Circular No. 76/2002/TT-BTC guiding financial issues when converting state-owned enterprises into joint-stock companies

CIRCULAR

OF THE MINISTRY OF FINANCE NO. 76/2002/TT-BTC SEPTEMBER 9, 2002 GUIDING FINANCIAL ISSUES WHEN TRANSFORMING STATE ENTERPRISES INTO JOINT STOCK COMPANIES
TRANSFORMING STATE ENTERPRISES INTO JOINT STOCK COMPANIES

 

Implementing Decree No. 64/2002/NĐ-CP dated June 19, 2002 of the Government on transforming state enterprises into joint stock companies (hereinafter referred to as Decree No. 64/2002/NĐ-CP), the Ministry of Finance guides financial issues as follows:

 

PART I
GENERAL PROVISIONS

 

Article 1. The subjects of this Circular are state enterprises and dependent units of state enterprises as prescribed in Article 2 of Decree No. 64/2002/NĐ-CP and implementing the transformation into joint stock companies under this Decree.

Enterprises listed in Section III, Part A, Criteria, and Classification List of State Enterprises and State Corporations issued together with Decision No. 58/2002/QĐ-TTg dated April 26, 2002 of the Prime Minister shall not be the objects of transformation into joint stock companies.

Article 2. Some terms in this Circular are understood as follows:

2.1 "Dependent unit of an enterprise that meets the conditions for independent accounting" means a dependent unit of an enterprise which has met the conditions for organizing accounting and statistical reporting on production and business activities of the unit up to final results and implementing financial reporting systems as prescribed by the State.

2.2 "Revenue from selling state-owned shares in the enterprise" means the amount of money received from selling state-owned shares in the enterprise, excluding the value of preferential treatment for employees and producers supplying raw materials to agricultural, forestry, and aquatic product processing enterprises.

2.3 "The time when a state enterprise transforms into a joint stock company operating under the Enterprise Law" means the time when the joint stock company is granted a business registration certificate.

Article 3. Depending on the scale of capital and specific conditions of the enterprise, when determining the plan for transforming state enterprises into joint stock companies, enterprises may choose and apply one of the forms of transformation prescribed in Article 3 of Decree No. 64/2002/NĐ-CP.

In the case where the enterprise implements transformation according to the form prescribed in Clause 1, Article 3 of Decree No. 64/2002/NĐ-CP: "Maintaining the existing state capital at the enterprise, issuing shares to attract additional capital," the value of state shares contributed to the company is determined by subtracting (-) the transformation costs, the value of preferential treatment for employees within the enterprise (including the value of deferred payment shares for the poor) and producers supplying raw materials to agricultural, forestry, and aquatic product processing enterprises from the actual value of state capital at the enterprise.

 

Article 4. The State will only hold controlling shares (over 50% of charter capital) of transformed joint stock companies operating in industries and meeting the conditions as prescribed in Point 1, Section II of the Criteria and Classification List of State Enterprises and State Corporations issued together with Decision No. 58/2002/QĐ-TTg dated April 26, 2002 of the Prime Minister.

Article 5. Members of state corporations after transformation into joint stock companies if the State retains over 50% of the charter capital remain members of the corporation but operate under the Enterprise Law and do not have to pay upper-level management fees. The corporation is only entitled to transfer its state-held shares in joint stock companies based on ensuring legal regulations and the Company's Articles of Association. After the shareholding reform, if the State retains more than 50% of the charter capital, it remains a member of the Joint Stock Corporation but operates under the Enterprise Law and does not need to pay overhead costs. The Joint Stock Corporation is only permitted to transfer its State-owned shares in joint stock companies based on ensuring compliance with legal regulations and the Company's Articles of Association.

Article 6. Upon receipt of the decision to implement transformation into joint stock companies from the competent authority, the enterprise must promptly carry out tax settlement and clearance, handle financial issues of the enterprise, and implement steps for transformation into joint stock companies. Financial management agencies and tax authorities are responsible for coordinating with the enterprise to immediately carry out tax settlement and clearance and handle financial issues of the enterprise according to the State-prescribed regulations.

 

PART TWO
ISSUES REGARDING THE TRANSITION OF STATE ENTERPRISES TO JOINT-STOCK COMPANIES
TRANSFER OF STATE ENTERPRISES TO
JOINT STOCK COMPANIES

 

I. INVENTORY AND CLASSIFICATION OF ASSETS AT STATE ENTERPRISES

 

Upon receiving the decision to implement joint-stock reform from the competent authority, the enterprise shall organize the inventory and classification of assets under its management and use at the time of preparing the financial settlement report for the most recent quarter before the date of the joint-stock reform decision:

1. Conduct an inventory to accurately determine the quantity and quality of actual assets currently managed and used by the enterprise at the time of the inventory. Identify excess or missing assets compared to accounting records, and analyze the reasons for such discrepancies.

