CIRCULAR

GUIDING THE HANDLING OF FINANCE AND DETERMINATION OF VALUE OF ENTERPRISE WHEN THE TRANSFORMATION OF THE 100% STATE-OWNED ENTERPRISES INTO JOINT STOCK COMPANIES UNDER THE PROVISIONS OF DECREE NO.59/2011/ND-CP OF 18/07/2011 OF THE GOVERNMENT

Pursuant to the Enterprise Law No.60/2005/QH11 dated 29/11/2005;

Pursuant to Decree No.118/2008/ND-CP dated 27/11/2008 of the Government regulating functions, duties, powers and organizational structure of Ministry of Finance;

Pursuant to Decree No.59/2011/ND-CP dated 18/7/2011 of the Government on the transformation of the 100% state-owned enterprises into joint stock companies (hereinafter referred to as Decree No.59/2011/ND-CP);

The Finance Ministry hereby guides a number of issues on financial handling and determination of value of enterprises to transform the 100% state-owned enterprises into joint stock companies as follows:

Chapter I

GENERAL PROVISIONS

Article 1. Subjects to the application and scope of governing

This Circular applies to the enterprises subject to equitization defined in Article 2 of Decree No.59/2011/ND-CP (hereinafter referred to as enterprises of equitization) and within the implementation process of transfer of 100% state-owned enterprises into stock companies (hereinafter referred to as equitized enterprise).

Article 2. A number of principles when implementing enterprise equitization

1. When implementing equitization for parent company, subsidiaries owned 100% of charter capital by the parent company shall be determined enterprise value under the provisions of this Circular. The time of determining the value of the subsidiaries must be coincided with the time of determining the value of parent company.

2. The agencies that are competent to decide on the implementation of the equitization of enterprises decide to publish the enterprise value, decide on approving the equitization plan for enterprises, decide on approving the restructuring plan for enterprises, decide on approving financial settlement, settlement for equitization costs, settlement of funds supportting for redundant laborers, the settlement for the proceeds from equitization and publish the actual value of the State capital at the time that joint stock companies are issued certificates of initial joint stock company registration as stipulated in Clause 1, Clause 2 of Article 49 of Decree No.59/2011/ND-CP (hereinafter referred to as agencies deciding the equitization of enterprises).

3. Before implementing equitization, equitized enterprises have to make inventory, process finance and redefine enterprise value, the value of state capital in enterprises in accordance with current legislation. The State does not grant more capital for equitization, including the enterprises that by the Decision No.14/2011/QD-TTg dated 04/3/2011 of the Prime Minister promulgating the criteria, list, classification of  state enterprises when implementing equitization are subjects to owned by the State more than 50% of the total shares.

4. After having been dealt with finance and implemented the determination of enterprise value that the state capital in the enterprise is no longer or the enterprise's actual value is lower than the liabilities, the agencies that are competent to decide on equitization direct the enterprise to corborate with the Debt Trading Company of Vietnam and the creditors of the enterprise to set up the plan of restructuring the enterprise to transfer the enterprise into joint stock company. In the case of the restructuring plan is not feasible, ineffective, it should apply other suitable arrangement in accordance with the law provisions.

5. The process of financial handling and the determination of equitized enterprise value must be ensured tightness, openness and transparency, not lossing capital and assets of the State. The concerned organizations and individuals when implementing the handling of finance and the determination of enterprise value fail to comply with regulations, causing damages or loss of state assets, are responsible for administrative sanction, paying material compensation or examined for criminal liability under the provisions of law.

6. Result of the determination of equitized enterprise value, the actual value of state capital approved by the competent authority is a basis for the equitized enterprises to define charter capital, to set up the plan of equitization and organize the sale of initial shares, organize the shareholders meeting, to continue handling the remaining financial matters to the time officially transformed into joint stock companies, settle finance of the equitization process with the state and hand over the joint stock companies.

7. Competent persons as defined in Article 49 of Decree No.59/2011/ND-CP establish the Steering committee of equitization to help the organization of the implementation of equitization according to regulations. The Steering committee of equitization shall be dissolved after equitized enterprise was completed the handover into the joint stock company. The financial problem arises (if any) after equitized enterprises has officially transformed into joint stock company, but is related to the equitization process, the agency that is competent to decide enterprise equitization is responsible for continue processing.

