Decree No. 69/2002/NĐ-CP on Management and Resolution of Outstanding Debts for State-Owned Enterprises

DECREE OF THE GOVERNMENT

On management and handling of overdue debts for state enterprises

 

THE GOVERNMENT

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

At the proposal of the Minister of Finance,

 

DECREE:

PART I

GENERAL PROVISIONS

Article 1.Scope of application

1.This Decree stipulates the handling of overdue debts and the debt managementmechanism, as well as the responsibility for debt repayment of stateenterprises.

2.This Decree applies to:

a)State enterprises operating in accordance with Article 1 of the Law on StateEnterprises.

b)State enterprises implementing conversion procedures (listed for shareholding,transfer, sale, lease, or transformation into a limited liability company) asdecided by competent state authorities (hereinafter referred to as convertingenterprises).

State-owned commercial banks shall have separate regulations.

Article 2.Overdue Debts

1.Overdue debts mentioned in this Decree refer to receivables and payables thathave exceeded the payment deadline, and despite the enterprise's efforts such asverification, confirmation, and urging payment, remain unpaid.

2.Overdue debts include:

a)Debts to the state budget.

b)Debts to commercial banks.

c)Debts to the National Reserve.

d)Debts to Social Insurance.

đ)Debts to organizations and individuals outside the enterprise and employeeswithin the enterprise.

e)Other debts.

Article 3. Scope of Debt Handling

1.For state enterprises currently in operation: the scope of handling includesoverdue debts up to December 31, 2000. Overdue debts arising after December 31,2000 must be settled and recovered by the enterprise itself.

2.For state enterprises undergoing conversion: the scope of handling includesoverdue debts up to the conversion date. Overdue debts arising after theconversion date must be settled and recovered by the enterprise itself.

Article 4. Requirements and Principles for Debt Handling

1.Enterprises are responsible for verifying and confirming debts, classifyingdebts, urging recovery, and actively handling overdue debts, including receivablesand payables, as prescribed in this Decree.

2.Priority order for mobilizing resources to handle overdue debts of stateenterprises:

a)Reserve funds for difficult-to-collect receivables established annually bystate enterprises.

b)Annual business profits of state enterprises (recorded as business expenses orincome depending on the type of debt).

c)Reduction from interest or capital of creditors in cases of debt write-off,debt extension, or debt cancellation.

d)Reduction from the value of state capital in the enterprise.

đ)Utilization of resources for state enterprise restructuring and the commercialeconomic bank system during the period 2001-2003 pursuant to Decision No. 92/QĐ-TTg dated January 29, 2002 of the Government Prime Minister.

3.For debts that cannot be recovered or repaid, enterprises must first seek allpossible measures to resolve them, sharing difficulties with creditors and debtorsthrough debt write-off, debt extension, debt cancellation, or debt purchase; incases exceeding their capacity and authority, enterprises must report tocompetent authorities for support in resolving the issue.

4.Enterprises implementing conversion procedures shall immediately handleoverdue debts in accordance with the conversion mechanism for state enterprises.

5.Debt resolution measures must be implemented in a coordinated manner based onthe organization and improvement of enterprise efficiency to generate resourcesfor debt repayment, thereby strengthening and stabilizing the long-term financialposition of the enterprise.

 

PART II

HANDLING OF OVERDUE RECEIVABLES OF ENTERPRISES

Article 5. Handling overdue receivables that are uncollectible

1. Overdue receivables or receivables not yet overdue that fall under any of thefollowing circumstances shall be considered uncollectible receivables:

a) The debtor is a business or organization that has completed liquidation orbankruptcy according to the provisions of the law.

b) The debtor has ceased operations and is unable to pay.

c) The debtor is an individual who has died, disappeared, is serving a prison term,or the successor designated by law, but is unable to pay.

d) Agricultural cooperatives that have been dissolved, agricultural cooperatives thathave been converted and registered for business under Decree No. 16/CP datedFebruary 12, 1997 of the Government, but face severe financial difficulties, losingsubstantially and unable to repay debts, the debts from these cooperatives havebeen used to invest in infrastructure, but now these infrastructures have beendamaged due to natural disasters and storms, and the State has decided to writeoff these debts.

