Circular No. 57 TC/TTN-94 GUIDING IMPLEMENTATION OF Directive No. 235/TTG dated May 11, 1994 of the Prime Minister on General Settlement and Debt Resolution in Phase II

CIRCULAR
GUIDELINES FOR IMPLEMENTING THE DIRECTIVE NO. 235/TTG OF MAY 11, 1994 ON TOTAL SETTLEMENT AND DEBT MANAGEMENT IN STAGE II
PRIME MINISTER'S DIRECTIVE ON TOTAL SETTLEMENT
AND DEBT MANAGEMENT IN STAGE II

Implementing Directive No. 235/TTg dated May 11, 1994 of the Prime Minister on accelerating total settlement and debt management in Stage II. The Central Committee for Total Settlement of Debts guides the following specific points:

I. SETTLEMENT OF DEBTS TO ENTERPRISES STILL OPERATING (TYPE 10) FOR DEBTS ALREADY ACKNOWLEDGED:

1\. Settle debts between state enterprises still operating that have been acknowledged. The central government will implement nationwide settlement as in Stage I (settlement by each enterprise, summarized by province), as follows:

a) Enterprises with a deficit must first use their own sources of capital such as: additional working capital allocated in 1994, basic depreciation funds left unused in 1994, legitimate funds such as production and business development funds, reserve funds, precautionary funds... liquidation of unused assets and materials, other monetary capital to settle debts. If insufficient, they may borrow from the State's revolving fund for up to two years at an interest rate of 0.8% per month, of which 0.5% is paid to creditors using promissory notes for settlement.

b) State enterprises with a surplus must be examined by the Debt Settlement Board to see if they still owe other entities. If so, they shall settle:

- Debts owed to enterprises that have ceased operations, dissolved, cooperatives, private businesses, credit funds, and living standard enterprises.
- Foreign debts (if any).
- Bank debts for overdue principal already declared and confirmed (including loans from the revolving fund in Stage I).
- Government budget debts.
Any remaining surplus shall be transferred to the enterprise's account.

2\. Settle debts between state enterprises still operating and state enterprises that have ceased operations and dissolved:

- State enterprises still operating with a surplus shall include this in the total amount of debts that the dissolved enterprises must pay, settling according to the proportion of capital received from the dissolved enterprise. The deficit not recovered shall be recorded as a loss and deducted from the profit realized in 1994 and subsequent years (if due to external factors). If due to the creditor's subjective fault, it shall be deducted from the enterprise fund, individual responsibility pursued, and compensation made in kind to the enterprise.
- State enterprises still operating with a deficit to dissolved enterprises must find all sources of capital within the enterprise to settle the debt. If insufficient, they may borrow from the State's revolving fund to settle the debt.

3\. Settle debts between operating enterprises and non-state enterprises, living standard enterprises, and private enterprises:

- State enterprises still operating with debts must settle these debts fairly, using the sources of capital as specified in points 1 and 2 above.
- Enterprises with surpluses must find all sources of capital to settle debts to non-state enterprises, private enterprises, and living standard enterprises. If the enterprise fails to settle the debt, the Debt Settlement Boards at all levels shall apply coercive measures (Circular No. 05/TTLN) to compel settlement and seize assets valued at 200,000 dong or more for public auction to repay the debt. If they refuse to settle, the case shall be referred to the internal affairs agency to handle according to civil or criminal procedure laws.
Debts not settled in 1994 shall be recorded in the pending accounts. All unsettled debts shall be transferred to the internal affairs agency and relevant departments after the dissolution of the Debt Settlement Board for continued recovery and legal action against violators.

II. STATE ENTERPRISES THAT HAVE CEASED OPERATIONS AND DISSOLVED (TYPE 80):

First, conduct a full inventory of all assets, land, materials, goods, cash, and receivables at the time of settlement.
Compare with the state capital assigned to the enterprise and the period of the dissolution decision. If there is a shortage without a valid reason, the liquidation board must compensate, and transfer to the internal affairs agency for investigation and handling according to the provisions of the law. Thus, the debts of the dissolved enterprise include debts after April 30, 1991 (if the enterprise was dissolved after April 30, 1991).
Recover debts from operating enterprises, cooperatives, private enterprises, living standard enterprises, and organizations and individuals using the assets of the dissolved enterprise. Proceeds from recovery shall be transferred to the Debt Settlement Board's account to settle debts to creditors.
Organize the sale of assets and materials of the dissolved enterprise according to Circular No. 05/TTLN dated August 21, 1992. The entire proceeds from sales shall be used to settle debts to the designated recipients according to the order set out in Decision No. 330/HĐBT dated October 23, 1991 of the Council of Ministers (now the Government).
Any remaining amount due to subjective reasons shall be transferred to the internal affairs agency for investigation and recovery, and deposited into the State budget.
For merged enterprises, the receiving enterprise shall be responsible for settling the debts of the merged enterprise, such as third-level trade merging with second-level trade. Initially, mutual offsetting of debts within the merged enterprises shall occur, and the remainder shall be integrated into settlement by locality or ministry.

