DECREE NO. 59/2011/ND-CP ON TRANSFORMING STATE CAPITAL ENTERPRISES INTO JOINT STOCK COMPANIES

DECREE

Regarding the conversion of state-owned enterprises with 100% state capital into joint-stock companies

_______________________

THE GOVERNMENT

Pursuant to the Law on Organization of the Government dated December 25, 2001;

Pursuant to the Enterprise Law dated November 29, 2005;

Pursuant to the Securities Law dated June 29, 2006;

Considering the proposal of the Minister of Finance,

DECREE

PART I

GENERAL PROVISIONS

Article 1. Objectives and requirements for converting state-owned enterprises with 100% state capital into joint-stock companies (hereinafter referred to as privatization)

1. Transforming enterprises where the State does not need to retain 100% capital into enterprises with multiple owners; mobilizing domestic and foreign investors' capital to enhance financial capacity, modernize technology, and improve management methods to increase efficiency and competitiveness in the economy.

2. Ensuring harmony of interests between the State, enterprises, investors, and workers within the enterprise.

3. Implement transparency according to market principles; address the issue of closed shareholding reform within enterprises; link with the development of the capital market and securities market.

Article 2. Objects of privatization

1. Single-member limited liability companies held by the State with 100% charter capital that are parent companies of Economic Groups; State-owned Corporations (including State Commercial Banks).

2. Single-member limited liability companies held by the State with 100% charter capital that belong to Ministries; agencies at the level of Ministries; agencies under the Government; People's Committees of provinces and centrally-administered cities.

3. State-owned enterprises with 100% state capital that have not yet been converted into single-member limited liability companies.

Article 3. Conditions for privatization

1. Enterprises specified in Article 2 of this Decree shall implement privatization when ensuring the following two conditions:

a) Not falling within the category of enterprises where the State needs to hold 100% charter capital. The list of enterprises where the State needs to hold 100% charter capital is decided by the Prime Minister during each period.

b) Remaining state capital after financial treatment and revaluation of enterprise value.

2. In cases where, after financial treatment and reassessment of the enterprise value according to Chapters II and III of this Decree, the actual enterprise value is lower than the liabilities, the competent authority deciding the privatization plan shall direct the enterprise to cooperate with Vietnam Asset Management Company and the creditors of the enterprise to develop a restructuring plan for the enterprise; if the restructuring plan is not feasible and effective, other forms of transformation shall be implemented according to the provisions of the law.

Article 4. Forms of privatization

1. Maintaining the existing state capital in the enterprise and issuing additional shares to increase the charter capital.

2. Selling part of the existing state capital in the enterprise or combining selling part of the state capital with issuing additional shares to increase the charter capital.

3. Selling all of the existing state capital in the enterprise or combining selling all of the state capital with issuing additional shares to increase the charter capital.

Article 5. Methods of initial public offering

1. The initial public offering shall be carried out according to the open auction, underwriting, and direct negotiation methods as stipulated in Chapter IV of this Decree.

2. Depending on the object and conditions for purchasing initial shares, the authority deciding privatization shall determine the appropriate method of selling shares.

3. The Ministry of Finance shall provide detailed guidance on the methods of initial public offering according to the provisions of this Decree.

Article 6. Objects and conditions for purchasing shares

1. Domestic investors:

a) Domestic investors include Vietnamese individuals and organizations established and operating under Vietnamese law (except for cases prescribed in point a, Clause 2, Article 2 of this Decree).

b) Domestic investors are entitled to purchase shares of privatized enterprises without any quantity limit, except for cases prescribed in Clause 4 and Clause 5 of this Article.

2. Foreign Investors:

a) Foreign investors include organizations and individuals from abroad as defined in the Regulations on Capital Contribution and Share Purchase by Foreign Investors in Vietnamese Enterprises decided by the Prime Minister during each period.

b) Foreign investors may purchase shares of privatized enterprises according to the provisions of this Decree and related legal regulations.

c) Foreign investors wishing to purchase shares must open a deposit account at a service provider organization according to Vietnamese laws on foreign exchange.

3. Strategic investors:

a) Strategic investors are domestic and foreign investors with financial capability and a written commitment from authorized persons to maintain long-term interests with the enterprise and support the enterprise post-privatization in areas such as: transferring new technologies; training human resources; enhancing financial capacity; corporate governance; supplying raw materials; developing product consumption markets.

b) Based on the scale of charter capital, industry characteristics, and business expansion requirements, the Steering Committee for Enterprise Privatization shall report to the competent authority deciding the privatization plan on the sale of initial shares to strategic investors and criteria for selecting strategic investors.

For large-scale enterprises with state capital over 500 billion VND operating in special sectors (such as: insurance, banking, postal telecommunications, aviation, coal mining, oil and gas, rare mineral mining), and parent companies of Economic Groups and State-owned Corporations, if it is necessary to select strategic investors beforehand, the authority deciding the privatization plan shall report to the Prime Minister for approval on criteria for selecting strategic investors, methods of sale, and the number of shares sold to strategic investors.

c) The maximum number of strategic investors purchasing shares in each privatized enterprise is three. Strategic investors are not allowed to transfer the purchased shares within a minimum period of five years from the date the joint-stock company is first registered to operate according to the Law on Enterprises. In exceptional cases requiring the transfer of these shares before the deadline, approval from the General Meeting of Shareholders is required.

d) If strategic investors fail to fulfill their commitments or violate the transfer restrictions as prescribed, they must compensate for all losses incurred according to the terms of the commitment contract and current laws.

đ) The price for selling shares to strategic investors is determined based on the principle:

- In the case of selling shares to strategic investors after a public auction, the sale price shall be directly negotiated between the Board of Directors for Corporate Shareholding and the strategic investors but shall not be lower than the lowest successful bid price from the public auction.

- In the case of direct negotiation or auction among strategic investors who meet the criteria and have registered to purchase before the public auction, the price shall be the agreed price between the parties (in the case of negotiation) or the successful bid price (in the case of auction), but shall not be lower than the initial bidding price approved by the competent authority deciding the corporate shareholding plan.

e) Strategic investors must immediately deposit ten percent of the value of the shares they have registered to purchase at the initial bidding price approved by the competent authority deciding the corporate shareholding plan. If they abandon their right to purchase, they will not receive back the deposit.

4. In cases where the enterprise being corporatized simultaneously lists on the Stock Exchange, the competent authority deciding the corporatization plan shall specify the maximum and minimum quantities of shares to be purchased publicly in the initial share issuance plan so that the enterprise after corporatization meets the listing conditions. The regulations on the maximum and minimum purchase amounts in the initial share issuance plan shall not discriminate against investors from all economic sectors.

5. Members of the Board of Directors for Corporate Shareholding of the enterprise (excluding members representing the enterprise); financial intermediaries; subsidiaries, associated companies within the same Group, Corporation, and parent-child company conglomerate; individuals performing advisory, valuation, auditing, and share auctioning services for the corporatized enterprise shall not participate in purchasing the initial issuance shares of that enterprise.

Article 7. Currency for Purchasing Shares

Domestic and foreign investors shall purchase shares of enterprises in Vietnamese dong.

Article 8. Costs of Implementing Corporate Shareholding

Corporate shareholding costs shall be deducted from state capital or revenue from corporate shareholding at the enterprise. The Ministry of Finance shall provide guidance on the content and level of corporate shareholding costs.

Article 9. Shares and Stocks

1. The authorized capital is divided into equal parts called shares. The face value of one (01) share is ten thousand Vietnamese dong (10,000 dong).

2. A stock certificate is issued by a joint-stock company or recorded in the books to confirm the ownership of one or more shares by shareholders in that company. Stocks may be registered or unregistered, but must contain the main contents prescribed in Article 85 of the Enterprise Law.

Article 10. Principles of Succession of Rights and Obligations of Joint-Stock Companies Converted from Enterprises with 100% State Capital

1. The corporatized enterprise has the responsibility to arrange and utilize the maximum number of employees at the time of the decision to corporatize and resolve the employment status of employees who stop working according to current regulations.

The joint-stock company has the obligation to succeed all responsibilities towards employees transferred from the corporatized enterprise; has the right to select and arrange the use of labor and cooperate with relevant agencies to resolve employee benefits according to the law.

2. The corporatized enterprise has the responsibility to coordinate with relevant agencies to inspect and handle financial issues to determine the value of state capital at the time of officially becoming a joint-stock company.

3. The joint-stock company may use all assets and funds received upon transfer to organize production and business activities; succeed all rights, obligations, and responsibilities of the corporatized enterprise that has been transferred and has other rights and obligations as prescribed by law.

Any obligations and responsibilities of the corporatized enterprise determined additionally after being settled and transferred to the joint-stock company by the competent authority do not belong to the joint-stock company's responsibility. In cases where new tax arrears or penalties for violations of the law occur after the transfer to the joint-stock company during the period when the enterprise was 100% state-owned, it is necessary to clarify individual and collective responsibility to implement compensation, payment of fines, and disciplinary action according to the law.

Article 11. Public disclosure and transparency of information and listing on the stock market

1. Joint-stock enterprises undergoing shareholding transformation must publicly disclose and ensure transparency regarding enterprise information, shareholding transformation plans, land management and usage, and labor conditions in accordance with the provisions of the Enterprise Law and other relevant laws.