2. Classify inventoried assets into the following groups:

2.1 Assets that the enterprise needs to use.

2.2 Assets that the enterprise does not need to use, surplus assets, assets awaiting liquidation, and assets without the ability to be restored for production and business activities.

2.3 Assets formed from welfare and reward funds (if any).

2.4 Leased assets, materials and goods held in custody, processed on behalf of others, sold on behalf of others, or consigned.

3. Verify and classify accounts receivable and payable, prepare detailed lists for each type of account according to the following provisions:

3.1 Accounts payable, including:

a. Overdue accounts payable.

 

b. Accounts payable that do not need to be paid due to the creditor no longer existing to claim payment (the enterprise has been dissolved, declared bankrupt, the creditor has died) or the creditor did not reconcile and claim payment despite the enterprise having issued a request to the creditor or announced it through mass media.

3.2 Accounts receivable, including: recoverable accounts receivable and non-recoverable accounts receivable. Analyze each non-recoverable accounts receivable item clearly, which includes overdue or non-overdue accounts receivable belonging to one of the following cases:

- The debtor is an enterprise or organization that has been dissolved, declared bankrupt, or ceased operations and is unable to pay.

- The debtor is an individual who has died, disappeared, is serving a prison sentence, or whose heir, according to a court ruling, is unable to pay. The debtor is being prosecuted, detained, or tried by law enforcement authorities but there is sufficient evidence to prove that the debt is unrecoverable.

- Accounts receivable from debtors who have been decided by the competent authority to write off debts according to the law.

- Accounts receivable where the estimated cost of collection exceeds the value of the accounts receivable.

- Accounts receivable that have exceeded the payment deadline for three years or more, with the debtor still existing and operating but suffering losses or facing extreme difficulties in making payments, and the enterprise has actively applied various solutions but still cannot collect the debt.

4. Organize the assessment and determination of the value of assets that the enterprise needs to use according to the regulations set by the State.

5. Check cash reserves, reconcile bank balances at the time of determining the enterprise's value for joint-stock reform.

 

II. RESOLUTION OF FINANCIAL ISSUES PRIOR TO DETERMINING THE VALUE
OF THE ENTERPRISE ENTERPRISE

 

1. Handling of Assets

Based on the results of the asset inventory and classification, the enterprise handles assets according to Article 9 of Decree No. 64/2002/NĐ-CP, wherein:

1.1 For excess or missing assets identified during the inventory, the enterprise must analyze the causes of the excess or missing assets and handle them as follows:

- For missing assets, determine the extent of responsibility for compensation by organizations or individuals along with administrative measures according to current regulations; the value of the missing assets, after deducting the compensation amount, shall be recorded in the enterprise's business results.

- For excess assets, if the cause cannot be determined and the owner cannot be found, they shall be recorded in the enterprise's business results.

1.2 For assets that the enterprise does not need to use, surplus assets, and assets awaiting liquidation, handle them as follows:

a. The enterprise must report to the competent authority to transfer these assets to other units for management and use specifically:

- If transferred to units within the same ministry, the ministry in charge decides; if transferred to units under provincial or municipal management, the Chairman of the Provincial People's Committee or Municipal People's Committee decides.

- If transferred to units outside the ministry or outside the locality, the ministry in charge, the Chairman of the Provincial People's Committee or Municipal People's Committee shall submit to the Prime Minister for consideration and decision.

Based on the Memorandum of Asset Transfer according to the decision of the competent authority, the enterprise undergoing joint-stock reform and the receiving enterprise shall adjust their capital increases or decreases according to the value of the assets recorded in the books of the enterprise undergoing joint-stock reform.

b. In the absence of a receiving unit, the enterprise shall proactively organize the liquidation and sale of assets according to the State's regulations. The sale of assets shall be conducted through public auction according to current State regulations. The enterprise must establish a Liquidation and Sale Council chaired by the General Director. Expenses and revenues from the liquidation and sale of assets during this period shall be recorded as extraordinary income and expenses according to State regulations.

c. If the assets have not yet been handled by the valuation date, the value of the unnecessary assets shall be excluded and not included in the enterprise's value for joint-stock reform. The enterprise shall continue to monitor and handle these assets until officially transitioning to a joint-stock company.

1.3 For welfare facilities such as kindergartens, clinics, and housing for employees funded by welfare and reward funds, they shall not be included in the enterprise's value for joint-stock reform but shall be transferred to the workforce for management and use through trade unions.

Specifically, housing for employees (including housing funded by state budget) shall be the responsibility of the enterprise to compile files and complete procedures for transferring to local land management agencies for management or sale to current occupants according to current regulations.

