Circular No. 47/2000/TT-BTC guiding financial issues in the transfer and sale of state-owned enterprises

CIRCULAR

Guidelines on financial matters concerning the transfer and sale of state-owned enterprises

Implementing Decree No. 103/1999/NĐ-CP dated September 10, 1999 of the Government on the transfer, sale, lease, and management contracting of state-owned enterprises, the Ministry of Finance provides guidelines on certain financial issues related to the transfer and sale of state-owned enterprises as follows:

I. GENERAL PROVISIONS

1. The applicable subjects are independent state-owned enterprises and member enterprises under State Corporations that maintain separate accounting records (excluding state-owned farms, forestry enterprises, and enterprises operating in consultancy, design, and inspection services) meeting one of the following conditions:

a) Having state-owned capital, including budget-funded capital or capital treated as budget-funded and self-supplemented capital of the enterprise (hereinafter referred to as state capital), recorded in accounting books below one billion VND, with prolonged losses but not yet in bankruptcy.

b) Having state capital recorded in accounting books below one billion VND, without losses, but not falling within the category of enterprises that the state needs to hold shares in.

c) Having state capital recorded in accounting books from one billion VND to less than five billion VND, with prolonged losses but not yet in bankruptcy, after implementing necessary measures but still unable to overcome them, and approved by the Prime Minister for specific cases.

2. Transferring or selling enterprises for continued production and business operations; the transferee or buyer shall not resell the enterprise during the period stipulated in the contract, including gradual sales or partial sales of assets of the enterprise, except for the sale of unused assets that need to be liquidated to replace and modernize technology to sustain and develop production and business operations.

3. The General Director of the enterprise, with the participation of the Enterprise Reform Board, is responsible for directing departments within the enterprise to organize asset inventory, determine the quantity and status of all assets and capital of the enterprise, classify assets, accounts receivable and payable, and take measures to clean up and improve financial health before transferring or selling the enterprise. At the same time, they must prepare a balance sheet and accounting report up to the date of transferring or selling the enterprise.

4. All assets of the enterprise subject to transfer or sale shall be valued at their actual market value at the time of the decision to implement the transfer or sale.

This price is determined by the transferring or selling party and agreed upon by the receiving or purchasing party in the transfer or sale contracts and approved by the competent authority.

5. The proceeds from the sale of the enterprise, after deducting costs for the sale process, payment of secured debts due, shall be deposited into the Fund for Enterprise Restructuring and Shareholding, corresponding levels: Central Fund (if it is a central state-owned enterprise), Fund of Corporation 91 (if it is a member enterprise of Corporation 91), and Local Fund (if it is a local state-owned enterprise).

6. Actual and reasonable expenses necessary for organizing the transfer and sale of the enterprise shall be deducted from the proceeds of the sale of the enterprise or the value of the enterprise prior to the transfer.

II. TRANSFERRING STATE-OWNED ENTERPRISES TO LABOR COLLECTIVES WITHIN THE ENTERPRISE.

1. Principles for handling assets and liabilities before transferring the enterprise.

1.1. Regarding receivables: The enterprise is responsible for handling receivables before transferring the enterprise according to the following directions:

a) Difficult-to-collect receivables due to objective reasons:

For receivables that have sufficient evidence to confirm they cannot be collected, such as debtors being dissolved, bankrupt, having fled, being under criminal sentence and having lost the ability to pay... the enterprise uses the provision for doubtful receivables to offset, if insufficient, it is recorded in the business results (if there is profit from production and business activities). In the case of no profit, the enterprise reports to the financial management agencies of the enterprise at the same level and the agency determining the transfer price to handle reducing the enterprise's value (state capital portion) before transferring the enterprise.

For receivables that have been outstanding for more than five years and the debtor still exists, despite the enterprise actively applying many solutions but still unable to recover the debt, the following principles apply:

For enterprises with profitable production and business activities: it can be recorded in the business results, reducing profits before transferring.

For enterprises with unprofitable production and business activities, suffering losses or without profit: the enterprise reports to the financial management agency of the enterprise and the agency determining the transfer price to handle reducing the enterprise's value (state capital portion) before transferring.

b) Difficult-to-collect receivables due to subjective reasons where individual responsibility has been established must be handled through liability and material compensation. The loss (after handling responsibility and compensating from reserve funds) is handled like difficult-to-collect receivables due to objective reasons.

c) Remaining receivables at the time of transferring the enterprise, the transferee is responsible for inheriting and continuing to handle. If the transferring and receiving parties cannot agree on a receivable, the transferring party continues to be responsible for monitoring and recovering the receivables handled according to the above principles and depositing them into the state budget (after paying off debts).