2. Joint-stock enterprises that meet the financial conditions for listing as stipulated by securities laws must develop plans and timelines for listing on the Stock Exchange in compliance with legal requirements.

The competent authority deciding the shareholding transformation plan shall include simultaneous shareholding transformation and listing on the stock market within the shareholding transformation plan to inform investors prior to the initial public offering of shares.

Article 12. Consulting for shareholding transformation

1. Joint-stock enterprises undergoing shareholding transformation may hire consulting organizations to determine enterprise value; develop shareholding transformation plans and initial share sales.

2. The competent authority deciding the shareholding transformation plan shall select consulting organizations for shareholding transformation in accordance with legal provisions and guidelines issued by the Ministry of Finance.

3. Costs for hiring shareholding transformation consultants shall be included in the shareholding transformation expenses.

Chapter II

FINANCIAL HANDLING DURING SHAREHOLDING REFORM

Article 13. Inventory, classification of assets, and resolution of financial discrepancies

1. Upon receiving the decision to implement shareholding transformation from the competent authority, the enterprise shall be responsible for organizing the inventory, classification of assets, sources of capital, and funds under its management and use at the time of determining enterprise value.

2. Joint-stock enterprises shall be responsible for conducting annual financial statement audits in accordance with state regulations. In cases where the time point for determining enterprise value does not coincide with the end of the fiscal year, joint-stock enterprises shall be responsible for preparing financial statements at the time of determining enterprise value.

3. Prior to determining enterprise value and settling accounts at the time the enterprise first obtains a business registration certificate under the Enterprise Law, the joint-stock enterprise must submit a written request to the directly managing tax authority to conduct inspections and settle tax payments. Within thirty working days of receiving the enterprise's request, the tax authority must prioritize inspections and settlements. If the tax authority fails to conduct inspections and settlements beyond this period, the joint-stock enterprise shall base its settlement and determination of enterprise value on declared figures. Any losses arising from non-conducted tax inspections and settlements after officially becoming a joint-stock company shall be handled according to Clause 3 of Article 52 of this Decree.

4. Based on the results of inventory, annual financial statement audits, and tax settlement, joint-stock enterprises shall cooperate with relevant authorities to proactively resolve financial discrepancies before determining the value of the shareholding transformation in accordance with their authority and legal provisions.

In cases where there are obstacles or exceedances of authority, joint-stock enterprises must promptly report to the competent authority for review and resolution.

In cases where reports have been made to the competent authorities but have not been resolved, these discrepancies must be clearly recorded in the Minutes of Determining the Value of the Shareholding Transformation Enterprise to serve as grounds for continued resolution during the phase from determining enterprise value to the official transition to a joint-stock company.

Article 14. Handling leased, borrowed, joint venture, associated assets, unused assets, and assets invested with Reward Fund and Welfare Fund

1. For assets that the shareholding enterprise leases, borrows, receives joint venture contributions, associated contributions, and other assets not belonging to the enterprise, these shall not be included in the enterprise's value for shareholding conversion. Before transferring to a joint-stock company, the shareholding enterprise must reach an agreement with the asset owner to have the joint-stock company inherit previously signed contracts or terminate the contracts.

2. For unused, stagnant, and pending liquidation assets, the shareholding enterprise has the responsibility to proactively handle them according to the current financial management regime (liquidation, sale). In cases where the enterprise has not yet handled such assets by the time the enterprise's value is determined, except for the cases stipulated in Clause 3 of this Article, the competent authority will decide to exclude these assets from the enterprise's value and transfer them to the following agencies:

a) Vietnam Asset Management Company to handle according to the laws applicable to enterprises specified in Article 2 of this Decree.

b) The parent company of State Economic Groups, State-owned Corporations, and Parent Companies in Holding Companies to handle according to the regulations applicable to limited liability companies held 100% by these enterprises.

3. Assets that are not allowed to be excluded include:

a) Assets such as houses, structures (including underground works, internal roads, fences, internal courtyards), which the enterprise directly or indirectly uses; machinery and equipment, transportation means newly invested and put into use within five years or having a remaining book value equal to or more than 50% of the original cost of the asset. The enterprise must continue to manage, monitor, and handle these assets according to the current financial management regime until the official transfer to a joint-stock company.

b) Assets that must be scrapped, such as chemicals, harmful substances, expired pesticides, the enterprise is responsible for coordinating with relevant authorities to handle and scrap them according to the current financial and environmental management regimes before the first registration of business operations under the Enterprise Law. After determining the cause and responsibility, compensation according to the current financial management regime, the loss part will be processed into the business results according to the regulations.

c) For unfinished construction projects suspended by the competent authority's decision, the shareholding enterprise is responsible for continuing to inherit, monitor, and handle them according to the law. Specifically, for project costs not approved by the competent authority and not forming physical assets, such as feasibility study costs, survey, and design costs, the enterprise must determine the cause and responsibility for compensation according to the current financial management regime, the loss part will be processed into the business results according to the regulations.

4. For welfare facilities: kindergartens, clinics, and other welfare assets invested with the Reward Fund and Welfare Fund, they will be transferred to the trade union organization at the joint-stock company for management and use to serve the collective workforce in the joint-stock company.

For housing for cadres, employees invested with the Welfare Fund of the enterprise, including housing invested with state budget funds, will be transferred to the local land management agency for management.

5. For production and business assets invested with the Reward Fund and Welfare Fund of the shareholding enterprise, these will be included in the enterprise's value and the joint-stock company will continue to use them in production and business. The corresponding capital equivalent to the value of these assets, the shareholding enterprise is responsible for repaying the Reward Fund and Welfare Fund to distribute to workers currently working at the enterprise at the time of determining the enterprise's value based on years of service at the shareholding enterprise.

6. For state commercial banks, the inventory, evaluation, and classification of monetary capital, financial lease assets, and receivables/payables (receivables, payables) will be carried out according to specific guidelines issued by the Ministry of Finance.

Article 15. Accounts Receivable Debts

1. The enterprise undergoing shareholding conversion shall be responsible for reconciling and confirming all accounts receivable debts (including both overdue and non-overdue debts), and shall recover overdue debts before determining the value of the shareholding conversion enterprise. If there are still difficult-to-collect accounts receivable debts at the time of determining the enterprise's value, they shall be handled according to the current State regulations on handling outstanding debts. Debts without sufficient legal documentation proving that the debtor owes money or lacks the ability to repay, as stipulated, shall not be excluded from the enterprise's value; the enterprise must clarify the reasons and handle them according to the following principles:

a) Determine the responsibility for compensating losses of groups and individuals related to unidentifiable accounts receivable debts, with the remaining loss being handled according to the current State regulations on handling outstanding debts.

b) Complete the documentation and continue monitoring to recover debts that cannot be proven to be unrecoverable.

2. The enterprise undergoing shareholding conversion shall be responsible for transferring non-value-included debts (including difficult-to-collect debts already resolved using reserve funds within the five years immediately preceding the shareholding conversion) along with complete documentation and relevant materials to the agency specified in Clause 2, Article 14 of this Decree.

3. For advance payments made to suppliers for goods and services such as rent for premises, land, purchase of goods, and labor costs, these amounts shall be reconciled against contracts and quantities of supplied goods and services to be included in the value of the shareholding conversion enterprise.

Article 16. Accounts Payable Debts

1. Debts to organizations and individuals:

The enterprise undergoing shareholding conversion shall be responsible for reconciling and confirming all accounts payable debts (including both overdue and non-overdue debts) before determining the value of the shareholding conversion enterprise. The enterprise undergoing shareholding conversion must mobilize legitimate sources of capital to pay off overdue debts before determining the enterprise's value, shareholding conversion, or reach a written agreement with creditors to resolve or convert the debt into share capital contributions.

The conversion of accounts payable debts into share capital contributions at the time of determining the enterprise's value shall be carried out based on the successful auction results of the creditor or not lower than the lowest successful public auction price (in the case of negotiated sale). In cases where strategic investors are sold shares prior to a public auction, the conversion of debt into share capital contributions shall be implemented based on the agreed result but not lower than the initial price approved by the authority with jurisdiction over the privatization plan.

2. Tax debts and other national budget payments: the enterprise undergoing shareholding conversion shall be responsible for paying taxes and national budget debts before the conversion; if the enterprise undergoing shareholding conversion has not fulfilled its tax payment obligations, the joint-stock company shall assume full responsibility for all transferred debts.

3. During the shareholding conversion process, if the enterprise undergoing shareholding conversion encounters difficulties in repaying overdue loans from financial institutions (including the Vietnam Development Bank) due to business losses, the debts shall be handled according to the current State regulations on handling outstanding debts.

Article 17. Provisions for reserves, losses, or profits

1. Reserves for inventory write-downs, financial investment losses, bad debts, and product warranties; foreign exchange differences shall be used to offset losses as prescribed, with the remainder included in the state capital value at the joint-stock enterprise.

2. Risk reserve funds of banks and business reserves of insurance companies, after offsetting losses as prescribed, shall be retained by the joint-stock enterprise but must be included in the state capital value at the joint-stock enterprise.