III. SETTLEMENT OF DEBTS BETWEEN ECONOMIC ORGANIZATIONS, COLLECTIVES, AND INDIVIDUALS OWING DEBTS TO STATE ENTERPRISES:

Non-state economic units and individuals owing debts to state enterprises.
+ Operating enterprises must settle all overdue debts acknowledged, and unacknowledged debts shall be referred to the legal authorities for review.
+ Ceased operations and dissolved enterprises shall settle according to the procedures and ratios specified above.
- If non-state units or individuals have debts payable, they must seek all sources of capital to repay their debts, including settling debts through physical assets within the prescribed time period.
Banks may provide loans under the current credit regime for non-state economic sectors and private enterprises (must be collateralized) to support them in increasing their capital to repay debts.
If units and individuals intentionally fail to repay their debts, compulsory debt collection measures shall be implemented, and the case files shall be transferred to legal authorities for examination, criminal or civil responsibility shall be pursued, and assets shall be seized and sold to repay debts.

IV. BANK DEBTS

1/ Debts receivable:

- For operating enterprises, after paying off debts according to the provisions above, the remaining amount shall first be used to repay the principal to the Bank.
The remaining amount shall be reviewed to determine whether the borrowed funds were used for their intended purpose. If not, adjustments shall be made to ensure compliance with the intended purpose, the repayment agreement shall be adjusted, and the unit shall repay the debt according to the new agreement, with the principal and interest calculated from the date of adjustment, such as short-term working capital loans, construction projects, where the unit must collateralize with the constructed assets for the Bank, converted into medium- or long-term investment loans for construction projects.
- For enterprises that have ceased operations or been dissolved, the Bank shall implement Point 5 of Decision No. 330/HĐBT issued by the Council of Ministers (now the Government).
- For non-state economic sectors, they must find all sources to repay both principal and interest. If payment is delayed, the assets of the unit or individual shall be auctioned to repay the debt.
Any remaining amounts that cannot be collected based on identified reasons, if due to objective factors, shall be deducted (principal) from the Bank's annual plan.
If due to subjective reasons of the debtor, the debt shall be set aside and gradually recovered for the Bank, while the Bank transfers the case file to internal agencies for examination and pursuit of civil or criminal liability against the individual.

2/ Debts payable (if any)

 The Bank shall first offset the overdue debts and initial loan guarantees for enterprises and other entities.

V. THE BUDGET SYSTEM

1/ Receivables

Financial authorities shall review and inspect each item specifically if the unit has any exempted or subsidized items retained. If the remaining amount to be paid legally, the unit must find sources to pay it to the budget. If the unit causes losses, legal responsibility shall be pursued.

2/ Debts payable:

The State budget shall only have debts payable for the following items:
+ Borrowing for expenditures
+ Completed basic construction projects in the plan that have not yet received funding.
+ Subsidies provided according to regulations that have not yet been disbursed.
+ Overpayments to the budget.
In practice, localities and units have used other units' funds to construct facilities outside the plan, financial authorities must conduct specific inspections of each project, analyzing its nature and purpose, if:
Projects serving production and business using medium- or long-term bank loans for settlement, if not borrowed, the debt settlement authority shall transfer the right to use the asset to the creditor to offset the debt.
Infrastructure projects serving state management agencies, culture, education, health care, etc. (non-productive projects), using budget support for settlement (according to budget management levels and economic regulations), disciplinary actions shall be taken against those who decide to build outside the plan, appropriate measures shall be applied depending on the severity.

VI. IMPLEMENTATION MEASURES

1/ Resolve definitively all confirmed debts between operating enterprises.

2/ Transfer debts to localities, ministries, and sectors to handle remaining debts according to provinces and cities for local economies, and to ministries and sectors for central economies.

- After transferring debts, external province debts now become internal province debts for enterprises with external province receivables, provincial People's Committees shall collect debts from enterprises and individuals with debts payable, and submit the difference to the central government according to the ratio of collected debts payable.
- Each ministry and sector shall also transfer debts like provinces and cities, ministries and sectors must fully recover debts payable from units within their own sectors, and submit the difference to the central government according to the ratio of collected debts payable.
- For example, a locality or ministry with 100 billion in receivables and 150 billion in payable debts, actually recovering 90 billion, which is 60% of the payable debts, the locality or ministry retains 60 billion to repay enterprises and individuals, and submits 30 billion to the central government.
For provinces, cities, ministries, and sectors with differences, the central government will settle after collecting the differences from these entities, the remaining amount shall be submitted to the Prime Minister for support or further handling.

