Circular No. 73/2003/TT-BTC guides the implementation of the Regulations on capital contribution and share purchase by foreign investors in Vietnamese enterprises.

 CIRCULAR

Guidelines for Implementing the Regulations on Foreign Investors' Capital Contribution and Share Purchase in Vietnamese Enterprises

Pursuant to Decision No. 36/2003/QĐ-TTg dated March 11, 2003 of the Prime Minister regarding the issuance of the Regulations on Foreign Investors' Capital Contribution and Share Purchase in Vietnamese Enterprises (referred to as the Regulations attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003 of the Prime Minister), the Ministry of Finance provides guidance on certain financial matters as follows:

I. GENERAL PROVISIONS

1- Object and Scope of Application

1.1- Object of Application of this Circular

- Foreign investors contributing capital and purchasing shares in Vietnamese enterprises as stipulated in Article 2 of the Regulations attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003 of the Prime Minister.

- Vietnamese enterprises receiving foreign investors' capital contributions and selling shares to foreign investors including state-owned enterprises undergoing shareholding reform, joint-stock companies (including joint-stock companies formed through the shareholding reform of state-owned enterprises and those established under the Enterprise Law), limited liability companies, partnerships, Cooperative Federations, and cooperatives engaged in business activities in sectors and industries determined by the Prime Minister or delegated to the Minister of Planning and Investment to announce at different periods.

- Shareholders holding shares in joint-stock companies, members holding capital contributions in limited liability companies, partnerships, Cooperative Federations, and cooperatives.

1.2- Scope of Application

This Circular applies to the activities of foreign investors contributing capital and purchasing shares in Vietnamese enterprises according to the Law on Encouragement of Domestic Investment and in the forms prescribed in Article 5 of the Regulations attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003 of the Prime Minister.

This Circular does not apply to the activities of foreign investors contributing capital and purchasing shares according to the Law on Foreign Investment in Vietnam.

2- Maximum Level of Foreign Investors' Capital Contributions and Share Purchases in Vietnamese Enterprises

Foreign investors contributing capital and purchasing shares in Vietnamese enterprises shall not exceed 30% of the charter capital of Vietnamese enterprises.

- In cases where foreign investors purchase shares issued for the first time from state-owned enterprises undergoing shareholding reform, the total value of the shares shall not exceed 30% of the projected charter capital in the shareholding reform plan approved by the Minister, Head of a Government Agency at the equivalent level (for enterprises under central management), or the Chairman of the People's Committee of provinces and centrally-administered cities (for enterprises under local management).

- In cases where multiple foreign investors simultaneously register to contribute capital and purchase shares with a value exceeding 30% of the charter capital, the enterprise shall decide based on actual circumstances whether to select partners without auction or organize an auction to choose partners (self-organized auction or through a financial intermediary organization).

- In cases where only one foreign investor contributes capital and purchases shares in a Vietnamese enterprise, they may also contribute capital and purchase shares up to a maximum of 30% of the charter capital of the enterprise.

3- Authority to Decide on Acceptance of Capital Contributions and Sale of Shares to Foreign Investors

3.1- For state-owned enterprises undergoing shareholding reform organizing the first sale of shares in accordance with Clause 24 of Decree No. 64/2002/NĐ-CP dated June 19, 2002 of the Government on the conversion of state-owned enterprises into joint-stock companies:

- State-owned enterprises under central management: decided by the Minister, Head of a Government Agency at the equivalent level.

- State-owned enterprises under local management: decided by the Chairman of the People's Committee of provinces and centrally-administered cities.

3.2- For joint-stock companies, shareholders in joint-stock companies, limited liability companies, partnerships, Cooperative Federations, cooperatives, and members in these organizations: the authority to decide shall be implemented in accordance with Clause 2 and Clause 3 of Article 6 of the Regulations attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003 of the Prime Minister.

II- SPECIFIC PROVISIONS

1- Implementation of Share Purchase and Sale and Capital Contribution

1.1- Selling Shares

1.1.1- For state-owned enterprises undergoing shareholding reform:

- State-owned enterprises undergoing shareholding reform that have the need and ability to mobilize foreign capital, technology, and management experience must determine the value of shares intended for sale to foreign investors in the initial share structure when drafting the shareholding reform plan to be submitted for approval by the Minister, Head of a Government Agency at the equivalent level (for enterprises under central management), or the Chairman of the People's Committee of provinces and centrally-administered cities (for enterprises under local management).

- The initial share structure of state-owned enterprises undergoing shareholding reform and the sale of shares to foreign investors shall comply with the provisions of Article 23 of Decree No. 64/2002/NĐ-CP dated June 19, 2002 of the Government on the conversion of state-owned enterprises into joint-stock companies. After determining the shares held by the State (if any), preferential shares sold to employees of the enterprise, and preferential shares sold to producers and suppliers of raw materials, the remaining shares will be sold outside the enterprise, including sales to foreign investors.

- After the shareholding reform plan of the state-owned enterprise has been approved by the competent authority, the enterprise must announce on mass media the sale of shares outside the enterprise and publicly disclose key information about the enterprise for foreign investors to review. The sale of newly issued shares outside the enterprise shall be carried out in accordance with Circular No. 80/2002/TT-BTC dated September 12, 2002 of the Ministry of Finance on guiding the guarantee of share issuance and auction sale of shares outside state-owned enterprises undergoing shareholding reform.

