Circular No. 95/2006/TT-BTC amends and supplements Circular No. 126/2004/TT-BTC dated December 24, 2004 of the Ministry of Finance guiding the implementation of Decree No. 187/2004/NĐ-CP dated November 16, 2004 of the Government on converting state-owned enterprises into joint-stock companies.

 

CIRCULAR

Amending and supplementing Circular No. 126/2004/TT-BTC dated December 24, 2004 of the Ministry of Finance guiding

the implementation of Decree No. 187/2004/NĐ-CP dated November 16, 2004 of the Government on converting state-owned enterprises into joint-stock companies

To resolve difficulties arising during the implementation of Circular No. 126/2004/TT-BTC dated December 24, 2004 of the Ministry of Finance guiding the implementation of Decree No. 187/2004/NĐ-CP of the Government on converting state-owned enterprises into joint-stock companies (hereinafter referred to as Circular No. 126/2004/TT-BTC) and guiding the implementation of Article 6 of Decree No. 17/2006/NĐ-CP dated January 27, 2006 of the Government amending and supplementing certain articles of decrees guiding the implementation of the Land Law,

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The Ministry of Finance amends and supplements some points of Circular No. 126/2004/TT-BTC as follows: Amending and supplementing Point 2.2 Section B Part II of Circular No. 126/2004/TT-BTC as follows:

1. "2.2. When there is a decision to announce the enterprise value, the enterprise shall be responsible for:

a) Adjusting accounting books and balance sheets according to the decision determining the enterprise value.

b) Safeguarding and transferring debts and assets excluded when determining the enterprise value (accompanied by relevant documentation) to the Company for Purchasing Debts and Surplus Assets of Enterprises within a maximum period of 60 days from the date of announcing the enterprise value.

c) Recording all expenses related to the implementation of the shareholding reform.

d) Implementing depreciation of fixed assets during the period from the time of determining the enterprise value to the time of officially becoming a joint-stock company as follows:

- In case the enterprise has already prepared financial statements according to reporting periods, the rate of depreciation will not be adjusted according to the new book value.

- In case the enterprise has not yet prepared financial statements, the enterprise shall adjust the rate of depreciation according to the new book value from the time of determining the enterprise value.

e) In case the period from when the investor pays for purchasing shares to the date the company receives the business registration certificate exceeds three months, the enterprise may calculate interest expenses to pay to investors according to the principle:

- Interest is only calculated from the fourth month onwards based on the total nominal value of the shares purchased.

- The interest rate shall not exceed the short-term loan interest rate at the same period of commercial banks at the time of calculating interest.

- Payment of interest must ensure that the enterprise does not incur losses.

These interest expenses shall be recorded as operating expenses.

f) Distribution of profits generated during the period from the time of determining the enterprise value to the time the enterprise officially becomes a joint-stock company shall be carried out in accordance with current laws applicable to state-owned enterprises."

Amending and supplementing Point 2.3 Section B Part II of Circular No. 126/2004/TT-BTC as follows:

2. "2.3. Preparing financial statements at the time the joint-stock company receives the business registration certificate:

a) Within thirty days from officially becoming a joint-stock company, the enterprise must prepare financial statements at the time of receiving the business registration certificate and submit them to relevant units in accordance with the accounting regulations.

Within thirty days from receiving the financial statements, the authority deciding the enterprise value shall conduct inspections and handle financial issues arising between the two periods; re-determine the value of state capital, decide on adjustments to state capital in the enterprise; organize the handover between the enterprise and the joint-stock company; send the results of re-determining the value of state capital to the Ministry of Finance.

b) The General Director and Chief Accountant of the state-owned enterprise shall be responsible for preparing and signing the financial statements, the report on determining the value of state capital at the time of transferring to a joint-stock company, the settlement report on shareholding reform costs, tax settlement reports, and bear responsibility for the truthfulness and accuracy of the reports.

The Board of Directors of the new joint-stock company shall be responsible for creating conditions for the leadership of the old state-owned enterprise to complete their tasks. The General Director and Chief Accountant of the state-owned enterprise who have not completed the financial statements shall not be transferred or leave work according to regulations.

c) In case the time point for determining the enterprise value is the previous year and the time point for officially becoming a joint-stock company is the following year, only one financial statement covering the entire period shall be prepared, without separating two reports at the end of the year and at the time of officially becoming a joint-stock company."

Amending and supplementing Point 6 Section A Part III of Circular No. 126/2004/TT-BTC as follows:

3. "6. Value of land use rights.