đ) The debtor has been officially decided by the competent authority to have theirdebts written off according to the provisions of the law.

e) The remaining difference of uncollectible receivables after handling theindividuals' and collectives' responsibility to compensate material losses.

g) The loss difference accepted by the competent authority due to sellingreceivables.

h) Receivables that exceed the payment deadline by three years or more, althoughthe debtor still exists and operates, but continuously incurs losses and facesextreme difficulties, completely unable to settle payments, and despite thebusiness actively applying measures, the debt remains unrecovered.

i) Receivables that exceed the payment deadline by three years or more, althoughthe debtor still exists and operates, but continuously incurs losses and facesextreme difficulties, completely unable to settle payments, and despite thebusiness actively applying measures, the debt remains unrecovered.

2. For state-owned enterprises currently operating, uncollectible receivables asdefined in Clause 1 of this Article shall be handled in the following order:

a) Using the reserve fund for difficult-to-collect receivables to offset.

b) Recording it as business expenses or income of the enterprise, depending on thespecific circumstances.

c) In cases where it is recorded as business expenses and the enterprise sufferslosses for two consecutive years and is unable to cover them, and the enterpriseis not in a situation requiring liquidation or bankruptcy, the competentauthority will consider and decide to reduce the state capital at the enterprise.

d) In cases where the measures prescribed in Points a, b, and c above have beenapplied but the enterprise still faces financial difficulties, the Ministry ofFinance will coordinate with relevant agencies to consider and decide onsupporting capital or reducing losses of the enterprise from the business reformcosts according to the Prime Minister's decision. This support will be directlyimplemented by the Ministry of Finance or through intermediary financialorganizations with such functions.

3. For state-owned enterprises undergoing transformation, uncollectible receivablesafter being processed once according to the provisions of Points a and b ofClause 2 of this Article, if the enterprise incurs losses or incurs losses beforeprocessing the debt, then the reduction of state capital at the enterprise beforetransformation will be considered.

In case the value of the state capital at the enterprise is insufficient to handleaccumulated losses and uncollectible receivables, or after reducing the value ofthe state capital at the enterprise, the remaining value is too small to implementthe preferential share sale policy for employees in the enterprise according to theprovisions, or does not ensure the required ratio of state capital participation ina joint-stock company, the Ministry of Finance will decide to transfer some ofthe receivables to organizations with the function of buying and selling debtsand state surplus assets for processing. In this case, the difference between thereceivable value and the actual amount received from the organization with thefunction of buying and selling debts and state surplus assets will be supportedfrom the business reform costs.

4. Even though uncollectible receivables have been processed, if the debtor stillexists, enterprises are responsible for continuing to monitor them off-balance-sheet and organize recovery within five years. The recovered amount will berecorded as income of the enterprise.

For transformed enterprises, after transformation, the representative of the statecapital at the enterprise is responsible for continuing to monitor and organizerecovery of difficult-to-collect receivables that were processed beforetransformation but still have the potential to be recovered. After deductingrecovery costs, the proceeds will be deposited into the Fund for SupportingEnterprise Restructuring and Shareholding or transferred to the organizationwith the function of buying and selling debts and state surplus assets accordingto the decision of the competent state agency to continue monitoring andorganizing recovery into the state budget.

Article 6. Handling overdue receivables that still have recovery potential

1. For overdue receivables that still have recovery potential, enterprises mustactively urge payment and apply all measures to recover them.

2. For overdue receivables that have been overdue for two years or more but stillhave recovery potential, enterprises must establish provisions and record them asmanagement expenses of the enterprise in the year. The level of provision shalldepend on the extent of possible losses, but the total amount of provisions fordifficult-to-collect receivables shall not exceed 20% of the total outstandingreceivable balance of the enterprise at the time of preparing the financialreport for the year.