1.1.2- For operating joint-stock companies:

- The Board of Directors or General Director of the company builds an investment plan and additional share issuance plan to raise capital, including selling shares to foreign investors, to be submitted for decision by the General Meeting of Shareholders or the Board of Directors (as stipulated in the company's charter).

In the case where a joint-stock company sells treasury shares to foreign investors, the Board of Directors or the General Director of the company must develop a plan to be submitted to the Shareholders' Meeting or the Board of Directors (as stipulated in the company's charter and operational regulations) for decision.

- Joint-stock companies listed on the securities market: shall sell shares publicly on the securities market in accordance with the laws of Vietnam regarding securities and the securities market.

- Joint-stock companies not listed on the securities market: shall sell shares within the enterprise or through financial intermediaries established in accordance with the law. The joint-stock company must publicly announce on mass media the sale of shares to foreign investors (number of shares sold, expected selling price, start date of sale); provide necessary information about business conditions, capital, and funds of the company for the reporting year and two preceding years to investors. The joint-stock company and foreign investors shall negotiate and independently decide on the purchase and sale of shares.

Joint-stock companies may hire financial intermediaries to sell shares to foreign investors in accordance with Circular No. 80/2002/TT-BTC dated September 12, 2002, issued by the Ministry of Finance, guiding public auction and underwriting issuance of shares outside enterprises.

1.1.3- For shareholders in joint-stock companies

Shareholders in joint-stock companies selling shares to foreign investors must comply with the provisions of the Enterprise Law, the company's charter, and register with the company to ensure that the proportion of foreign investment does not exceed 30% of the registered capital of the enterprise.

1.2- Accepting contributions from foreign investors

Limited liability companies, partnerships, federations of cooperatives, and cooperatives accepting contributions from foreign investors shall implement according to Clause 2 Article 9 and Clause 3 Article 11 of the Regulation attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003, of the Prime Minister.

1.3- Foreign investors purchasing shares, contributing capital to Vietnamese enterprises shall implement according to Clause 1 Article 11 of the Regulation attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003, of the Prime Minister. In cases where foreign investors do not have the conditions to directly participate in auctions (with multiple foreign investors registering), they shall negotiate with the seller on the purchase and sale prices of shares and contribution prices according to Point 2 Section II of this Circular.

2- Price of share sales, contribution capital

2.1- Price of share sales

- The price of the initial issuance of shares of state-owned enterprises undergoing corporatization is determined according to Decree No. 64/2002/NĐ-CP dated June 19, 2002, of the Government on converting state-owned enterprises into joint-stock companies and Circulars No. 79/2002/TT-BTC dated September 12, 2002, and No. 80/2002/TT-BTC dated September 12, 2002, guiding the implementation of Decree No. 64/2002/NĐ-CP on converting state-owned enterprises into joint-stock companies.

- The price of shares of joint-stock companies listed on the securities market is based on the securities market price.

- The price of shares of joint-stock companies not listed on the securities market is agreed upon between the buyer and seller but cannot be lower than the price offered to domestic investors.

- The price of shares owned by shareholders is agreed upon between the shareholder and the foreign investor, decided by the shareholder independently and cannot be lower than the market price of the securities market for listed joint-stock companies or lower than the price offered to domestic investors for unlisted joint-stock companies.

2.2- Contribution capital price

- The contribution capital price of foreign investors to become new members in limited liability companies, partnerships, federations of cooperatives, and cooperatives is decided by the board of directors (for limited liability companies with multiple members), general partners, and capital contributors (for partnerships), and the cooperative member assembly (for federations of cooperatives, cooperatives) after negotiating with the contributor.

- The price of reselling the contribution capital of members in limited liability companies, partnerships, federations of cooperatives, and cooperatives is agreed upon between the member and the foreign investor and cannot be lower than the price offered to other members in the enterprise.

3- Information before and after completion of share sales, acceptance of foreign investor contributions

3.1- Information before selling shares, accepting contributions

Within thirty days prior to implementing the sale of shares, acceptance of contributions from foreign investors (including both auction and non-auction cases), Vietnamese enterprises must provide key information: name and address of the enterprise; number of shares sold, amount of capital received; necessary information about business conditions, capital, and funds of the enterprise for the reporting year and two preceding years; conditions for participating in auctions; payment methods, and other related issues on mass media (newspapers, radio, central and local television stations) at least three consecutive times.

3.2- Reporting results of share sales, acceptance of foreign investor contributions

Within fifteen days after completing the sale of shares, acceptance of contributions, the enterprise must prepare a report and send it to the following authorities:

- State-owned enterprises undergoing corporatization: send to the Minister, head of the equivalent ministry (for enterprises under central management); send to the chairman of the provincial people's committee, city people's committee directly under the central government (for enterprises under local management).

- Joint-stock companies, limited liability companies, partnerships, federations of cooperatives, and cooperatives: send to the authority issuing the business registration certificate.

4. Rights and obligations of foreign investors: implemented according to Articles 15 and 16 of the Regulation attached to Decision No. 36/2003/QĐ-TTg dated March 11, 2003, of the Prime Minister.

III- IMPLEMENTATION PROVISIONS

This Circular takes effect fifteen days after its publication in the Official Gazette and replaces Circular No. 132/1999/TT-BTC dated November 15, 1999, of the Ministry of Finance guiding the sale of shares to foreign investors. During implementation, if there are difficulties, enterprises and foreign investors are advised to promptly report them to the Ministry of Finance for study and resolution.