Nghị định 76/2002/NĐ-CP ngày 13/09/2002 sửa đổi Nghị định 79/NĐ-CP năm 2000 Hướng dẫn Luật Thuế giá trị gia tăng

CIRCULAR

GUIDING FINANCIAL MATTERS UPON THE TRANSFORMATION OF STATE ENTERPRISES INTO JOINT-STOCK COMPANIES

In furtherance of the Government’s Decree No. 64/2002/ND-CP of June 19, 2002 on the transformation of State enterprises into joint-stock companies (hereinafter referred to as Decree No. 64/2002/ND-CP for short), the Ministry of Finance provides hereby the following guidance on financial matters:

Part one

GENERAL PROVISIONS

1. The subjects of application of this Circular are State enterprises and their dependent units prescribed in Article 2 of Decree No. 64/2002/ND-CP, which are equitized under this Decree.

Enterprises defined in Section III, Part A of the classification criteria and list of to be-classified State enterprise and State corporations, issued together with the Prime Minister’s Decision No. 58/2002/QD-TTg of April 26, 2002 shall not be equitized.

2. A number of words and phrases in this Circular are construed as follows:

2.1. "Enterprises dependent units fully meeting the conditions for independent accounting" are enterprises dependent units which have met fully the conditions for organizing cost-accounting and statistics of their production and business activities till the final results, and implement the State-prescribed financial reporting regime.

2.2. "Proceeds from the sale of the State capital portions at enterprises" are the sums of money collected from the sale of shares belonging to the State capital at enterprises, excluding the value of preferences for laborers as well as producers and suppliers of raw materials for the enterprises engaged in processing agricultural, forestry and aquatic goods.

2.3. "The time of transformation of State enterprises into joint-stock companies operating under the Enterprise Law" means the time when the joint-stock companies are granted the business registration certificates.

3. Depending on the capital size and practical conditions of each enterprise, when determining their equitization plans, the State enterprises may select and apply one of the equitization forms specified in Article 3 of Decree No. 64/2002/ND-CP.

In cases where the enterprises are equitized in the form specified in Clause 1, Article 3 of Decree No. 64/2002/ND-CP: "Maintaining the existing State capital portion at the enterprises and issuing share certificates to attract more capital," the value of the State’s shares contributed to the companies shall be determined as the actual value of the State capital portion at the enterprises minus (-) the equitization expenses and the value of preferences for laborers in the enterprises (including the value of shares sold on deferred payment to the poor) and for the producers and suppliers of raw materials for the enterprises engaged in processing agricultural, forest and/or aquatic products.

4. The State shall only hold dominant shares (accounting for over 50% of the charter capital) of the equitized enterprises operating in the conditional business lines specified at Point 1, Section II of the classification criteria and list of to be-classified State enterprise and State corporations, issued together with the Prime Minister’s Decision No. 58/2002/QD-TTg of April 26, 2002.

5. If, after being equitized, member enterprises of State corporations still have over 50% of their charter capital held by the State, they shall still be the corporations members but operate under the Enterprise Law and shall not have to pay remittances to the higher level. The corporations shall only be entitled to transfer the State capital portion contributed to the joint-stock companies on the basis of compliance with the provisions of law and the companies charters.

6. Upon receiving the equitization decisions of competent bodies, the enterprises must expeditiously effect the tax settlement, handle their unsettled financial matters, and proceed with the equitization steps. The enterprise finance management agencies and the tax offices shall have to coordinate with the enterprises in promptly effecting the financial settlement and handling the enterprises unsettled financial matters according to the State-prescribed regime.

Part two

FINANCIAL MATTERS UPON THE TRANSFORMATION OF STATE ENTERP-RISES INTO JOINT-STOCK COMPANIES

I. INVENTORY AND CLASSIFICATION OF ASSETS AT STATE ENTERPRISES

Upon receiving the equitization decisions of competent bodies, the enterprises shall have to organize the inventory and classification of assets which they are managing and using at the time of making financial settlement reports of the quarter preceding the date of issuance of the equitization decisions:

1. Inventorying to determine the accurate quantities and quality of actually existing assets which the enterprises are managing and using at the time of inventory. Identifying any surplus and/or deficient assets as compared to the accounting books, clearly analyzing the reasons therefor.

