CIRCULAR

Guidelines for the financial regulations of state-owned single-member limited liability companies and political organizations, political-social organizations

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Pursuant to Decree No. 63/2001/NĐ-CP dated September 14, 2001 of the Government on the conversion of state-owned enterprises and enterprises of political organizations and political-social organizations into single-member limited liability companies, the Ministry of Finance issues guidelines for the financial regulations applicable to such single-member limited liability companies as follows:

I. GENERAL PROVISIONS:

1. These Circulars stipulate the financial regulations applicable to state-owned single-member limited liability companies and political organizations, political-social organizations (hereinafter referred to as Single-Member Limited Liability Companies).

2. The Single-Member Limited Liability Companies operate in accordance with the Law on Enterprises, guiding documents of the Law on Enterprises, Decree No. 63/2001/NĐ-CP dated September 14, 2001, these Circulars, and the Company's Articles of Association without contravening national regulations.

II. SPECIFIC PROVISIONS

A. MANAGEMENT OF CAPITAL AND ASSETS:

1. Registered Capital:

The charter capital of a single-member limited liability company is invested by the owner or the representative of the owner (hereinafter collectively referred to as the owner) and is specified in the Company's Articles of Association.

1.1 - The charter capital of a single-member limited liability company includes:

+ Capital of the owner actually recorded in the accounting books at the time of conversion from a state-owned enterprise or an enterprise of a political organization or political-social organization to a company, as prescribed in Decree No. 63/2001/NĐ-CP dated September 14, 2001 of the Government, or the owner's capital invested at the time of establishment of the company;

+ Post-tax profits retained to supplement the company's capital;

+ Additional capital contributed by the company's owner (if any);

For state-owned single-member limited liability companies, additional capital may also be supplemented from the following sources:

+ Amounts due to the state budget but retained by the state to supplement the company's capital (if any), as prescribed by the state;

+ Other types of capital with origins from the state budget and treated as state budget funds, as prescribed by the Ministry of Finance.

1.2. Adjustments to increase or decrease the charter capital of the company are decided by the owner.

The owner can only withdraw invested capital from the company in cases where there is an adjustment to the charter capital. In cases where there is no adjustment to the charter capital, the owner can only withdraw invested capital through the transfer of all or part of the shares to other organizations or individuals.

For the committed capital that the owner has pledged to supplement for a single-member limited liability company, the owner is responsible for investing the full amount according to the agreed timeframe. If, within two years, the owner fails to fully invest the committed capital on time, the owner must adjust the reduction of the company's charter capital.

2. Capital Mobilization:

In addition to the capital invested by the owner, the company is entitled to mobilize capital from organizations and individuals both domestically and internationally, in accordance with the law, to serve business operations. The mobilization of capital by the company shall not alter the form of ownership of the company.

The company is responsible for repaying the mobilized capital and interest (if any) to creditors as agreed.

The company owner decides and bears responsibility for loan contracts with a value equal to or greater than 50% of the total asset value recorded in the company's financial report at the most recent date, based on ensuring the economic efficiency of the borrowed capital. In special cases, the owner may delegate this decision-making authority to the Board of Directors or the Chairman of the company, provided that such delegation is recorded in the Company's Articles of Association.

If the owner decides on a proportion less than 50% of the total asset value recorded in the financial report, the specific proportion must be stipulated in the Company's Articles of Association. Remaining loan projects are decided by the Board of Directors or the Chairman of the company.

3. Fixed Assets:

3.1. The fixed assets of the company include tangible and intangible fixed assets.

Standards (regarding time and value) and original cost of fixed assets are determined in accordance with the regulations of the Ministry of Finance.

Interest on borrowed capital payable, exchange rate differences of foreign currency loans incurred before the fixed assets are put into operation, shall be accounted for as part of the original cost of the fixed assets.

3.2. The company may proactively choose investment plans for purchasing fixed assets, modernizing equipment technology, or changing the structure of fixed assets in line with business objectives to enhance the efficiency of asset utilization and capital usage.

- The company implements construction and procurement of fixed assets in accordance with the current Investment Management Regulations. Specifically, the owner of the company decides on investment projects for purchasing fixed assets with a value equal to or greater than 50% of the total asset value of the company recorded in the most recent financial report. If the owner decides on a proportion less than 50%, the specific proportion must be stipulated in the Company's Articles of Association.