Article 7.Handling overdue receivables of state-owned enterprises related to the governmentbudget

1. Amounts subsidized or compensated according to regulations but not yetprovided shall be provided by the budget level that owes them to the enterprise.

2. Amounts overpaid by the enterprise into a particular budget level shall berefunded to the enterprise by that budget level or deducted from the nextpayment period according to tax laws.

3. Amounts owed due to completed basic construction projects approved withincompetent authority, funded by the budget, put into operation but not fully paidshall be promptly settled by the budget. Projects funded by a particular budgetlevel shall be fully and promptly settled by that budget level.

4. Local budgets receiving debt repayment when transferring assets of theenterprise to public service units or local state management agencies shall use thebudget to repay the enterprise's debt.

5. Overdue receivables of enterprises arising from constructing public works andinfrastructure facilities for localities, selling assets, and office space topublic service units and local state management agencies within approvedinvestment plans, if the enterprise has not received payment, the investmentdecision authority must allocate the budget to settle the enterprise's debt. If itexceeds authority and budget capacity, it must report to the Prime Minister foradjudication. Enterprises undergoing conversion may reduce state capital in thetotal enterprise value and increase capital for the unit receiving theconstruction project or infrastructure facility or the unit using the purchasedassets from the enterprise.

6. Funds temporarily held by state agencies during inspections, audits, orinvestigations, if the enterprise is found to have no violations or does not needto rectify consequences, the agency holding the funds must immediately returnthem to the enterprise.

Article 8.Handling receivables with guarantees

Organizations and individuals guaranteeing loans or deferred payments of materialsand goods for enterprises that are overdue and which the guaranteed enterprisehas not repaid shall assume responsibility for repayment. The enterprise beingrepaid must recognize the debt and repay the organization or individual thatguaranteed it according to regulations.

Article 9.Accounting for unrecoverable debt losses

State-owned enterprises may handle and account for unrecoverable debts once orgradually in annual production and business results according to the provisionsof Point b Clause 2 Article 5 of this Decree, but not exceeding two years atmaximum.

Article 10. Enterprises with large uncollectible debts

State-owned enterprises with excessively large receivables that cannot becollected and cannot be resolved through measures prescribed in Clause 2, Article5 of this Decree, and thus unable to pay their due debts, shall proceed withdissolution or bankruptcy as provided for by law.

In cases where it is necessary to maintain the enterprise and the enterprise hasan effective business plan approved by the competent authority, the provincialpeople's committee directly under the central government or the managementministry shall send opinions to the Ministry of Finance to consider supplementingthe registered capital or taking financial support measures so that the enterprisecan continue normal operations. If the matter exceeds the authority or thecapacity of the state budget, the Ministry of Finance shall report to the PrimeMinister for decision.

 

CHAPTER III

SETTLEMENT OF ENTERPRISE'S PENDING DEBTS

Article 11. Tax Debts and Other Payments to the State Budget

1. State-owned enterprises implementing investment projects approved bycompetent authorities but lacking funds have occupied tax money and otherpayments to the state budget from before December 31, 1999 to finance theinvestment project, and now still cannot repay, if the investment project has beencompleted and put into use, then the taxes and other payments to the state budgetthat the enterprise has used for these projects shall be supplemented to theenterprise's investment capital.

2. State-owned enterprises subject to transfer or sale according to Decree No.103/1999/NĐ-CP dated September 10, 1999 and Decree No. 49/2002/NĐ-CP datedApril 24, 2002 of the Government, where the debts exceed the value of theenterprise's assets or the proceeds from selling the enterprise, shall beconsidered for debt relief on taxes and other payments to the state budget.

3. State-owned enterprises merged into other state-owned enterprises by thedecision of competent authorities, after applying financial and credit supportmeasures, if the merged enterprise still cannot repay tax debts and other paymentsto the state budget, shall be relieved of tax debts and other payments to thestate budget up to the amount of losses of the merged enterprise.