1.2. Regarding payables and losses:

The enterprise is responsible for handling payables before transferring the enterprise to a labor collective.

In the case of financial difficulties due to losses, the enterprise may handle as follows:

Outstanding payables to banks, individuals, enterprises, and other economic organizations, the enterprise must negotiate with creditors and report to the competent authority for examination and handling of debt write-offs or extensions depending on specific circumstances.

For outstanding state budget debts: enterprises shall prepare plans to report to the agency that decides to transfer the enterprise for examination by the Ministry of Finance, allowing the enterprise to handle and write off the outstanding state budget debts up to the maximum amount equal to the accumulated losses of the enterprise at the time of the decision to transfer the enterprise. If there are still losses after writing off the state budget debts at the time of transferring the enterprise, the value of the enterprise will be adjusted downward when transferring.

For remaining debts that have not been handled by the transfer date, the person receiving the transferred enterprise shall be responsible for inheriting and repaying such debts.

1.3. Handling assets not included in the transfer value of the enterprise:

For assets contributed to joint ventures or received from joint ventures, leased assets, financial leases, borrowed or held assets, the principle of handling is: the parties transferring and receiving the enterprise and the asset owners shall agree on the inheritance of previously signed contracts, terminate and liquidate old contracts, or sign new contracts.

For unused assets awaiting liquidation, or assets that the transferring and receiving parties do not agree to include in the transfer value of the enterprise, the principle of handling is: the transferring enterprise shall be responsible for disposing of these assets through measures such as selling or liquidating them. If they have not been disposed of before the transfer, they shall be handed over to the receiving enterprise for safekeeping to continue monitoring and disposing of them, or entrusting the receiving enterprise to dispose of them and deducting storage and sales costs from the agreed-upon asset value.

1.4. Handling assets formed from Reward and Welfare Funds

In principle, these assets shall be inherited by the two parties transferring and receiving the enterprise according to current regulations before the transfer of the enterprise, or transferred to the workforce for management and use through the grassroots trade union organization. Specifically, for housing assets, they shall be transferred to the Department of Real Estate to convert housing prices for workers according to current regulations.

2. Determining the Transfer Value of the Enterprise

2.1. Organizing the Determination of the Transfer Value of the Enterprise

Based on the results of inventory, classification, and handling of financial issues as stipulated above, the General Director of the enterprise shall be responsible for working with the Enterprise Reform Board to develop a plan to determine the enterprise's value to submit to the agency issuing the enterprise transfer decision.

The agency deciding to transfer the enterprise shall be responsible for directing the Enterprise Management Reform Board to organize the determination of the enterprise's value, serving as the basis for both parties to sign the enterprise transfer contract.

2.2. Principles for Determining the Actual Value of Enterprise Assets According to Market Prices as Follows:

For assets traded in the market, the market price is the current buying and selling price of that type of asset.

For specialized assets or construction investment products, the basis is the investment cost at the time of determining the enterprise's value as prescribed by the competent authority.

For monetary capital, it is calculated based on the verified balance at the time of determining the enterprise's value. If the balance is foreign currency, it must be converted to Vietnamese Dong using the exchange rate published by the inter-bank at the time of determining the enterprise's value.

For receivables and payables that have been reconciled and confirmed.

In-progress expenses are determined based on the ledger balance and the reasonableness of the expenses.

Short-term and long-term deposits and guarantees are calculated based on the actual ledger balance after reconciliation and confirmation.

For short-term and long-term investments, their values are determined based on market prices for assets inherited by the buyer or receiver.

For intangible assets (if any), their value is determined based on the remaining value recorded in the ledger.

2.3. Costs of Transferring the Enterprise:

a) Costs of transferring the enterprise include:

- Expenses for inventorying assets and determining their value

- Printing training materials for enterprise employees

- Developing plans for transferring the enterprise; drafting organizational operation charters for the workforce receiving the enterprise.

- Costs of employee meetings to implement the enterprise transfer or the first shareholders' meeting of a joint-stock company

- Audit fees (if applicable)

- Publicity and advertising costs

- Tender organization costs

- Other related costs.

b) Costs for preparing tender documents are borne by the bidder.

c) The total cost of transferring the enterprise shall not exceed 3% of the actual value of the enterprise for enterprises with an actual value under 3 billion VND. For enterprises with an actual value between 3 billion and 10 billion VND, an additional 2% can be added for the excess value; for enterprises with an actual value over 10 billion VND, an additional 1% can be added for the excess value. The maximum transfer cost shall not exceed the actual value of the state capital in the enterprise.

d) The General Director of the state-owned enterprise implementing the transfer may decide on necessary costs for the transfer according to the principle of thrift and must have legal vouchers.