Remaining investment projects are decided by the Board of Directors or the Chairman of the company.

- The General Director of the company is responsible for organizing and implementing the investment projects and is accountable to the Board of Directors and the Owner's Representative regarding the progress and quality of the projects.

- For fixed assets that are completed works or project components that have been put into use but not yet settled for their value, the provisional increase in the original cost of fixed assets is recorded based on provisional values for depreciation accrual. After settlement, if there are discrepancies between the provisional and final values, the original cost will be adjusted accordingly based on the approved final value.

3.3. Management and Utilization of Fixed Assets: Fixed assets are managed and utilized in accordance with state regulations and the Company's Articles of Association: The Board of Directors or the Chairman of the company decides the rate of depreciation of fixed assets within the framework prescribed by the Ministry of Finance to recover investment capital and maintain capital. The owner decides on rates of depreciation outside the framework prescribed by the Ministry of Finance.

The Articles of Association of the Company: The Board of Directors or the Chairman of the Company decides the depreciation rate of fixed assets within the framework prescribed by the Ministry of Finance to recover investment capital and maintain capital. The owner decides the depreciation rate outside the framework prescribed by the Ministry of Finance.

3.4. Liquidation and sale of fixed assets: The company shall proactively develop plans and submit them to the Board of Directors or the company chairman for approval to sell or liquidate fixed assets and long-term investments when they are no longer needed or have been damaged beyond use to recover capital. Sales and liquidations of assets must be conducted through auction methods. Proceeds from sales and liquidations shall be recorded as income to determine the company's business results.

For plans to liquidate or sell fixed assets with remaining values equal to or greater than 50% of the total asset value reported in the company's financial statements at the latest disclosure date, such decisions shall be made by the owner. In special cases, the owner may delegate this authority to the Board of Directors or the company chairman, who will bear responsibility for the outcomes of the liquidation or sale plans. Such delegation must be recorded in the Company Charter. If the owner decides on a ratio lower than 50%, the specific ratio must be stipulated in the Company Charter.

4. Inventory management:

- Current assets include inventory goods, which consist of purchased goods intended for sale that remain unsold, goods in transit, consigned goods for sale, raw materials, supplies, tools, equipment in inventory or in transit, work-in-progress products still in production, finished products not yet warehoused, finished goods in inventory or consigned for sale...

The cost of inventory goods is determined based on their original cost, including purchase price, processing costs, and other related costs such as transportation fees, handling charges, storage fees, insurance premiums, import duties (if applicable) to bring the inventory goods to their current location and condition. If the book value recorded in accounting records exceeds the recoverable amount, the enterprise must establish provisions for inventory write-downs according to regulations.

- Current assets also include labor tools whose value is allocated to production and business expenses of the company over one or two years depending on the nature and value of the assets. Once fully allocated but still in use, the company must maintain detailed records for management.

5. Accounts receivable and payable:

The company must maintain ledgers tracking each debtor and creditor account: total accounts receivable, amounts received, and outstanding balances; total accounts payable, amounts paid, and outstanding balances. Regularly analyze and urge the collection of receivables and payment of payables.

Before closing the books to prepare annual financial reports, the enterprise must conduct physical inventories and reconcile each receivable account with debtors or creditors. For receivables identified as difficult to collect or overdue for more than two years, provisions must be established according to current regulations. Unrecoverable receivables must be written off according to state regulations and compensated by provisions for doubtful receivables after deducting compensation from relevant individuals or entities; any shortfall shall be recorded as business expenses.

6. Management and utilization of capital:

6.1. The company has the right to manage and flexibly utilize its entire equity investment and other lawful sources of capital in business activities aimed at generating profits, while being responsible to the owner for preserving capital, using it effectively, and ensuring the rights of those related to the company, such as creditors and customers, as committed.

6.2. The company may use its capital and assets to invest outside the company in accordance with the law. The use of land use rights to contribute capital for external investments must comply with the Land Law and other relevant state regulations.

- External investments (including foreign investments) can be carried out in the following forms: joint venture contributions, establishment of limited liability companies or joint-stock companies; acquisition of investment shares from other investors or other investment forms as prescribed by law.

- The owner decides on external investment projects or transfers of investment capital outside the company with values equal to or greater than 50% of the total asset value reported in the company's financial statements at the latest disclosure date. If the owner decides on a ratio less than 50% of the total asset value, the specific ratio must be specified in the Company Charter.