4. State-owned enterprises engaged in production and business suffering lossesand owing taxes and other payments to the state budget from before December 31,1998 due to changes in policies, natural disasters causing damage, lack ofinvestment capital for technological renewal, machinery, and equipment, ordifficulty in labor restructuring, if the enterprise does not fall into thecategory requiring dissolution, bankruptcy, or merger, after applying taxexemption, tax reduction, financial support, credit, and other measures, and theenterprise still suffers losses and cannot repay tax debts and other payments tothe state budget, shall be relieved of tax debts and other payments to the statebudget up to the amount of losses of the enterprise at the time of debt relief.

5. Enterprises engaged in export and import business being pursued for taxpayments and penalties due to objective reasons shall be considered for debtrelief on the pursued tax payments and penalties on a case-by-case basis.

6. For enterprises that have decisions to implement conversion and owe taxesand other payments to the state budget, after handling receivables, if theenterprise still cannot repay tax debts and other payments to the state budgetdue to losses, shall be considered for debt relief up to the amount of lossesgenerated until the date of the conversion decision.

7. In cases where enterprises borrow state budget funds to purchase goods forexport to repay foreign debts, export to establish a national reserve fund, or topurchase circulating reserve goods, but due to price fluctuations, the enterprisecannot purchase the required goods as stipulated, and at the time this Decree istaken effect, the enterprise records a debt to the state budget which has beendeclared and confirmed by the Provincial Debt Settlement Board directly under thecentral government or the managing ministry, such debts shall be relieved.

8. In cases where enterprises owe the state budget for imported goods accordingto the Government's Agreement due to unsold goods or having received paymentbut not fully remitted to the state budget, they shall be handled as follows:

a) In cases where enterprises have sold goods on credit to units as directed andregulated by the state but have not yet received payment, debt relief shall beconsidered.

b) In cases where enterprises import goods according to the Government'sAgreement which are not suitable for market requirements, must sell at a lowerprice than the price received from the state and suffer losses but have not yetbeen resolved, debt relief equivalent to the difference between the lower salesprice and the price received from the state shall be considered, but not exceedingthe unresolved losses.

9. Regarding loans from the state budget, enterprises are responsible forrepaying the state budget according to regulations. If unable to repay due toobjective reasons, enterprises shall report to the competent authority forindividual case resolution according to the law.

Article 12.Loans from the State Commercial Bank to state-owned enterprises

1. For operating state-owned enterprises with loans from the State CommercialBank already included in the debt settlement network, confirmed by the ProvincialDebt Settlement Board directly under the central government, but suffering lossesthat are classified and handled as follows:

a) For continuously loss-making enterprises that cannot be rectified, dissolutionor bankruptcy shall be carried out according to the law.

b) For loss-making enterprises that have reorganized production and have thepotential for development, they shall be handled as follows:

State-owned enterprises with State Commercial Bank loans that have beenwritten off shall have interest debts relieved and consideration given forextending the write-off period.

State-owned enterprises with State Commercial Bank loans included in thedebt settlement network, if due to objective reasons but not yet written off,interest debts shall be relieved and principal debts written off according to thelaw.

2. For state-owned enterprises that have decisions to implement conversion but encounter difficulties in balancing sources to pay off overdue debts, the General Director of the State Commercial Bank shall examine and decide to allow the enterprise to extend or write off overdue debts up to the time of implementing the conversion within a period of from three to five years. In cases where these enterprises incur losses and are unable to make payments, they will be exempted from interest on loans, including interest received with the amount not exceeding the remaining loss.

For enterprises currently undergoing procedures for shareholding, transfer, or sale, in addition to the above debt write-off and exemption measures, the enterprise shall coordinate with the main creditor bank and organizations with functions to buy and sell debts to handle the remaining overdue principal debts through purchasing or reselling debts or converting debts into equity contributions of the bank in the shareholding enterprise according to the provisions of the law on the ratio of capital contribution.

3. The bank's loan interest income that cannot be collected in the cases stipulated in point b Clause 1 and Clause 2 of this Article shall be recorded as part of the bank's expenses. The difference in losses due to selling outstanding debts shall be handled according to the provisions of the law on handling outstanding debts for commercial banks.