2. Classifying the inventoried assets into the following groups:

2.1 Assets which the enterprises need to use.

2.2. Assets which the enterprises do not need, unsold assets, assets awaiting liquidation, assets irrestorable for the production and business process.

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

2.4. Assets leased from outside, supplies and merchandise accepted for custody, processing, sale and/or consignment.

3. Comparing, acknowledging and classifying assorted debts, making detailed lists of debts of each type according to the following regulations:

3.1. Payable debts, including:

a/ Overdue payable debts.

b/ Payable debts which need not be repaid are debts of the creditors that no longer exist (dissolved or bankrupted enterprises, dead creditors) or do not come to compare and claim though the enterprises have notified the creditors in writing or on the mass media.

3.2. Receivable debts, including: receivable debts recoverable, receivable debts irrecoverable. Clearly analyzing the receivable debts irrecoverable whether they are overdue or undue, and classifying them into one of the following cases:

- Debtors are enterprises or organizations which have been dissolved, bankrupted or inoperative being unable to repay debts.

- Debtors are individuals who are dead, missed, serving imprisonment sentences, or whose heirs by court judgment are unable to repay debts. Debtors who are being prosecuted, detained or tried by law bodies and there are sufficient evidences to prove that their debts are irrecoverable.

- Receivable debts of debtors, which are written off under decisions of competent bodies according to law provisions.

- Receivable debts with the estimated expenses for their recovery being larger than their value.

- Receivable debts which have been overdue for three years or more and the debtors, though still existing and operating, are doing business at a loss or meet with so great difficulties that they are unable to repay debts, or the enterprises cannot recover such debts though they have actively applied many measures.

4. Organizing the evaluation and determination of the value of assets which the enterprises need to use according to the State-prescribed regime.

5. Inventorying the cash fund, comparing the bank deposit balance at the time of determining the value of the enterprises to be equitized.

II. HANDLING OF FINANCIAL MATTERS BEFORE DETERMINING THE VALUE OF ENTERPRISES

1. Handling of assets

On the basis of the asset inventory and classification results, the enterprises shall handle assets according to the provisions in Article 9 of Decree No. 64/2002/ND-CP, including:

1.1. For assets found to be surplus and/or deficient through inventory, the enterprises must analyze and identify clearly the reasons therefor and handle these assets as follows:

- For deficient assets, the enterprises must determine the compensation responsibilities of concerned organizations and/or individuals as well as administrative handling measures according to current regulations; for the value of deficient assets, after subtracting the compensated amounts, the enterprises shall account it into their business results.

- For surplus assets, if reasons therefor and their owners cannot be identified, they shall be accounted into the enterprises business results.

1.2. Assets which the enterprises do not need, unsold assets, and assets awaiting liquidation shall be handled as follows;

a/ The enterprises must report them to competent bodies for the latter to transfer them to other units for management and use. Specifically:

- For the transfer of assets to units within the branches managed by ministries, the ministries shall issue decisions thereon; for the transfer of assets to units managed by provinces or cities, the presidents of the provincial/municipal People’s Committees shall issue decisions thereon.

- For the transfer of assets to units outside the branches or localities, the branch-managing ministries or the provincial/municipal People’s Committee presidents shall submit it to the Prime Minister for consideration and decision.

On the basis of the records on asset hand-over and receipt under the asset transfer decisions of competent bodies, the equitized enterprises and the asset-receiving enterprises shall adjust their capital, up or down, according to the value of assets recorded in the accounting books of the equitized enterprises.

b/ Where no units receive the assets, the enterprises shall take initiative in liquidating or selling such assets according to the State-prescribed regime. The sale of assets shall be effected through public auctions according to the State’s current regulations. The enterprises must set up asset liquidation or sale councils headed by the enterprise directors.

Revenues from and expenses for asset liquidation and/or sale activities of the enterprises at this stage shall be accounted into the enterprises irregular revenues and expenses according to the State-prescribed regime.

c/ Where the assets have not yet been handled by the time of valuation, the value of assets no longer needed for use shall be excluded from the enterprises value for equitization. The enterprises shall have to continue monitoring and handling such assets pending their official transformation into joint-stock companies.

