Circular No. 64/2001/TT-BTC guiding the implementation of the regulations on managing state capital in other enterprises

CIRCULAR

OF THE MINISTRY OF FINANCE NUMBER 64/2001/TT-BTC AUGUST 10, 2001
GUIDELINES FOR IMPLEMENTING THE REGULATIONS ON MANAGEMENT OF STATE CAPITAL IN OTHER ENTERPRISES
AT OTHER ENTERPRISES

Pursuant to Decree No. 73/2000/NĐ-CP dated December 6, 2000 of the Government on promulgating the Regulations on Management of State Capital in Other Enterprises, the Ministry of Finance guides the implementation of certain points of the Regulations on Management of State Capital in Other Enterprises as follows:

I - STATE CAPITAL AT OTHER ENTERPRISES INCLUDES:

- The capital amounts prescribed in Article 3 of the Regulations on Management of State Capital at Other Enterprises issued together with Decree No. 73/2000/NĐ-CP dated December 6, 2000 of the Government (hereinafter referred to as the Regulations accompanying Decree No. 73/2000/NĐ-CP);

- The corporate income tax exemption and reduction amounts due to investment incentives of the State retained to increase the State's share capital in enterprises;

- Thirty percent of the value of the shares that employees return when transferring shares in the enterprise assigned to the collective of employees according to Point 5, Article 10, Chapter II of Decree No. 103/1999/NĐ-CP dated September 10, 1999 of the Government on the transfer, sale, lease, and management contracting of state-owned enterprises;

- Other additional investments by the State in enterprises.

II - RIGHTS AND OBLIGATIONS OF THE REPRESENTATIVE AND DIRECT MANAGER OF STATE CAPITAL
AT OTHER ENTERPRISES

The State manages the State's capital in other enterprises through representatives and direct managers:

1- For the representative of State capital: The rights and obligations of the representative are stipulated in Articles 6, 7, and 8 of the Regulations on Management of State Capital at Other Enterprises issued together with Decree No. 73/2000/NĐ-CP dated December 6, 2000 of the Government.

2- For the direct manager of State capital:

2.1 The representative appoints the direct manager of State capital in other enterprises in the following cases:

a - The State invests capital, assets, land rent, or the value of land use rights in joint ventures (domestic and foreign) and limited liability companies.

b - The State holds controlling shares in joint-stock companies (specifically, the State's shares account for more than 50% of the total shares of the company or the State's shares are equal to or greater than twice the largest shareholder's shares in the company).

In cases where the State's capital participation in a joint-stock company does not reach the controlling ratio, but the level of investment in the company is large, if deemed necessary for management and supervision requirements, the representative shall consider and decide to appoint a direct manager. In other cases, although not appointing a direct manager, the representative must organize work to ensure monitoring of the State's invested capital and the dividends derived from the State's invested capital in this enterprise and assign personnel to exercise shareholders' rights according to the Enterprise Charter. 2.2 In cases where the representative of State capital is the Ministry of Finance as stipulated in Point 1, Article 6 of the Regulations accompanying Decree No. 73/2000/NĐ-CP, the Ministry of Finance delegates to the Heads of economic technical ministries or agencies deciding the establishment of enterprises to appoint direct managers; after reaching a consensus with the Ministry of Finance, the Heads of these agencies decide to appoint direct managers of State capital in other enterprises.

Based on the scale of investment capital, management and supervision requirements, and the Enterprise Charter, the representative may appoint from one to two direct managers of State capital in one enterprise, decide on their working conditions, and define their responsibilities. If two people are appointed, the direct manager must designate the person responsible.

2.3 - A person who has been appointed as a dedicated direct manager in one enterprise cannot be concurrently appointed as a direct manager in another enterprise. - The direct manager is selected from economic technical management agencies (Ministries, Departments managing industries); financial management agencies (Enterprise Financial Department, Department of Finance - Price Control); superior agencies of the enterprise (Group Corporation, Company), or directly from the enterprise contributing capital to another enterprise. The direct manager participating in the board of supervisors of the enterprise must have expertise in enterprise financial management.

Cases where representatives from enterprises are appointed as direct managers in other enterprises must comply with Clause 1, Article 50 of the Bankruptcy Law.