3. Financial reserve funds to cover losses (if any), to offset losses on assets, uncollectible debts after individual liability compensation has been processed (if any), with the remainder included in the state capital value at the joint-stock enterprise.

4. Profits generated to cover previous year's losses (if any) according to the Law on Corporate Income Tax, to offset losses on unused assets awaiting liquidation, asset write-downs, uncollectible debts, with the remainder distributed according to current regulations before determining the enterprise value.

5. Losses after processing according to the above provisions up to the time of determining the enterprise value, if there are still outstanding debts from credit organizations (including the Vietnam Development Bank), the joint-stock enterprise shall cooperate with relevant agencies to implement debt interest write-offs according to current State regulations on handling outstanding debts.

Article 18. Long-term investments in other enterprises such as joint ventures, joint operations, share capital contributions, establishing limited liability companies, and other long-term investment forms

1. In cases where the joint-stock enterprise inherits long-term investments in other enterprises, the entire amount shall be included in the enterprise value for joint-stock conversion according to the principles stipulated in Article 33 of this Decree.

2. In cases where the joint-stock enterprise does not inherit long-term investments in other enterprises, it shall report to the competent authority to decide on the joint-stock conversion plan to handle as follows:

a) Agree with the contributing parties to transfer to state-owned enterprises holding 100% of the capital as partners.

b) Resell the contributed capital to partners or other investors in accordance with the law.

c) If, at the time of announcing the enterprise value, the joint-stock enterprise cannot sell or transfer the long-term investment to another partner, it must inherit according to the provision in Clause 1 of this Article.

d) In cases where the value of investment in other enterprises is large, if included in the enterprise value leading to difficulties in implementing joint-stock conversion, the competent authority deciding the joint-stock conversion plan must clarify the reasons and propose solutions to report to the Prime Minister for consideration and decision.

Article 19. Cash balances of the Reward Fund and Welfare Fund

The cash balances of the Reward Fund and Welfare Fund, after offsetting expenditures exceeding the allowance for employees, shall be distributed to employees working at the enterprise at the time of determining the enterprise value based on their years of service at the joint-stock enterprise.

Article 20. Balance of the Enterprise Restructuring Support Fund at the enterprise

The balance of the Enterprise Restructuring Support Fund at the enterprise undergoing shareholding reform (if any) shall be recorded as an increase in state capital at the enterprise.

Article 21. Financial settlement at the time when the enterprise officially becomes a joint-stock company

1. Based on the value of the enterprise undergoing shareholding reform that has been decided by the competent authority, the enterprise shall adjust the figures in the accounting books; preserve and hand over debts and assets excluded from the enterprise's value according to Clause 2, Article 14 and Clause 2, Article 15 of this Decree; continue to handle financial issues during the period from the valuation date to the official conversion date of the enterprise into a joint-stock company and prepare financial statements at the official conversion date.

At the time when the enterprise undergoing shareholding reform first receives the Business Registration Certificate, when preparing financial statements for the transfer from a 100% state-owned enterprise to a joint-stock company, the enterprise shall revalue securities investments (if any) included in the value of the shareholding-reformed enterprise; the total value of changes in securities investment balances compared to the current accounting records shall be recorded in the business results according to the law.

2. Within thirty working days from the date of receiving the first Business Registration Certificate, the enterprise undergoing shareholding reform must complete the preparation of financial statements at the registration date, conduct an audit of the financial statements, request the tax authority to check and settle taxes, implement settlements, determine the value of state capital at the official conversion date into a joint-stock company and continue handling remaining financial issues.

3. The excess difference between the actual value of state capital at the time the enterprise officially converts into a joint-stock company and the actual value of state capital at the valuation date shall be handled as follows:

a) Pay into the Enterprise Restructuring Support Fund at the parent company of the State Economic Group, State Corporation, or parent company in a parent company-subcompany combination when converting a limited liability company with 100% state capital held by these enterprises into a joint-stock company.

b) Pay into the Enterprise Restructuring and Development Support Fund when fully converting a limited liability company with 100% state capital held by state-owned enterprises under Ministries, agencies equivalent to Ministries, government agencies, provincial People's Committees, centrally-administered municipalities; parent companies of State Economic Groups, State Corporations.

4. In case of a decrease in difference, the enterprise undergoing shareholding reform shall be responsible for reporting to the competent authority deciding the shareholding reform plan to coordinate with relevant agencies to organize inspections, clarify causes, determine collective and individual responsibilities, and handle as follows:

a) If due to objective reasons (natural disasters; enemy attacks; changes in state policy or international market fluctuations and other force majeure reasons), the enterprise shall report to the competent authority deciding the shareholding reform plan to consider and decide on using proceeds from selling shares to offset losses after deducting insurance compensation (if any). If the proceeds from selling shares are insufficient to cover the losses, the competent authority deciding the shareholding reform plan shall consider through the Shareholders' Meeting to adjust the scale and capital structure of the joint-stock company.

b) If due to subjective reasons:

- If the loss is due to failure to properly resolve financial issues according to current state regulations, then the responsibility of related agencies and individuals: the enterprise, consulting organizations, auditing agencies, and the agency deciding the shareholding reform must be determined to compensate for material losses;

- If the loss is due to production and business management or mismanagement causing capital and asset losses, the managers of the enterprise shall be responsible for compensating for losses caused by their own actions according to current regulations;

- In cases where the person responsible for compensation is unable to fulfill the compensation decision due to force majeure, the remaining losses shall be handled as in the case of objective reasons according to point a of this clause.

Chapter III

DETERMINATION OF THE VALUE OF JOINT-STOCK ENTERPRISE

Section 1

ORGANIZATION TO DETERMINE THE VALUE OF THE ENTERPRISE

Article 22. Consulting to Determine the Value of Enterprises

1. Joint-stock enterprises with total asset values according to accounting books of at least 30 billion VND or state capital values according to accounting books of at least 10 billion VND must engage organizations with valuation functions such as auditing companies, securities companies, domestic and foreign enterprise appraisal firms (hereinafter referred to as valuation consulting organizations) to provide consulting services for determining the value of the enterprise.

2. Joint-stock enterprises not falling under the provisions of Clause 1 of this Article are not necessarily required to engage valuation consulting organizations to determine the value of the enterprise. In cases where they do not engage valuation consulting organizations, the enterprises shall independently determine their value and report it to the competent authority for decision on the enterprise's value.

3. The competent authority deciding the joint-stock conversion plan selects the valuation consulting organization to provide consulting services for determining the value of the enterprise. Where there are two or more valuation consulting organizations registering to participate in providing valuation consulting services, a bidding process must be organized to select the implementing organization in accordance with current regulations.

4. The selected valuation consulting organization may choose appropriate methods to determine the enterprise's value, ensuring compliance with the principles stipulated in this Decree, and must complete within the agreed timeframe and in accordance with all commitments made in the signed contract. Joint-stock enterprises have the responsibility to provide full and truthful information related to the enterprise for the valuation consulting organization to use during the valuation process.

The valuation consulting organization bears responsibility for the results of determining the enterprise's value. If the determined value does not comply with State regulations, the competent authority deciding the joint-stock conversion plan may refuse payment for the service fees and, if damage is caused, the State will compensate and the organization will be removed from the list of eligible organizations to provide valuation consulting services.

5. Domestic and foreign valuation consulting organizations registering to provide consulting services for determining the value of joint-stock enterprises must meet the following criteria and conditions:

a) Auditing companies, securities companies, and enterprise appraisal firms must have valuation functions and meet the organizational and operational requirements for each type of enterprise as prescribed by Vietnamese law.

b) They must have a business process for determining the value of enterprises that complies with current Government regulations on converting 100% state-owned enterprises into joint-stock companies.

c) They must have at least five years of experience in one of the following fields: valuation, auditing, accounting, financial advisory, ownership transition advisory. Within the three most recent years prior to submitting the application to perform valuation services, each organization must complete at least 30 contracts providing services in these fields annually.

d) They must have at least three appraisers who have been licensed by the Ministry of Finance.

đ) They must meet the criteria regarding the quantity and quality of staff working in the fields and industries in which the organization operates.

e) They must not violate legal regulations in their business fields and industries in the five consecutive years preceding the year of registration.

The Ministry of Finance shall provide detailed guidance on the provisions of Clause 5 of this Article.

Article 23. Methods for Determining Enterprise Value

The methods for determining enterprise value include: the asset method, the discounted cash flow method, and other methods.

The determined and announced enterprise value shall not be lower than the enterprise value determined according to the asset method as stipulated in Section 2 of this Chapter.

Article 24. Announcing Enterprise Value

1. Based on the enterprise value determination dossier prepared by the valuation consulting organization (or self-prepared by the enterprise undergoing shareholding reform), the Steering Committee for Enterprise Shareholding Reform shall be responsible for reviewing the procedures, formalities, and compliance with legal regulations on enterprise value determination, and submitting it to the competent authority to decide on the enterprise value.

2. The competent authority deciding on the enterprise value shall be responsible for examining, deciding, and announcing the enterprise value within a period not exceeding ten working days from the date of receiving all necessary documents, except for enterprises specified in Clause 1 of Article 27 of this Decree.