The Steering Committee for Innovation and Enterprise Development and the Ministry of Finance appoint their members to joint in the Steering Committee of equitization of enterprises with large capital, business activities in the specific sectors, branches according to provisions in point b Clause 4 of Article 49 of Decree No.59/2011/ND-CP to assist the Steering Committee of enterprises equitization to perform its tasks of which direct are the difficulties and problems of policy mechanisms during the process of enterprise equitization when required to submit to the competent authorities for handling and performing other duties as assigned by the Chief of Steering Committee of enterprises equitization.

8. The work steps and the conversion procedure of the 100% state-owned enterprises into the joint stock companies shall comply with Appendix issued together with Decree No.59/2011/ND-CP In case of equitized companies do not make enterprise transformation by this process shall be implemented according to decision of the Prime Minister.

Article 3. Interpretation of terms

A number of terms used in this Circular are construed as follows:

1. "The time of making decision on equitization" means the time the agency that is competent to decide equitization of enterprises to issue decision on implementing equitization of enterprise.

2. " The time of determining value of equitized enterprise" means the time of closing accounting books, making annual or quarter financial statements selected by the agency that is competent to decide equitization of enterprises in accordance with method of determining value of enterprise, in particular:

a) Where the determination of value of equitized enterprise according to the method of assets, the time of determining value of enterprise is the time of closing accounting books and making annual or quarter financial statements closest to the the time of making decision on equitization.

b) In case of determining value of enterprise by the method of discounted cash flow or other methods, the time of determining value of enterprise is the time of closing accounting books and making annual financial statements closest to the the time of making decision on equitization.

3. "The time of publicizing enterprise value" means the time that agency that is competent to decide equitization of enterprises to issue decision on publicizing the value of equitized enterprises.

4. "The time of transformation into joint stock company of equitized enterprise" means the time that joint stock company converted from equitized enterprise is granted business registration certificate of the first joint-stock company.

Chapter II

FINANCIAL HANDLING UPON EQUITIZATION

SECTION I. INVENTORY OF ASSETS AND CROSS-CHECK OF LIABILITIES

Article 4. Inventory and classification of assets

1. Upon receiving the decision of equitization of the authorities that are competent  to decide on equitization, equitized enterprises are responsible for the inventory and classification of assets, capital sources and enterprise funds being managed, used at time of determining enterprise value. The group of helping the equitization, equitized enterprises coordinate with consultants (if any) to implement the inventory and classification of assets.

2. Making a list table to correctly identify the number, quality and value of existing assets being managed and used by the enterprise; inventorying cash fund, cross-checking balance of bank deposits; and identifying assets, surplus or deficit cash compared to the accounting books, analyzing clearly the causes of surplus or deficit and the responsibility of the concerned persons, determining the level of compensation as prescribed by law.

3. Inventoried assets are classified according to the following groups:

a) Assets that enterprises wish for use.

b) Assets that are no longer needed or unsold assets and assets awaiting liquidation.

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

d) Assets leased, borrowed, materials, goods to be kept for others or from processed outsource, received from acting as agent, assets deposited, assets contributed as capital to joint ventures and other assets not belonging to enterprise.

đ) The assets attached to land subject to treatment under the reorganization plan, treatment for the facilities of housing and land as decided by the Prime Minister of the reorganization, the handling of houses, land owned by the State.

Article 5. Comparison, confirmation and classification of liabilities

Equitized enterprises compare, confirm and classify the liabilities; set up detailed lists for each debtor, creditor according to the following provisions:

1. Debts receivable:

a) To compare and certify all of the receivable debts by each debtor, including:

- The receivable debts not yet due and overdue receivable debts.

- To analyze clearly the bad receivable debts meaning the receivable debts that are overdue for payment as stated  in the economic contract. The receivable debts not yet due, but economic organizations (companies, private enterprises, cooperatives, credit institutions) have been in bankruptcy or conducting dissolution procedure; the debtors are missing, run away, are being prosecuted by law enforcement agencies, detented, brough to trial or serving sentences or were dead.