1.3. For assets being welfare facilities like creches, kindergartens, health stations, and dwelling houses of officials and employees, which were invested with the welfare and/or reward funds, they shall not be calculated into the enterprises value for equitization; instead, they shall be transferred to the laborers collectives for management and use through trade union organizations.

Particularly for dwelling houses of employees and workers (including those invested with the State budget capital), the enterprises shall have to compile dossiers thereof and fill in the procedures to transfer them to the local land and house management agencies for management or sale to the dwellers according to current regulations.

1.4. For assets invested with the reward and/or welfare funds of the enterprises but currently used in production and business, they shall be calculated into the value of the to be-equitized enterprises according to their re-assessed value. The value of these assets shall be converted into shares under the ownership of laborers on the enterprises lists of regular laborers at the time of equitization and shall be distributed according to the actual working time of each laborer in the enterprises.

2. Handling of bad receivable debts

Bad receivable debts shall be handled according to the provisions in Article 10 of Decree No. 64/2002/ND-CP, including:

2.1. For receivable debts which are irrecoverable, the enterprises must produce concrete evidences to prove their irrecoverability, such as:

- Grounds proving that the owing enterprises or organizations have ceased operating and are unable to repay their debts.

- For the dissolved or bankrupted enterprises, there must be the dissolution decisions of the agencies that have decided on their establishments, or the court’s decisions to handle bankrupted units.

- The written certifications of local authorities, for debtors being individuals who have been dead, missed, have no inherited properties for debt repayment, or are serving sentences, prosecuted, detained or tried and unable to repay their debts.

- Hunt orders or certifications of law bodies, for debtors being individuals who have fled away.

- Decisions of competent authorities on writing off the enterprises irrecoverable debts.

- For receivable debts which have been overdue for over 3 years and the debtors still exist but are unable to repay such debts, the enterprises have applied many measures but they cannot recover them, the enterprises must produce such evidences as: records on debt comparison with the debtors, debt-claiming official dispatches, official dispatches requesting the court to declare bankruptcy according to law provisions.

For receivable debts with adequate evidences proving their irrecoverability, the enterprises shall handle them according to the provisions in Clauses 1, 2 and 3, Article 10 of Decree No. 64/2002/ND-CP.

2.2. For other overdue receivable debts, the enterprises must continue claiming them or sell them to economic organizations with the debt sale and purchase function at negotiated prices, must not sell them directly to the debtors. Any loss incurred from the debt sale shall be handled according to the provisions in Clause 1, Article 10 of Decree No. 64/2002/ND-CP.

2.3. Pending their official transformation into joint-stock companies, the enterprises shall have to continue supervising, and organizing the collection of, debts already excluded from their value.

3. Handling of payable debts

Payable debts shall be handled according to the provisions in Article 11 of Decree No. 64/2002/ND-CP, including:

3.1. For payable debts which need not be repaid, they shall be accounted into the enterprises irregular incomes.

3.2. For tax debts and remittances payable into the State budget: After handling the receivable debts according to the provisions in Item 2 above, if the enterprises are still unable to repay tax debts and remittances payable into the State budget, they shall, on the basis of their practical financial situation and the reasons for outstanding debts, compile dossiers reporting them to the Tax Department for inspection before submission to the Ministry of Finance for consideration and decision on the applicable measures to freeze and/or reschedule debts, support investment capital or write off outstanding tax debts as well as remittances payable into the budget, which must not exceed the accumulated loss at the time of valuation. The order and procedures therefor shall comply with the guidance in Part B, Section IV of Circular No. 32/2002/TT-BTC of April 10, 2002 of the Ministry of Finance on rescheduling, freezing and writing off tax debts and remittances payable into the State budget for enterprises as well as production and business establishments meeting with difficulties due to objective causes.

3.3. For outstanding debts owed to State-run commercial banks: Where the enterprises meet with difficulties in balancing their capital sources to repay overdue debts, the general directors of State-run commercial banks shall consider and decide to freeze and/or reschedule the enterprises overdue debts by the time of issuance of the equitization decisions within a time limit of between 3 and 5 years. Where these enterprises suffer from business losses and are unable to repay debts, they shall have their interest debts, including interests already added to the loan principals, written off with the amounts not exceeding the remaining losses.