At the end of the enterprise transfer process, the General Director of the state-owned enterprise implementing the transfer shall be responsible for preparing a final report on all transfer-related costs to the enterprise transfer decision-making agency and the same-level enterprise financial management agency.

e) Total costs for transferring the enterprise, once approved, shall be deducted from the transfer value of the enterprise.

2.4. Determining the Transfer Value of the Enterprise

The transfer value of the enterprise is determined based on the remaining value of the state capital in the enterprise after deducting the transfer costs as stipulated in point "2.3" above.

The price and transfer plan must be approved by the competent authority as provided for in Article 58 of Decree 103/1999/NĐ-CP dated September 10, 1999, issued by the Government.

3. Ownership Rights After the Transfer of the Enterprise

3.1 Workers listed on the payroll and contributing to social insurance at enterprises implementing the transfer of part of the enterprise's value to a collective of workers through shares shall be entitled to such ownership corresponding to the number of years worked in the state sector without having received severance pay or unemployment benefits.

The authority issuing the decision to transfer the enterprise to the collective of workers shall be responsible for signing a Contract with the representative receiving the transfer (the Trade Union Chairman or a person authorized by the Trade Union) and the Contract shall include a list of each worker's ownership rights mentioned above.

3.2 For the shares transferred, workers in the enterprise shall only be entitled to dividends, have the right to inherit them, but may not transfer them within a minimum period of three years from the date of the transfer.

3.3 Based on the number of shares transferred, workers shall be responsible for accepting a debt obligation with the new enterprise equivalent to 30% of the share value at the time of transfer and must repay the enterprise when transferring shares so that the enterprise can repay the State (the Fund for Supporting Enterprise Restructuring and Shareholding at the same level).

In the case of transferring part of the shares, the worker shall first ensure sufficient repayment of 30% of the share value at the time of transfer to enable the enterprise to repay the State.

III. SALE OF STATE ENTERPRISES

1. Principles for handling assets and debts when selling an enterprise

The enterprise shall be responsible for self-managing all receivables, payables, and losses prior to the sale of the enterprise.

1.1. Regarding receivables:

To be handled according to the principles stipulated in Section 1.1 of Part II of this Circular.

1.2. Regarding payables and losses (if any):

Depending on whether the conditions of purchase and sale involve the assumption of debt or not, they shall be handled according to the following principles:

a) In the case where the buyer commits to assuming the debts, the losses and payables shall be deducted from the value of the sold enterprise.

All commitments between the parties involved in the purchase and sale must be clearly stated in the enterprise purchase and sale contract and notified to relevant parties.

b) In the case where the buyer does not commit to assuming the debt, the selling enterprise shall be responsible for resolving all remaining debts as follows:

Prior to ceasing operations, the selling enterprise must collect the following amounts:

- Revenue from outstanding receivables.

- Revenue from the liquidation of assets not included in the value of the sold enterprise.

- Revenue from the sale of the enterprise (after deducting costs associated with the sale).

- Other revenues if any (such as cash capital not included in the asset inventory for sale).

The selling enterprise may use these revenues to settle payables due up to the date of the enterprise sale, including:

- Social Insurance debt.

- Bank debt.

- Debt to economic organizations and individuals.

- State budget debt.

- Other debts.

Any surplus remaining after deducting the aforementioned payables shall be remitted to the Fund for Supporting Enterprise Restructuring and Shareholding at the same level as prescribed in Section "5" of Part I of this Circular.

If the revenues are insufficient to cover the payables, the selling enterprise shall report to the authority issuing the decision to sell the enterprise and the financial management agency at the same level to take appropriate measures, including selling debts to debt-buying companies or support from the Fund for Supporting Enterprise Restructuring and Shareholding at the same level as prescribed. In cases where there is a request to write off tax debts and state budget debts, the enterprise shall report to the authority issuing the decision to sell the enterprise to report to the Ministry of Finance for consideration and resolution within its jurisdiction.

Among the receivables not assumed by the buyer, the seller may negotiate with the buyer to collect on their behalf within a certain period and deduct collection costs agreed upon by both parties.

