Circular No. 79/2010/TT-BTC guides the financial handling when converting state-owned enterprises into limited liability companies with one member.

I. SCOPE AND APPLICABLE OBJECTS

Article 1. These Circulars regulate the financial handling applicable to the objects specified in Article 7 of Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government, which convert into limited liability companies operating under the Law on Enterprises (hereinafter referred to collectively as enterprises).

Article 2. The objects converting into limited liability companies (referred to collectively as company) must meet the conditions stipulated in Article 8 of Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government and be decided to convert according to the provisions of Article 11 of Decree No. 25/2010/NĐ-CP dated March 19, 2010 of the Government, including:

- Independent state-owned enterprises;

- State-owned enterprises that are parent companies of state economic groups; parent companies in state corporations; parent companies in state corporations belonging to state economic groups; parent companies in the parent company - subsidiary model (collectively referred to as parent companies);

- Independent accounting subsidiaries of state corporations, state economic groups;

- Dependent accounting units of state corporations, parent companies of state economic groups, parent companies of state corporations;

- Agricultural companies, forestry companies, state-owned farms, state-owned forest farms.

II. PROVISIONS ON FINANCIAL HANDLING WHEN CONVERTING STATE-OWNED ENTERPRISES INTO LIMITED LIABILITY COMPANIES

Article 3. Enterprises falling within the scope of conversion into limited liability companies shall be responsible for inventorying assets, sources of capital, and existing funds, preparing financial statements (consolidated financial statements for parent companies) at the end of December 31, 2009 (as stipulated in Clause a Point 1 of Circular No. 570/TTg-ĐMDN dated April 9, 2010 of the Prime Minister on the implementation of Decree No. 25/2010/NĐ-CP) to develop a conversion plan and record it in the conversion decision. Specifically:

1. Inventory, classify, and determine the quantity of current assets at the enterprise (including short-term and long-term assets, leased, rented, borrowed, held in custody, deposited, joint venture, and associated assets), compare with accounting records to identify excess, shortage, assets under management and use; assets not under management and use; clearly identify the cause, responsibility of those involved, and propose measures to handle excess, shortage; assets not under management and use. Assess the current status and classify assets needed for use, unused assets, and assets awaiting liquidation to recommend measures for each type of asset.

2. Inventory and reconcile receivables, payables, sources of capital, funds, bank account balances, etc., evaluate and classify debts according to current regulations:

a) For receivables: Clearly identify recoverable debts, difficult-to-collect debts, and unrecoverable debts. Analyze the causes, determine individual and collective responsibilities for each difficult-to-collect debt and unrecoverable debt, and propose measures to handle them.

b) For payables: Prepare a list of creditors and identify each payable. Analyze overdue debts, principal, interest, and payables without a debtor, individual and collective responsibilities for each overdue debt, and propose solutions.

Article 4. Based on the results of inventory, classification of assets, capital, and data in the financial statements, the company develops a financial handling plan (in the conversion plan) to report to the competent authority for approval. After the conversion plan (including the financial handling plan) is approved, the company proactively implements financial handling according to the following regulations, while preparing a new financial statement at the end of December 31, 2009 (after financial handling):

1. For assets:

a) Unused assets and assets awaiting liquidation: The company may sell or liquidate according to current regulations for state-owned enterprises. The difference between the proceeds from sale or liquidation and the remaining value of the asset and liquidation costs is recorded as income.

b) For leased, borrowed, held in custody, deposited, joint venture, and associated assets: Depending on the need, the company agrees with the owner of the leased, borrowed, held in custody, deposited, joint venture, and associated assets to continue to inherit or terminate contracts before conversion.

c) For assets formed from reward and welfare funds serving the collective interests of employees in the company, state-owned enterprises transfer such assets to the limited liability company for management and use to serve the collective workforce in the company. In cases where assets formed from reward and welfare funds are used for production and business, the limited liability company continues to manage and use them, deduct depreciation to repay the reward and welfare funds.

d) Forest land and assets on forest land are transferred intact to the limited liability company based on the book value on the accounting books.

đ) Asset inventory discrepancies: The enterprise must clearly identify the reasons for excess or shortage and handle them as follows:

- For excess assets if the cause and owner cannot be identified: The enterprise records an increase in the owner's equity (account number 411 as stipulated in Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance) corresponding to the actual value of the excess assets.

- For property that has been lost, damaged, or depreciated: The enterprise must clearly identify the cause and responsibility of the collective and individual involved, and request compensation from the responsible parties in accordance with the provisions of the law. The difference between the remaining value of the asset recorded in the accounting books and the compensation paid by the individuals, collectives, or insurance organizations (if any) shall be covered by the financial reserve fund; if insufficient, it shall be recorded as production and business expenses of the enterprise.