The equitized enterprises shall take initiative in coordinating with the creditor-banks and the organizations with the debt purchase and sale function in handling the residual overdue loan principals along the direction of purchasing or re-selling such debts or converting them into the banks� capital contributed to the equitized enterprises according to the law provisions on the percentage of contributed capital.

3.4. For overdue debts payable to foreign countries, which have been guaranteed, the enterprises and the guarantors must negotiate with the creditors so as to write off the interests thereon, freeze debts or reduce the loan principals, then arrange capital sources for debt repayment. Where the enterprises cannot arrange capital sources for debt repayment, the guarantors shall have to arrange capital sources for repaying the debts for the enterprises according to the committed schedule. The enterprises shall have to repay the debts to the guarantors or convert them into the guarantors capital contributed to the joint-stock companies.

3.5. For social insurance debts and debts owed to officials and employees: The enterprises shall have to repay them definitely before being equitized so as to ensure the laborers interests.

3.6. The conversion of payable debts into equities in the equitized enterprises must ensure the following requirements:

a/ Being effected through the results of the auctions to sell shares.

Where the creditors have no conditions to participate directly in the auctions, the enterprises and the creditors shall sign agreements on the prices for converting debts into equities before the auctions take place, which shall be the creditors prices for participation in the auctions. Where the participants offer the same auction prices, the creditors shall have the pre-emptive right to convert debts into equities at the negotiated prices. Particularly for the conversion of debts payable to the laborers in the enterprises into equities, it shall be effected at the "floor" price prescribed in Article 21 of Decree No. 64/2002/ND-CP.

b/ Complying with the State’s regulations on the right to buy first-time shares and the State’s right to hold dominant share at enterprises.

4. Reserves and undistributed profits

Before determining the enterprises value, the stock price decrease reserve, the bad debt reserve, the securities price decrease reserve, exchange rate difference, job-loss allowance reserve, financial reserve and undistributed profits shall be handled as follows:

a/ The balance of the reserves for stock price decrease, bad debts, securities price decrease (after offsetting losses in stock price decrease, securities price decrease and handling bad debts at the time of determining the enterprises value according to the State-prescribed regime) shall be incorporated into the enterprises incomes.

b/ The balance of exchange rate difference shall be handled as follows:

- For the value of incomplete construction works, if the exchange rate difference arises, after balancing the increased and decreased amounts, it must be calculated into the value of the works when determining the enterprises value.

- For exchange rate difference arising in other foreign currency operations, after balancing the increased and decreased amounts, it shall be accounted into the enterprises financial expenditures and revenues according to the State-prescribed regime.

c/ The balance of the job-loss allowance reserve fund: The job-loss allowance reserve fund shall be retained to settle the policies for redundant laborers according to the current regime. If the fund is not needed or not used up, the remainder must be incorporated into the enterprises after-tax incomes.

d/ The balance of the financial reserve fund: The financial reserve fund shall be used to offset the rest of the property damage and losses (if any) suffered by the enterprises in the course of business till the time of determining the enterprises value. The remainder shall be incorporated into the enterprises after-tax incomes.

e/ Where the enterprises have the previous years accumulated losses, they may use the pre-tax incomes earned up to the equitization time to offset such losses before applying measures to write off tax debts and remittances payable into the budget as well as outstanding debts owed to State-run commercial banks. Post-enterprise income tax incomes shall be distributed according to current regulations.

5. Assets contributed as capital to joint ventures with foreign countries

Assets contributed as capital to joint ventures with foreign countries shall be handled according to the provisions in Article 13 of Decree No. 64/2002/ND-CP, including:

5.1. Where the equitized enterprises take over joint-venture activities, they must calculate the value of assets contributed as joint-venture capital into their value.

5.2. Where the equitized enterprises do not take over joint-venture activities, they shall compile dossiers for reporting to the bodies competent to decide on equitization for consideration and decision and handling of assets contributed as joint-venture capital as follows:

+ Negotiating to buy or resell the contributed joint-venture capital.