Specifically, housing for employees (including housing funded by the State budget) shall be collected and processed for transfer to local land management authorities for management or sold to current users according to current regulations by the enterprise.

1.4 Assets invested with funds from the Reward Fund and Profit Sharing Fund of the enterprise but currently used in production and business operations shall be included in the value of the enterprise for shareholding reform at the re-evaluated asset value. The portion of this asset value shall be converted into shares belonging to employees whose names are on the regular list of the enterprise at the time of shareholding reform and distributed according to the actual working time of each employee at the enterprise.

2. Handling difficult-to-collect receivables

Difficult-to-collect receivables shall be handled in accordance with Article 10 of Decree No. 64/2002/NĐ-CP, including:

2.1 For receivables that have no possibility of recovery, the enterprise must provide specific evidence to prove such as:

- Evidence proving that the enterprise or organization has ceased operations and is unable to pay off debts.

- For enterprises that have been dissolved or declared bankrupt, there must be a dissolution decision from the establishment authority or a court decision regarding the insolvent entity.

 

- A certificate from local authorities confirming that individual debtors who have died, disappeared, have no inheritable assets to repay debts, are serving sentences, under prosecution, detained, or being tried and thus unable to repay debts.

- An arrest warrant or confirmation from law enforcement agencies for individual debtors who have fled.

- A decision from the competent authority regarding the write-off of unrecoverable debts by the enterprise.

- For receivables that have existed for over three years but the debtor still exists and is unable to repay, and the enterprise has applied various measures without success, the enterprise must provide evidence such as: Debt reconciliation statements with debtors, demand letters, and letters requesting the court to declare bankruptcy in accordance with the Law.

Receivables that have sufficient evidence proving they cannot be recovered shall be handled in accordance with Clauses 1, 2, and 3 of Article 10 of Decree No. 64/2002/NĐ-CP.

2.2 For other overdue receivables, the enterprise must continue to collect debts or sell them to economic organizations with the function of buying and selling debts at agreed prices, and may not directly sell debts to debtors. Losses from selling debts shall be handled in accordance with Clause 1 of Article 10 of Decree No. 64/2002/NĐ-CP.

2.3 During the period before officially becoming a joint-stock company, the enterprise still bears the responsibility to monitor and organize the collection of debts that have been excluded from the valuation of the shareholding enterprise.

3. Handling payable debts

Payable debts shall be handled in accordance with Article 11 of Decree No. 64/2002/NĐ-CP, including:

3.1 For payable debts that cannot be paid, they shall be recorded as extraordinary income of the enterprise.

3.2 For tax debts and other amounts payable to the State budget: After handling receivables in accordance with Section 2 above, if the enterprise still lacks the ability to pay tax debts and other amounts payable to the State budget, based on the financial status and reasons for arrears, the enterprise shall prepare a report to the Tax Department for inspection before submitting to the Ministry of Finance for consideration and decision to apply measures such as writing off, deferring, providing investment capital support, or writing off tax arrears and other amounts payable to the State budget up to the cumulative loss amount at the valuation date. Procedures and formalities follow the guidelines in Part B, Section IV of Circular No. 32/2002/TT-BTC dated April 10, 2002, issued by the Ministry of Finance on handling deferred payments, write-offs, and cancellations of tax arrears and other amounts payable to the State budget for enterprises and production and business establishments facing difficulties due to external factors.

3.3 For overdue bank loans: In cases where the enterprise encounters difficulties and cannot balance sources to pay off overdue debts, the General Director of the State Commercial Bank shall consider and decide to allow the enterprise to write off, defer overdue debts until the shareholding reform decision within a period of 3 to 5 years. If these enterprises suffer losses and lack the ability to pay, interest on loans, including accrued interest, can be written off up to the remaining loss amount.

The shareholding enterprise shall proactively coordinate with the main creditor bank and organizations with the function of buying and selling debts to handle the remaining overdue principal debt through purchasing or reselling the debt or converting the debt into the bank's equity contribution in the shareholding enterprise in accordance with the law on equity contribution ratios.

3.4 For overdue foreign payable debts with guarantees, the enterprise and guarantor must negotiate with creditors to cancel interest, write off debts, or reduce principal and arrange sources to repay debts. If the enterprise cannot arrange repayment sources, the guarantor is responsible for arranging repayment sources according to the committed terms for the enterprise. The enterprise is responsible for repaying the guarantor or converting the payable debt into the guarantor's equity contribution in the joint-stock company.

3.5 For social insurance debts and employee debts: The enterprise is responsible for settling these debts completely before shareholding reform to ensure the rights of employees.

3.6 The conversion of payable debts into share contributions in the shareholding enterprise must meet the following requirements:

It must be carried out through the results of auctioning shares.