Article 13. Handling Debts Owed to the National Reserve Agency

1. Debts arising from advance payments for purchasing rice, processing rice for export, and borrowing rice from the National Reserve Agency in the years 1988-1990, if the enterprise has repaid the advance payment in full and paid the purchase price of rice at the time of borrowing, but still owes the quantity based on the repayment price, such debts shall be waived.

2. The price of rice for settling debts to the National Reserve Fund shall be applied according to the agricultural tax price of rice at the time of borrowing.

Article 14.Handling Social Insurance Debts

1. For enterprises implementing conversion, before implementing the conversion, the enterprise is responsible for settling all debts owed to the Social Insurance Fund.

2. For enterprises implementing sales without assuming debts: they are entitled to prioritize using the proceeds from the sale of the enterprise to settle the enterprise's debts to the Social Insurance Authority. If there is a shortfall, it will be considered and supported for settlement from the Enterprise Restructuring and Shareholding Support Fund.

Article 15.Handling Debts Owed to Organizations and Individuals

Enterprises with conversion decisions must settle all debts owed to creditors inside and outside the enterprise before implementing the conversion. In cases where the enterprise encounters difficulties or needs additional funding, restructuring debts and obtaining creditor approval, the enterprise may convert the debt into shares in the converted enterprise but must comply with legal provisions on the minimum number of shareholders and the right to purchase initial shares in shareholding enterprises.

Article 16. Other Debts Owed by Operating Enterprises

1. Enterprises importing goods according to directives from competent state agencies and distributing according to the national plan but failing to collect money to repay debts must report to the Ministry of Finance for consolidation and submission to the Prime Minister for decision-making to provide the enterprise with funds to repay debts.

2. Enterprises importing goods according to directives from competent state agencies, if the goods become inventory, stagnant, and unsellable, can be liquidated and reduced in value. The liquidation process shall be carried out in accordance with the law.

3. Enterprises undertaking foreign borrowing to import goods according to directives from competent state agencies or according to the national plan, if exchange rate differences between the borrowing and repayment periods result in the enterprise being unable to repay the debt, the Ministry of Finance shall inspect and consider allocating budget funds for the exchange rate difference to enable the enterprise to repay the debt.

4. Enterprises borrowing abroad with guarantees from competent state agencies or other organizations, but suffering losses and unable to repay debts, the guarantor agencies and organizations shall lead negotiations with foreign creditors to reduce the debt to the lowest possible level and allocate funds from the same-level budget to repay foreign debts. Enterprises whose foreign debts are repaid by the budget are responsible for reimbursing the budget. If there are difficulties, the agencies and organizations that guaranteed the enterprise's borrowing shall report to the Ministry of Finance to submit to the Prime Minister for decision.

Article 17. Handling State Enterprises with Large Debts Unable to Repay

State enterprises that have been reorganized but still have large debts that theyare unable to repay must be dissolved or declared bankrupt according to the law.In cases where it is necessary to maintain the enterprise and the enterprise has aneffective business plan approved by the competent authority, the provincial people'scommittee, ministries managing the industry, and state corporations shall proposemeasures for handling the situation and submit them to the Ministry of Financefor consideration to support part of the capital from the cost of restructuringstate enterprises, creating financial conditions for the enterprise to operate normally.If the matter exceeds their authority, they shall report to the Prime Minister for adetermination.

 

PART IV

AUTHORITY, MANAGEMENT RESPONSIBILITY AND DEBT HANDLING

Article 18. Authority to Handle Debts

1.Minister of Finance:

a)Decide on the write-off of tax debts, amounts payable to the budget, and theconversion of overdue budget debts into budgetary support investment capital forstate enterprises.

b)Decide on the handling of purchase-sale price differences for organizationswith the function of purchasing and selling debts and assets for overdue receivablesfrom converted enterprises transferred to these organizations for handlingaccording to the decision of the competent authority from the cost of restructuringenterprises.

c)Decide on reducing capital for independent accounting enterprises under statecorporations and ministries, agencies equivalent to ministries, and governmentagencies.

d)Decide on supporting capital or handling reduced losses for enterprises fromthe cost of restructuring state enterprises according to the Government's decision.