Calculating the value of land use rights to include in the enterprise value in accordance with Clause 1 and Clause 2 of Article 19 of Decree No. 187/2004/NĐ-CP, including:

6.1. In case the enterprise implements the land lease form:

a) If currently leasing, the value of land use rights shall not be included in the enterprise value; the joint-stock company continues to sign land lease contracts in accordance with the law and manage and use it for its intended purpose, and shall not sell it.

b) If the land has been received and the land use fee has been paid to the State budget, and the land was purchased from other individuals or legal entities now converted to lease, only the costs increasing the value of land use and assets on the land such as compensation, resettlement, and land leveling shall be included in the enterprise value.

The enterprise must complete the procedure to convert from the land grant form to the land lease form before the official conversion to a joint-stock company.

6.2. In case the enterprise implements the land grant form with payment of land use fees, the determination of the value of land use rights to include in the enterprise value shall be carried out as follows:

a) For the area of land leased by the enterprise being converted to the land grant form: After the decision on shareholding reform, simultaneously with the inventory, classification, and revaluation of assets, the enterprise must base on the provisions of Article 6 of Decree No. 17/2006/NĐ-CP dated January 27, 2006 of the Government to determine the value of land use rights payable to the State budget at the time of valuation and report to the People's Committee of the province or centrally-administered city where the enterprise has the land grant area for consideration and decision.

a) For the land area currently leased by the enterprise being converted to the form of land allocation: After receiving the decision on equitization, simultaneously with conducting inventory, classification, and revaluation of assets, the enterprise must base its determination of the value of land use rights to be paid to the state budget at the time of valuation on the provisions of Article 6 of Decree No. 17/2006/NĐ-CP dated January 27, 2006 of the Government, and report this to the People's Committee of the province or centrally governed municipality where the enterprise has the allocated land for consideration and decision.

Within thirty days from the date of receipt of the enterprise's report, the People's Committee of the province or centrally governed city shall decide on the specific land price and notify the enterprise. If the People's Committee of the province or centrally governed city does not provide comments within this period, it shall be deemed to agree with the enterprise's proposed land price determination plan. In case the shareholding enterprise disagrees with the land price reassessed by the People's Committee of the province or centrally governed city, it shall continue to lease the land for the purpose of implementing the shareholding reform.

The value of the land use right determined according to the above principle shall be included in the enterprise's value but shall not be counted as an increase in state capital at the enterprise, but rather recorded as a payable amount to the state budget.

The procedures and formalities for transferring land, paying land use fees, and issuing certificates of land use rights shall be carried out in accordance with the provisions of the Land Law and guiding documents for the implementation of the Land Law.

b) In cases where enterprises are allocated land for construction of houses and infrastructure for transfer or lease and have paid land use fees to the state budget:

- Must re-evaluate the value of the land use right based on the price set by the People's Committee of the province or centrally governed city at the time of valuation, but not lower than the actual cost of land use rights currently recorded in the accounting books. If the re-evaluated value of the land use right is higher than the actual cost of land use rights currently recorded in the accounting books, the difference shall be added to the actual value of state capital at the enterprise. - If the value of state capital (including the value of land use rights) is too large, exceeding the scale of the charter capital of the shareholding enterprise according to the approved plan, then the difference shall be treated as revenue from the shareholding reform and handled in accordance with point 1.3, section VI of Circular No. 126/2004/TT-BTC.

- If the value of state capital (including the value of land use rights) is too large, exceeding the scale of the charter capital of the shareholding enterprise according to the approved plan, then the difference shall be treated as revenue from the shareholding reform and handled in accordance with point 1.3, section VI of Circular No. 126/2004/TT-BTC.

c) In cases where shareholding enterprises are allocated land for construction of housing and infrastructure for transfer or lease and part of the land area is used for public welfare facilities handed over to local authorities for management and use, the value of the land use right to be included in the value of the shareholding enterprise shall be determined as follows:

- If handed over through a payment method, only the value of the land use right for the areas allocated for business purposes shall be re-evaluated and included in the value of the shareholding enterprise.

- If handed over without payment, the entire value of the land use right for the allocated area shall be included in the value of the enterprise after deducting the costs incurred for constructing the public welfare facilities handed over.

d) In cases where shareholding enterprises are allocated land for construction of housing and infrastructure for transfer or lease and have implemented the regulation of the housing and land fund according to the mechanism prescribed by the People's Committee of the province or centrally governed city, the value of the land use right to be included in the enterprise value shall be determined based on the re-evaluated land use right value minus the income regulated.

đ) In cases where shareholding enterprises are allocated land for construction of houses and infrastructure for transfer or lease and have transferred a portion of high-rise buildings to other agencies for office or business use, they must allocate the re-evaluated land use right value to the transferred building area according to the floor coefficient or the selling price of each floor. The coefficient shall be prescribed by the People's Committee of the province or centrally governed city in accordance with current regulations.

e) In cases where shareholding enterprises are allocated land for construction of housing for sale and have sold the houses, the corresponding area of sold houses shall be excluded from revaluation, equivalent to the sales proceeds recorded as income, determining annual business results, and paying taxes in accordance with the regulations of the state.

