Circular No. 51/2006/TT-BTC guiding certain contents of the Auctioning State-Owned Enterprises Regulation

CIRCULAR

Guidelines on certain contents of the Auctioning State-Owned Enterprises Regulation

Pursuant to Decision No. 330/2005/QĐ-TTg dated December 13, 2005 of the Prime Minister promulgating the Auctioning State-Owned Enterprises Regulation, the Ministry of Finance issues guidelines on certain contents of the Auctioning State-Owned Enterprises Regulation as follows:

Part I

GENERAL PROVISIONS

1. Principles of Implementation.

a) The auctioning of state-owned enterprises shall be carried out in accordance with Decision No. 330/2005/QĐ-TTg dated December 13, 2005 of the Prime Minister and the provisions of this Circular, ensuring fairness, transparency, and openness.

b) State-owned enterprises put up for auction must have resolved all financial issues in accordance with current regulations of the State.

c) All parties involved in the auction process shall be responsible under the law for complying with State regulations and the rules of the auction session.

2. Object and Conditions for Application.

State-owned enterprises (hereinafter referred to as enterprises) that meet the conditions stipulated in Article 5 of the Auctioning State-Owned Enterprises Regulation issued together with Decision No. 330/2005/QĐ-TTg dated December 13, 2005 of the Prime Minister (hereinafter referred to as the Auctioning State-Owned Enterprises Regulation) shall be decided by the competent authority to be put up for auction.

3. Conditions for Participation in Auctions for Investors.

Investors participating in the auction of enterprises are regulated in Article 3 of the Auctioning State-Owned Enterprises Regulation. Foreign investors, including Vietnamese citizens with foreign nationality, when participating in auctions must open an account at a bank or service provider operating within the territory of Vietnam and comply with Vietnamese laws. All activities related to participation in the auction of state-owned enterprises must be conducted through this account.

Organizations and individuals participating in the valuation of the enterprise and auction advisory organizations may not participate in the auction.

4. Handling Financial Issues.

The handling of financial issues for enterprises put up for auction shall be carried out in accordance with Circular No. 109/2005/TT-BTC dated December 8, 2005 of the Ministry of Finance guiding certain aspects of finance in transferring, selling, leasing, and entrusting management of state-owned enterprises, and Circular No. 126/2004/TT-BTC dated December 24, 2004 of 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 enterprises into joint-stock companies (hereinafter referred to as Circular No. 126/2004/TT-BTC).

5. Attached Forms of the Circular.

The forms attached to this Circular serve as guidance. Based on the characteristics of the enterprise being auctioned and the actual process of ownership transfer through this method, the Steering Committee, in conjunction with the organization advising on the sale of the enterprise, may design them flexibly but must ensure they contain all necessary elements specified in the forms attached to this Circular.

Part II

SOME CONTENTS OF THE AUCTIONING PROCESS

1. Preparing for Auction.

a) Based on the plan for the conversion of state-owned enterprise ownership approved by the competent authority in accordance with Article 54 of Decree No. 80/2005/NĐ-CP dated June 22, 2005 of the Government on transferring, selling, entrusting management, and leasing state-owned enterprises, the agency deciding to sell the enterprise selects enterprises meeting the conditions stipulated in Article 5 of the Auctioning State-Owned Enterprises Regulation to put up for auction and simultaneously establishes the Steering Committee for Auctioning State-Owned Enterprises (hereinafter referred to as the Steering Committee for Auctioning).

b) The Steering Committee for Auctioning implements the steps of work as prescribed in Article 7 of the Auctioning State-Owned Enterprises Regulation, conducts an audit of the financial report, and proceeds with the valuation of the enterprise according to Circular No. 126/2004/TT-BTC and Article 7 of the Auctioning State-Owned Enterprises Regulation.

c) Based on the results of the enterprise valuation, the Steering Committee for Auctioning prepares the auction plan, determines the starting price, reports it to the agency deciding to sell the enterprise for approval, and appoints the organization conducting the auction.

d) Within the five working days stipulated in Article 8 of the Auctioning State-Owned Enterprises Regulation, the selected organization conducting the auction must publicly announce the necessary information related to the enterprise being auctioned and the auction session on mass media, at the organization conducting the auction, and at the headquarters of the enterprise at least 45 working days before the auction date. The content of the announcement is as Model No. 1 attached to this Circular.