2.4 The criteria for direct managers are implemented according to Article 11 of the Regulations accompanying Decree No. 73/2000/NĐ-CP. Direct managers are not allowed to contribute capital, lend capital, or enter into purchase and sale contracts with enterprises with State capital where they are appointed as direct managers (except for entities eligible to purchase initial shares in state-owned enterprises being converted into joint-stock companies according to Decision No. 202/HĐBT dated June 8, 1992 of the Chairman of the Council of Ministers now the Prime Minister on piloting the conversion of some state-owned enterprises into joint-stock companies, Decree No. 28/CP dated May 7, 1996 of the Government on converting some state-owned enterprises into joint-stock companies; Decree No. 44/1998/NĐ-CP dated June 29, 1998 of the Government on converting state-owned enterprises into joint-stock companies).

III - SYSTEM AND REPORTING INDICATORS:

1- For the direct manager

1.1 Based on the financial statements and other reports of the enterprise, the direct manager is responsible for preparing an enterprise file (Form 1 attached to this Circular) to monitor and implement management tasks as prescribed.

The direct manager must prepare reports on certain financial indicators: Form 2 (for quarterly and annual reports) attached to this Circular, including an analysis and evaluation of the management and use of capital in the enterprise, payment capacity, business results, dividend distribution. Propose measures to address difficulties and obstacles to effectively utilize the State's invested capital in other enterprises.

1.2 Recipients of the report and reporting deadlines: The responsible manager shall establish a business enterprise file (Annex 1 attached to this Circular) for monitoring and performing management tasks as prescribed.

The direct manager must prepare financial indicator reports: Annex 2 (for quarterly and annual reports) attached to this Circular, including an analysis and assessment of the management and utilization of capital at the enterprise, payment capacity, business results, profit distribution. Recommendations and proposals for measures to address difficulties and obstacles to effectively utilize state investment capital at other enterprises should be included.

1.2 Recipients of the report and reporting deadlines:

Quarterly (no later than the first day of the month of March of the following quarter), annually (no later than April 30 of the following year), the direct manager shall be responsible for submitting reports containing all the above contents to the representative. In cases where the direct manager is appointed according to Clause 1, Article 6 of the Regulation attached to Decree No. 73/2000/NĐ-CP, such reports shall be sent to the Ministry of Finance, and at the same time, one copy shall be sent to the economic technical ministry or agency that issued the decision appointing the direct manager for the state capital in another enterprise.

1.3 In addition to the periodic reports mentioned above, the direct manager must submit ad hoc reports to the representative regarding the situation of the enterprise in the following circumstances:

- When requested by the representative;

- Significant issues arise affecting the business results of the enterprise and requiring guidance from the representative.

1.4 In cases where there is no appointment of a direct manager, the representative must assign someone to monitor and report on the above contents.

2- For the representative:

Based on the financial statements of other enterprises and the periodic reports of the direct manager, the representative shall be responsible for:

- Fulfilling their rights and obligations as prescribed in Section II of the Regulation attached to Decree No. 73/2000/NĐ-CP;

- Annually and semi-annually, compiling the reporting indicators of the direct manager (Table 2) for each type of enterprise with state capital participation: foreign-invested enterprises, joint-stock companies, limited liability companies, etc. Analyzing and preparing reports on the financial situation of the enterprise in accordance with the provisions of Point 2, Article 8 of the Regulation attached to Decree No. 73/2000/NĐ-CP;

- The representative's report shall be submitted to the Ministry of Finance (Enterprise Financial Department) no later than July 31 for the six-month report, and May 31 of the following year for the annual report. In cases where the representative is defined under Clause 3, Article 6 of the Regulation attached to Decree No. 73/2000/NĐ-CP, they must also send it to the agency that decided to establish the state-owned enterprise investing in another enterprise.

In addition to the above reports, the representative must also prepare other ad hoc reports upon request of the Ministry of Finance to meet the requirements of state financial management.

IV- HANDLING THE DISTRIBUTED PROFIT AND RECOVERY OF CAPITAL FROM OTHER ENTERPRISES.