If the creditor does not have the conditions to participate directly in the auction, the enterprise and the creditor shall sign an agreement on the conversion price of debt into share contributions before the auction, which will be the price at which the creditor participates in the auction. If the parties participating in the auction have the same bid price, the creditor has the right of priority to convert debt into share contributions at the agreed price. Specifically, the conversion of payable debts owed by employees in the enterprise into shares shall be carried out at the floor price stipulated in Article 21 of Decree No. 64/2002/NĐ-CP.

b. Comply with state regulations on the right to purchase initial shares and the state's controlling shareholding in enterprises.

4. Provisions and undistributed profits

Before determining the value of the enterprise, provisions for inventory write-downs, doubtful debts, securities write-downs, exchange rate differences, employment termination benefits, financial reserves... and undistributed profits shall be handled according to the following regulations:

a. The balance of inventory write-down provisions, doubtful debt provisions, and securities write-down provisions (after offsetting losses from inventory write-downs, securities write-downs, and handling difficult receivables at the time of determining the enterprise's value as prescribed by the State) shall be restored to the enterprise's income.

b. The balance of exchange rate differences shall be handled as follows:

- For unfinished construction projects if there are exchange rate differences, after offsetting increases and decreases, they must be included in the project value when determining the enterprise's value.

- For exchange rate differences arising from other foreign currency transactions, after offsetting increases and decreases, they shall be recorded as financial expenses or income of the enterprise according to the State's regulations.

c. The balance of the Employment Termination Benefits Reserve: The Employment Termination Benefits Reserve shall be retained to address surplus labor policies under current regulations. If there is no need to use it or it is not fully utilized, it must be restored to the enterprise's post-tax income.

d. The balance of the Financial Reserve: The Financial Reserve shall be used to cover remaining losses on assets and losses (if any) of the enterprise during the business period up to the time of determining the enterprise's value. The remainder shall be restored to the enterprise's post-tax income.

e. In cases where the enterprise has accumulated losses from previous years, pre-tax income available up to the time of privatization shall be used to offset these losses before implementing measures to write off tax debts, budget payments, and overdue loans from State Commercial Banks. Post-income tax revenues shall be distributed according to current regulations.

5. Assets Contributed to Joint Ventures with Foreign Countries.

Assets contributed to joint ventures with foreign countries shall be handled according to Article 13 of Decree No. 64/2002/NĐ-CP, wherein:

5.1 In cases where enterprises undergoing privatization inherit joint venture activities, the value of assets contributed to joint ventures must be included in the value of the privatized enterprise.

5.2 In cases where enterprises undergoing privatization do not inherit joint venture activities, they must prepare reports for the competent authority deciding on privatization to consider and decide on the handling of assets contributed to joint ventures as follows:

+ Agreeing to buy or sell back joint venture contributions.

+ Agreeing with the joint venture capital contributor to transfer the contribution to another entity as a partner according to the decision of the competent authority.

+ In cases where the enterprise undergoing privatization and the foreign partner agree to terminate the joint venture contract, it shall be handled according to Circular No. 22/2002/TT-BTC dated March 11, 2002, issued by the Ministry of Finance, guiding the financial treatment and accounting for state-owned enterprises in Vietnam that have contributed capital to establish joint ventures under the Law on Foreign Investment in Vietnam when the joint venture ceases operations.

6. Balances in the Reward Fund and Welfare Fund: These shall be distributed to employees whose names are on the regular list of the enterprise at the time of the privatization decision to purchase shares. The distribution method shall be decided by the enterprise director after consultation with the trade union organization based on each employee's contribution level. Employees do not have to pay income tax on this income.

In cases where, prior to privatization, the enterprise has exceeded the Reward and Welfare Funds, it shall be treated as a pending receivable. Specifically:

- For expenditures made to employees still working in the enterprise before privatization, they shall be deducted from the portion of asset value used to distribute shares to employees in the enterprise according to Clause 1.4, Point 1, Section II of this Circular (if applicable); The enterprise shall be responsible for recovering the shortfall from employees before implementing preferential discounts on share sales or termination benefits.

- For excess expenditures from the Reward and Welfare Funds due to recording production and business operation costs, charitable donations, and supplementary wages, bonuses, and welfare for employees who have left or terminated their employment before the valuation date, the enterprise must report to the financial authority and the authority determining the enterprise's value for consideration and handling as an uncollectible debt.

 

III. FINANCIAL HANDLING FROM THE TIME OF DETERMINING THE ENTERPRISE'S VALUE TO THE TIME THE ENTERPRISE OFFICIALLY TRANSFORMS INTO A JOINT-STOCK COMPANY
ENTERPRISE VALUE DETERMINATION TO THE TIME THE ENTERPRISE OFFICIALLY TRANSFORMS INTO A JOINT-STOCK COMPANY

 

1. Based on the decision announcing the enterprise's value by the competent authority, the enterprise must adjust its accounting books and balance sheets according to the State's accounting regulations, while continuing to monitor and handle debts and assets excluded when determining the value of the privatized enterprise; fully record all related costs associated with implementing privatization. Part arising during the period.