3/ Settlement shall be based on independent economic accounting units with legal personality before the law. Representatives of economic legal entities, such as directors, deputy directors, and chief accountants appointed by competent state authorities shall handle legal entity matters. When a debt is reflected in an economic contract, a letter of authorization from the representative of the economic legal entity authorizing the person to execute, clearly stating the position representing the economic legal entity, the settlement of the debt shall be handled by the economic legal entity. If the position is not clearly stated, the individual signing shall bear the responsibility for settlement.

If representatives of economic legal entities act improperly, they shall bear legal responsibility for the economic legal entity they manage. For example, Enterprise A, managed by Director B, owes Enterprise C 100 million VND, but B uses the money for personal purposes, Enterprise A shall hold B responsible and require him to repay the economic legal entity A, and Enterprise A shall repay Enterprise C.
||| The debt collection bodies at all levels have the right to summon individuals related to debts back to their agencies, units, and current officials to resolve issues caused by individuals.

||| 4\. For debts with payment guarantees. Individuals or economic organizations that stand as guarantors for loans or credit purchases must share responsibility with the unit in realizing assets from all sources, assigning responsibility to collectives, individuals, and the managing authorities of the indebted unit, and the remaining portion shall be assigned to the guarantor individual or unit to repay on behalf of the unit.

|||- Guarantees issued by banks with authority over foreign affairs must settle on behalf of the unit the difference not collected.
|||- If the guarantee is provided by local government or financial authorities and is deducted from the local budget, and if it occurs in a county without a county budget now, then the provincial or city level must take responsibility to resolve the issue.
||| Guarantees provided by mass organizations can be deducted from the regular expenditure (budget) of those mass organization budgets.

||| 5\. In cases where assets, materials, goods, various types of funds of enterprises that cease operations or dissolve are transferred, moved, or reallocated without complying with state regulations on asset management and capital handling for dissolved or ceased operations enterprises, these assets must be recovered for the enterprise to auction to generate settlement funds. The selling price is the highest bidding price in the auction. For entities or individuals purchasing immovable property of dissolved enterprises, land use rights will be transferred. Proceeds from the sale of immovable property of dissolved or ceased operation enterprises will be handled as follows:

|||- For enterprises granted land use rights without paying land use fees, the amount paid into the State budget for transferring land use rights must be according to the state-prescribed value, and the excess between the selling price and the transfer fee for land use rights will be retained to create settlement funds.
|||- For enterprises required to purchase land use rights or pay land use fees to the State (if applicable), the entire proceeds from the sale of immovable property (land and buildings) will be added to the settlement fund.

||| 6\. Debt collection bodies may seize assets of defaulting debtors with asset values of 200,000 or more, temporarily revoke business licenses (for collective and private economies), and require suspension of managerial duties for enterprise leaders who evade responsibility for debt resolution until completion. A comprehensive audit of debts will be conducted, cross-referencing with the Bankruptcy Law; if insolvency is found as defined by the Law, the body will propose the economic court to declare bankruptcy, which will be resolved according to the Bankruptcy Law (as per the Prime Minister's Directive and Circular Joint No. 05 TTLN).

||| 7\. Exchange rates for foreign currency payments; gold foreign currencies (except Rubles) are converted to USD (US dollars) based on the exchange rate declared at the time of debt declaration (April 30, 1991) at 7900 VND/USD.

||| For Rubles, they are settled according to the average price set by our Government (finance) at 4,000 VND/Ruble.
||| For materials sold to purchase export goods, the transaction formula will be used to calculate the payment value, for example: 1 Ure is exchanged for 2 or 2.5 kg of rice... the payment value is the current selling price of 2, 2.5 kg of rice for 1 kg of Ure...

||| The analysis of the causes of debt generation is carried out from the source to the end, to clearly assign responsibility to each stage and each entity.

||| First, economic measures must be taken; unresolved issues must be assigned responsibility based on the cause of debt generation, and recorded as appropriate reductions in debt according to each type of capital. For example: An economic unit uses the enterprise fund for joint ventures, but now cannot recover it, must deduct from the unit's fund...
||| This guidance applies to debt settlement and resolution according to Decision No. 277/CT dated July 29, 1992, and Directive No. 235/TTg dated May 11, 1994. During implementation, if there are difficulties, please report to the Central General Debt Collection Steering Committee or the Ministry of Finance and the Central Bank for appropriate amendments and supplements.