Circular No. 43/2004/TT-BTC guides the handling of losses arising from the time of determining the value of the enterprise to the time when the state-owned enterprise officially becomes a joint-stock company.

 CIRCULAR

Guidelines for handling losses arising from the time of determining the enterprise value to the time when state-owned enterprises officially become joint-stock companiesImplementing the Prime Minister's directive in Circular No. 280/VPCP-ĐMDN dated January 15, 2004 of the Government Office, the Ministry of Finance provides guidelines for handling business losses occurring from the time of determining the enterprise value to the time of transitioning to a joint-stock company for state-owned enterprises undergoing shareholding reform as follows:I. FOR ENTERPRISES CURRENTLY IMPLEMENTING SHAREHOLDING REFORM

1. The General Director of state-owned enterprises and the Enterprise Reform and Development Board (referred to as the Reform Board at the enterprise) must urgently complete the conversion plan within a maximum period of six months from the date of approval of the shareholding reform plan. During the implementation of the shareholding reform plan (the enterprise has not yet registered to operate as a joint-stock company), if there is a business loss from the time of determining the enterprise value to the time of preparing the quarterly or annual financial report, then: The General Director of the enterprise and the Reform Board at the enterprise must clearly identify the cause, collective and individual responsibility; handle material compensation (if due to subjective reasons), while coordinating with financial authorities and commercial banks to examine conditions and process procedures to write off overdue taxes and other amounts payable to the state budget, and unpaid bank loans to handle the remaining loss (if any) as prescribed in Circular No. 85/2002/TT-BTC dated September 26, 2002 of the Ministry of Finance and Circular No. 05/2003/TT-NHNN dated February 24, 2003 of the State Bank of Vietnam.

2. After handling according to the provisions of point 1, if there is still a loss, the General Director of the enterprise and the Reform Board at the enterprise shall be responsible for reporting to the competent authority deciding on shareholding reform to consider and handle as follows:

2.1. In cases where the enterprise's loss amount is less than the actual value of the state capital at the enterprise and does not fall under the category of enterprises where the state needs to hold controlling shares: Adjust the shareholding reform plan based on reducing the expected contribution value of state capital at the enterprise corresponding to the remaining loss, if insufficient, continue to adjust the reduction in the value of state capital used to implement preferential policies regarding share prices and the share sale plan.

2.2. In cases where the enterprise's loss amount is less than the actual value of the state capital at the enterprise but falls under the category of enterprises where the state needs to hold controlling shares: Adjust the shareholding reform plan towards reducing the charter capital scale and the preferential share sale plan for employees and producers who supply raw materials, ensuring that the state's shareholding ratio is sufficient to exercise control rights.

2.3. In cases where the enterprise's loss amount equals or exceeds the actual value of the state capital at the enterprise, it will be transferred to another restructuring form such as transferring, selling, or declaring bankruptcy of the enterprise.

II. FOR ENTERPRISES THAT HAVE COMPLETED SHAREHOLDING REFORM AND REGISTERED TO OPERATE UNDER THE ENTERPRISE LAW

After completing shareholding reform and registering to operate under the Enterprise Law, the enterprise must settle its financial accounts at the time of obtaining the business registration certificate to hand over to the joint-stock company. If there is a loss from the valuation time to the time of obtaining the business registration certificate, the General Director of the enterprise and the Reform Board at the enterprise must clearly identify the cause, collective and individual responsibility, report to the competent authority deciding on shareholding reform for inspection and handling of material compensation liability (if due to subjective reasons), the remaining loss of the enterprise (after handling material compensation liability) shall be handled as follows:

1. For enterprises not falling under the category of enterprises where the state needs to hold controlling shares:

1.1. If the loss amount is less than the proceeds from selling state capital at the enterprise, the Enterprise Restructuring and Shareholding Support Fund (Enterprise Restructuring Fund) shall refund part of the proceeds already deposited into the fund to offset the loss.

1.2. If the loss amount is greater than the proceeds from selling state capital at the enterprise but less than the value of state capital at the enterprise before shareholding reform, then:

- The Enterprise Restructuring Fund shall return the entire proceeds from selling state capital at the enterprise.

- The remaining loss (the difference between the proposed loss amount and the refunded amount) shall be reported to the authority deciding on shareholding reform for consideration and decision on adjusting the state capital contribution at the enterprise and reducing the number of preferential shares sold at a discount (if the state capital contribution at the joint-stock company is less than the remaining loss); simultaneously convening an extraordinary shareholders' meeting to decide on issuing additional shares to offset the reduced state shares or adjusting the scale and structure of the charter capital, electing a new Board of Directors, and adjusting the business registration certificate.