2. By the time the joint-stock company receives the business registration certificate, the enterprise must proactively prepare financial statements, continue to handle financial issues according to Section II of this Circular, and settle taxes with the tax authority to determine the actual value of the state capital at the time of shareholding reform and complete the handover between the state-owned enterprise and the joint-stock company.

3. The difference between the actual value of the state capital at the time the enterprise transitions to a joint-stock company and the actual value of the state capital at the time the enterprise's value was determined shall be handled as follows:

a. In cases where there is an increase in the difference, it shall be deposited into the Fund for Reorganization and Shareholding Reform of State-Owned Enterprises at the same level.

b. In cases where there is a decrease in the difference, the enterprise must clarify the reasons, identify responsibilities, and handle it as follows:

- Compensate for material losses according to current regulations for the portion of the decrease attributable to individual or collective responsibility.

- After compensating for material losses (if applicable), the competent authority deciding on shareholding reform shall reduce the enterprise's value and notify the management agency of the Fund for Reorganization and Shareholding Reform of State-Owned Enterprises at the same level to supplement capital to ensure the necessary state shareholding ratio in the joint-stock company's charter capital structure. 4. Regarding debts and assets excluded from the enterprise's value:

a. During the transitional period before officially becoming a joint-stock company, the state-owned enterprise is responsible for continuing to monitor and organize the recovery of debts, liquidation, and sale of these assets (including selling them to organizations with the function of buying and selling debts and surplus assets) and depositing all proceeds into the Fund for Reorganization and Shareholding Reform of State-Owned Enterprises.

b. If, by the time the enterprise officially becomes a joint-stock company, these debts and assets have not been fully resolved, the authority deciding on shareholding reform shall consider and decide to transfer the handling of these excluded debts and assets to another enterprise or authorize the company to continue managing and resolving them. The joint-stock company will enjoy 10% of the total proceeds from the sale, liquidation of assets, and recovery of debts to cover costs and has the responsibility to deposit the remaining proceeds into the Fund for Reorganization and Shareholding Reform of State-Owned Enterprises.

The joint-stock company must organize the liquidation and sale of these assets within six months; if this period is exceeded, it must report to the authority deciding on shareholding reform for further action. If the joint-stock company intends to use these assets, it must report to the authority deciding on shareholding reform to lease or purchase them at market prices. part reform examines and decides on the transfer of handling of debts and assets excluded when determining the value of the enterprise being shareholding reformed to other enterprises or entrusts the company to continue managing and handling them. The joint stock company receives 10% of the total proceeds from the sale, liquidation of assets, and recovery of receivables to cover expenses and is responsible for remitting the remaining revenue to the Fund for Supporting Enterprise Restructuring and Shareholding Reform. part to handle. If the joint stock company has a need to use them, it reports to the authority deciding on the shareholding reform to lease or purchase at market prices.

The joint-stock company must organize the liquidation and sale of these assets within six months; if this period is exceeded, it must report to the authority deciding on shareholding reform for further action. If the joint-stock company intends to use these assets, it must report to the authority deciding on shareholding reform to lease or purchase them at market prices. total number of shares II. Method for Determining Preferential Shares Sold to Producers and Suppliers of Raw Materials for Processing Enterprises of Agricultural, Forestry, and Aquatic Products.

 

IV. SALE OF SHARES

 

1. The enterprise is responsible for developing a plan for selling shares according to the priority sequence and shareholding structure specified in Article 23 of Decree No. 64/2002/NĐ-CP, including:

1.1 A plan for selling shares at preferential prices to producers and suppliers of raw materials for processing enterprises in agriculture, forestry, and aquaculture, as guided by Circular No. 96/2001/TT-BTC dated November 23, 2001, of the Ministry of Finance. In this plan, the sale of shares at preferential prices to aquaculture producers and suppliers is based on the area of aquaculture, the quantity of aquaculture products supplied to the processing enterprise undergoing shareholding reform, and the total value of shares sold at preferential prices. Based on the actual number of shares sold externally and the enterprise's needs for new technology absorption, management experience, and market expansion, the shareholding reform enterprise calculates the number of shares to be sold externally to develop a first-time share sale plan for review and approval by the competent authority. The minimum number of shares expected to be sold externally is determined using the following formula:

1.2 Minimum number of shares expected to be sold externally

 

Joint-stock enterprises with financial conditions suitable for listing on the securities market must ensure the conditions for listing on the securities market according to the Securities Law when selling shares to outside parties.