2. For receivables and payables:

a) For receivables: The limited liability company shall be responsible for receiving the receivables of the enterprise, collecting receivables due before the conversion, and managing receivables according to the current regulations of the state.

For uncollectible receivables (including those specified in Circular No. 228/2009/TT-BTC dated December 7, 2009, issued by the Ministry of Finance, guiding the system for setting up and using reserves for inventory write-downs, investment losses, difficult-to-collect receivables, and product warranties), the company shall use the reserve for difficult-to-collect receivables and the financial reserve fund to cover the shortfall after deducting the compensation from the individuals and collectives involved. If these reserves are insufficient, the shortfall shall be recorded as management expenses of the enterprise. The procedures and processes for handling uncollectible receivables shall be carried out in accordance with Circular No. 228/2009/TT-BTC dated December 7, 2009, issued by the Ministry of Finance.

b) For payables: The limited liability company shall be responsible for assuming and paying off the payables to creditors as committed, including tax debts and budgetary debts, employee debts, and paying off payable debts due.

For payables where there is no longer a counterparty to pay, the company shall record an increase in shareholders' equity (account number 411 on the balance sheet as prescribed in Decision No. 15/2006/QĐ-BTC dated March 20, 2006, of the Minister of Finance).

3. Reserves for inventory write-downs, reserves for investment losses, reserves for difficult-to-collect receivables, financial reserve funds, and reserves for unemployment benefits, after being used to cover losses of assets and uncollectible receivables, if there is still a surplus, the enterprise may transfer the surplus to the limited liability company for continued use.

4. In cases where enterprises converting are subsidiaries under dependent accounting of state-owned corporations, parent companies of state economic groups, or parent companies of state-owned corporations, it is strictly prohibited to abuse the authority of the enterprise's owner representative to handle common financial issues for the entire state corporation when converting to a subsidiary under dependent accounting.

Article 5. For enterprises that meet the conditions stipulated in paragraph a of Article 8 of Decree No. 25/2010/NĐ-CP but have no state capital (negative shareholders' equity), the converting enterprise shall prepare a plan to submit to the competent authority for approval as prescribed in Article 11 of Decree No. 25/2010/NĐ-CP to report to the Prime Minister for decision; if the enterprise is not supplemented with capital, it shall proceed with the forms of enterprise ownership conversion as provided in Article 80 of the Law on State-Owned Enterprises.

Article 6. For enterprises subject to shareholding reform but have not yet implemented shareholding reform or are implementing the process and procedures to convert the enterprise into a joint-stock company but have not received a decision on the enterprise's value determination from the competent authority by July 1, 2010, when converting to a limited liability company, they are not required to prepare a plan and implement asset disposal, financial settlement, labor restructuring, and land use as prescribed in paragraph d of Article 9 of Decree No. 25/2010/NĐ-CP.

Article 7. The official date of conversion of a state-owned enterprise into a limited liability company is the date the company receives the business registration certificate as a limited liability company.

1. Within thirty days from the date of receiving the business registration certificate as a limited liability company, the company must prepare a financial statement at the official conversion date to submit for approval by the competent authority. After the competent authority approves, this financial statement will serve as the basis for transferring to the limited liability company. The financial statement at the official conversion date must be audited in accordance with current regulations.

2. The distribution of profits up to the date of the enterprise officially converting into a limited liability company shall be carried out in accordance with Circular No. 155/2009/TT-BTC dated July 31, 2009, issued by the Ministry of Finance, guiding the profit distribution system of state-owned enterprises as prescribed in Decree No. 09/2009/NĐ-CP dated February 5, 2009, of the Government.

3. Authority to approve the financial statements of the company at the official conversion date:

a) The representative of the owner or the head of the agency authorized by the Prime Minister to approve for state-owned economic group parent companies, state-owned corporation parent companies, large and important state-owned enterprises established by the Prime Minister's decision.

b) The Minister or the head of an agency equivalent to a ministry for state-owned enterprises under central ministries and sectors.

c) The Chairman of the People's Committee of provinces and centrally-administered cities for state-owned enterprises established by the People's Committees of provinces and centrally-administered cities.

d) The head of political organizations or political-social organizations for enterprises managed by political organizations or political-social organizations.