Article 25. Utilizing the Results of Enterprise Value Determination

The result of the enterprise value announcement by the competent authority serves as the basis for determining the registered capital scale, the initial share structure, and the starting price for the auction sale of shares.

Article 26. Adjusting Enterprise Value

1. An enterprise undergoing shareholding reform may adjust the announced enterprise value in the following cases:

a) There are objective reasons (natural disasters, enemy attacks, changes in state policies, or other force majeure factors) affecting the value of the enterprise's assets.

b) Within twelve months from the date of enterprise value determination, if the enterprise has not yet implemented the sale of shares, except for special cases decided by the Prime Minister.

2. The provisions of Clause 1 of this Article only apply in cases where the enterprise undergoing shareholding reform has not yet sold shares.

3. The competent authority shall be responsible for examining, deciding on adjustments, and re-announcing the enterprise value of the shareholding reform enterprise. The decision to adjust the enterprise value serves as the basis for developing the shareholding reform plan.

Article 27. State Audit for Enterprises Undergoing Shareholding Reform

1. Objectives and Scope of Implementation of Audit:

Based on the results of enterprise value determination for shareholding reform, which have been confirmed by the consulting organization and the opinion of the competent authority deciding on enterprise value, the State Audit shall conduct an audit of the valuation results and handle financial issues before valuation for large-scale enterprises with state capital over 500 billion VND operating in specific sectors and industries (such as insurance, banking, postal and telecommunications, aviation, coal mining, oil and gas, rare mineral mining); parent companies under economic groups, state-owned corporations, and other enterprises as required by the Prime Minister.

2. Responsibilities of the State Audit and Related Authorities:

a) After receiving the valuation advice results, the competent authority deciding on enterprise value shall be responsible for sending a document along with the dossier requesting the State Audit to conduct an audit of the valuation advice results and handle financial issues before officially announcing the enterprise value for shareholding reform.

b) Within fifteen working days from the date of receipt of the request from the competent authority, the State Audit shall be responsible for organizing the audit of the valuation advice results and handling the financial issues of the shareholding reform enterprise. The completion and announcement of the audit results shall not exceed sixty working days from the start of the audit. The State Audit shall bear responsibility for the audit results in accordance with the law.

c) The shareholding reform enterprise and the valuation consulting organization shall be responsible for providing complete dossiers and documents related to the enterprise value determination work and handling financial issues before valuation according to the requirements of the State Audit.

3. Handling Audit Results:

Based on the audit results of the State Audit, the competent authority shall examine, decide on the announcement of the enterprise value, and proceed with subsequent steps of the shareholding reform process as prescribed.

In case the competent authority deciding on the shareholding reform enterprise value does not agree with the State Audit's announced results, the parties shall exchange opinions to reach an agreement or report to the Prime Minister for examination and decision before announcing the enterprise value within their authority.

Section 2

DETERMINATION OF THE VALUE OF AN ENTERPRISE BY THE ASSET METHOD

Article 28. Value of Joint Stock Enterprise under Asset Method

1. The actual value of the joint stock enterprise is the total value of all assets of the enterprise at the time of joint stock conversion taking into account the profitability of the enterprise that both the buyer and seller of shares can accept.

The actual value of state capital in the joint stock enterprise is the actual value of the enterprise after deducting all payable debts, surplus of the Reward Fund, Welfare Fund, and surplus of operating funds (if any).

2. When converting the parent company of an Economic Group, State Corporation, or Parent Company in a Parent-Subsidiary Combination to a joint stock enterprise, the state capital value in the joint stock enterprise is the actual value of state capital in the parent company.

3. For financial and credit organizations when determining the enterprise value according to the asset method, the results of auditing the financial statements are used to determine monetary capital assets, receivables and payables, but must conduct inventory and evaluation for fixed assets, long-term investments, and unfinished costs related to compensation, clearance, land leveling, and land use rights value according to the regulations of the State.

Article 29. Items not included in the enterprise value for joint stock conversion

1. The value of assets specified in Clauses 1, 2, and 4 of Article 14 of this Decree.

2. Receivable debts with no possibility of recovery.

3. Long-term investments in other enterprises as stipulated in Points a and b Clause 2 of Article 18 of this Decree.

4. The person authorized to decide on the enterprise value shall consider and decide not to include in the enterprise value for joint stock conversion the contents specified in Clauses 1, 2, and 3 of this Article and shall be responsible under the law for their decision.

Article 30. Bases for Determining the Actual Value of the Enterprise

1. Data from the enterprise's accounting books at the time of determining the enterprise value.

2. Inventory, classification, and quality assessment documents of the enterprise's assets at the time of determining the enterprise value.

3. Market price of assets at the time of valuation organization.

4. The value of land use rights granted, the reassessed land rent value in cases where the enterprise has paid once for the entire lease period, and the business advantage value of the enterprise.

Article 31. Value of Land Use Rights

1. For the entire area of land managed and used by the joint stock enterprise for construction of headquarters, transaction offices; production bases; agricultural, forestry, aquaculture, salt-making land (including land already transferred by the State with or without payment of land use fees), the joint stock enterprise is responsible for developing a land use plan to submit to the competent authority for examination and decision. The enterprise's land use plan must comply with the regulations on reorganization and handling of houses and land as decided by the Prime Minister and must be sent to the People's Committee of the province or centrally administered city before determining the enterprise value. The enterprise may choose the form of land leasing or land transfer in accordance with the Law on Land.

2. In cases where the joint stock enterprise chooses the form of land transfer (including areas of land transferred by the State for the enterprise to build houses for sale or lease for hotel business, commercial service business; construction of infrastructure for transfer or lease), the value of land use rights must be included in the enterprise value according to the following provisions:

a) For joint stock enterprises currently implementing land leasing and now switching to land transfer with land use fee payments, the land price for determining the value of land use rights in the joint stock enterprise is the land price defined and announced by the People's Committee of the province or centrally administered city (where the enterprise has been allocated land) at the time of including land price in the enterprise value according to the law on land. If the land price is not close to the actual market price of land transfer rights under normal conditions, the provincial People's Committee will base it on the actual market price of land transfer rights with similar purposes to determine the specific land price appropriately.

b) For joint stock enterprises that have been allocated land and have paid land use fees to the state budget or legally acquired land use rights transfer (including areas allocated for the enterprise to build houses for sale or lease for hotel business, commercial service business; construction of infrastructure for transfer or lease), the land price is determined according to the provision in Point a Clause 2 of this Article.

In cases where the land area allocated to the enterprise includes land used for public utility services and welfare activities (such as green parks, urban environment, bus parking lots, land for water conservancy works, etc.) which do not require payment of land use fees according to the law on land, these areas are excluded when determining the value of land use rights to be included in the joint stock enterprise value. For land areas used for public facilities with safety protection zones according to the law on land, they are also considered and excluded according to the Prime Minister's decision. The joint stock enterprise manages and uses these land areas according to the decision of the competent authority in accordance with planning and the law on land.

The Ministry of Natural Resources and Environment will provide detailed guidance on determining the area of land to be excluded from the enterprise value as stipulated in this Article.

c) The value of land use rights determined to be included in the enterprise's value pursuant to point a, Clause 2 of this Article shall be recorded as a payment to the state budget. The enterprise undergoing shareholding reform must pay this amount to the state budget to obtain the certificate of land use rights. The procedures for transferring land, paying land use fees, and issuing certificates of land use rights shall be carried out in accordance with the provisions of the Land Law and guiding documents implementing the Land Law.

d) The difference in value between the re-evaluated land use rights value specified in point b, Clause 2 of this Article and the value currently recorded in the accounting books (if any) shall be recorded as an increase in the state capital at the enterprise undergoing shareholding reform.

In cases where the re-evaluated land use rights value is lower than the actual cost of land use rights currently recorded in the accounting books, the value shall be calculated based on the value currently recorded by the enterprise.

If the enterprise implements a change in the purpose of land use that has been allocated, it must pay the additional amount corresponding to the difference in the value of land use rights according to the new purpose as stipulated by the laws on land.

3. In cases where the enterprise undergoing shareholding reform chooses the form of leasing land, it must sign a lease agreement for a fixed term in accordance with the laws on land and does not need to supplement the value of locational advantages when determining the enterprise's value as follows:

a) For leased land areas under the annual payment method, the enterprise must pay the land lease fee in accordance with current laws and does not include the land lease fee in the enterprise's value.

b) For enterprises that have paid the land lease fee in one lump sum for the entire lease period before the Land Law of 2003 came into effect, they must reassess the value of the land lease fee according to the lease rate at the time of shareholding reform for the remaining lease period and include it in the enterprise's value. The increased difference from reassessing the value of the land lease fee shall be recorded as an increase in the state capital at the enterprise undergoing shareholding reform.

c) In cases where the enterprise has been allocated land but now chooses the form of leasing land, it must complete the procedures to switch to leasing land and submit them to the authority deciding on the shareholding reform and the local land management agency before officially converting to a joint-stock company.