Remaining external investment projects shall be decided by the Board of Directors or the Chairman of the company.

- Revaluation of assets for joint ventures, establishment of joint-stock companies, limited liability companies, etc., shall be carried out in accordance with current laws.

6.3. Annually, before closing the books to prepare the annual financial report, the company must organize actual inventory checks of fixed assets, inventory, cash, and receivables/payables to determine the actual figures at the time of preparing the Financial Report; identify excess or missing assets or losses; clarify the causes and responsibilities of relevant individuals or groups; and determine material compensation levels according to the law and the Company Charter. Compensation levels are decided by the General Director or the Director of the company. Excess asset values are recorded as other income. Missing or lost asset values, after deducting compensation from individuals, groups, or insurance organizations, are recorded as business expenses.

B. MANAGEMENT OF REVENUE, EXPENSES, AND COST OF GOODS SOLD.

The company has the right to decide on product and service selling prices and to determine incidental expenses incurred during business operations. Business revenue and operating expenses are determined as follows:

1. Revenue and Income of the Company:

1.1- Business revenue is the total amount of money already received or expected to be received from the sale of goods and provision of services during the period, including additional charges and fees (if any).

1.2- Financial activity revenue is the amount of money already received or expected to be received arising from the use of the company's assets by other parties, income generated from lending capital, interest on deposits, interest on bonds, bills, or income distributed from investment outside the enterprise such as share capital contributions, joint venture capital contributions... Investment income from outside the enterprise that has not yet been subject to corporate income tax must be recorded as pre-tax income.

1.3- Other income is the amount of money already received or expected to be received from the sale and liquidation of fixed assets, insurance compensation payments, customer penalties for breach of contract, debts that were previously payable but are now not payable...

1.4- The revenues and incomes mentioned above shall be determined in accordance with Standard No. 14 Revenue and Other Income issued together with Decision No. 149/2001/QĐ-BTC dated December 31, 2001 of the Minister of Finance on the issuance and publication of Vietnamese accounting standards (Batch 1) and guiding documents for implementing accounting standards.

2. Expenses of the Company include:

c) Banking service business expenses.

a. Production and business expenses incurred during the period include:

- Raw material, fuel, power, semi-finished product, and external service costs (based on actual consumption and actual cost), tool and equipment depreciation costs, repair costs for fixed assets;

- Depreciation costs of fixed assets as stipulated in Point 3 Clause A Part II of this Circular;

- Wages and salaries payable to employees as decided by the Board of Directors in accordance with guidelines of the Ministry of Labor, Invalids, and Social Affairs;

- Social insurance fees, trade union fees, and health insurance fees of employees in the enterprise as required by regulations;

- Transaction, brokerage, hospitality, marketing, advertising, and meeting costs based on actual expenses incurred. The Board of Directors or the Chairman of the company approves expense limits and must publicly announce them as a basis for management, operation, and supervision. The General Director or the Company Director decides on the expense levels and is responsible before the Board of Directors or the Chairman of the Company and the Owner for their decisions.

- Other monetary expenses such as severance pay for employees, training costs to enhance management skills and expertise, medical expenses, scientific research expenses, taxes like natural resource taxes, land taxes, land rental fees, female employee expenses, warranty reserve expenses for products or asset repairs, insurance purchase expenses...

- Actual loss value of assets (determined by subtracting related individual and collective compensation amounts, insurance agency compensation, recovered scrap value, and financial reserve compensation from the book value of the asset), uncollectible receivables.

- Value of inventory reduction reserves, investment securities reduction reserves, bad debt reserves, exchange rate differences of long-term foreign currency loans. The level of reserves extracted into expenses is based on the actual situation of the enterprise and state regulations.

b. Production and business expenses are classified as follows:

- Direct production and business expenses include:

+ Direct raw materials, materials, fuel, and power costs used in producing the enterprise's products; wages and allowances payable to direct production workers such as: wages, wage supplements, social insurance, health insurance, trade union fees.

+ Common production costs occurring in workshops such as: fixed asset depreciation costs, indirect raw material costs, wages, wage supplements, social insurance, health insurance, trade union fees of workshop staff.

- Management expenses include costs for the management and operation machinery related to the company's business activities such as:

+ Fixed asset depreciation costs, small tools, and equipment serving the management and operation of the company.

