiving, preserving, developing capital, recovering debts, and settling liabilities. The new enterprise must pay the state budget capital usage fee according to current regulations.

d) Economic organizations converted into limited liability companies, joint-stock companies, private enterprises, cooperatives... will handle assets and capital as follows:

- Assets sourced from state budget funds or having origins from the state budget will be revalued and contributed as shares or sold to the new enterprise to recover capital and remit it to the state budget. For fixed assets that the enterprise cannot purchase but need to lease, a lease contract must be signed with a minimum rental price equal to the fixed asset depreciation rate. All proceeds from leasing assets must be fully remitted to the state budget.

- The new enterprise is responsible for receiving all remaining assets and capital, except for unusable assets and debts without identifiable debtors and uncollectible debts, which the agency or unit with the old economic organizations must handle or report to higher-level management authorities for resolution.

If the total value of these assets, deposits, monetary capital, recovered debts... exceeds the liabilities to be settled, the surplus will be considered as the share contribution to the joint-stock company or loans to other enterprises of the agency or unit. The interest earned will be used to improve the living conditions of cadres and employees.

Depending on the proportion of this capital in the total capital of the new enterprise, the agency or unit may appoint representatives to participate in the new enterprise's management structure (number of members, chairman of the board of directors, general manager).

e) Proceeds from selling assets sourced from state budget funds or having origins from the state budget must be deposited into item 09, chapter, type, section, category as appropriate, and proceeds from leasing assets must be deposited into item 47, chapter, type, section, category as appropriate according to the current state budget classification.

IV- PROCEDURES FOR DISSOLUTION AND SETTLEMENT OF FINANCIAL ISSUES DURING DISSOLUTION OF ECONOMIC ORGANIZATIONS

1. The head of the immediate superior state management authority (the authority deciding to establish the economic organization) has the right to declare and issue a decision to dissolve the economic organizations under the agency or unit. In the dissolution decision, the following must be clearly stated:

- The deadline for dissolving the economic organization (this period shall not exceed six months).

- The date of cessation of production and business operations of the economic organization and its management body.

- The responsibilities of the person in charge and assisting departments of the economic organization during the dissolution process under the supervision and guidance of the Dissolution Committee.

- Announcing the date when interest on bank credit loans will cease to accrue (after agreement with the bank) and announcing the date when interest on other debts will cease to accrue.

2. Establishing a Dissolution Committee for economic organizations consisting of members:

- Leaders and heads of accounting and finance departments, organizational labor and salary departments, and other departments (if necessary), representing the trade union of the superior management authority of the agency or unit with the economic organization;

- Representatives of the same-level finance and tax authorities;

- Representatives of the same-level banking authorities;

- Representative of the equivalent economic arbitration agency at the same level;

- If necessary, the superior management agency has the right to appoint other members of the liquidation board for economic organizations.

3. The liquidation board has the authority and responsibilities:

a) To receive and re-examine all accounting books of the economic organization, recover the seal of the economic organization, and if necessary, have the right to request the head of the agency or unit with the economic organization to explain clearly or answer questions related to the accounting books of the economic organization.

b) To continue implementing contracts that have been signed in accordance with the interests of the economic organization as well as its creditors until the economic organization is dissolved.

c) To audit the inventory of assets and capital of the economic organization. Recover, manage, and assess the current status of assets and capital.

d) To propose plans for dissolving the economic organization, plans for selling the assets of the economic organization, price ranges for the entire asset and each individual asset, and plans for distributing the value obtained from selling the assets of the economic organization for the superior management agency's head to decide.

4. Resolve financial issues for dissolved economic organizations:

a) Liquidate fixed assets and circulating assets

- For assets previously provided by the State:

+ Allow agencies and units to retain necessary assets for use.

+ Sell through public auctions of the entire or partial assets of the economic organization to organizations and individuals of all economic sectors, prioritizing former employees of the economic organization within the same industry, under the same conditions, prices, and purchasing methods. In cases where organizations and individuals purchase the entire asset in its original condition for use on-site and take over the labor force from the old economic organization, they may be given preferential discounts. The discount rate is determined by the direct superior management agency of the agency or unit with the economic organization in consultation with the same-level finance agency.