4. The People's Committee of the province or centrally governed city shall be responsible for:

a) Within thirty working days from the date of receiving all necessary documents, the People's Committee of the province or centrally governed city must provide formal opinions on the land lots that the enterprise will continue to use after shareholding reform and the land price serving as the basis for determining the value specified in point a, Clause 2 of this Article.

b) In cases where the enterprise's proposal for land use is inconsistent with the overall planning of the locality and does not comply with the purpose of land use as decided by the competent state agency regarding the reorganization and handling of state-owned real estate, the enterprise must return the land to the state for other purposes. The People's Committee of the province or centrally governed city shall coordinate with the competent authority deciding on the shareholding reform plan to handle it according to the regulations.

c) After thirty working days from the date of receiving all necessary documents, if the People's Committee of the province or centrally governed city has not provided a formal opinion on the land price specified in point a, Clause 2 of this Article, the competent authority deciding on the enterprise's value for shareholding reform shall use the land price announced by the People's Committee of the province or centrally governed city at the nearest time point according to the land law to calculate and determine the enterprise's value for shareholding reform; simultaneously, publicly announce in the shareholding reform plan the provisional calculation of the land use rights value.

When transferring land, the People's Committee of the province or centrally governed city shall review and officially determine the obligation to pay the land use fee according to a price close to the actual market transfer price of similar land use purposes at the time of land transfer. The enterprise undergoing shareholding reform shall be responsible for paying the entire amount to the state budget (including any difference with the provisional price - if any) to obtain the certificate of land use rights or sign a land lease contract in accordance with current laws on land.

d) Direct relevant agencies to guide enterprises undergoing shareholding reform to fully implement the procedures and formalities to obtain the Certificate of Land Use Rights or sign a land lease contract in accordance with current laws on land before officially converting to a joint-stock company.

5. For enterprises that have completed the shareholding reform or are currently undergoing shareholding reform (with the enterprise's value for shareholding reform already determined and published by the competent authority) before this Decree comes into effect, they shall continue to implement land allocation, leasing, and calculating the value of land use rights according to the approved plan without adjusting according to the provisions of Clause 2 and Clause 3 of this Article.

Article 32. Value of Business Advantage of Enterprises

1. The value of business advantage of enterprises undergoing corporatization includes brand value and development potential.

2. The value of business advantage of enterprises undergoing corporatization shall be determined by the competent authority responsible for determining the enterprise's value after considering the guidance of the Ministry of Finance, but it must not be lower than the determined business advantage value.

Article 33. Determination of Long-term Investment Capital Value of Enterprises Undergoing Corporatization in Other Enterprises

1. The long-term investment capital value of enterprises undergoing corporatization in other enterprises is determined based on:

a) The ratio of the investment capital of the enterprise undergoing corporatization to the charter capital or total contributed capital at other enterprises.

b) The net asset value at other enterprises according to audited financial statements. In cases where auditing has not been conducted, the net asset value according to the most recent financial report of that enterprise shall be used for determination.

c) In cases where investment capital is in foreign currency, it shall be converted into Vietnamese Dong based on the average exchange rate in the inter-bank foreign exchange market published by the State Bank of Vietnam at the time of valuation.

d) If the long-term investment capital value of the enterprise undergoing corporatization in another enterprise is determined to be lower than the recorded value in the accounting books, then the long-term investment capital value shall be determined according to the recorded value in the accounting books of the enterprise undergoing corporatization.

2. The contribution value of enterprises undergoing corporatization in listed joint-stock companies traded on the securities market shall be determined based on the closing price of the shares traded on the securities market at the nearest date to the valuation date. For the contribution value in unlisted joint-stock companies not traded on the securities market, the determination result of the consulting agency shall be considered by the State Enterprise Corporatization Steering Committee for submission to the competent authority responsible for determining the enterprise's value for decision.

3. The contribution value of enterprises undergoing corporatization investing in wholly-owned subsidiaries must re-determine the enterprise value of these subsidiaries as prescribed in Chapters II and III of this Decree.

Section 3

DETERMINATION OF THE VALUE OF AN ENTERPRISE BY THE DISCOUNTED CASH FLOW METHOD

Article 34. Enterprise Value of Enterprises Undergoing Corporatization According to Discounted Cash Flow Method

1. The actual value of state capital in enterprises is determined according to the discounted cash flow method based on the profitability of the enterprise in the future.

In cases where the enterprise invests capital in another enterprise, the profit generated from such investment shall also serve as a basis for determining the enterprise value.

2. The actual value of the enterprise includes the actual value of state capital, liabilities, balances of Reward Fund and Welfare Fund, and operating fund surplus (if any).

In cases where the enterprise chooses the form of land transfer or land lease with one-time payment, the value of land use rights and land lease payments must be added to the enterprise value according to the provisions of Article 31 of this Decree.

Article 35. Basis for determining the enterprise value using the discounted cash flow method

1. The financial statements of the enterprise for the five consecutive years immediately preceding the time point for determining the enterprise value.

2. Business operation plans of the enterprise for three to five years after becoming a joint-stock company.

3. The interest rate of government bonds with a term of five years at the nearest time point before the organization carries out the determination of the enterprise value and the discount factor of the enterprise being valued.

Chapter IV

SALE OF INITIAL SHARES AND MANAGEMENT AND USE OF FUNDS FROM SHARE ISSUANCE

Article 36. Determination of registered capital and initial share structure

1. Based on the results of announcing the actual value of state capital in the enterprise undergoing stock conversion and the production and business plan for the years following the conversion to a joint-stock company, the competent authority decides the scale and structure of the registered capital according to the stock conversion plan.

a. In cases where the actual value of state capital in the enterprise exceeds the necessary registered capital for the operation of the enterprise and the enterprise does not fall under the category of state holding controlling shares, the competent authority deciding to approve the stock conversion plan determines the adjustment of the registered capital based on actual needs. The difference between the actual value of state capital in the enterprise and the determined registered capital shall be deposited into the Fund as stipulated in Clause 3, Article 21 of this Decree.

b. In cases of issuing additional shares, the registered capital is determined by the actual value of state capital in the enterprise and the value of additional shares issued at par value.

2. On the basis of the determined registered capital, the competent authority deciding to approve the stock conversion plan decides the initial share structure, including:

a. State-held shares according to the classification criteria for state-owned enterprises announced by the Prime Minister during each period.

b. Shares sold to strategic investors and other investors not less than 25% of the registered capital, except in cases specified in point b, Clause 3 of this Article. The number of shares sold to other investors must not be less than 50% of the aforementioned shares.

For large-scale enterprises with state capital over 500 billion VND operating in specific sectors and industries (such as insurance, banking, postal and telecommunications, aviation, coal mining, oil and gas, rare mineral mining), and parent companies of economic groups and state-owned corporations, the proportion of shares auctioned off to investors must be decided specifically by the Prime Minister or the agency authorized by the Prime Minister.

c. Preferential shares sold to trade unions in the stock conversion enterprise:

The grassroots trade union in the enterprise may use the trade union fund in the stock conversion enterprise (as stipulated in Clause 2, Article 16 of the Trade Union Law; without raising funds or borrowing) to purchase preferential shares but not exceeding 3% of the registered capital. These preferential shares are held by the trade union but cannot be transferred. If the grassroots trade union in the stock conversion enterprise is authorized by the General Assembly of employees to use the reward and welfare fund to purchase and manage these shares on behalf of the employees, then the number of these shares will be deducted from the number of preferential shares that employees can purchase according to Clause 1, Article 48 of this Decree, and the trade union has the right to transfer or repurchase these shares purchased from the reward and welfare fund upon request of the employees.

The selling price of preferential shares to trade unions in the stock conversion enterprise is the preferential selling price for employees as stipulated in Clause 1, Article 48 of this Decree.

d. Preferential shares sold to employees in the enterprise as stipulated in Clause 1 and Clause 2, Article 48 of this Decree.

3. In cases where the number of preferential shares sold to employees in the enterprise (based on the maximum preferential rate) exceeds the remaining number of shares planned to be issued (after deducting the number of state-held shares and the number of shares sold to investors and trade unions as stipulated in points a, b, and c, Clause 2 of this Article), the following measures shall be taken:

a. If the enterprise does not fall under the category of state holding controlling shares, the competent authority deciding to approve the stock conversion plan shall consider and decide to adjust the reduction in the number of state-held shares to increase the number of preferential shares sold to employees.

b. If the enterprise falls under the category of state holding controlling shares, the competent authority deciding to approve the stock conversion plan shall consider and decide to adjust the scale of the registered capital to reasonably increase the number of preferential shares sold to employees in the enterprise or reduce the shares sold to strategic investors and other investors, but it must ensure that the shares sold to strategic investors and ordinary investors are not less than 20% of the registered capital.

Article 37. Public Auction Method

1. The public auction method shall be applied in cases where shares are sold to the public without distinction between corporate investors, individual investors, domestic investors, and foreign investors.

2. Organizing public auctions:

a) At financial intermediaries if the par value of the shares offered for sale is less than 10 billion VND.

In the absence of a financial intermediary willing to sell the shares through public auction, the Enterprise Shareholding Reform Steering Committee shall directly organize the sale of shares at the enterprise.

b) At the Stock Exchange if the par value of the shares offered for sale is 10 billion VND or more.

