CIRCULAR

Guidelines for implementing Directive No. 235/TTG dated May 11, 1994 of the Prime Minister on comprehensive settlement and handling of debts in Phase II

Implementing Directive No. 235/TTg dated May 11, 1994 of the Prime Minister on accelerating comprehensive settlement and handling of debts in Phase II. The Central Committee for Debt Settlement guides the following specific points:

debt phase II

I. SETTLEMENT OF DEBTS FOR ENTERPRISES STILL IN OPERATION (TYPE 10) FOR DEBTS ALREADY ACKNOWLEDGED:

1. Settlement of debts between state enterprises still in operation that have been acknowledged, the central level will implement nationwide debt offsetting as in Phase I (offsetting each enterprise, summarized by province), thus some enterprises will still be able to collect, while others will still need to pay, 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 remaining unused in 1994, lawful funds such as production and business development funds, reserve funds, precautionary funds... liquidation of unused assets and materials, other monetary funds to settle debts. If insufficient, they can 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 payment vouchers.

b) State enterprises with a surplus must consider whether the enterprise still owes other entities, if so, settlement shall be made for:

- Debts owed to enterprises that have ceased operations, dissolved, collective economic units, private individuals, credit funds, and living economy enterprises.

- Foreign debt (if any).

- Bank debt for overdue principal already declared and confirmed (including revolving fund loans in Phase I).

- Government budget debt.

Any remaining surplus shall be transferred to the enterprise's account.

2. Settlement of debts between state enterprises still in operation and state enterprises that have ceased operations and dissolved:

- State enterprises still in operation with a surplus shall be included in the total amount of debts that the dissolved enterprises must repay, settled according to the proportion of funds collected from the dissolved enterprise, any uncollectible surplus 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 shall be pursued, and material compensation shall be provided to the enterprise.

- State enterprises still in operation with a deficit must find all sources of capital within the enterprise to settle the debt, if insufficient, they can borrow from the State's revolving fund to settle the debt.

3. Settlement of debts between enterprises still in operation and non-state enterprises, living economy enterprises, and private individuals:

- State enterprises still in operation with outstanding debts must settle all debts fairly, also utilizing the sources of capital as stipulated in points 1 and 2 above.

- Enterprises with receivables, non-state enterprises, private individuals, and living economy enterprises must find all sources of capital to settle debts owed by enterprises still in operation, if the enterprise fails to settle the debt, the debt settlement committees at various 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 intentionally not settled, the case file shall be transferred to the internal affairs agency to handle according to the Civil Procedure Code or Criminal Law.

In cases where debts remain unsettled in 1994, enterprises may record them in pending accounts. All unsettled debts shall be transferred to the internal affairs agency and relevant departments after the dissolution of the debt settlement committee for continued recovery and legal action against violators.

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

- First, conduct a full inventory of assets, land, materials, goods, cash, and debts up to the time of settlement.

Compare with the state assets assigned to the enterprise and the period of the dissolution decision, if there is a shortage without a legitimate reason, the liquidation committee must compensate, and simultaneously transfer to the internal affairs agency for investigation, considering the extent of violation and handling according to the provisions of the laws. 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 enterprises still in operation, collective economic units, private individuals, living economy enterprises, and organizations with debts, and those who have used the assets of the dissolved enterprise, the proceeds shall be transferred to the debt settlement committee's account to settle debts for creditors.

- Organize the sale of assets and materials of the dissolved enterprise according to Circular No. 05/TTLN dated August 21, 1992, the entire value of the sale shall be included in the source of funds to settle debts for the specified parties according to the order of settlement prescribed in Decision No. 330/HĐBT dated October 23, 1991 of the Council of Ministers (now the Government).

- Any remaining amount due to subjective reasons causing losses shall be transferred to the internal affairs agency for investigation and recovery and submission to the State Budget.

- For merged enterprises, the receiving enterprise shall be responsible for settling the debts of the merged enterprise, such as third-level commerce merging with second-level commerce. Initially, offset debts within the merged enterprises, any remaining amount shall be integrated into settlement according to 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.

+ State enterprises still in operation must repay the full amount of overdue debts acknowledged, for debts not yet acknowledged, the creditor shall transfer the case file to the legal authority for review.

+ Dissolved enterprises shall be repaid according to the procedures and ratios specified above.

+ Enterprise ceases operation, dissolution shall be paid according to the procedure and ratio specified in the aforementioned point.

- 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, 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 repaid to the Bank as principal.

The remaining amount shall be reviewed to determine whether the borrowed funds were used for their intended purpose. If not, adjustments shall be made accordingly, the repayment agreement shall be revised, and the unit shall repay according to the new agreement, with the principal and interest calculated from the date of adjustment: working capital loans, used for basic construction, the unit must collateralize with the constructed asset to the Bank, converted into medium-term or long-term investment loans for basic construction.

- 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 entities, they must find all sources to pay both principal and interest. If payment is delayed, the assets of the entity or individual shall be auctioned to repay the debt.

Any remaining amount 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 written off and gradually recovered by the Bank, while the Bank transfers the 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 payments to enterprises and other entities against overdue debts and phase I loan guarantees.

