Directive No. 84-TTG on Promoting the Implementation of Pilot Shareholding of State-Owned Enterprises and Measures to Diversify Ownership Forms for State-Owned Enterprises

DIRECTIVE

On Promoting the Implementation of Pilot Stock Ownership Reform for State Enterprises and Measures to Diversify Forms of Ownership for Domestic Enterprises

Decision No. 202/CT dated June 8, 1992 of the Chairman of the Council of Ministers (now Prime Minister) on continuing to conduct pilot programs to convert certain state enterprises into joint-stock companies has been issued for over eight months, but the implementation has been too slow, failing to meet the requirements and progress stipulated. The main reasons for these delays are that relevant ministries have not promptly provided guidance and detailed regulations based on Decision No. 202-CT; management boards of production and business units, provincial People's Committees under the central government, and municipal People's Committees have not deeply understood the viewpoints and contents of stock ownership reform and have not adequately directed the implementation of this work. Additionally, stock ownership reform has not been closely combined with enterprise restructuring, especially for enterprises facing difficulties, with directives focusing more on dissolving enterprises than finding appropriate solutions to diversify forms of enterprise ownership.

the joint, To implement and carry out effectively the pilot stock ownership reform according to Decision No. 202-CT and create conditions for state enterprises facing difficulties to stabilize and continue developing, the Prime Minister specifies the following specific points:

A. On Stock Ownership Reform

I. Objectives of Stock Ownership Reform

It is necessary to pay very close attention to the objective of transforming state ownership into ownership by shareholders, creating fundamental changes in management methods to enhance the efficiency of production and business operations of each enterprise as well as the entire national economy.

In the direction of changing the economic structure and reorganizing the state-owned economic sector, the State will only retain large and important enterprises and those in key industries vital to the national economy, to perform the function of controlling and macro-regulating the economy, areas related to national defense, security, and sectors forming infrastructure or providing essential public welfare services that the State must undertake. For state enterprises outside these fields, the State allows the diversification of ownership forms, among which, the stock ownership reform of existing state enterprises is a major solution to improve social production efficiency.

All objectives of stock ownership reform stated in Decision No. 202-CT are considered as a unified whole, complementing each other, with particular attention paid to capital mobilization through various forms: for enterprises currently in debt, debt can be converted into share capital, or state debt can be converted into shareholder debt; or part or all of the capital can be returned to the state budget; or capital can be raised for deepening investment and expanding the enterprise.

II. Mechanisms and Policies in Stock Ownership Reform

1. Enterprises conducting pilot stock ownership reform are permitted to allow employees to borrow interest-free loans with a maximum term of five years in the form of deferred payment shares at an average rate not exceeding three million dong per person and a maximum rate not exceeding five million dong per person depending on salary and length of service. These shares, employees will enjoy annual dividends, have inheritance rights, but cannot transfer them, nor withdraw capital before fully paying for the deferred shares. The beneficiaries are employees within the establishment's roster at the time of stock ownership reform and retired or disabled employees of the enterprise.

In specific cases, to encourage employees to purchase shares in cash, the Minister of Finance and the Minister of the principal ministry are authorized to decide on the amount of deferred payment shares with preferential interest rates equivalent to the annual return rate on capital usage; the maximum amount of this type of deferred payment shall not exceed the number of shares purchased in cash.

2. Land that enterprises are using belongs to the State, and enterprises only have the right to use it. When implementing stock ownership reform, the value of land is not included in the enterprise's value but is included in costs, with the initial revenue from land use rights certificates and land surface use fees (related to compensation, land clearance...) being collected. Thereafter, enterprises annually pay land rent according to the Investment Law (if selling shares to foreigners) or pay land tax (if only selling shares to domestic individuals).

3. Enterprises are allowed to handle surplus welfare and incentive funds (in cash) before stock ownership reform, encouraging distribution to employees to purchase shares. Specifically, welfare funds in the form of facilities such as cultural houses, clubs, clinics, rest homes, etc., will still be maintained and developed to ensure common welfare for the enterprise after stock ownership reform.

4. In specific cases, if there are difficulties in business operations, pilot enterprises undergoing stock ownership reform may be eligible for a reduction in corporate income tax not exceeding 50% for two years from the date of stock ownership reform.

5. Labor policies and social policies for workers must be properly addressed when implementing stock ownership reform. Before stock ownership reform, retirees, disabled persons, and those who have left their jobs are resolved according to current regulations. Workers who continue working at joint-stock companies; the Ministry of Labor, Invalids, and Social Affairs issues social insurance books for all employees who have signed labor contracts. Working time in state enterprises prior to this is preserved as the basis for calculating social insurance benefits according to state regulations.

6. Pilot projects for selling shares to foreign organizations and individuals are allowed. The Ministry of Finance, together with the principal ministry or provincial People's Committees under the central government, and relevant ministries must provide specific guidelines, carefully consider, and report to the Prime Minister on each specific case.