The receivable debts are unlikely to recover required to have enough documents to prove that.

b) To review the economic contracts to determine the amounts already paid to suppliers of goods and services but have been accounted for the entire prepaid value in business expenses such as rent, land rent, purchase amount, long term insurance purchase amount, salaries and wages ....

2. Payable liabilities include loans, tax debts and other obligations to the state budget:

a) Pursuant to the contracts, notice of debts to make a list comparing the loans according to each creditor; determine the tax debts and amounts payable to other state budget; specifically analyze the loans under contracts (domestic loans, foreign loans), loans with guarantee, loans by issuing bonds; in term loans, loans not yet come due, overdue loans for payments, principal debts and outstanding interest debts, payable debts but not required to be paid.

b) Payable liabilities but not required to be paid mean debts that creditors of equitized enterprises when implementing comparison and certification of debts are under the following circumstances:

- The debts of the enterprises that have been dissolved, bankrupted, but not specifying the agency or individual to inherit under the plan of dissolution, processing of enterprise bankruptcy assets of the enterprise dissolved, bankrupted decided to approve by  the competent agency.

- The debts of the individuals who have died but did not specify a successor.

- The debts of other creditors that have been overdue for years but creditors did not come for comparison and verification. In this case, the equitized enterprises shall send written notice directly to the creditors or make notice on the mass media 5 working days before the time of inventory.

Article 6. Comparison and certification of financial investment amounts; the divided amounts; the amounts received from capital contributions

Equitized enterprises compare and confirm, make detailed list for the financial investment amounts, divided amounts of enterprises including: investments in joint ventures, associated with enterprises, organizations; and participation in the equity or capital contribution to establish limited liability companies, capital investment to establish one member limited liability companies owned by the equitized enterprises, profits divided from the investments (there were the Resolutions of the Management Board, the Council of members) but not actually received; analyse the results of investment activities with interest and investment activity lost not yet treated;

To determine the quantity and value of securities (stocks, bonds ...) purchased; quantity of shares that equitized enterprises are received extra without making payment because the joint stock companies use the share capital surplus amounts, the funds of equity, after-tax profits not yet distributed to increase charter capital (investment capital increase of the owners in the joint stock companies with contributed capital of the equitized enterprises) .

For amounts received from contribution of capital of joint ventures, associated enterprises, equitized enterprises based on joint venture contracts make a list in details for each partner contributed capital to the equitized enterprises and inform the capital contributors for the company to inherit the previously signed contracts or liquidate the contracts.

Article 7. Inventory, comparison, confirmation and classification of assets and liabilities when the equitization of state-owned commercial banks

The inventory and assessment, classification of assets as capital in cash, financial  leasing property and other debts in the State Commercial Bank when implementing equitization shall be  made as follows:

1. To inventory, compare the customer's deposits and certificates of deposits (fiducial credits, bills, bonds) as follows:

a) To make detailed inventory for each item on the accounting books.

b) To compare and confirm the balance of customers’ deposits as legal entities.

c) Savings deposits, personal deposits, certificates of deposits may not be required to be compared with the clients, but shall be compared with the archived cards. For some specific cases (with large deposit balances or difference between the data on accounting books with the archived cards) shall be compared directly with clients.

2. Comparison of asset as credit outstanding (including outstanding monitored off-balance sheet) is as follows:

a) Based on the credit profile of each customer in a commercial bank to establish a list of customers having credit outstanding and number of credit outstanding of each customer, detailed by each the credit contract.

b) Make comparison between the data determined by the credit profile with data accounted on the accounting books of the commercial bank; to compare credit outstanding with each customer to collect confirmation of the customers on the credit outstanding.

For individual customers, if it may not be organized the comparison with each consumer, the commercial bank, credit institution shall compare with the archived cards.

c) Where there is a difference between the profile data with accounting books and customers’ confirmation, the commercial bank must make clearly the reasons of the difference and determine the responsibilities of concerned organizations and individuals for handling according to current regulations of the State.

3. To classify the outstanding receivable debts eligible for treatment under the guidance of the State Bank of Vietnam.

4. For financial leasing assets: it must compare with each client, identifying the debts remaining to be paid of each financial leasing asset.

