Chương 2 Nghị định 109/2007/NĐ-CP: Xử lý tài chính khi cổ phần hóa

Chapter II

DEALING WITH FINANCES ON EQUITIZATION

Article 13. Inventory, classification of assets and dealing with existing financial issues

1. Upon receipt of the decision to undergo equitization from the authorized body, the enterprise shall be responsible to carry out an inventory and classification of the assets which the enterprise is managing and using as at the date of valuation of the enterprise.

2. The enterprise to be equitized shall be responsible to conduct an audit of the annual financial statements in accordance with State regulations. If the date of valuation of the enterprise does not coincide with the end of the financial year, the enterprise to be equitized shall be responsible to prepare financial statements as at the date of valuation of the enterprise.

3. Based on the result of the inventory and audit of the annual financial statements, the enterprise to be equitized shall be responsible to co-ordinate with the relevant bodies in taking the initiative to deal with existing financial issues, in accordance with authority and in accordance with regulations, prior to conducting the valuation of the enterprise to be equitized.

In a case of difficulties or in a case exceeding authority, the enterprise must report to the authorized body for its consideration and resolution.

If a report has been made to the authorized body but the issue remains unresolved, the issue must be specified in the Minutes of valuation of the enterprise to be equitized in order to provide a basis for further resolution in the stage after valuation and prior to official conversion to a shareholding company.

Article 14. Dealing with leased or borrowed assets, assets received as joint venture capital contribution, joint assets, assets not required to be used, and investments funded by the Reward and Welfare Funds

1. Assets which an enterprise to be equitized leases, borrows or receives as joint venture capital contribution, and joint assets and other assets which do not belong to the enterprise shall not be included in the value of the enterprise to be equitized. Prior to conversion to a shareholding company, the enterprise to be equitized must reach agreement with the owners of assets in order for the shareholding company to inherit previously signed contracts or to liquidate the contracts.

2. With respect to assets not required to be used, idle stock and assets awaiting liquidation, the enterprise to be equitized shall be responsible to deal with these assets in accordance with current regulations on financial management (by liquidation or agreement to sell). If these assets were not able to be dealt with by the time of valuation of the enterprise, they shall not be included in the value of the enterprise and shall be transferred to the following bodies:

(a) A company specializing in the purchase and sale of debts and idle stock for such company to realize in accordance with law, applicable to the enterprises stipulated in clauses 1, 2 and 3 of article 2 of this Decree and to limited liability companies in which the State owns 100% charter capital of ministries, ministerial equivalent bodies, Government bodies or peoples committee of provinces and cities under central authority;

(b) A group, State owned corporation, parent company or independent State owned company for such body to realize in accordance with regulations, applicable to the enterprises stipulated in clauses 4 and 5 of article 2 of this Decree and to limited liability companies in which a group, corporation or parent company owns 100% charter capital.

3. Welfare buildings such as kindergartens, children's nurseries and outpatient clinics and other welfare assets the investment in which was funded by the Reward and Welfare Funds shall be handed over to the shareholding company for management and use for the benefit of the labour collective in the equitized enterprise.

Residences of staff and officials the investment in which was funded by the Reward and Welfare Funds of the enterprise, including residences funded by the State Budget, shall be transferred to the local land and housing authority for management.

4. Assets used in production and business the investment in which was funded by the Reward and Welfare Funds of the equitized enterprise shall be included in the value of the enterprise, and the shareholding company shall continue to use them in production and business. The equitized enterprise shall be responsible to refund to the Reward and Welfare Funds the amount of capital equivalent to the value of these assets, to be divided amongst employees working at the enterprise at the time of valuation of the enterprise.

Article 15. Debts receivable

1. An enterprise undergoing equitization shall be responsible to review, confirm and recover debts which are due and receivable prior to equitization. If, by the time of valuation of the enterprise, there are still arrears of bad debts, they shall be dealt with in accordance with current State regulations on dealing with arrears of bad debts.

2. The enterprise undergoing equitization shall be responsible to handover all irrecoverable debts which have been excluded from the valuation of the equitized enterprise (together with files on the debts and other relevant data) to the relevant body stipulated in article 14.2 of this Decree.

3. With respect to items paid in advance to suppliers of goods and services, such as rent for housing or land and purchase price of goods and wages, these items must be reviewed against contracts and the volume of goods and services provided, in order to be included in the value of the enterprise.

Article 16. Debts payable

1. Debts payable by organizations and individuals:

An enterprise to be equitized must mobilize legally sourced capital in order to pay debts which mature prior to conducting equitization, or it must agree with creditors on dealing with the debts or on their conversion into shareholding capital contribution.

The conversion of due debts payable at the time of valuation of the enterprise into shareholding capital contribution shall be implemented on the basis of results of the successful auction obtained by creditors [also taking part in the auction].

2. Tax and State budget debts:

An enterprise to be equitized shall be responsible to pay tax and debts owing to the State budget prior to conversion; if the equitized enterprise fails to completely discharge its tax obligations, then the shareholding company shall be responsible to inherit all of such debts.

3. If during the equitization process the enterprise to be equitized is in difficulty regarding ability to repay overdue debts (loans from State commercial banks and the Vietnamese Development Bank) because the business has incurred losses, the debts shall be dealt with in accordance with current State regulations on dealing with arrears of bad debts.

Article 17. Reserves, losses or profits

1. Reserves for reduction of the price of goods in stock, for bad debts, for reduction in the value of securities, and for exchange rate differences shall be used to cover all losses in accordance with current regulations; any balance of such reserves shall be accounted for as increase in State owned capital.