V/ BUDGET SYSTEM

1/ Receivables

Financial authorities shall examine and verify each item specifically if units have any exempted or subsidized items retained for them. If the remaining amount to be paid is legitimate, 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:

+ Loans 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.

+ Overpaid budget amounts.

In practice, localities and units have used other units' funds to build facilities outside the plan, financial authorities must conduct specific inspections of each project, clearly analyzing the nature and purpose of the project.

Projects serving production and business using medium-term 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 (non-production projects), using budget support funds for settlement (according to budget and economic management levels), disciplinary actions shall be taken against those who decide to construct outside the plan, appropriate measures shall be taken depending on the severity.

VI/ IMPLEMENTATION MEASURES

1/ Resolve definitively the 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, debts payable outside the province now become debts payable within the province for enterprises with receivables outside the province, receivables of the Bank and provincial People's Committee budgets shall collect debts from enterprises and individuals with debts payable locally, and submit the difference to the Central Government according to the ratio of the debt payable collected.

- Each ministry and sector also receives debt transfers like provinces and cities, ministries and sectors must fully recover debts payable from units within their own ministry or sector, and submit the difference to the Central Government according to the ratio of the debt payable collected.

- For example, a locality or ministry has a receivable of 100 billion VND and a payable of 150 billion VND, actually recovering 90 billion VND, which is 60% of the payable, the locality or ministry can retain 60 billion VND for repayment and submit 30 billion VND to the Central Government.

For localities, 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 persons such as General Directors, Deputy General Directors, and Chief Accountants appointed by authorized state agencies shall resolve legal person economic matters. When a debt is reflected in an economic contract, a letter of authorization from the representative of the economic legal person authorizing the person to execute, clearly stating the position representing the economic legal person, the resolution of the debt shall be carried out by the economic legal person. If the position is not clearly stated, the individual signing shall bear the responsibility for settlement.

If representatives of economic legal persons act improperly, they shall bear legal responsibility for the economic legal person they manage. For example, Enterprise A, managed by Mr. B, owes Enterprise C 100 million VND, but Mr. B misuses the money for personal or enterprise purposes, Enterprise A shall hold Mr. B responsible and require him to repay Enterprise A, and Enterprise A shall repay Enterprise C.

Debt settlement boards at all levels have the authority to summon relevant parties involved in debts back to the agency or unit along with the incumbent to resolve issues caused by individuals.

4. For debts with payment guarantees. Individuals or economic organizations standing as guarantors for loans, credit purchases must share responsibility with the entity in realizing the collection of all sources of funds, holding the collective, individual, or management agency of the indebted unit accountable, and the remaining portion shall be held responsible by the guarantor individual or unit to repay on behalf of the unit.

- Guarantees issued by authorized banks for foreign transactions, banking agencies must settle the difference that cannot be collected on behalf of the unit.

- If the guarantee is provided by local authorities or financial agencies and deducted from the local budget, and if it occurs at the county level where there is no longer a county budget, then the provincial or city level must take responsibility for resolving the outstanding issues.

Guarantees provided by mass organizations shall be deducted from the regular expenditure (budget) of those mass organization budgets.

5. In cases where assets, materials, goods, various types of funds from enterprises that have ceased operations or been dissolved are transferred, moved, or reallocated without complying with state regulations on asset and capital management, or without complying with regulations on handling dissolved or inactive enterprises, such assets shall be recovered for the enterprise to auction and generate funds for settlement. The selling price is the highest bidding price in the auction market. Agencies and individuals purchasing immovable property from dissolved enterprises shall transfer land use rights. Proceeds from the sale of immovable property from dissolved or inactive enterprises shall be handled as follows:

- For enterprises granted land use rights without paying land use fees, the amount received from transferring land use rights must be paid into the budget according to the state-prescribed value, and the difference between the selling price and the transfer fee shall be retained to create a source of funds for settlement.

- 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) shall be added to the settlement fund.

6. Debt settlement boards may seize assets of debtors who are in arrears 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 evading responsibility for debt resolution until completion. A comprehensive audit of all debts shall be conducted, cross-referenced with the Bankruptcy Law, and if insolvency is found as defined by the Law, the court shall declare bankruptcy, which shall be resolved according to the Bankruptcy Law (as directed by the Prime Minister's Directive and stipulated in Circular Joint No. 05/TTLN).

7. Exchange rates for foreign currency payments; gold foreign currencies (excluding Rubles) shall be converted to USD (US dollars) at an exchange rate of 7,900 VND/USD based on the date of debt declaration (April 30, 1991).

For Rubles, they shall be settled at the average government price (finance) of 4,000 VND/Ruble.

For materials sold to purchase export goods, the transaction formula shall be used to calculate the payment value, for example: 1 Urea exchanges for 2 or 2.5 kg of rice... the payment value is the current selling price of 2 or 2.5 kg of rice for 1 kg of Urea...

8. Analysis of the causes of debt generation shall be carried out from the initial stage to the final stage to clearly define the responsibility of each stage and each party.

First, economic measures shall be taken; unresolved issues shall be addressed based on the causes of debt generation, attributing responsibility to collectives or individuals, and reducing debt accordingly for each type of capital. For example: An economic unit uses the enterprise fund for joint ventures, now unable to recover, 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 Settlement Steering Committee or the Ministry of Finance and the State Bank for appropriate amendments and supplements.