+ Wages, wage supplements, and social insurance, health insurance, trade union fees of the management and operation machinery of the company.

+ External service costs, other monetary costs such as reception, ceremonial transaction costs, severance pay for employees, scientific research costs, technological innovation research costs, award costs for initiatives and improvements, training and education costs, medical costs for enterprise employees, environmental protection costs, female employee costs, asset insurance purchase costs...

- Sales expenses include all costs related to selling products and services, including product warranty costs such as: wages payable to sales personnel, social insurance, health insurance, trade union fees of sales personnel, packaging and product packing costs...

- Inventory reduction reserves, bad debt reserves, exchange rate differences of long-term foreign currency loans.

- Actual loss value of assets, uncollectible receivables.

2.2. Financial activity expenses include: expenses related to investments outside the enterprise (joint ventures, joint operations, capital contributions to establish companies...), interest expenses on business borrowings, discount payment expenses, leasing expenses, investment security reduction reserves, bond and stock trading expenses, including investment losses if any.

2.3. Other expenses:

- Expenses for the sale and liquidation of fixed assets (including the remaining value of fixed assets when liquidated and sold);

- Expenses for recovering written-off receivables;

- Expenses for economic contract breaches;

- Expenses for collecting fines;

- Other extraordinary expenses.

2.4. The following items shall not be included in business expenses if they have alternative sources of funding or are unrelated to production and business activities:

- Costs for purchasing and constructing tangible and intangible fixed assets;

- Interest expenses on borrowings and foreign exchange rate differences arising before the project is put into use;

- Expenses unrelated to the company's business activities.

3. The cost of products and services consumed during the period (or the cost of goods sold and services provided during the period) includes:

- The production cost of products and services consumed during the period is calculated according to the weighted average method of the production cost of products during the period and the opening inventory production cost at the beginning of the period; or the production cost of products received before being dispatched; or the production cost of products received later but dispatched earlier.

The production cost of products during the period is determined by adding the cost of work-in-progress at the beginning of the period to the direct production costs incurred during the period, then subtracting the cost of work-in-progress at the end of the period.

- Business management expenses incurred during the period. In cases where the production cycle of products is long or the production has a special nature, depending on the specific circumstances of each enterprise, the Board of Directors or the Chairman of the Company decides to allocate business management expenses to products consumed during the period, inventory products, and work-in-progress at the end of the period based on the principle that the value of inventory products and work-in-progress at the end of the period does not exceed the recoverable value.

- Sales expenses incurred during the period.

- Inventory reduction reserves, bad debt reserves, exchange rate differences of long-term foreign currency loans.

- Actual loss value of assets, uncollectible receivables.

4. For joint venture cooperation contract activities, if the contract is in the form of a product-sharing agreement, the company must separately account for revenue and production costs corresponding to the quantity of shared products. If the contract is in the form of a profit-sharing agreement, the profit derived from the joint venture cooperation contract is accounted for as financial income of the enterprise.

5. The realized profit of the company is determined according to the financial costs stipulated in this Circular. Enterprise income serving as the basis for calculating corporate income tax is based on the costs prescribed in the Corporate Income Tax Law and related guiding documents issued by the Ministry of Finance and other relevant ministries and sectors.

C. PROFIT AND USE OF PROFIT OF THE COMPANY:

1. The total profit of the company includes operating profit, financial profit, and other profits.

The total realized profit of the company is the difference between operating revenue, financial revenue, and other income and the cost of products consumed, financial expenses, and other expenses.

2. After paying corporate income tax according to the Corporate Income Tax Law, and after offsetting previous years' losses that cannot be deducted from pre-tax profit, the owner decides to use the realized profit of the company in the following manner:

a. Allocate 10% to establish a financial reserve fund. When the balance of this fund reaches 25% of the registered capital, no further allocations are required.

b. Allocate 5% to establish an unemployment assistance fund. When the balance of this fund equals six months' salary, no further allocations are required.

c. After deducting amounts a and b, the remaining profit is used for:

+ Allocating up to 10% to establish a reward fund;

+ Allocating up to 10% to establish a welfare fund.

+ Allocating up to 5% to establish a bonus fund for the Management Board. The allocation amount shall not exceed 100 million VND under the condition that the pre-tax profit margin on equity of the company must be equal to or greater than the planned profit margin; in case the pre-tax profit margin is lower than planned, the corresponding reduction must be made.