- For leased or borrowed assets, return them to the owner and both parties settle rental payments.

- For rented or lent assets, they must be recovered and sold according to the above regulations.

- For collateralized assets, bank loans, or other collateralized debts, prioritize their liquidation to repay debts, sell through public auction, or offset debts based on the liquidation board's decision after reviewing loan contracts between borrowers and lenders.

b) Liquidate other sources of capital, enterprise funds, deposits, cash, debts payable, receivables:

- Other sources of capital: monetary capital, cash reserves, bank deposits, surplus self-owned investment capital for construction and development, basic depreciation, and major repairs, surplus development incentive funds (if any) are mobilized to settle debts payable using corresponding sources of capital. Any remaining surplus is used to settle other debts.

- Reward and welfare funds, if there is a surplus, must be used to pay off employee wages (if any) first, then to settle other debts.

- Recovery of receivables serves as capital to settle debts in the priority order specified in point c below.

c) The value recovered from selling the assets of the economic organization (after deducting collateralized assets sold to repay creditors), surplus from other monetary capital sources, and receivables (as stipulated in section B) are pooled together to settle remaining debts in the following priority order:

- Pay outstanding salaries and social insurance owed to cadres and workers by the economic organization.

- Repay debts to organizations and individuals who lent money.

- Repay principal and interest on bank loans.

- Repay debts including budget repayment obligations and outstanding taxes.

After settling the aforementioned debts, any surplus is transferred to the trade union of the agency or unit as a fund serving the common benefits of cadres and workers. If there is a shortage, the debts are set aside and reported to the competent authority for handling and assigning responsibility to individuals and collectives. Depending on the degree of violation, warnings, compensation, or prosecution will be imposed.

For other capital sources not belonging to the finance agency, it should not intervene; the responsibility for handling lies with the agency or unit in accordance with the law.

d) Finalize settlement and conclude the dissolution process:

After completing the dissolution process within the prescribed time frame (not exceeding six months) according to the approved dissolution plan, the liquidation board prepares a post-dissolution settlement report, reporting on the results of asset, material, capital, and account settlements during the economic organization's dissolution process. Propose further financial issues to be addressed after dissolution. Recommend pursuing material or criminal responsibility (if applicable) against individuals and collectives who took advantage of loopholes in the profit-making management mechanism, lacked a sense of responsibility, causing economic losses.

- The head of the superior management agency bases decisions on the liquidation board's report, which includes opinions from representatives of the finance, tax, banking, and other relevant agencies, approving the economic organization's liquidation report regarding finance and personnel, and pursuing responsibility. Identify ongoing issues requiring continued resolution and subsequently decide to terminate the liquidation board's operations.

V- RESPONSIBILITIES OF FINANCE AND TAX AUTHORITIES AT ALL LEVELS

1. Finance and tax authorities are responsible for closely monitoring the dissolution process and the establishment of new enterprises for each economic organization. Together with the superior management agency and related industries, handle labor and financial issues in accordance with regulations.

2. Finance and tax authorities are responsible for:

- Collecting the full amount of state budget refunds, outstanding taxes, and penalties (if any) from economic organizations before they convert into suitable enterprises or are dissolved.

- In cases where economic organizations cannot cover state budget refunds and outstanding taxes, these amounts must be set aside and reported to the competent finance and tax authorities for resolution.

- Economic organizations being converted into state-owned enterprises shall have their budget debts: capital repayment, taxes... transferred to the new enterprise, which must provide a written commitment and be responsible for paying into the State Budget according to the committed deadlines.

3. Financial and tax management agencies directly responsible shall have the duty to guide and assist newly established enterprises in implementing financial, accounting, and tax regimes, and to collect taxes and other revenues in accordance with the law.

Request the Department of Finance and the Tax General Department to closely coordinate with relevant sectors to guide and inspect the implementation of the reorganization of economic organizations established pursuant to Decision No. 268/CT dated July 30, 1990, in accordance with the spirit of Decision No. 196/CT dated June 5, 1992 of the Chairman of the Council of Ministers.

During the implementation process, if there are any difficulties, they are requested to promptly reflect them so that the Ministry of Finance can study and resolve them.