+ Negotiating between the joint-venture capital-contributing partners and the enterprises on transferring their contributed capital to other partner enterprises under decisions of competent bodies.

+ Where the equitized enterprises and the foreign partners agree to terminate their joint-venture contracts, they shall handle their contributed capital according to the provisions in the Finance Ministry’s Circular No. 22/2002/TT-BTC of March 11, 2002 guiding the handling of financial matters and accounting for Vietnamese State enterprises which have contributed capital for the setting up of joint-venture enterprises under the Law on Foreign Investment in Vietnam when such joint-venture enterprises terminate their operation.

6. The cash balance of the reward and welfare funds shall be distributed to the laborers on the enterprises lists of regular laborers at the time of the equitization decision for the purchase of shares. The distribution mode shall be decided by the enterprise directors after consulting the trade union organizations on the basis of the level of contribution of each laborer. Laborers shall not have to pay income tax on these incomes.

If, before being equitized, the enterprises have overspent the reward and welfare funds, the overspent amount shall be handled as an outstanding receivable amount. Specifically:

- For amounts spent for the laborers still working in the enterprises before being equitized, they shall be deducted from the value of assets used for distributing shares to the laborers in the enterprises according to the provisions at Item 1.4, Point 1, Section II of this Circular (if any). For any deficits, the enterprises shall have to collect them from the laborers before implementing the preferential policies to reduce the selling prices of shares or the policies on job-severance or -loss allowances.

- If the reward and welfare funds have been overspent to cover rejected expenses for production and business activities, expenses for presents and gifts; additional amounts for salaries, rewards and welfare of laborers who retire or give up their jobs before the time of determining the enterprises value, the enterprises must report the overspent amounts to the enterprise finance agency and the enterprise value-determining agency for consideration and handling as an irrecoverable debt.

III. FINANCIAL HANDLING FROM THE TIME OF DETERMINING THE ENTERPRISES� VALUE TO THE TIME THE ENTERPRISES ARE OFFICIALLY TRANSFORMED INTO JOINT-STOCK COMPANIES

1. On the basis of the competent authorities decisions to announce the enterprises value, the enterprises must adjust their accounting books and the accounting balance sheets according to the State-prescribed accounting regime, and shall, at the same time, have to continue monitoring and handling debts and assets already excluded when determining the value of the equitized enterprises; fully account the equitization-related expenses arising in the period.

2. By the time the joint-stock companies are granted the business registration certificates, the enterprises shall take initiative in making financial reports, continue handling financial matters under the provisions in Section II of this Circular and effect the tax settlement with the tax agencies so as to re-determine the actual value of the State capital portion at the time of equitization, and carry out the hand-over thereof to the joint-stock companies.

3. The difference between the actual value of the State capital portion at the time the enterprises are transformed into joint-stock companies and the actual value of the State capital portion at the time of determining the enterprises value shall be handled as follows:

a/ Where the difference is positive, it shall be remitted into the same-level Fund for support of State enterprise arrangement and equitization.

b/ Where the difference is negative, the enterprises must clearly identify the reasons as well as responsibilities therefor and handle it as follows:

- Claiming material compensations according to current regulations for the negative difference due to individual or collective responsibility.

- If there remains any negative difference (if any) after material compensations have been paid, the agencies competent to decide on equitization shall decide to reduce the enterprises value and notify such to the same-level agencies that manage the Fund for support of State enterprise arrangement and equitization so that the latter allocates additional capital to ensure the percentage of shares the State needs to hold in the structure of the charter capital of the joint-stock companies.

4. For debts and assets excluded from the enterprises value:

a/ Pending their official transformation into joint-stock companies, the State enterprises shall have to continue monitoring and organize the collection of debts as well as the liquidation or sale of the above-said assets (including the re-sale thereof to organizations with the function of purchasing and selling outstanding debts and assets), then pay all proceeds therefrom into the Fund for support of State enterprise arrangement and equitization.

b/ If, by the time the enterprises have officially been transformed into joint-stock companies, they have not yet completely handled the above-said debts and assets, the equitization-deciding agencies shall consider and decide to transfer the handling of debts and assets excluded when determining the enterprises value to other enterprises or to authorize the joint-stock companies to continue preserving and handling them. The joint-stock companies shall enjoy 10% of the total proceeds from the sale or liquidation of assets and collection of debts to offset expenses, and shall have to remit the remaining amounts into the Fund for support of State enterprise arrangement an equitization.

