Joint Circular No. 46/TTLB-NHNN guiding the management of working capital for state-owned enterprises according to Decision No. 76-HĐBT dated June 26, 1986 of the Council of Ministers.

JOINT CIRCULAR

GUIDELINES FOR THE MANAGEMENT OF WORKING CAPITAL OF STATE ENTERPRISES PURSUANT TO DECISION NO. 76-HĐBT OF JUNE 26, 1986

Pursuant to Decision No. 76-HĐBT dated June 26, 1986 of the Council of Ministers, to enhance the initiative of enterprises in managing working capital, to meet production and business requirements effectively, to ensure that enterprises use capital economically, for proper purposes, and achieve high economic efficiency, the Ministry of Finance and the State Bank provide specific guidelines on the management of working capital of state enterprises as follows:

1. The working capital of enterprises is provided through two sources:

a) Self-owned working capital and capital treated as self-owned includes:

- Initial capital allocated from the State Budget when the enterprise begins production.

- Capital drawn from the development incentive fund to supplement annual working capital.

- Fixed amount debts (legally permissible occupied capital) such as amounts due to the State Budget but not yet payable, wages owed to workers but not yet due, pre-paid expenses.

- Other working capital such as self-owned capital contributions in joint ventures and associations, additional working capital granted by supervisory authorities, the value of fixed assets belonging to the State Budget capital purchased with self-owned funds, borrowed from banks but fully repaid and converted into current assets due to changes in fixed asset standards, idle balances of various funds of the enterprise which have not been utilized (such as large-scale repair depreciation funds, development incentive funds, reward funds, welfare funds), which can temporarily be mobilized for inventory reserves.

b) Working capital borrowed from the State Bank.

2. When enterprises start production and business operations, they are allocated a portion of the approved working capital quota (regardless of whether the working capital quota consists of goods or not) according to each industry to ensure that the State Budget allocates part of the working capital and planned fixed amount debts account for:

- 10% (ten percent) for service enterprises, public catering enterprises.

- 20% (twenty percent) for transportation enterprises, postal service enterprises.

- 30% (thirty percent) for trading enterprises, foreign trade companies.

- 50% (fifty percent) for industrial enterprises, agricultural enterprises, forestry enterprises, geological exploration enterprises, fisheries, salt enterprises, construction enterprises, turnkey enterprises, supply organizations, and other types of enterprises.

For enterprises that commence operation in phases based on approved economic and technical justifications, the working capital quota will be reviewed to match the increased working capital needs during each phase. Based on the proportion of the State Budget required to allocate within the working capital quota, the State Budget will provide initial capital to the enterprise until it reaches its full capacity.

In cases where production restructuring leads to redefined production and business tasks for some enterprises, resulting in the establishment of new enterprises, supervisory authorities, finance departments, and banks must not only review the working capital quotas for newly established enterprises but also reassess the working capital quotas for existing enterprises due to changes in their production and business tasks. If existing enterprises reduce their production and business tasks and have excess self-owned working capital, these enterprises must transfer the excess capital to the newly established enterprises according to the directive of the supervisory authority. The State Budget will only allocate initial working capital to newly established enterprises (based on the above ratio) after deducting the excess working capital transferred from existing enterprises.

3. The method for determining the working capital quota for enterprises is carried out strictly in accordance with the regulations issued in Decision No. 302-TTg dated July 7, 1976 of the Prime Minister.

The main supervisory ministry coordinates with the Ministry of Finance and the State Bank to review the working capital quotas for central state enterprises.

Provincial supervisory departments coordinate with provincial finance departments and State Bank branches under the central government to review the working capital quotas for provincial state enterprises.

District supervisory departments coordinate with district finance departments and State Bank branches to review the working capital quotas for district state enterprises.

4. Enterprises operating before July 1, 1986 retain all State Budget capital directly allocated to them, as well as State Budget capital allocated on behalf of the budget according to Directive No. 301-CT dated December 1, 1982 of the Council of Ministers Chairperson, and capital distributed from the price difference of inventory materials to supplement self-owned working capital, to be used as self-owned working capital.

Annually, enterprises review their working capital quotas, if necessary, propose to review the working capital quotas, based on which they determine the shortfall of self-owned working capital that the enterprise must replenish itself.

5. Apart from the State Budget capital already allocated, annually, enterprises must prioritize using the development incentive fund to supplement self-owned working capital. The specific amount drawn from the development incentive fund to supplement self-owned working capital is decided by the Enterprise Director to ensure the self-owned working capital ratio as stipulated in Point 2 of this Circular. During the plan year, if the enterprise fails to achieve the self-supplementation plan, it may borrow from the bank to supplement.

6. Besides self-owned working capital and capital treated as self-owned, enterprises may borrow from the bank to ensure production and business activities, based on agreed credit plans, enterprises sign credit contracts with the bank.

In special cases, if working capital is lost or damaged due to natural disasters, fires, or enemy attacks, enterprises are eligible for financial authorities to approve recovery of working capital on a case-by-case basis.

7. For the surplus materials with slow turnover generated prior to this time which have been allocated from the State Budget and lent by the Bank, when they are released, the enterprise shall be responsible for repaying the National Bank and replenishing its own working capital corresponding to the structure of the State Budget funds and Bank funds in the surplus materials with slow turnover.

8. This Circular takes effect from July 1, 1986. All previous regulations contrary to this Circular are hereby abolished.