1.3. If the loss amount is equal to or greater than the value of state capital at the enterprise before shareholding reform:

- The Enterprise Restructuring Fund shall return the proceeds from selling state capital at the enterprise;

- Fully reduce the state capital contribution at the enterprise and recover the value of state capital used for implementing preferential discounts and delayed payments to reduce the loss.

In cases where the state capital has been fully reduced but there is still a loss, the company must convene an extraordinary shareholders' meeting to inform about the current status of the enterprise and vote on issues related to the survival of the enterprise in the direction:

+ Accepting the inheritance of the remaining loss and continuing operations;

+ Selling the enterprise with the condition that the buyer inherits the debt and loss;

+ Declaring bankruptcy of the company, liquidating assets to pay debts to creditors and returning capital contributions to shareholders.

2. For enterprises falling under the category of enterprises where the state needs to hold controlling shares, the Enterprise Restructuring Fund can be used to offset and maintain the proportion of state capital contribution in the joint-stock company.

III. PROCEDURE AND PROCEDURES

2. For state-owned enterprises that need to maintain controlling shares, they may use the Enterprise Restructuring Fund as a source to compensate and maintain the proportion of state capital contribution in joint-stock companies.

III. PROCEDURE AND FORMALITIES

1. To have grounds for inspection and timely handling of losses, enterprises must proactively develop loss resolution plans (as prescribed in Sections I and II of this Circular) and prepare a dossier to request loss resolution, reporting to the competent authority deciding on equitization, the Ministry of Finance (for enterprises under provinces, centrally-run cities, and state-owned corporations with losses reducing the state capital value at the enterprise by VND 500 million or more), state-owned corporation (if the enterprise is a member of a corporation), and the agency managing the business restructuring fund.

2. The dossier requesting resolution of losses of equitized enterprises includes:

- The enterprise's letter requesting loss resolution and the state-owned corporation's letter (if the enterprise is a member of a corporation).

- Financial statements from the valuation date to the end of the quarter or year when losses occurred (for enterprises currently implementing equitization). Financial statements from the valuation date to the date of issuance of the business registration certificate (for enterprises that have completed equitization).

For equitized enterprises that are members of state-owned corporations, the financial statements must include an audit opinion from the corporation.

- Minutes identifying the causes of losses, collective and individual responsibilities, and the enterprise's loss resolution plan.

- Decision on announcing the value of the equitized enterprise and Decision approving the equitization plan of the competent authority.

- Dossier determining the value of the equitized enterprise.

3. Within fifteen days from the date of receiving all dossiers, the competent authority deciding on equitization shall be responsible for organizing inspections, identifying the causes of losses at the enterprise, and coordinating with the agency managing the business restructuring fund to handle them according to current regulations and provisions of this Circular.

For state-owned enterprises that are members of state-owned corporations implementing equitization, the corporation shall be responsible for coordinating with the equitization decision-making agency to inspect and resolve losses of member enterprises.

For equitized enterprises with losses occurring from VND 500 million or more, they must obtain a written agreement from the Minister of Finance before resolving such losses.

4. The use of the Business Restructuring Fund to resolve losses occurring from the valuation date to the official conversion into a joint-stock company for state-owned enterprises undergoing equitization shall be carried out as follows:

4.1. Enterprises subject to paying proceeds from selling state-owned shares into which fund shall be responsible for coordinating with the equitization decision-making agency and the Ministry of Finance to resolve losses according to the above regulations.

4.2. In cases where the Business Restructuring Funds of state-owned corporations and localities do not have sufficient sources to cover: The People's Committee of the province, centrally-run city, and the Board of Directors of state-owned corporations shall report to the Minister of Finance to implement fund reallocation as stipulated in Decision No. 174/2002/QĐ-TTg dated December 2, 2002, of the Prime Minister.

IV. IMPLEMENTATION

1. This Circular takes effect fifteen days after its publication in the Official Gazette.

2. The competent authority deciding on equitization shall be responsible for coordinating with the enterprise's finance agency and the agency managing the business restructuring fund to guide, inspect, and supervise enterprises undergoing equitization in handling losses occurring from the enterprise valuation date to the date of conversion into a joint-stock company according to the provisions of this Circular.

3. During implementation, if there are difficulties, they should be promptly reflected to the Ministry of Finance for study and resolution./.