4. Amend and supplement point 1.2, section A, Part V of Circular No. 126/2004/TT-BTC as follows:

"1.2. Strategic investors as defined in Clause 2, Article 26 of Decree No. 187/2004/NĐ-CP, approved by the authority deciding on the shareholding reform. Employees of the shareholding enterprise and legal entities within the same Group Corporation shall not be recognized as strategic investors."

5. Add point 1.4 to section A, Part V of Circular No. 126/2004/TT-BTC as follows:

"1.4. Members of the Steering Committee for the shareholding reform of the enterprise (in the case of auction within the enterprise), financial intermediaries implementing valuation or auction of shares of the shareholding enterprise shall not participate in the auction to purchase shares of that enterprise."

6. Amend and supplement point 2.2, section A, Part V of Circular No. 126/2004/TT-BTC as follows:

"2.2. The quantity of preferential shares sold shall be specified as follows:

a) Sold to employees of the enterprise up to a maximum of 100 shares per year of service in the state sector at a discount of 40% compared to the average successful auction price.

b) Sold to strategic investors up to a maximum of 20% of the total shares sold at a discount of 20% compared to the average successful auction price.

c) The total value of preferential discounts for employees and strategic investors (calculated based on par value) shall not exceed the state capital at the enterprise after deducting the value of state-held shares and the cost of shareholding reform according to the standard."

7. Amend and supplement point 2.3, section A, Part V of Circular No. 126/2004/TT-BTC as follows:

"2.3. The number of shares sold publicly through auction to investors (including strategic investors and employees if purchasing additional shares) shall not be less than 20% of the charter capital. In cases where it is insufficient to reach 20% of the charter capital, the following measures shall be taken:

a) Reduce the number of state-held shares for enterprises not under the state's controlling stake.

b) Reduce the number of preferential shares sold to strategic investors, and if still insufficient, reduce the number of preferential shares sold to employees."

8. Add point 2.5 to section A, Part V of Circular No. 126/2004/TT-BTC as follows:

"2.5 Enterprises undergoing shareholding reform that meet the conditions for listing and trading on the securities market shall ensure their share sale plans comply with the requirements for the number of shareholders necessary for listing or trading on the securities market."

9. Amend and supplement point 1.4, section B, Part V of Circular No. 126/2004/TT-BTC as follows:

"1.4 In cases where enterprises located in remote areas have a public auction volume of shares exceeding one billion to ten billion dong: after publicly announcing the hiring of organizations to sell shares but no financial intermediaries accept to sell shares for the enterprise, the State Capitalization Steering Committee shall organize the auction themselves."

10. Amend and supplement Clause d, Point 2.2, Section B, Part V of Circular 126/2004/TT-BTC as follows:

"d. Provide information related to the capitalization enterprise (in accordance with Appendix No. 7 issued together with Circular 126/2004/TT-BTC), the privatization plan, draft charter on organization and operation of joint-stock companies; bidding registration forms and other information related to the auction (in accordance with Appendix No. 9 issued together with Circular 126/2004/TT-BTC) to investors and investment promotion organizations."

11. Amend and supplement Point 6, Section B, Part V of Circular 126/2004/TT-BTC as follows:

"6. Handling of unsold shares:

6.1. In cases where not all shares are sold at auction, the State Capitalization Steering Committee of the enterprise reports to the authority deciding on privatization to handle according to the following directions:

a) If the remaining number of shares is less than 50% of the number of shares put up for sale, adjust the registered capital scale and state-owned shareholding ratio to convert the enterprise into a joint-stock company.

b) If the remaining number of shares is 50% or more of the number of shares put up for sale, consider adjusting the starting price (not lower than par value) and organize another auction for the remaining shares.

6.2. In cases where the winning bidder does not purchase or does not purchase the full amount of shares they were entitled to buy according to the auction results, they will not be refunded the deposit corresponding to the shares they refuse to buy. The State Capitalization Steering Committee of the enterprise will consider handling the refused shares as follows:

a) If the number of shares refused by the winning bidder is less than 30% of the total number of shares put up for sale, sell them to participating bidders through negotiation. The selling price will be from highest to lowest but not lower than the average successful auction price (including the price of the bidder who refused to buy).

After negotiating sales still fail to sell all shares, the State Capitalization Steering Committee of the enterprise reports to the authority deciding on privatization to handle according to Clause a of Point 6.1 above.

b) If the number of shares refused by the winning bidder is 30% or more of the total number of shares put up for sale, organize another auction for the refused shares.

After another auction still fails to sell all shares, the State Capitalization Steering Committee reports to the authority deciding on privatization to handle according to Clause a of Point 6.1 above.

6.3. In cases where employees and strategic investors do not purchase all preferential shares, the State Capitalization Steering Committee reports to the authority deciding on privatization to decide on adjusting the registered capital scale and state-owned shareholding ratio to convert the enterprise into a joint-stock company.