+ Allocating at least 30% to supplement the company's capital.

The remaining owner decides to continue supplementing capital for the company or reallocating investment to another business or submitting it to the State Budget.

3. The financial reserve fund is used for:

- Compensate for losses and damages to assets occurring during the business process after deducting compensation from related organizations, individuals, and insurance organizations.

- Compensate for the company's loss according to the decision of the company's owner.

4. The unemployment assistance fund is used to provide assistance to employees who have been temporarily unemployed due to changes in their jobs as prescribed by the State; to train employees in new skills or techniques due to technological changes or job transfers; and to train female employees in alternative professions.

5. The company's award fund is used for:

Year-end or regular awards for employees within the company, including members of the Board of Directors, General Director or Manager of the company, and external individuals who contribute to the company's operations. The Board of Directors or Chairman of the company approves the use of the award fund based on proposals from the General Director or Manager of the company. The General Director or Manager of the company determines specific award amounts for employees and is responsible to the Board of Directors or Chairman of the company for these decisions.

6. The welfare fund is used for:

- Investing in or repairing welfare facilities of the company or contributing capital to jointly build welfare facilities with units within the Group, Ministry, Sector, People's Committee, or other units according to the terms of the contract.

- Funding sports, cultural, and public welfare activities for the collective of employees in the company.

- Contributing to local government welfare funds or funding public welfare activities in the location where the company is headquartered (including charitable work and building houses of affection).

- Providing regular and emergency assistance to employees in the company, including retired, disabled, or laid-off employees.

7. The management and operation bonus fund is used for:

Awarding the Board of Directors or Chairman of the Company, General Director, or Manager of the company. The owner decides the bonus amount for the Board of Directors or Chairman of the Company; the Board of Directors decides the bonus amount for the General Director or Manager of the company based on the company's operational results.

8. The use of the aforementioned funds must be conducted openly in accordance with the regulations of grassroots democracy and state provisions.

When the company has not fully settled its debts and other financial obligations due, the company shall not establish an award fund, welfare fund, or management and operation bonus fund, and the owner shall not withdraw profits from the company. In this case, anyone who decides to establish other funds or distribute profits shall be responsible for recovering them; if they cannot be recovered, compensation shall be provided.

D. FINANCIAL PLANNING, ACCOUNTING, AND AUDITING

1. The company shall develop investment plans, long-term financial plans, and annual plans consistent with the company's business plan according to the model attached to this Circular.

2. Annual investment construction plans shall be established in accordance with the current investment management regulations.

The Board of Directors or Chairman of the company decides on the company's financial plan and reports to the owner as a basis for monitoring and evaluating the management and operation results of the Board of Directors (or Chairman of the company) and the General Director (or Manager).

The pre-tax profit margin on equity is used to determine the amount to be allocated to the General Director's fund from post-tax profits as stipulated in Clause 2, Part II of this Circular.

4. The company must organize and implement internal auditing in accordance with the regulations of the Ministry of Finance to serve the management of the General Director or Manager and the supervision and inspection of the Board of Directors.

5. At the end of each accounting period (quarter, year), the company must prepare Financial Statements in accordance with the financial regulations set forth in this Circular, other relevant financial accounting circulars, and the Company Charter.

The Board of Directors or Chairman of the company is responsible for reviewing the company's Financial Statements and ensuring the accuracy of the reviewed figures. After review, the company submits the Financial Statements to relevant authorities in accordance with current regulations of the Ministry of Finance and seeks approval from the owner.

The owner must approve the company's Financial Statements within fifteen days of receiving them. The approval document must be sent to the enterprise and the entity receiving the Financial Statements according to current regulations.

6. The company must conduct financial transparency in accordance with grassroots democratic regulations and state provisions.

III. IMPLEMENTATION PROVISIONS

1. Ministries, agencies equivalent to ministries, government agencies, provincial/municipal people's committees directly under the central government, finance and price departments, tax bureaus of provinces/cities directly under the central government, state-owned corporations, and limited liability companies with a single member are responsible for implementing this Circular in accordance with its guidelines.

2. This Circular takes effect fifteen days after its signing date. During implementation, any issues encountered should be promptly reported to the Ministry of Finance for guidance on resolution.