1.3 In addition to the shares purchased at preferential prices, employees in joint-stock enterprises undergoing shareholding reform have the right to register to purchase the remaining shares (after determining the number of shares sold to outside parties) at the floor price.

If employees in joint-stock enterprises undergoing shareholding reform do not fully register to purchase the shares, the enterprise must promptly adjust its share sale plan and supplement the number of shares sold to outside parties.

2. The initial sale of shares of enterprises undergoing shareholding reform shall be carried out in accordance with Article 24 of Decree No. 64/2002/NĐ-CP.

In cases where joint-stock enterprises have fewer than 500 million VND in issued share value or are located in remote areas and face difficulties in selling through intermediary financial organizations, or if the expected costs for organizing the sale of shares by intermediaries exceed the allowable commission rate, the authority deciding on the shareholding reform shall assign the enterprise to organize the sale of shares to outside parties through auction.

 

V. MANAGEMENT AND USE OF FUNDS FROM SHARE SALES

 

1. Funds from the sale of state-owned shares (including any price difference from auctions) in enterprises undergoing shareholding reform starting from July 5, 2002, shall be managed and used in accordance with Article 25 of Decree No. 64/2002/NĐ-CP and the regulations on managing and using funds from share sales issued by the Ministry of Finance. Funds from the sale of state-owned shares in enterprises undergoing shareholding reform before July 5, 2002, shall be managed and used in accordance with 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.

2. Funds from the sale of shares issued by the enterprise to raise additional capital shall remain within the joint-stock company and be managed and used in accordance with the law and the articles of association of the joint-stock company.

 

VI. COSTS OF SHAREHOLDING REFORM

 

1. Costs of shareholding reform for state-owned enterprises include:

- Costs for printing materials and training on shareholding reform;

- Expenses for inventory and valuation of assets;

- Costs for preparing the shareholding reform plan and drafting the articles of association for the joint-stock company;

- Fees for consulting and auditing services (if applicable);

- Costs for extraordinary general meetings of workers and staff to implement shareholding reform;

- Costs for publicizing information about shareholding reform;

- Costs for organizing the sale of shares (including auction costs);

- Costs for the first general meeting of shareholders;

- Other costs related to shareholding reform.

2. The maximum cost for converting state-owned enterprises into joint-stock companies is determined as follows:

+ Enterprises with actual value under 5 billion VND can spend up to 100 million VND;

+ Enterprises with actual value from 5 billion to 10 billion VND can spend up to 150 million VND;

+ Enterprises with actual value over 10 billion to 20 billion VND can spend up to 200 million VND;

+ Enterprises with actual value over 20 billion to 30 billion VND can spend up to 250 million VND;

+ Enterprises with actual value over 30 billion to 40 billion VND can spend up to 350 million VND;

 

+ Enterprises with actual value over 40 billion to 50 billion VND can spend up to 400 million VND;

+ Enterprises with actual value over 50 billion to 60 billion VND can spend up to 450 million VND;

+ Enterprises with actual value over 60 billion VND can spend up to 500 million VND;

The director of the enterprise undergoing shareholding reform decides on necessary expenses for the shareholding process in accordance with the principles of reasonableness, legality, economy, and full documentation. If the enterprise exceeds these limits, it must report to the Ministry of Finance. please consider and decide.

At the end of the shareholding process, the enterprise must report and settle the shareholding reform costs with the authority responsible for the shareholding reform. The total shareholding reform costs are deducted from the proceeds from the sale of state-owned shares in the enterprise.

 

VII. TRANSFER OF ASSETS AND CAPITAL TO THE JOINT-STOCK COMPANY

 

1. Documents for transferring assets and capital include:

- Financial statements at the time the enterprise officially becomes a joint-stock company and tax settlement reports.

- Decision on the enterprise's value at the time of conversion to a joint-stock company by the competent authority.

- Transfer record of assets and capital established at the time of transfer.

2. The transfer record must contain signatures of representatives from the authority deciding on the shareholding reform, the state-owned enterprise (Director, Chief Accountant), the joint-stock company (Board of Directors, Director, Chief Accountant), and the trade union organization in the company. The transfer record between both parties must clearly show:

- The situation of assets, capital, and labor at the time of transfer.

- Rights and obligations of the joint-stock company that will continue to be inherited.

- Outstanding issues that the joint-stock company is responsible for continuing to resolve (including ongoing monitoring, recovery of debts, excluded assets, delayed payment for share sales...).