2. Registration to Participate in Auction.

a) Based on the announcement of the auction of state-owned enterprises made by the organization conducting the auction, investors who meet the conditions for participation in the auction shall proceed with registration procedures to participate in the auction to purchase the enterprise with the organization conducting the auction. When registering, the investor must present evidence proving compliance with the conditions stipulated in Point 3, Part I of this Circular.

b) The auction dossier issued by the organization conducting the auction includes detailed information about the financial situation and business operations of the state-owned enterprise, application form (Form No. 2), power of attorney (Form No. 3), rules of the auction session (Form No. 4), documents that the buyer must sign after the auction session such as: Minutes of the auction session (Form No. 5), purchase and sale contract (Form No. 6), handover minutes (Form No. 7). 

3. On-site Survey of the Enterprise.

a) Before auctioning the enterprise, the organization conducting the auction shall coordinate with the enterprise to arrange for registered investors to conduct an on-site survey, study the files, financial statements, asset lists, property rights certificates, land use rights certificates, and contracts related to the enterprise.

b) Depending on the number of registered investors and the specific content to be surveyed at the enterprise, the on-site survey can be organized in one or more sessions.

c) The on-site survey must be conducted in a manner that does not affect the enterprise's production and business operations.

4. Submission of Application Form and Deposit.

a) Investors must submit the application form to participate in the auction of the enterprise and pay the deposit to the organization conducting the auction in accordance with the time limit and amount of deposit stipulated in Article 11 of the Auctioning State-Owned Enterprises Regulation.

b) In the registration form to participate in the auction, the investor company must clearly state the first bid price, which cannot be lower than the starting price. The auction organization has the responsibility to keep the investor's bid price confidential.

c) Upon receiving the registration form and the bid deposit, the auction organization issues to the investor an auction participation ticket for purchasing a state-owned company (Model No. 8) and a receipt for the bid deposit. The auction participation ticket must clearly indicate the investor's code number.

d) Within the registration period, an investor who has registered may withdraw their registration to participate in the company auction and immediately receive a refund of the bid deposit.

5. Auction session.

a) After the registration deadline for participating in the company auction, the auction organization must report the registration results to the Auction Steering Committee. The auction session can only be conducted if there are at least two valid investor registrations to purchase the company.

b) If there is only one registration for the auction, the auction organization reports to the Auction Steering Committee to submit to the authority responsible for selling the state-owned company for consideration and decision on applying the direct negotiation sale method as prescribed in Decree No. 80/2005/NĐ-CP dated June 22, 2005 of the Government on transferring, selling, leasing, and entrusting management of state-owned companies.

c) Investors who have been issued an auction participation ticket must complete the registration in the auction participation register, with the registration time following the rules of the auction session.

6. Conducting the auction session.

a) The organization conducting the company auction must issue a Decision appointing a representative with authority to conduct the auction session and invite a notary public to witness the auction session. The bidding process and behavior rules during the auction session are carried out according to the auction session rules.

b) All state-owned company auction sessions are conducted through secret ballot bidding rounds, with continuous bidding rounds until the highest bidder is selected.

c) Before commencing the auction, the auction session conductor must announce the basic contents of the auction session rules and disclose the highest bid prices recorded in the registration forms of investors for purchasing the state-owned company auction, which serves as the starting price for the first bidding round.

d) The auction session conductor distributes bid price sheets to the investors, which must clearly indicate the current round's starting price and a blank space for the investor to record their bid price. After each round, when all bid sheets are collected, the auction session conductor publicly announces the code number and bid price of the highest bidder and continues distributing bid sheets to the remaining bidders to start the next round. The highest bid from the previous round becomes the starting price for the subsequent round. The auction concludes when the remaining bidders voluntarily decline to bid further, and the highest bidder in the final round is declared the successful bidder.