The joint-stock companies shall have to organize the liquidation or sale of these assets within 6 months; if they fail to do so within this time limit, they must report such to the equitization-deciding agencies for handling. If the joint-stock companies have the demand to re-use such assets, they must report such to the equitization-deciding agencies so as to rent or buy them at market prices.

IV. SALE OF SHARES

1. The enterprises shall have to formulate the plans on sale of shares in the priority order and with the share structure as prescribed in Article 23 of Decree No. 64/2002/ND-CP, including:

1.1. The plans on sale of shares at preferential prices to the producers and suppliers of raw materials to the enterprises engaged in processing agricultural, forest and/or aquatic products, as determined under the guidance in the Finance Ministry’s Circular No. 96/2001/TT-BTC of November 23, 2001. Under this guidance, the plans on sale of shares at preferential prices to the producers and suppliers of aquatic products shall be determined on the basis of the aquaculture areas and amounts of aquatic products supplied to the processing enterprises to be equitized as well as the total value of shares sold at preferential prices.

1.2. On the basis of the quantities of shares actually sold to the outside and the enterprises demands in the absorption of new technology and managerial experiences and in the market expansion, the equitized enterprises shall calculate the quantities of shares to be sold to the outside so as to formulate the plans of first-time sale of shares, then submit them to competent authorities for consideration and approval. The expected minimum quantities of shares to be sold to the outside shall be determined according to the following formula:

The The total The The quantity The expected expected quantity of quantity of shares quantity of minimum the company’s of the sold at shares to be quantity of = shares State’s  preferential sold to the x 30% shares to (corresponding shares at the prices to raw-material be sold to to its charter joint-stock laborers in the producers and the outside capital) company enterprise suppliers

For the equitized enterprises having the financial situation eligible for listing on the securities market, the plans on sale of shares to the outside must ensure the conditions for listing on the securities market as prescribed by the securities legislation.

1.3. Apart from the quantity of shares bought at preferential prices, the laborers in the equitized enterprises shall be entitled to register to buy other shares (after the quantity of shares to be sold to the outside has been determined) at the floor price.

Where the laborers in the equitized enterprises register to buy not all the shares, the enterprises must promptly adjust their share sale plans, supplementing the quantity of shares to be sold to the outside.

2. The first-time sale of shares by the equitized enterprises shall comply with the provisions in Article 24 of Decree No. 64/2002/ND-CP.

Where the equitized enterprises have the quantity of shares to be sold to the outside with the share value of under VND 500 million or the equitized enterprises located in deep-lying or remote areas meet with difficulties in the sale thereof through intermediary financial institutions or the estimated expenses for the sale of shares through intermediary institutions exceed the permitted commission level, the equitization-deciding agencies shall assign the enterprises to organize the sale of shares to the outside in the form of auction.

V. MANAGEMENT AND USE OF PROCEEDS FROM THE SALE OF SHARES

1. The proceeds from the sale of shares belonging to the State capital portion (including the difference in the selling price of shares, resulting from auctions) at the enterprises equitized as from July 5, 2002 onwards shall be managed and used according to the provisions in Article 25 of Decree No. 64/2002/ND-CP and the Finance Ministry’s Regulation on the management and use of revenues and proceeds from the sale of shares. The proceeds from the sale of the State capital portion at the enterprises equitized before July 5, 2002 shall be managed and used according to the provisions in the Prime Minister’s Decision No. 177/1999/QD-TTg of August 30, 1999 and the Finance Minister’s Decision No. 95/2000/QD-BTC of June 9, 2000.

2. The proceeds from the sale of shares issued by the enterprises so as to additionally mobilize capital shall be retained, managed and used by the joint-stock companies according to law provisions and their organization and operation charters.