đ) The Board of Directors or General Director of the parent company of state economic groups, state-owned corporations (if the group or corporation does not have a Board of Directors) for independent accounting subsidiaries of state economic groups, state-owned corporations, and dependent accounting subsidiaries of state-owned corporations.

e) The Board of Directors or General Director of the parent company of state economic groups, state-owned corporations (if the parent company of the group or corporation does not have a Board of Directors) for dependent accounting subsidiaries of the parent company of state economic groups, state-owned corporations.

Article 8. Determination of Registered Capital.

1. The registered capital of a limited liability company shall be determined in accordance with the provisions of Article 14 of Decree No. 25/2010/NĐ-CP of the Government.

The actual owner's equity to determine the registered capital of a limited liability company shall be based on the financial statements at December 31, 2009 (after financial processing) using code 410 of the Balance Sheet as prescribed in Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance.

2. For limited liability companies converted from dependent accounting units of state-owned corporations, parent companies of state economic groups, or parent companies of state-owned corporations, the registered capital must be determined in the conversion plan to ensure that the company can operate normally according to its scale and design capacity. The owner specified in Clause 3 of Article 3 of Decree No. 25/2010/NĐ-CP shall have the responsibility to invest sufficient capital for the enterprise according to the plan to determine the registered capital before the enterprise officially converts into a limited liability company.

3. For businesses operating in industries or professions where the law requires a minimum capital, the registered capital of a limited liability company shall not be lower than the minimum capital.

Article 9. State-owned enterprises shall transfer all assets, capital, funds, receivables, and financial reports approved by competent authorities, along with related documents, to the limited liability company. The handover between the state-owned enterprise and the limited liability company must be recorded in a signed agreement between representatives of the state-owned enterprise and the limited liability company as stipulated in Article 3 of Decree No. 25/2010/NĐ-CP of the Government, serving as a basis for management, monitoring, inspection, and supervision.

Assets not needed, stagnant, or awaiting liquidation shall be determined in the conversion plan and transferred to the limited liability company for continued processing.

All assets of the enterprise when implementing the conversion must be valued.

Article 10. Costs of implementing the conversion:

1. Costs of implementing the conversion include expenses related to the conversion of state-owned enterprises into limited liability companies from the time the conversion decision is made until the handover between the state-owned enterprise and the limited liability company. Implementation costs include:

- Training costs for domestic business conversion;

- Inventory, classification, and determination of asset status, capital, receivables, etc.;

- Costs for developing the conversion plan and drafting the organizational and operational charter of the limited liability company;

- Other costs related to the conversion into a limited liability company.

2. Expenses related to the conversion must be supported by valid and reasonable documents in accordance with state regulations, approved and responsible for by the General Director (Director) of the converting company. Conversion implementation costs shall be accounted for as a reduction in owner's equity (code 411 of the Balance Sheet as prescribed in Decision No. 15/2006/QĐ-BTC dated March 20, 2006 of the Minister of Finance) of the limited liability company. Specific expenditure levels are decided and responsible for by the representative of the owner according to the principle of thrift and efficiency appropriate to the scale of the converting company. For converting companies with total asset value under 50 billion VND, the maximum allowable expenditure is 50 million VND; for converting companies with total asset value from 50 billion VND to 100 billion VND, the maximum allowable expenditure is 100 million VND; for converting companies with total asset value over 100 billion VND, the maximum allowable expenditure is 150 million VND.

In special cases, for large and complex converting enterprises where necessary conversion costs exceed the maximum limit, the conversion decision-making body may proactively consider and decide, but not exceeding 200 million VND.

III. IMPLEMENTATION

Article 11. This Circular takes effect from the date Decree No. 25/2010/NĐ-CP takes effect and replaces Circular No. 25/2007/TT-BTC dated April 2, 2007 of the Ministry of Finance guiding financial treatment when converting state-owned enterprises into single-member limited liability companies.

Financial treatment for enterprises of political organizations and political-social organizations currently operating under the Law on State-Owned Enterprises when converting to limited liability companies shall be applied in accordance with the guidance provided in this Circular.

Ministries and provincial People's Committees may apply the provisions of this Circular to convert revenue-generating public service units not included in the scope of conversion into science and technology enterprises into single-member limited liability companies after approval by

    Ministries and provincial People's Committees may apply the provisions of this Circular to convert revenue-generating public service units not included in the scope of conversion into science and technology enterprises into single-member limited liability companies after approval by the Prime Minister.

  During the implementation process, if there are any difficulties, ministries, sectors, localities, and enterprises are requested to promptly report to the Ministry of Finance for research and guidance on resolution./.

DEPUTY MINISTER

DEPUTY MINISTER

(Signed)

Tran Van Hieu