The handling of distributed profit and the recovery of state investment capital in other enterprises shall be carried out as follows:

1- In cases where the Ministry of Finance or the People's Committee of a province or centrally-administered city is the representative:

- The other enterprise shall be responsible for remitting the following amounts to the Fund for Supporting Enterprise Restructuring and Shareholding of State-Owned Enterprises at the central or local level, as stipulated in Decision No. 177/1999/QĐ-TTg dated August 30, 1999 of the Prime Minister and Decision No. 95/2000/QĐ-BTC dated June 9, 2000 of the Minister of Finance:

1.1 Distributed profit from other enterprises;

1.2 Recovery of capital when deciding to reduce the state capital share in other enterprises, or when the enterprise is dissolved or declared bankrupt;

1.3 Recovery of the amount lent to employees to purchase shares during the shareholding reform of state-owned enterprises;

1.4 Recovery of the value of shares allocated to employees to enjoy dividends, and shares sold on credit to poor employees within the enterprise.

The direct manager of the state capital in other enterprises shall be responsible for urging the other enterprise to timely remit the above amounts.

- Based on the proposal of the other enterprise with state capital and the direct manager of the state capital in that enterprise, the use of distributed profit to increase the state capital share in other enterprises shall be examined and decided by the Minister of Finance after consulting the head of the economic technical management agency (in cases where the Ministry of Finance is the representative) or by the Chairman of the People's Committee of a province or centrally-administered city (in cases where the People's Committee of a province or centrally-administered city is the representative).

2 - In cases where the Board of Directors (for state-owned enterprises with a Board of Directors) or the General Director of the enterprise (for independent state-owned enterprises without a Board of Directors, collectively referred to as state-owned enterprises) is the representative:

- The other enterprise shall be responsible for remitting the following amounts to the state-owned enterprise (the representative with capital contribution in the other enterprise):

2.1 Distributed profit from other enterprises;

2.2 Difference arising from the sale or recovery of state capital (when deciding to sell or reduce the state capital share in other enterprises).

2.3 Recovery of capital when deciding to reduce the state capital share in other enterprises, or when the enterprise is dissolved or declared bankrupt.

2.4 Recovery of the amount lent to employees to purchase shares during the shareholding reform of state-owned enterprises.

2.5 Recovery of the value of shares allocated to employees to enjoy dividends, and shares sold on credit to poor employees within the enterprise.

The distributed profits and price differences from sales or recoveries of capital as specified in Points 2.1 and 2.2 of this section (after deducting selling expenses) shall be accounted for in the operating results of the state-owned enterprise.

In cases of capital recovery as specified in Points 2.3, 2.4, and 2.5 of this section, the difference reduced from the initial investment capital shall be accounted for in the operating results of the state-owned enterprise.

The direct manager of the state capital in other enterprises shall be responsible for urging the other enterprise to timely remit the above amounts.

- The use of distributed profit to increase the state capital share in other enterprises shall be decided by the Board of Directors (for state-owned enterprises with a Board of Directors) or the General Director of the enterprise (for state-owned enterprises without a Board of Directors) after consulting the agency that decided to establish the enterprise.

V- IMPLEMENTATION PROVISIONS

This Circular takes effect from the date Decree No. 73/2000/NĐ-CP dated December 6, 2000 of the Government comes into force. All previous regulations contrary to this Circular are abolished.

During implementation, if any difficulties arise, please promptly reflect them to the Ministry of Finance for study and resolution.

TABLE 1

ENTERPRISE FILE

1. Enterprise name

2. Business Registration Certificate number ... Date ...

3. Business sector:

4. Address, telephone, FAX

5. Registered Capital:

Year . . .

TABLE 2

REPORT ON CERTAIN FINANCIAL INDICATORS FOR THE QUARTER ... YEAR 200...

Issued with Circular No. 64/2001/TT-BTC dated August 10, 2001
guiding the implementation of Decree No. 73/2000/NĐ-CP dated December 6, 2000 of the Government

(Aapplicable to representatives and direct managers of state capital
in other enterprises)

Unit: VND

(*) Recorded as a negative number in parentheses (...)

VII- Analysis, Evaluation, and Recommendations:

Representative signing, stamping

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