VI. EQUITIZATION EXPENSES

1. The expenses for equitization of State enterprises shall include:

- Expenses for printing materials and professional training on enterprise equitization;

- Expenses for inventorying assets and determining the value thereof;

- Expenses for formulating equitization plans and organization and operation charters of the joint-stock companies;

- Costs of hiring consultants and auditors (if any);

- Expenses for organizing the extraordinary congress of the enterprise’s employees and workers to deploy the equitization;

- Expenses for propaganda activities to disseminate information prospectuses on equitization;

- Expenses for organizing the share sale (including expenses for auctioning activities;

- Expenses for organizing the first congress of shareholders;

- Other expenses related to enterprise equitization.

2. The maximum spending levels for the transformation of State enterprises into joint-stock companies shall be determined as follows:

+ Enterprises with their respective actual values of under VND 5 billion may spend VND 100 million at most;

+ Enterprises with their respective actual values of between VND 5 billion and 10 billion may spend VND 150 million at most;

+ Enterprises with their respective actual values of between over VND 10 billion and 20 billion may spend VND 200 million at most;

+ Enterprises with their respective actual values of between over VND 20 billion and 30 billion may spend VND 250 million at most;

+ Enterprises with their respective actual values of between over VND 30 billion and 40 billion may spend VND 350 million at most;

+ Enterprises with their respective actual values of between over VND 40 billion and 50 billion may spend VND 400 million at most;

+ Enterprises with their respective actual values of between over VND 50 billion and 60 billion may spend VND 450 million at most;

+ Enterprises with their respective actual values of over VND 60 billion may spend VND 500 million at most;

The directors of the equitized enterprises shall decide on the expenses actually necessary for the equitization process on the principles of rationality, validity, economy and adequate vouchers. Where the enterprises overspend the above-said limits, they must send reports thereon to the Ministry of Finance for consideration and decision.

At the end of the equitization process, the enterprises must report on and settle the equitization expenses with the equitization-deciding agencies. The total equitization expenses shall be deducted from the proceeds from the sale of shares belonging to the State capital portion at the enterprises.

VII. HAND-OVER OF ASSETS AND CAPITAL TO JOINT-STOCK COMPANIES

1. An asset and capital hand-over dossier consists of:

- The financial report at the time the enterprise is officially transformed into in a joint-stock company and the tax settlement report.

- The competent body’s decision on the enterprise’s value at the time the enterprise is transformed into a joint-stock company.

- The record on the asset and capital hand-over, made at the time of hand-over.

2. The hand-over records must contain all the signatures of the representative of the equitization-deciding agency, the State enterprise’s representatives (including the director and chief accountant), the joint-stock company’s representatives (the Management Board, director and chief accountant), and the representative of the trade union organization in the company. The hand-over record between the two parties must clearly reflect:

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

- Interests and obligations taken over by the joint-stock company.

- Unsettled matters to be further settled by the joint-stock company (including the continued monitoring and recovery of excluded debts and assets, collection of money from the sale of shares on deferred payment)

VIII. PREFERENTIAL REGIMES FOR STATE ENTERPRISES TRANSFORMED INTO JOINT-STOCK COMPANIES AND LABORERS THEREIN

1. For State enterprises transformed into joint-stock companies

The preferential regimes for State enterprises transformed into joint-stock companies shall comply with the provisions in Article 26 of Decree No. 64/2002/ND-CP and the guidance of the ministries and branches, including:

1.1. The equitized State enterprises shall enjoy tax preferences at the levels specified in Articles 18 and 21 of the Government’s Decree No. 51/1999/ND-CP of July 8, 1999 detailing the implementation of Domestic Investment Promotion Law No. 03/1998/QH10 (amended) for newly-set up enterprises.

On the basis of their own conditions and the criteria for determining the tax reduction and exemption levels, the enterprises shall take initiative in determining and registering the tax reduction and exemption levels with the tax offices for realizing the tax preference policies. They shall, at the same time, have to send the copies of the equitization plan-approving decisions and the business registration certificates to the tax offices as basis for determining the preference levels.

1.2. The joint-stock companies shall have to manage, preserve and develop the welfare funds in kind handed over by the State enterprises so as to ensure welfare for the laborers in the joint-stock companies. Where the laborers have no demand but the joint-stock companies have the demand to use such funds for production and business purposes, the joint-stock companies shall re-purchase them or sell them to other subjects, then remit the proceeds therefrom into the companies welfare funds.