6.4. The actual average successful auction price used as the basis for determining the preferential selling price to employees and strategic shareholders is calculated based on the price and quantity of shares actually purchased by investors (including the result of negotiated sales and second auction if applicable)."

12. Amend and supplement Point 8, Section B, Part V of Circular No. 126/2004/TT-BTC as follows:

"8. Costs for organizing the auction of shares are decided by the authority deciding on privatization and determined as follows:

a) In cases where the State Capitalization Steering Committee of the enterprise implements it, the maximum cost does not exceed 10% of the total privatization costs.

b) In cases where financial intermediaries implement it, the maximum cost does not exceed 15% of the total privatization costs (including costs for at least two investment opportunity presentations and introductions of the privatized enterprise to investors).

c) In cases where the auction takes place at the Stock Exchange Trading Center, the maximum cost for selling shares through auction does not exceed 20% of the total privatization costs. The division of costs between the Center and financial intermediaries is agreed upon by both parties."

13. Supplement the end of Point 1.3, Part VI of Circular 126/2004/TT-BTC as follows:

"After completing the sale of shares of independent state-owned enterprises under Ministries, agencies equivalent to Ministries, government agencies, People's Committees of provinces and centrally-administered cities, the entity conducting the auction must immediately remit the proceeds from the sale of state-owned shares and the surplus from the auction to the Enterprise Restructuring Support Fund at the Ministry of Finance (not transferred to the enterprise) at the address:

Receiving unit: Department of Corporate Finance - Ministry of Finance.

Account: 942.01.00.00000

At: National Treasury Bank Branch.

Upon completion of the privatization process, the enterprise is responsible for officially determining the amount due, settling accounts for employee expenses and privatization costs, and reporting to the authority deciding on privatization. If the amount due is greater than the amount already paid, the enterprise must pay the difference to the Fund. If the amount due is less than the amount already paid, the enterprise must report to the Fund so that the Fund can refund the excess.

Ministries, agencies equivalent to Ministries, government agencies (for central enterprises), People's Committees of provinces and centrally-administered cities (for provincial enterprises) are responsible for directing and urging the remittance of proceeds from the sale of shares to the Enterprise Restructuring Support Fund at the Ministry of Finance."

14. Add Points 2.4, 2.5, and 2.6 to Section VIII of Circular 126/2004/TT-BTC as follows:

"2.4. Responsibilities of the valuation organization:

Responsible for the results of determining the enterprise's value. In cases where the results of determining the enterprise's value do not comply with state regulations, the State Capitalization Steering Committee may refuse to pay the service fee and consider removing the organization from the list of eligible valuation organizations.

2.5. Responsibilities of the auction implementation agency:

Responsible for information related to the enterprise published before the auction. This information must be approved by the State Capitalization Steering Committee of the enterprise before being published to investors."

In the event that the information is inaccurate or misrepresents the situation of the enterprise, causing losses to state capital or damage to investors, the auction agency shall be fully responsible for compensating such losses.

2.6. The responsibilities of relevant agencies in settling tax matters for shareholding enterprises are as follows:

a) The valuation date of the enterprise:

- The enterprise is responsible for preparing and submitting the tax settlement report up to the valuation date of the enterprise to the tax authority in accordance with regulations. The Tax Department is responsible for proactively arranging staff to settle taxes for enterprises in accordance with the announced valuation date.

- If the tax settlement inspection has not been completed by the time the enterprise's value is determined, the enterprise may use the financial statements as the basis for determining the enterprise's value (including the determination of the enterprise's tax liabilities and profit distribution). After the tax settlement, any discrepancies regarding the enterprise's tax liabilities to the State (if any) will be adjusted at the time the enterprise officially receives the business registration certificate and becomes a joint-stock company.

b) The date when the enterprise receives the business registration certificate:

- The enterprise must prepare and submit the tax settlement report for the period from the valuation date of the enterprise to the date it officially becomes a joint-stock company to the tax authority in accordance with current laws immediately after receiving the business registration certificate. Within ten days from the date of receipt of complete files, the tax authority must complete the tax settlement inspection for the enterprise.

- If the enterprise has submitted all necessary documents and the tax authority does not conduct the tax settlement inspection within the prescribed timeframe, the competent authority deciding on the shareholding reform shall issue a decision approving the tax settlement, transferring capital and assets to the joint-stock company. The joint-stock company will not be liable for additional taxes arising beyond the figures approved and transferred by the competent authority in the financial statements.

This Circular takes effect fifteen days after its publication in the Official Gazette.

Any difficulties encountered during implementation should be reported to the Ministry of Finance for study and resolution./.

DEPUTY MINISTER
DEPUTY MINISTER

        (Signed)


    Tran Xuan Ha