If the enterprise undergoing shareholding reform has a par value of shares offered for sale less than 10 billion VND and wishes to conduct the public auction at the Stock Exchange, the competent authority deciding the privatization plan shall make such a decision.

c) The competent authority deciding the approval of the privatization plan shall decide on selecting the Stock Exchange or hiring a financial intermediary to carry out the auction.

At least 20 working days before the first sale of shares, the Enterprise Shareholding Reform Steering Committee must cooperate with the Stock Exchange or financial intermediary to publish information at the enterprise, at the auction site, and through mass media according to the guidelines of the Ministry of Finance.

4. The selling price under the public auction method is the successful bid price of each investor. Under this method, investors who win at a certain price will purchase shares at that price but not below the starting price.

Article 38. Guarantee Issuance Method

1. The guarantee issuance method is a method of issuing shares with the commitment of a guarantor organization to ensure the distribution of all issued shares outside as approved by the competent authority.

In the case of guaranteeing the issuance for foreign investors, it must comply with the provisions of the law regarding the rights of foreign investors to purchase and invest in Vietnamese enterprises.

In the event of unsold shares, the organizations responsible for guaranteeing the issuance shall be responsible for purchasing the remaining shares at the guaranteed price agreed upon in the Guarantee Contract, following the principle of not being lower than the starting price.

2. The obligations and powers of the guarantor organization shall be implemented in accordance with the laws on securities and the securities market and the Guarantee Agreement for the issuance of shares signed between the guarantor organization and the authorized representative of the enterprise undergoing shareholding reform.

Article 39. Direct Negotiation Method

1. The direct negotiation method is a method of selling shares to investors based on the results of negotiations between the Enterprise Shareholding Reform Steering Committee or an organization authorized by the Enterprise Shareholding Reform Steering Committee and each investor.

2. The selling price under the direct negotiation method is the negotiated price with each investor ensuring the principle of not being lower than the starting price (in the case of pre-negotiated sales to strategic investors) or not being lower than the lowest successful bid price (in the case of handling unsold shares from a public auction).

Article 40. Handling Unsold Shares

1. The quantity of unsold shares includes:

a) The number of shares for which the winning bidder in the public auction refuses to purchase.

b) The number of shares not registered for purchase by investors according to the approved public auction sale plan.

c) The number of shares refused by employees and trade unions within the enterprise according to the approved plan.

2. The Steering Committee on Shareholding Reform has the right to publicly offer the remaining unsold shares to investors who participated in the auction through direct negotiation. Investors who refuse to buy shares will not be refunded their bidding deposit.

3. In cases where the public offering through direct negotiation still fails to sell all shares, the Steering Committee on Shareholding Reform shall report to the competent authority to decide on approving the shareholding reform plan to adjust the charter capital structure to convert 100% state-owned capital into a joint-stock company before convening the first General Meeting of Shareholders.

The Steering Committee on Shareholding Reform and the representative of state capital at the enterprise undergoing shareholding reform are responsible for supplementing the draft Charter to be approved at the first General Meeting of Shareholders regarding the right to continue selling state capital in the joint-stock company after the company officially operates under the Enterprise Law according to the approved shareholding reform plan with adjustments.

Article 41. Time Limit for Completing Share Sales

Within three months from the date of the decision approving the shareholding reform plan, the enterprise must complete the sale of shares (including sales through guaranteed issuance and direct negotiation).

Article 42. Management and Use of Proceeds from Shareholding Reform

1. For the case of selling state capital in the enterprise:

a) Proceeds from the shareholding reform of the enterprise are used to pay for shareholding reform costs and policies for surplus labor when implementing the shareholding reform of the enterprise according to state regulations and decisions of the competent authority. The remainder is handled according to the provisions of point c of this clause.

b) If the proceeds from the shareholding reform of the enterprise are insufficient to resolve policies for surplus labor, they are supplemented from:

- The enterprise restructuring support fund at the parent company of the economic group, state-owned corporation, or parent company in a holding company system when the single-member limited liability company held 100% of the charter capital by these enterprises undergoes shareholding reform;

- The enterprise restructuring and development support fund when the single-member limited liability company held 100% of the charter capital by the State, belonging to Ministries, agencies equivalent to Ministries, government agencies, provincial People's Committees, centrally-administered municipalities, parent companies of economic groups, or state-owned corporations undergoes shareholding reform.

c) The remaining proceeds from selling state capital (including price differences from selling shares) after deducting expenses as stipulated in point a of this clause are deposited into the Fund according to the provisions of Clause 3, Article 21 of this Decree.

2. In the case of issuing additional shares to increase charter capital:

a) Proceeds from the shareholding reform retained by the enterprise equal to the value of the additional shares issued at par value; the surplus capital (the difference between the proceeds from the shareholding reform and the total par value of the additional shares issued) is used to pay for shareholding reform costs and policies for surplus labor, if insufficient, it is handled according to the provisions of point b of Clause 1 of this Article.

b) Any remaining amount (if any) is left to the joint-stock company in proportion to the additional shares issued in the charter capital structure. The remainder is handled according to the provisions of point c of Clause 1 of this Article.

3. In the case of selling state capital combined with issuing additional shares:

a) Proceeds from the shareholding reform retained by the enterprise equal to the value of the additional shares issued at par value; the surplus capital is used to pay for shareholding reform costs and policies for surplus labor, if insufficient, it is handled according to the provisions of point b of Clause 1 of this Article.

b) The remaining amount (if any) is handled as follows:

- Deposited into the beneficiary units according to the provisions of point c of Clause 1 of this Article the value of the state shares sold off at par value;

- The remaining amount (if any) is distributed according to the provisions of point b of Clause 2 of this Article.

Article 43. Management and use of the Fund for enterprise restructuring and development

1. Convert the Central Enterprise Restructuring Support Fund into the Fund for Enterprise Restructuring and Development to:

a) Support state-owned forestry and farm enterprises, enterprises with 100% state capital under Ministries, agencies at the level of Ministries, government agencies, provincial People's Committees, and centrally governed city People's Committees in implementing restructuring, ownership conversion, and resolving surplus labor policies and financial issues in accordance with the law.

b) Provide funding for parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations that lack sufficient resources to implement restructuring, ownership conversion, and resolve surplus labor policies for their subsidiaries in accordance with the law.

c) Supplement the registered capital of parent companies of economic groups, state-owned corporations, and enterprises with 100% state capital based on the Prime Minister’s decision upon the Finance Ministry's proposal in accordance with the law.

d) Invest additional capital to maintain or increase the proportion of state capital participation in other enterprises; invest in important projects and other expenditures as decided by the Prime Minister.

2. Establish a restructuring support fund at the parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations to be used for:

a) Supporting member enterprises and directly affiliated business units in implementing restructuring, ownership conversion (including mergers, acquisitions, dissolution, bankruptcy, shareholding reform, transfer, sale, conversion into a limited liability company with one shareholder, conversion into a revenue-generating public service unit...); resolving surplus labor policies and financial issues in accordance with the law.

b) Supplementing the registered capital of parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations based on the decision of the competent authority.

c) The remaining portion shall be invested in developing enterprises by the parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations according to the Prime Minister’s decision after consulting with the Finance Ministry.

3. The Prime Minister decides the management and use mechanism of the Fund for Enterprise Restructuring and Development; decides on the reallocation of funds between parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations to the Fund for Enterprise Restructuring and Development based on the Finance Ministry's proposal. The Finance Ministry is responsible for organizing the management of the Fund for Enterprise Restructuring and Development according to the mechanism prescribed by the Prime Minister.

4. The Finance Ministry prescribes the management and use mechanism of the restructuring support fund at the parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations; monitors and supervises the management and use of income from shareholding reform to support enterprise restructuring and develop enterprises in accordance with the law.

By the end of the fiscal year, within 45 days, parent companies of economic groups, state-owned corporations, and parent companies in parent-child company combinations must submit a final report on the restructuring support fund to the Finance Ministry. The final report on the restructuring support fund must fully and truthfully reflect data on income and expenditure situations; receivable and payable debts, and existing issues in the management of the restructuring support fund, accompanied by a confirmation of the balance of the restructuring support fund from the commercial bank where the restructuring support fund has an account.

In case of failure to report fully and promptly as required, the leadership of economic groups, state-owned corporations, and parent companies in parent-child company combinations (Board of Members, Board of Directors) will be deemed to have not fulfilled their tasks and will bear responsibility as stipulated in the current law's supervision and classification regulations for enterprises.

5. Enterprises undergoing shareholding reform must open a separate account at a commercial bank to freeze the proceeds from selling shares.

Within 15 working days from the completion of the share sale, the Shareholding Reform Steering Committee is responsible for determining the amount retained by the enterprise (including all projected expenses for employees and shareholding reform costs according to the approved shareholding reform plan) and the amount to be transferred to the Fund (after deducting allowable expenditures according to the approved budget) to transfer funds from the frozen account to the enterprise and the Fund in accordance with Clause 3, Article 21 of this Decree.

6. Within a maximum of 15 working days after receiving audited financial reports at the time of officially becoming a joint-stock company, the competent authority deciding to approve the shareholding reform plan is responsible for coordinating with the finance department to inspect and handle financial matters at the time of officially becoming a joint-stock company in accordance with Article 21 of this Decree.