2. For laborers in the enterprises

The preference regimes for laborers in the enterprises shall comply with the provisions in Article 27 of Decree No. 64/2002/ND-CP, including:

2.1. For laborers on the enterprises lists of regular laborers at the time of equitization decision, for each year’s working for the State they shall be sold by the State up to 10 shares (the par value of a share is VND 100,000) with the reduction of 30% of the par value. According to this provision the laborers shall have to pay only VND 70,000 for each preferred share; the remainder of VND 30,000 is the preferential value offered by the State to the laborers.

2.2. Poor laborers in the equitized enterprises may buy shares at the preferential prices by deferred payment in 10 years, including 3 grace years. They shall make payment gradually in the 7 subsequent years without having to pay any interest. The total quantity of shares sold to poor laborers by mode of deferred payment must not exceed 20% of the total quantity of shares sold by the State at preferential prices to the laborers in the enterprises.

2.3. The total value of preference for laborers and preferences for the producers and suppliers of raw materials to the enterprises engaged in processing agricultural, forest and aquatic products, and the value of preferential shares sold by deferred payment to poor laborers shall be deducted from the State capital portion at the enterprises and must not exceed the actual value of the State capital portion at the enterprises after subtracting the capital amounts the State needs to hold and the equitization expenses.

The sale of preferential shares to the producers and suppliers of raw materials for the enterprises engaged in processing agricultural, forest and aquatic products shall be effected only after the plans on sale of preferential shares to laborers in the enterprises have been realized.

(The method of determining the quantities of shares sold at preferential prices to the laborers as well as producers and suppliers of raw materials in the equitized State enterprises is described in the appendix attached herewith (not printed here)).

The joint-stock companies shall have to monitor and organize the collection of the value of shares purchased with deferred payment and promptly remit it into the Fund for support of State enterprise arrangement and equitization.

2.4. The certificates of shares sold at preferential prices are registered ones which their owners can transfer only after three years as from the time of purchasing them. For shares sold by mode of deferred payment to the poor, their owners can sell them only after they have paid all debts to the State. Where the share owners have the demand to transfer their shares before this time limit, the approval of the Management Boards is required. The joint-stock companies shall give priority to repurchase these shares at the market prices and account them into the share funds for management and use according to the State-prescribed regime.

2.5. If the laborers who were recruited before April 21, 1998 lose their jobs or retire prematurely at the time of equitization or within 12 months after the enterprises are officially transformed into joint-stock companies, they shall enjoy allowances prescribed in the Government’s Decree No. 41/2002/ND-CP of April 11, 2002 on the policies towards redundant laborers due to re-arrangement of State enterprises, Circular No. 11/2002/TT-BLDTBXH of June 12, 2002 guiding the implementation of a number of articles of Decree No. 41/2002/ND-CP, which are paid by the Fund for support of redundant laborers in the enterprises.

The laborers who are dismissed or lose their jobs and do not fall into the subjects entitled to allowances under the provisions of Decree No. 41/2002/ND-CP and the above-said documents shall enjoy allowances as prescribed by the Labor Code, which are paid by the Fund for enterprise rearrangement as prescribed in Clauses 5 and 6, Article 27 of the Government’s Decree No. 64/2002/ND-CP of June 19, 2002 on the transformation of State enterprises into joint-stock companies.

Part three

ORGANIZATION OF IMPLEMENTATION

1. Enterprises may take initiative in handling financial matters according to the current financial regime and the guidance in this Circular before determining the enterprises value.

2. The equitization-deciding agencies shall have to urge the equitized enterprises to handle financial matters before determining their value.

3. The enterprise finance agencies of the same level shall have to guide and supervise the enterprises in handling the financial matters for the equitized enterprises strictly according to the State�s regulations. Problems, if any, should be promptly reported to competent authorities for consideration and handling.

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

All documents guiding the handling of financial matters upon the transformation of State enterprises into joint-stock companies, which are contrary to this Circular, shall be hereby annulled.

Should any problems arise in the course of implementation, the ministries, branches, localities and equitized enterprises are requested to report them to the Ministry of Finance for study and settlement.

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