 

VIII. PREFERENTIAL REGIME FOR STATE-OWNED ENTERPRISES AND
EMPLOYEES WHEN CONVERTING INTO JOINT-STOCK COMPANIES.

 

1. For state-owned enterprises converted into joint-stock companies

The preferential regime for state-owned enterprises converted into joint-stock companies is implemented in accordance with Article 26 of Decree No. 64/2002/NĐ-CP and guidelines from relevant ministries and sectors. Among which:

1.1 State-owned enterprises undergoing shareholding reform enjoy tax preferences at levels specified in Articles 18 and 21 of Decree No. 51/1999/NĐ-CP dated July 8, 1999, of the Government detailing the implementation of the Law on Encouraging Domestic Investment (amended) No. 03/1998/QH10 for newly established enterprises.

Based on the conditions of the enterprise and the criteria for determining tax exemptions and reductions, the enterprise proactively determines and registers with the tax authority to implement preferential tax policies. At the same time, it must submit copies of the decision approving the privatization plan and the business registration certificate for the tax authority to have grounds to determine the level of preference.

1.2 The joint-stock company has the responsibility to manage, maintain, and develop the welfare fund in the form of assets transferred by state-owned enterprises to ensure benefits for workers in the joint-stock company. In cases where workers do not need to use these assets and the joint-stock company needs them for production purposes, the joint-stock company may purchase or sell them to other entities, and the proceeds shall be transferred to the company's welfare fund.

2. For employees in enterprises

The preferential treatment regime for workers in enterprises is implemented according to the provisions of Article 27 of Decree No. 64/2002/ND-CP, including:

2.1 Workers whose names are on the regular list of the enterprise being privatized at the time of the privatization decision, for each year of work for the State, are entitled to have the State sell up to 10 shares (the par value of one share is 100,000 VND) at a discount of 30% from the par value. According to this provision, when purchasing each preferential share, workers only have to pay 70,000 VND, while 30,000 VND is the preferential value provided by the State to the workers.

2.2 Poor workers in privatized enterprises are allowed to purchase privatized shares at preferential prices through installment payments over 10 years, with a deferral period of three years and gradual repayment over the following seven years without interest. The total number of shares sold to poor workers through installment payments shall not exceed 20% of the total number of preferential shares sold to workers in the enterprise.

2.3 The total preferential value for workers, preferential value for producers and suppliers of raw materials for processing enterprises, and the value of preferential shares sold to poor workers on credit shall be deducted from the state capital in the enterprise and shall not exceed the actual value of the state capital in the enterprise after deducting the required state-held capital and privatization costs.

The sale of preferential shares to producers and suppliers of raw materials for processing enterprises shall only be carried out after the completion of the plan to sell preferential shares to workers in the enterprise.

(The method for determining the number of preferential shares sold to workers, producers, and suppliers of raw materials in state-owned enterprises undergoing privatization is attached as an appendix).

The joint-stock company is responsible for monitoring and organizing the recovery of the value of shares purchased on credit and promptly depositing it into the support fund for restructuring and privatizing state-owned enterprises.

2.4 Shares sold at preferential prices are registered shares, and their owners can only transfer these shares three years after purchase. For shares sold through installment payments to the poor, the owner can only sell them after fully repaying the debt to the State. If the owner wishes to transfer the shares before the above period, they must obtain approval from the Board of Directors. The joint-stock company prioritizes buying back these shares at market price and accounting them into the treasury stock for management and use according to the regulations set by the State.

2.5 Workers hired before April 21, 1998, who lose their jobs or retire early at the time of privatization or within twelve months after the enterprise officially becomes a joint-stock company, are entitled to receive assistance according to Decree No. 41/2002/ND-CP dated April 11, 2002, of the Government regarding policies for surplus labor due to restructuring of state-owned enterprises, Circular No. 11/2002/TT-BLDTBXH dated June 12, 2002, guiding the implementation of certain provisions of Decree No. 41/2002/ND-CP, and supported by the surplus labor support fund to assist the enterprise in payment.

Workers who are dismissed or lose their jobs and do not fall under the category eligible for assistance according to Decree No. 41/2002/ND-CP and the aforementioned documents are entitled to receive assistance according to the Labor Code and are supported by the enterprise restructuring fund for payment as stipulated in Clause 5 and Clause 6 of Article 27 of Decree No. 64/2002/ND-CP dated June 19, 2002, of the Government regarding the conversion of state-owned enterprises into joint-stock companies.

 

PART THREE
IMPLEMENTATION

 

1. Enterprises are entitled to handle financial matters according to the current financial regime and the guidelines set forth in this Circular before determining the enterprise's value.

2. The authority deciding on equitization shall be responsible for urging enterprises undergoing equitization to resolve existing financial issues before determining the enterprise's value.

3. The enterprise's financial authority at the same level shall be responsible for guiding and inspecting the enterprise's handling of financial issues during the equitization process in accordance with state regulations. If there are any difficulties, they must promptly report them to the competent authority for consideration and resolution.

4. This Circular replaces Circular No. 104/1998/TT-BTC dated July 18, 1998, issued by the Ministry of Finance, and takes effect from July 4, 2002.