Within 60 working days from the date of obtaining the first business registration certificate, Ministries, agencies at the level of Ministries, government agencies, provincial People's Committees, and centrally governed city People's Committees, and Boards of Members of parent companies of economic groups, state-owned corporations, and 100% state-owned parent companies are responsible for directing and urging the continued transfer of proceeds from selling shares to the Fund in accordance with Clause 3, Article 21 of this Decree.

Within sixty working days from the date of issuance of the first Enterprise Registration Certificate, if the enterprise has not paid the amount to the Fund as stipulated in Clause 3, Article 21 of this Decree, the enterprise undergoing shareholding reform shall be liable for additional interest calculated at the basic lending rate published by the State Bank of Vietnam at the nearest time for the amount and period of delay. After three months from the date of issuance of the first Enterprise Registration Certificate, the enterprise shall be liable for additional interest calculated at the overdue loan interest rate for the amount delayed during the period exceeding three months. These late payment penalties shall not be considered as reasonable expenses when calculating corporate income tax and shall be covered from post-tax profits after deducting compensation and responsibility handling fees of the Board of Members, the Board of Directors, and related collectives and individuals responsible for the delay (if any).

7. The competent authority deciding to approve the shareholding reform plan shall be responsible for directing the Shareholding Reform Steering Committee and the enterprise undergoing shareholding reform to report fully and promptly on the management and use of revenues from shareholding reform to the Ministry of Finance for consolidation and reporting to the Prime Minister.

Article 44. Company Charter of Joint Stock Companies

1. The company charter of joint stock companies shall be drafted under the direction of the Shareholding Reform Steering Committee, which coordinates with the consulting organization for shareholding reform, and shall be published to investors before selling shares, including provisions allowing the continued sale of state capital in the enterprise after shareholding reform as stipulated in Clause 3, Article 40 of this Decree. The draft company charter must not contravene the provisions of the Enterprise Law and relevant laws.

2. The company charter of joint stock companies shall be approved by the first General Meeting of Shareholders when at least 65% of the total number of voting shares of participating investors agree.

Article 45. First General Meeting of Shareholders and Initial Enterprise Registration

Within thirty working days from the completion of the share sale, the enterprise undergoing shareholding reform must organize the first General Meeting of Shareholders to transform the enterprise into a joint stock company and complete initial enterprise registration in accordance with the law.

The enterprise registration dossier must include: the decision to convert into a joint stock company issued by the authority deciding on shareholding reform, the decision appointing the representative of state capital in the joint stock company issued by the competent authority (if applicable), and the joint stock company charter signed by the legal representative of the joint stock company.

Article 46. Appointment of State Capital Representatives in Enterprises Undergoing Shareholding Reform

1. For enterprises undergoing shareholding reform where state capital continues to participate in the joint stock company, the agency entrusted with exercising ownership rights over state capital in the enterprise shall be responsible for appointing representatives of state capital in these enterprises.

2. The person appointed as the representative of state capital in enterprises undergoing shareholding reform must meet the following criteria:

a) A Vietnamese citizen residing in Vietnam. Must have good health, moral character, honesty, integrity, knowledge of the law, and a sense of compliance with the law.

b) Graduated from university, possessing expertise in corporate finance or the business field of the enterprise with state investment, having business capability and enterprise management skills.

c) Not belonging to the category prohibited from assuming managerial positions in enterprises according to points đ, e, g of Clause 2, Article 13 of the Enterprise Law.

d) Not being someone who managed and operated a wholly state-owned enterprise that incurred losses and lost state capital.

đ) Other criteria not contrary to the provisions of the company charter.

Chapter V

POLICY FOR ENTERPRISES AND WORKERS DURING SHAREHOLDING REFORM

Article 47. Preferential policies for joint-stock enterprises

1. Exempted from stamp duty for the transfer of assets under the management and use of the joint-stock enterprise to become the property of the joint-stock company.

2. Exempted from registration fee for the Certificate of Enterprise Registration when transferring from a state-owned enterprise with 100% state capital to a joint-stock company.

3. Prioritized to inherit lawful rights and interests regarding land use according to the laws on land.

4. Maintained and developed welfare funds in the form of tangible assets such as cultural facilities, clubs, clinics, convalescent homes, kindergartens to ensure welfare for workers in the joint-stock company.

Article 48. Preferential policies for workers in joint-stock enterprises

1. Workers listed in the regular roster of the enterprise at the time of announcing the value of the joint-stock enterprise may purchase up to 100 shares per year of actual work in the state sector at a selling price equal to 60% of the lowest successful auction price (in the case of public auction prior) or 60% of the lowest successful selling price to strategic investors (for the case of sale to strategic investors prior).

2. Workers listed in the regular roster of the enterprise at the time of announcing the value of the joint-stock enterprise, who are objects that the enterprise needs to use and have committed to work long-term for the enterprise for a minimum period of three years (from the date the enterprise was first issued the Certificate of Enterprise Registration) will be eligible to purchase additional preferential shares according to the following provisions:

a) Purchase an additional amount of 200 shares/year for each year of continued commitment to work in the enterprise but not exceeding a maximum of 2,000 shares for one worker.

Specifically, workers who are excellent specialists with high professional qualifications working in the enterprise can purchase an additional amount of 500 shares/year for each year of continued commitment to work in the enterprise but not exceeding a maximum of 5,000 shares for one worker. The joint-stock enterprise shall base on the specific characteristics of its industry and business field to establish and decide criteria to determine excellent specialists with high professional qualifications and must be agreed upon at the General Assembly of Employees before the joint-stock process.

b) The selling price of additional preferential shares for workers purchasing additional shares as stipulated in point a clause 2 of this Article is determined as the lowest successful auction price (in the case of public auction prior) or equal to the lowest successful selling price to strategic investors (for the case of sale to strategic investors prior).

c) Each worker is only entitled to purchase additional preferential shares according to the level specified in point a clause 2 of this Article.

d) The number of preferential shares purchased by workers as stipulated in point a clause 2 of this Article will be converted into ordinary shares after the completion of the commitment period.

In the event that the joint-stock company implements restructuring leading to workers having to terminate their labor contracts, resign, or lose their jobs before the committed period according to the Labor Code, the additional shares already purchased will be converted into ordinary shares. If workers wish to resell these shares back to the enterprise, the joint-stock company has the responsibility to repurchase them at a price close to the market transaction price.

If workers terminate their labor contracts before the committed period, they must sell all the additional shares purchased back to the joint-stock company at a price close to the market transaction price but not exceeding the purchase price at the time of the joint-stock process.

3. Divided the surplus cash of the Reward Fund and Welfare Fund (including the value of assets used in production and business invested from the Reward Fund and Welfare Fund) according to the provisions of Articles 14 and 19 of this Decree to purchase shares.

4. Continue to participate and enjoy social insurance, health insurance, and other benefits according to current regulations when transferring to work at the joint-stock company.

5. Enjoy retirement benefits and other rights according to current regulations if they have met the conditions at the time of announcing the enterprise value.

6. If they lose their job or resign at the time of announcing the enterprise value, they will be paid unemployment assistance according to the law.

7. Workers in enterprises implementing restructuring according to clause 2 Article 3 and point e clause 2 Article 49 of this Decree will enjoy the policies stipulated in clauses 4, 5, and 6 of this Article; at the same time, they will apply the policies stipulated in clauses 1, 2, and 3 of this Article based on the specific conditions of the enterprise and the restructuring plan approved by the competent authority.

Chapter VI

IMPLEMENTATION

Article 49. Powers and responsibilities in organizing the implementation of corporatization

1. The Prime Minister:

a) Approve the plan for corporatizing enterprises as specified in Article 2 of this Decree.

b) Decide to approve the corporatization schemes of economic groups, state-owned corporations, and certain enterprises operating in special sectors (such as: insurance, banking, telecommunications, aviation, coal mining, oil and gas, rare mineral mining); decide on the agency representing the state ownership interest in these enterprises.

c) Delegate authority to the Board of Members of joint-stock companies with 100% state capital, which are parent companies of economic groups; special corporations established by decision of the Prime Minister to announce the enterprise value, and to approve the corporatization schemes of member enterprises. After making the decision, the Board of Members of economic groups and special corporations shall report to the Steering Committee for Enterprise Reform and Development and the Ministry of Finance for inspection and supervision to ensure compliance with the law.

2. Ministers of Ministries, Heads of agencies at the ministerial level, agencies under the Government, Chairpersons of People's Committees of provinces and centrally-administered cities, based on the enterprise restructuring plans for 100% state-owned enterprises approved by the Prime Minister:

a) Establish a Steering Committee for corporatization to assist the Minister, Head of agency at the ministerial level, agency under the Government, Chairman of People's Committee of province, centrally-administered city to organize the implementation of corporatization according to the provisions of this Decree.

Establish a Steering Committee for corporatization to assist the Prime Minister in organizing the implementation of corporatization of enterprises as specified in point b, Clause 1, Article 49 of this Decree.

b) Guide, inspect, and supervise the corporatization process of units under their management according to the contents stipulated in this Decree.

c) Decide to announce the enterprise value and submit to the Prime Minister for approval of the corporatization scheme of enterprises as specified in point b, Clause 1, Article 49 of this Decree.

d) Decide to announce the enterprise value, decide on the corporatization scheme of enterprises under their management accompanied by a draft charter of the joint-stock company built in accordance with the provisions of the Enterprise Law and related laws.