đ) In the event that multiple bidders voluntarily decline to continue bidding in the final round and have identical bid prices, the auction session conductor will organize a draw among those bidders and declare the successful bidder as the one who wins the draw, thereby obtaining the right to purchase the company.

7. Auction session minutes.

a) At the end of the auction session, the auction session conductor prepares the Auction Session Minutes and sends it to the Auction Steering Committee. The auction session minutes must bear the signatures of the auction session conductor, the witness, and the investor.

b) In cases where the auction session fails due to various reasons, the auction session conductor must prepare the unsuccessful auction session minutes (Model No. 9) and clearly state the reasons for the failure, which must be signed by the auction session conductor and the witness.

8. Post-auction procedures.

a) Within the time frame specified in Article 15 of the Auction Rules for Companies, the authorized representative of the authority responsible for selling the company and the investor must sign the company purchase and sale contract, and the auction organization shall return the bid deposits to the investors.

b) The bid deposit will not be refunded to the investor if the bid price is lower than the starting price, if the bid price in the subsequent round is lower than the highest price of the previous round, if the investor refuses to sign the company purchase and sale contract, or if the investor violates the auction session rules.

9. Payment.

Payment for purchasing the company is carried out according to the provisions of Article 16 of the Auction Rules for Companies, Article 26 of Decree No. 80/2005/NĐ-CP dated June 22, 2005 of the Government on transferring, selling, entrusting management, and leasing state-owned companies, and the agreements stipulated in the company purchase and sale contract.

10. Transfer of the company.

a) After the investor has completed payment in accordance with the company purchase and sale contract, the authority responsible for selling the company organizes the transfer of the company to the investor in accordance with the company purchase and sale contract, and both parties sign the handover certificate.

b) The company purchase and sale contract and the handover certificate, once signed, serve as legal evidence of the investor's ownership rights over the company. These documents are submitted to the same-level financial authority for monitoring and supervision.

11. Proceeds from the sale of the company.

The proceeds from the sale of the state-owned company through auction and the bid deposits that do not need to be refunded to the investor as stipulated in item b, point 8 above, after deducting the costs incurred during the auction process, are handled according to the provisions of Article 19 of the Auction Rules for Companies.

12. Announcement of cessation of company operations.

According to the deadline specified in Article 18 of the Auction Rules for Companies, the authority responsible for selling the enterprise announces the sale of the company and the cessation of its operations through mass media.

13. Costs and settlement of auction costs for the company.

a) The costs of the company auction include:

- Training costs for company auction business.

- Inventory and valuation costs of the company.

- Costs for preparing the dossier and the plan for auctioning the company.

- Costs for organizing the auction.

- Other costs related to the auctioning of the company.

b) The maximum level of costs for auctioning the company shall be applied as prescribed for the conversion of state-owned enterprises into joint-stock companies as stipulated in Circular No. 126/2004/TT-BTC.

The General Director or Director of the company decides on the contents and necessary levels of expenditure within the maximum control limit to implement the auctioning of the company and bears responsibility for the legality and validity of these expenditures. In cases where the company being auctioned has a large scale and complexity, resulting in necessary expenditures exceeding the maximum control limit; the decision-making body for the auction may proactively consider and decide, and notify the Ministry of Finance.

Upon completion of the auction, the company must settle the auctioning costs and report to the decision-making body for the auction for approval.

Part III

IMPLEMENTATION

This Circular takes effect fifteen days from the date of publication in the Official Gazette. Any provisions contrary to this Circular shall be implemented according to the guidance provided in this Circular. During implementation, if there are difficulties or obstacles, they are requested to be reported to the Ministry of Finance for study and resolution.

During implementation, if there are difficulties or obstacles, they are requested to be reported to the Ministry of Finance for study and resolution./.