Any guiding documents concerning the handling of financial matters when converting state-owned enterprises into joint-stock companies that conflict with this Circular shall be abolished.

During implementation, if there are any difficulties, the relevant ministries, sectors, localities, and enterprises undergoing equitization are advised to report them to the Ministry of Finance for study and resolution.

ANNEX

METHODS FOR DETERMINING THE PREFERRED SHARES TO BE SOLD TO EMPLOYEES, PRODUCERS, AND SUPPLIERS OF RAW MATERIALS IN STATE-OWNED ENTERPRISES UNDER EQUITIZATION.
(Announced together with Circular No. 76/2002/TT-BTC dated September 9, 2002)
I. Method for Determining the Total Number of Preferred Shares to be Sold to Employees

- Let S represent the maximum number of preferred shares to be sold to employees in the enterprise.

 

- Let S represent the actual number of preferred shares permitted to be sold to employees in the enterprise (determined based on the actual value of the state capital portion in the enterprise).

- Let T represent the total time worked in the state sector by all employees listed regularly in the enterprise at the time of equitization.₁ - Let G represent the maximum total value of preferences for employees in the enterprise; G represents the actual total value of preferences for employees determined based on the actual value of the state capital portion in the enterprise.

- Let T represent the total time worked in the state sector by all employees listed regularly in the enterprise at the time of equitization.₂ - Let C represent the maximum value of deferred payment shares for poor employees; C represents the actual value of deferred payment shares for poor employees determined based on the actual value of the state capital portion in the enterprise. - Let H represent the actual remaining state capital portion after deducting equitization costs and the necessary state capital portion retained in the joint-stock company.

The number of preferred shares to be sold and the value of preferences for employees and raw material suppliers are determined as follows:

1. The maximum number of preferred shares to be sold is:₁ = T x 10 shares₂ 2. The maximum value of preferences is:

x 30,000 (VND)₁ 3. The maximum value of deferred payment shares is: C₂ x 20% x 70,000 (VND)

- In case G + C ≤ H, employees may purchase preferred shares and deferred payment shares at the maximum levels calculated above.

- In case G + C > H, the number of preferred shares to be sold, the actual value of preferences, and the actual value of deferred payment shares for employees must be recalculated as follows:

1. The actual number of preferred shares permitted to be sold:

Provincial People's Committees set specific prices₁ 2. The actual value of preferences for employees:

3. The actual value of deferred payment shares for employees:

G₁= Provincial People's Committees set specific prices₁ II. Method for Determining Preferred Shares to be Sold to Producers and Suppliers of Raw Materials for Processing Agricultural, Forestry, and Aquatic Products Enterprises

- Let K represent the ceiling on the total value of preferred shares for producers and suppliers of raw materials. Then K = 10% of the value of state capital in the enterprise.

C₁ = S₁ - Let G represent the value of preferences for producers and suppliers of raw materials.

= 30% K₁ - Let S represent the number of preferred shares to be sold to producers and suppliers of raw materials.₁ Ê a. In case H - (G + C) ≥ K, the number of preferred shares to be sold to producers and suppliers of raw materials is determined as follows:

= 30% K₁ - Let S represent the number of preferred shares to be sold to producers and suppliers of raw materials.₁ > 30,000 VND

b. In case H - (G + C) < G, the value of preferences for producers and suppliers of raw materials is:

 

Provincial People's Committees set specific prices1 =	H --------- x Provincial People's Committees set specific prices1
	G1 ĐMT1

 

H - (G + C)

 

G2 =	H --------- x G1
	G1 - Let S represent the number of preferred shares to be sold to producers and suppliers of raw materials.1

 

The number of preferred shares to be sold to producers and suppliers of raw materials is:

 

C2 =	H --------- x C1
	G1 ĐMT1

 

is the preferential value for producers and suppliers of raw materials.

= 30% K

1. The maximum number of preferred shares to be sold is:₃ is the quantity of preferential shares sold to producers and suppliers of raw materials.

G₃ a. In case H - (G

- Let T represent the total time worked in the state sector by all employees listed regularly in the enterprise at the time of equitization.₃ then the quantity of preferential shares sold to producers and suppliers of raw materials is determined as follows:

Determination method:

30,000 VND₁ ĐMT₁) ³ G₃ b. In case H - (G

Provincial People's Committees set specific prices3 =	G3 ---------
	) < G

 

then the preferential value for producers and suppliers of raw materials is:₁ ĐMT₁H - (G₃ The quantity of preferential shares sold to producers and suppliers of raw materials is:

H - (G₁ ĐMT₁)

The quantity of preferential shares sold to growers and suppliers of raw materials is:

 

Provincial People's Committees set specific prices3 =	H - (G1 ĐMT1) ----------------
	) < G