đ) Proactively transfer enterprises listed for corporatization but not meeting the conditions to other forms such as transferring, selling, dissolving, or declaring bankruptcy of the enterprise.

e) Approve the restructuring plan, corporatization plan of loss-making enterprises after reaching a written agreement with Vietnam Asset Management Company and creditors of the enterprise regarding the restructuring plan of the enterprise as stipulated in Clause 2, Article 3 of this Decree.

The time to complete the approval of the restructuring plan, corporatization plan of loss-making enterprises as stipulated in Clause 2, Article 3 of this Decree shall not exceed three months from the date of announcing the enterprise value.

g) Coordinate with relevant agencies to approve the financial settlement; settlement of corporatization costs; settlement of support funds for redundant workers; settlement of proceeds from corporatization and announcement of the actual value of state capital at the time the joint-stock company is first issued a business registration certificate.

h) Resolve difficulties, complaints, and denunciations of corporatized enterprises within their jurisdiction according to current laws.

i) Report to the Prime Minister for consideration and decision on the agency representing the state ownership interest when corporatizing joint-stock limited liability companies with 100% state capital, which are parent companies of economic groups and state corporations.

k) For corporatized enterprises that are transferred to the State Capital Investment Corporation for the transfer of state ownership representation rights, the Minister, Head of agency at the ministerial level, agency under the Government, Chairman of People's Committee of province, centrally-administered city shall be responsible for coordinating with the State Capital Investment Corporation in selecting representatives of state capital contributions to the joint-stock company and implementing the transfer of state ownership representation rights at the enterprise immediately after announcing the actual value of state capital at the time the joint-stock company is first issued a business registration certificate.

3. The Board of Members of joint-stock limited liability companies with 100% state capital, which are parent companies of economic groups, corporations mentioned in point c, Clause 1, Article 49 of this Decree shall have the responsibility:

a) Organize the implementation of the corporatization plan of enterprises under the group, corporation according to the state enterprise restructuring project approved by the Prime Minister.

b) Establish a Steering Committee for corporatization to assist the Board of Members in organizing the implementation of corporatization according to the provisions of this Decree.

c) Guide, inspect, and supervise the corporatization process of units under their management according to the contents stipulated in this Decree.

d) Direct member units: handle financial issues as prescribed in Chapter II of this Decree, organize the determination of enterprise value, prepare the corporatization scheme for approval by the Board of Members; implement the approved scheme.

đ) Handle financial issues of enterprises under their management within their authority.

e) Decide to announce the enterprise value and approve the corporatization scheme of member enterprises in the group, corporation accompanied by a draft charter of the joint-stock company built in accordance with the relevant laws.

g) Direct member units to coordinate with relevant agencies to implement financial settlement, settlement of corporatization costs, settlement of support funds for redundant workers, settlement of proceeds from corporatization and announcement of the actual value of state capital at the time the joint-stock company is first issued a business registration certificate.

4. Powers, responsibilities, and composition of the Steering Committee for Corporate Shareholding Reform of Enterprises:

a) The Steering Committee for Corporate Shareholding Reform of Enterprises has the following powers and responsibilities:

- Assist the authority deciding on corporate shareholding reform to direct and organize the implementation of corporate shareholding reform of one or more enterprises as stipulated in this Decree.

- Be authorized to use the seal of the competent authority while performing its tasks;

- Establish a Working Group to implement corporate shareholding reform work at the enterprise;

- Report to the authority deciding on corporate shareholding reform on the selection of methods for the initial public offering of shares;

- Direct the drafting of the corporate shareholding reform plan and the draft Articles of Association of the joint-stock company;

- Review and submit to the competent authority for decision on the publication of the enterprise's value and approval of the corporate shareholding reform plan;

- Direct the enterprise undergoing corporate shareholding reform to cooperate with financial intermediaries to organize the auction sale of shares;

- Summarize and report to the competent authority the results of the sale of shares;

- Summarize and submit to the competent authority for decision on adjustments to the corporate shareholding reform plan and the enterprise's value after conversion into a joint-stock company;

- Examine, select, propose, and coordinate with the competent authority to appoint representatives of state capital contribution at the enterprise undergoing corporate shareholding reform;

b) The composition of the Steering Committee for Corporate Shareholding Reform of Enterprises shall be decided by the Minister, Head of a ministry-level agency, agency under the Government, Chairman of the People's Committee of a province or centrally governed city, Board of Directors of the parent company of an Economic Group, State-owned Corporation, or a parent company within a parent company - subsidiary company conglomerate.

For large-scale enterprises with state capital exceeding VND 500 billion operating in special sectors (insurance, banking, postal and telecommunications, aviation, coal mining, oil and gas, rare mineral mining), and parent companies of Economic Groups and State-owned Corporations, members of the Steering Committee for Corporate Shareholding Reform of Enterprises must include representatives from the Steering Committee for Enterprise Renewal and Development and the Ministry of Finance.

5. Trade unions at enterprises undergoing corporate shareholding reform have the responsibility to coordinate with the Steering Committee for Corporate Shareholding Reform of Enterprises:

a) To disseminate and mobilize cadres, workers, and employees at enterprises undergoing corporate shareholding reform to implement the state's corporate shareholding reform policy.

b) To participate in supervising the corporate shareholding reform process at the enterprise.

c) To nominate union representatives to run for election to the Board of Directors and Supervisory Board of the joint-stock company according to the provisions of the law.

d) To use trade union funds according to the law to purchase preferential shares at the enterprise, participate in managing the enterprise as a shareholder, and organize the protection of workers' rights in the enterprise according to the law.

Article 50. Reporting and Inspection System

1. The Minister, Head of a ministry-level agency, agency under the Government, Chairman of the People's Committee of a province or centrally governed city, Board of Directors of the parent company of an Economic Group, State-owned Corporation, or parent company shall be responsible for promptly reporting to the Steering Committee for Enterprise Renewal and Development and the Ministry of Finance on matters related to the corporate shareholding reform process: results of handling financial issues, valuation results, decisions on publishing the enterprise's value and adjusting the enterprise's value, corporate shareholding reform plans, results of selling shares, settlement of corporate shareholding reform costs, settlement of handover from a 100% state-owned enterprise to a joint-stock company, violations by consulting organizations during the corporate shareholding reform process.

2. The Ministry of Finance shall inspect and supervise compliance with policies and laws on converting a 100% state-owned enterprise into a joint-stock company as stipulated in this Decree; periodically compile and report to the Prime Minister on the situation and results of corporate shareholding reform of enterprises.

Article 51. Procedure for Shareholding Reform

The shareholding reform process shall be carried out according to the specific steps detailed in the Appendix attached to this Decree, including the following basic steps:

1. Developing the Shareholding Reform Plan

a) Establishing the Steering Committee for Shareholding Reform of the enterprise and the working group.

b) Preparing the necessary files and documents.

c) Organizing an inventory, addressing financial issues, and determining the enterprise's value.

d) Determining and announcing the enterprise's value.

đ) Completing the Shareholding Reform Plan for submission to the competent authority for approval.

2. Implementing the Shareholding Reform Plan

3. Completing the conversion of the state-owned enterprise with 100% state capital into a joint-stock company.

a) Organizing the first General Meeting of Shareholders and registering the enterprise.

b) Organizing the settlement and handover between the state-owned enterprise and the joint-stock company.

Chapter VII

IMPLEMENTING PROVISIONS

Article 52. Implementation Provisions

1. This Decree takes effect from September 5, 2011, and replaces Government Decree No. 109/2007/NĐ-CP dated June 26, 2007, on converting state-owned enterprises with 100% state capital into joint-stock companies. Previous regulations on shareholding reform that conflict with this Decree are no longer effective.

2. Enterprises that have received approval decisions for their shareholding reform plans from the competent authority before this Decree takes effect shall continue to implement the approved plan and the provisions of this Decree.

3. Any organizations or individuals causing losses discovered through the inspection and audit work of state agencies after the enterprise has officially converted into a joint-stock company shall bear responsibility for compensation in accordance with current regulations. In cases where there are signs of criminal violations, they will be referred to the investigative authorities for handling.

4. Single-member limited liability companies held by 100% charter capital by parent companies of economic groups, state-owned corporations, or parent companies in parent-subsidiary combinations shall carry out shareholding reform in accordance with the provisions of this Decree.

5. Single-member limited liability companies held by 100% charter capital by political organizations or political-social organizations established and operating under the Enterprise Law shall apply the contents stipulated in this Decree to convert into joint-stock companies.

Article 53. Responsibility for Implementation and Organization

1. The Ministries of Finance, Labor - Invalids and Social Affairs, Natural Resources and Environment, Planning and Investment; the State Bank of Vietnam; the Vietnam Social Security; the National Audit Office, and other relevant agencies within their functions and tasks shall be responsible for guiding the implementation of this Decree.

2. Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairmen of People's Committees of provinces and centrally-administered cities, Councils of Directors of economic groups, and state-owned corporations decided by the Prime Minister to establish shall be responsible for implementing this Decree./.