B. Measures to Diversify Forms of Ownership to Stabilize and Develop Production and Business Operations

6. Permit the pilot sale of shares to foreign organizations and individuals. The Ministry of Finance, together with the competent ministry or People's Committee of centrally governed cities and provinces, and relevant ministries must issue specific guidelines, carefully consider, and report each specific case to the Prime Minister.

B. Measures to diversify ownership forms to stabilize and develop production and business operations

For state-owned enterprises currently facing difficulties in production and business operations, they are permitted to undergo transformation or diversification of ownership forms through the following solutions:

1. Selling the entire enterprise to one or several private individuals or organizations to form a private enterprise or a Limited Liability Company.

This solution mainly applies to small enterprises in the trade sector and local district and county enterprises that are currently profitable or temporarily losing money but not yet at the point of bankruptcy. The valuation of the enterprise for sale shall be conducted in accordance with the procedures for the shareholding reform of state-owned enterprises.

2. Transferring part of the capital and assets of the enterprise to form joint ventures between the State and private individuals or organizations (including domestic and foreign entities) under the form of a Limited Liability Company. It may also involve combining the transfer or consolidation of existing state-owned enterprises with private individuals or organizations investing through shares to deepen and expand the business.

3. In addition, to limit capital loss and enhance the operational efficiency of state-owned enterprises under current conditions, enterprises are allowed to apply the following solutions:

- Selling part of machinery and factory buildings to concentrate investment in the remaining parts. This form is applied to enterprises with excess equipment and factory buildings that are not needed. The proceeds from this sale will be considered as state budget capital reinvested in the enterprise.

- Merging troubled enterprises into well-performing state-owned enterprises without weakening the latter's performance, thereby utilizing existing facilities and addressing technological and financial difficulties of the merged enterprises.

- Leasing the entire enterprise or leasing business assets and means of operation, primarily applicable to small enterprises with simple fixed asset structures and technology such as shops, warehouses, storage yards, etc.

- Contracting management, applicable to enterprises where current difficulties are mainly due to poor business organization and management.

4. The final measure is to dissolve heavily loss-making enterprises that have lost their ability to pay and are at risk of bankruptcy.

Financial agencies, supervisory bodies, and debt settlement committees must determine and clearly define responsibilities for debts owed to related organizations and individuals. Any shortfall in debt repayment will be covered by the state budget. After determining the final responsibility for debt repayment, the dissolution procedures for the enterprise shall be carried out according to Decisions No. 315-HĐBT dated September 1, 1990, and No. 330-HĐBT dated October 23, 1991, of the Council of Ministers.

C. On Implementation Mechanism

1. All enterprises undergoing shareholding reform or transformation and diversification of ownership forms must conduct an assessment of the value of capital, assets, and enterprise value for shareholding reform, transfer, lease, merger, etc. The assessment of the value of capital, assets, and enterprise value must be based on audited settlement data confirmed by competent state authorities. The Ministry of Finance will provide detailed guidance on assessing the value of capital, assets, and enterprise value and financial procedures for shareholding reform, transfer, sale, lease, merger, etc., ensuring strict management of state capital and assets and preventing abuse of loopholes leading to loss of state capital and assets.

2. The Ministry of Finance, together with the Ministry of Labor, Invalids, and Social Affairs, the State Committee on Cooperation and Investment, and the State Planning Commission (Central Institute for Economic Management), shall promptly issue guiding documents on capital, finance, labor policies, wages, social insurance, selling shares to foreigners, when implementing shareholding reform, model articles of association for Joint Stock Companies, and when implementing diversification of ownership forms according to the above solutions.

3. Ministries managing production and business units, People's Committees of provinces and centrally-administered cities must promptly establish Steering Committees for Enterprise Renewal (according to Decision No. 83-TTg dated March 4, 1993, of the Prime Minister) at ministries, provinces, and cities, and strictly direct the implementation of pilot shareholding reform in accordance with the content and requirements of Decision No. 202-CT, and the transformation and diversification of ownership forms of state-owned enterprises as stipulated in this Directive.

4. The Ministry of Finance, together with the State Planning Commission (Central Institute for Economic Management), shall coordinate with relevant ministries, sectors, and People's Committees of provinces and centrally-administered cities to guide, direct, and supervise the implementation of pilot shareholding reform and the transformation and diversification of ownership forms of state-owned enterprises. The Ministry of Finance shall have the responsibility to report promptly any difficulties and obstacles for the Government to consider and resolve.

The Government Organizational and Cadre Department, together with the Ministry of Finance, shall study and propose a project allowing the Ministry of Finance to establish a financial company to provide services for shareholding reform before the stock market exists and manage the state shares in joint stock companies.

The Prime Minister requests that ministers, heads of ministerial-level agencies, heads of agencies under the Government, and chairpersons of provincial and centrally-administered city people's committees strictly implement the provisions of this Directive so that the pilot shareholding reform is carried out in accordance with the prescribed content, requirements, and schedule, and effectively implement solutions to diversify ownership forms to stabilize and develop the production and business activities of state-owned enterprises.