2. The enterprise undergoing equitization shall set aside a reserve for retrenchment allowances in accordance with the State regime and use it to pay allowances to employees who become redundant during the equitization process; any balance by the time of official conversion into a shareholding company shall be accounted for as increase in State owned capital at the time of handover.

3. After reserves for risks and professional reserves of the banking and insurance systems are used to cover losses in accordance with regulations, any balance shall belong to the equitized enterprise but shall be included in the commencement price when making the initial share issue.

4. After financial reserves to cover losses (if any) and financial reserves to cover loss and damage to assets and irrecoverable debts are used to compensate losses (if any) caused by individuals, their balance shall be included in the value of the State owned capital portion in the enterprise undergoing equitization.

5. The balance in reserves of earned profit in order to cover losses (if any) from previous years in accordance with the Law on Corporate Income Tax and to cover loss and damage to assets not required to be used, assets awaiting liquidation, reduction in the value of assets, and debts unable to be collected shall be distributed in accordance with current regulations prior to valuation of the enterprise.

6. After losses have been dealt with by the time of valuation of the enterprise undergoing equitization in accordance with the above-mentioned provisions but there still remain some losses, the enterprise undergoing equitization shall be responsible to co-ordinate with the Vietnamese Development Bank (previously known as the Development Assistance Fund) and State commercial banks in order to write off debts being interest on borrowings in accordance with current State regulations on dealing with arrears of bad debts.

Article 18. Long-term investment capital in other enterprises such as joint venture capital contribution, associated ventures, shareholding capital contribution, capital contribution to establishment of limited liability companies, and other forms of long-term investment

1. If an enterprise undergoing equitization inherits long-term investment capital in other enterprises, the whole of such capital shall be included in the value of the enterprise to be equitized in accordance with the principles stipulated in article 32 of this Decree.

2. If an enterprise undergoing equitization does not inherit long-term investments made in other enterprises, it must report to the authorized body to deal with them as follows:

(a) Transfer them to another enterprise with 100% State owned capital to act as party;

(b) If the investments are not so transferred, the enterprise undergoing equitization must inherit them to include them in the value of the enterprise in accordance with clause 1 of this article.

Article 19. Cash balance in Reward and Welfare Funds

Any cash balance in the Reward and Welfare Funds shall be distributed to the current workforce in the enterprise at the time of valuation of the enterprise in accordance with the number of years they have worked at the enterprise undergoing equitization.

Article 20. Cash balance in Assistance Fund for Restructure of Enterprises at the enterprise

Any cash balance in the Assistance Fund for Restructure of Enterprises at the enterprise undergoing equitization shall be accounted for as increase in State owned capital in the enterprise.

Article 21. Dealing with finances at the time the enterprise is officially converted into a shareholding company

1. Based on the value of the enterprise to be equitized as decided by the body making the equitization decision, the enterprise shall be responsible for adjusting accounting data in books of account; for preserving and handing over debts and assets which have been excluded upon valuation of the enterprise pursuant to the provisions in articles 14.2 and 15.2 of this Decree; and for preparing financial statements for the enterprise for the period from the date of valuation of the enterprise to the date of official conversion of the enterprise into a shareholding company.

2. Within one (1) month from the time it is issued with its initial business registration certificate, an equitized enterprise must complete preparation of financial statements as at the time of business registration, [complete] determination of the value of the State owned capital portion as at the time of official conversion into a shareholding company, and [complete] dealing with financial issues which needed to be dealt with.

3. The difference being an increase between the actual value of the State owned capital portion as at the time when the enterprise converts to a shareholding company and the actual value of the State owned capital portion as at the time of the valuation shall be dealt with as follows:

(a) Paid into the Assistance Fund for Restructuring Enterprises at a group, State owned corporation or parent company when a member company, subsidiary company or dependent accounting affiliate of such enterprise is equitized, or to an independent State owned company or an independent accounting member company when such sections of these companies are equitized;

(b) Paid into the Assistance Fund for Restructure of Enterprises of the State Capital Investment Corporation when the whole of an independent State owned company, the whole of a group, a State owned corporation or a parent company is equitized.

4. Where the difference is a decrease, the equitized enterprise shall be responsible to report to the body making the decision on equitization in order for the latter to co-ordinate with the relevant bodies to check and clarify the reasons and to determine the liabilities of the collective and/or of individuals and to deal with such difference as follows:

(a) If the reasons were objective (natural calamity or enemy destruction; change of State policy due to international market fluctuations and other reasons of force majeure), the equitized enterprise shall report to the body making the decision on equitization to consider and make a decision on using the proceeds from the sale of shares to offset losses after allowing for receipt of insurance proceeds (if any). If the proceeds from the sale of shares are insufficient to offset losses, then the body making the decision on equitization shall consider and make a decision on adjusting the scale and structure of charter capital of the shareholding company.

(b) If the reasons were subjective:

- If losses were due to not completely dealing with the existing financial issues in accordance with current State regulations when the value of the enterprise was determined, the liability of relevant bodies such as the enterprise itself, the consultants on valuation or the body making the equitization decision must be clearly confirmed, in order to process compensation for material loss;

- If losses were due to operation of production and business, then the managers of the enterprise shall be liable to pay compensation in accordance with current regulations for the total loss subjectively caused;

- If for reasons of force majeure the person liable to pay compensation is unable to do so in accordance with the decision of the body making the equitization decision, the remaining loss shall be dealt with as if it was due to objective reasons as stipulated in sub-clause (a) above.

(c) If after implementing the above-mentioned provisions there is still insufficient to cover the decrease, the shareholding company shall be liable to inherit the losses.