đ)Decide on handling export and import tax debts according to Article 11 of thisDecree.

e)Take the lead together with the State Bank of Vietnam and relevant agencies indirecting and organizing the handling of debts for state enterprises and financialhandling for state commercial banks when implementing debt extension, debtwrite-off, or debt cancellation for enterprises according to this Decree.

2.Director General of the General Department of Customs shall cooperate with theMinistry of Finance to examine and handle export and import tax debts accordingto this Decree.

3.Governor of the State Bank of Vietnam shall take the lead and cooperate with theMinistry of Finance to direct and decide on the implementation of debt extension,debt write-off, debt cancellation, and the conversion of bank loans into sharecapital at enterprises undergoing transformation.

4.Ministers, Heads of agencies equivalent to ministries, members of the Board ofDirectors of state corporations shall cooperate with the Ministry of Finance tohandle debts for independent accounting enterprises directly under their jurisdiction.

5.Chairmen of People's Committees of provinces and centrally governed citiesshall examine and decide on reducing capital and handling debts for independentaccounting enterprises under their jurisdiction.

Article 19. Management and Debt Handling Responsibilities

1.Enterprises are responsible for establishing regulations on debt management,keeping books to track debts according to current regulations, assigning staff tomanage debts, regularly reconciling accounts, urging payment, and activelyseeking all measures to recover outstanding debts; promptly settling debts due inorder to prevent recurring arrears.

2.In cases where overdue receivables cannot be recovered, enterprises must analyzeboth subjective and objective reasons, determine individual and collectiveresponsibility for compensation. If the non-recovery is due to unresolved contractdisputes, the legal representative of the enterprise shall be responsible for findinga final solution. The enterprise must set aside provisions for difficult-to-collectreceivables and handle unrecoverable receivables according to the provisions ofthis Decree.

3.Receivables arising after December 31, 2000, must be settled definitively uponmaturity and not left outstanding. The legal representative of the enterprise shallbe responsible if outstanding receivables arise. For difficult-to-collect receivables,enterprises must proactively handle them according to legal provisions and notleave them outstanding for more than three years.

4.The Board of Directors or the General Director (for enterprises without a Boardof Directors) shall implement the handling of overdue receivables that areunrecoverable according to the above provisions and bear legal responsibility fortheir handling. For enterprises undergoing transformation, the reduction inenterprise value and state-owned equity value, the enterprise's General Directormust report to the competent state agency to decide on the enterprise valueaccording to the regulations.

 

CHAPTER V

IMPLEMENTING PROVISIONS

Article 20. Establishment of organization to perform functions of buying and selling debts and accumulated assets

1. Establish an organization for buying and selling debts and accumulated assets to support the resolution of debt payment and asset issues when restructuring and reorganizing state-owned enterprises, thereby promoting the process of converting state-owned enterprises.

2. The organization for buying and selling debts and accumulated assets shall be provided with sufficient registered capital from the enterprise reform costs by the State, and shall be supported by the State for the difference between the value of receivable debts and the actual amount collected from difficult-to-collect and unrecoverable receivable debts transferred from converted enterprises according to the decision of the competent state agency from the enterprise reform costs.

Article 21. Effective Date

This Decree takes effect fifteen days after the date of issuance. Previous Decisions on debt settlement that are not contrary to this Decree remain in force.

Article 22. Guidance on Implementation

Ministers, Heads of ministerial-level agencies, Heads of government-affiliated agencies, Chairmen of People's Committees of provinces and centrally governed cities, Boards of Directors of State-owned Corporations, General Directors, Directors of state-owned enterprises, Central Debt Settlement Steering Committee, and Debt Settlement Committees at all levels are responsible for guiding, directing, and organizing the implementation of this Decree./.