All such commitments between the buyer and seller must be clearly stated in the enterprise purchase and sale contract and notified to relevant parties.

1.3 Handling assets not included in the value of the sold enterprise.

a) Excess inventory and assets not agreed upon by the buyer to be included in the value of the enterprise for sale shall be resolved by the seller (the selling enterprise) before the sale date.

b) In cases where they cannot be resolved before the sale date, the selling enterprise shall be responsible for managing and taking measures to resolve them before ceasing operations. The approach to handling these assets is to liquidate and sell them to recover funds. The selling enterprise must establish a committee to determine the quality and value of the assets and implement their disposal, including reducing prices and auctioning them according to current regulations.

c) In cases where they cannot be disposed of before the selling enterprise ceases operations, the authority deciding to sell the enterprise may handle them as follows:

Article for transferring to continue processing or selling through intermediary companies regarding asset purchases and sales.

Send the purchasing enterprise to hold and sell on behalf of the selling enterprise according to the agreed price. In this case, the purchasing enterprise is compensated for storage and selling expenses as agreed by both parties. The holding period shall not exceed ninety days from the date of the decision to sell the enterprise.

1.4. Handling assets formed from Reward and Welfare Funds

a) In principle, these assets are transferred to be managed and used by the collective of workers through the grassroots trade union organization. Specifically, for housing assets, they are transferred to the Department of Real Estate to implement the valuation of housing for workers according to the current regulations.

b) If the buyer only commits to continuing to employ less than fifty percent of the existing workforce of the enterprise, the authority deciding to sell the enterprise may resell it to the buyer or other economic and social organizations to distribute among the collective of workers within the enterprise.

2. Determining the value of the enterprise for sale.

2.1. Organization for determining the selling price of the enterprise:

Based on the results of inventory, classification of assets, conditions for purchase and sale, and the situation of handling financial issues as stipulated above, the Director of the enterprise has the responsibility to work with the Enterprise Reform Board to develop a plan for selling the enterprise and determine the minimum selling price to submit to the authority deciding to sell the enterprise.

The authority deciding to sell the enterprise has the responsibility to direct the Enterprise Reform Management Board to take the lead, coordinate with relevant departments to review and determine the actual value of the enterprise being sold as the basis for determining the selling price of the enterprise according to auction or direct negotiation methods as prescribed in Decree No. 103/1999/ND-CP dated September 10, 1999 of the Government.

2.2. Principles for determining the selling price of the enterprise:

The principles for determining the actual value of the enterprise's assets for sale are stipulated as at point "2.2" section "2" part II of this Circular.

The selling price of the enterprise is determined based on the actual value of the enterprise at the time of sale, agreed upon by the buyer and seller depending on:

- Purchase and sale conditions (whether or not to inherit debts, payment in one lump sum or in installments);

- Discount level for the buyer who commits to investing to maintain production and business operations and ensure employment for existing workers in the enterprise;

- Selling method (auction or direct negotiation);

- The selling price of the enterprise must be approved by the competent authority according to Article 58 of Decree No. 103/1999/NĐ-CP dated September 10, 1999 of the Government.

For cases where the buyer inherits debts, the actual value of the enterprise being sold is the actual value of state capital in the enterprise at the time of sale and accepted by both the buyer and seller.

For cases where the buyer does not inherit debts, the actual value of the enterprise being sold is the actual value of all assets of the enterprise that the buyer needs to use (excluding receivables and cash capital) and accepted by both the buyer and seller. In this case, the implementation of preferential policies on discount prices for the sale of enterprises according to Articles 50, 51, and 52 of Decree No. 103/1999/NĐ-CP must ensure funds to repay loans taken out to invest in purchasing assets of the enterprise.

2.3. Costs of selling the enterprise:

Actual, reasonable, and necessary costs for organizing the sale of the enterprise are deducted from the proceeds from the sale of the enterprise.

The level of costs for selling the enterprise is determined and managed like the costs assigned to the enterprise as stipulated at point "2.3" section "2" part II of this Circular.

2.4. Preferential policies on selling prices: Applied as the current provisions in Decree No. 103/1999/NĐ-CP dated September 10, 1999 of the Government.

IV. IMPLEMENTATION

This Circular takes effect from the date of signature.

Financial authorities at all levels are responsible for guiding, supervising, and inspecting the implementation of this Circular in enterprises implementing assignment and sale.

During the implementation process, if there are difficulties, please promptly reflect them to the Ministry of Finance for study and resolution./.