Article 8. Responsibility in the inventory of assets, comparison, confirmation of assets and capital of all kinds to make the enterprise equitization

In the process of the inventory of assets, comparison, confirmation of debts, capital of all kinds if it is omitted leading to reduce the value of enterprises and the state capital in equitized enterprises, the directors, chief accountants and other concerned organizations, individuals shall be responsible for paying compensation and remitting to the state budget the total value of assets and capital of all kinds that had been omitted in accordance with the law provisions.

SECTION II. HANDLING ON FINANCE BEFORE DETERMINATION OF ENTERPRISE VALUE AND AT THE TIME OF TRANSFORMATION INTO JOINT STOCK COMPANY

Article 9. Handling on finance before determination of enterprise value

1. Handling of assets:

Based on the results of the inventory, classification of assets, enterprise handles assets in accordance with provisions in Article 14 of Decree No.59/2011/ND-CP of which:

a) For assets of surplus or deficit, it must analyze to make clear the reasons, and processed as follows:

- Deficit assets: it must determine the responsibilities of organizations and individuals to handle material compensation in accordance with current provisions; value of deficit assets after deducting compensation of organizations and individuals (if any), shall be accounted by the enterprise into production and business costs.

- Surplus assets: if it is not determined the cause or can not be found the owner shall be handled to increase the actual value of the State capital.

b) With respect to assets no longer needed or unsold assets and assets awaiting liquidation:

- Directors of equitized enterprises are responsible for directing the liquidation or sale of assets. The liquidation, sale of assets is done by means of public auction under the current regulations of the State.

- The revenues and expenses for the activities of liquidation or sale of assets shall be accounted into the revenues and expenses of the enterprises.

- By the time of determining enterprise value, those assets no longer needed or unsold assets and assets awaiting liquidation that have not been handled, except for the assets not allowed to exclude specified in Clause 3 of Article 14 of Decree No.59/2011/ND-CP the authorities that are competent to decide on announcement of the value of equitized enterprises consider to decide on excluding not including into enterprise value and perform the handover for the agencies specified in clause 2 of Article 14 of Decree No.59/2011/ND-CP Specifically:

Debts Trading Company of Vietnam for handling in accordance with the law provisions for the enterprises defined in Article 2 of Decree No.59/2011/ND-CP.

The parent companies of the economic groups, the State-owned Corporation, parent company of the group of parent company - subsidiary for handling in accordance with provisions for the limited liability companies held 100% of charter capital by these enterprises.

c) The equitized enterprises are not excluded from the equitized enterprise value the assets used by the enterprises as mortgage for loans including assets that the enterprises have no need for use.

d) For the assets not allowed to exclude, the equitized enterprises shall handle in accordance with provisions in clause 3 of Article 14 of Decree No.59/2011/CP-ND.

đ) The equitized enterprises make the plans of restructuring, handling facilities of houses, land and submit to the competent authorities for approval in accordance with provisions of the Prime Minister for handling completely ownership of property and land ownership of the enterprises before determining value of enterprises to be equitized.

For assets attached to land not under enterprises’ management, use right, equitized enterprises based on the plans of restructuring, handling facilities of houses, land that have been approved by competent authorities according to provisions of the Prime Minister to handle completely ownership of property and land ownership of the enterprises before determining value of enterprises to be equitized.

e) Assets as public welfare works: nursery schools, kindergartens, clinics and other welfare assets invested with the welfare and reward funds; residences of officials and public employees invested with welfare fund and invested with the state budget are handled as prescribed in Clause 4 of Article 14 of Decree No.59/2011/ND-CP.

g) For assets being used in production, business invested with welfare fund, reward fund of equitized enterprises are included in the value of equitized enterprises and the joint stock companies are entitled to continue use in production, business.

2. Handling of receivable debts:

The treatment of receivable debts of the enterprises shall comply with Article 15 of Decree No.59/2011/ND-CP of which:

2.1. Based on the result of comparison and certification of receivable debts, the equitized enterprises shall recover debts when coming due; actively urge and take all necessary measures to recover the overdue receivable debts likely to recover prior to the determination of the value of equitized enterprises.

2.2. The receivable debts are determined to be bad receivable debts when having full documents to prove, as follows:

a) The receivable debts required to have original documents, with comparison, certification of debtors of amounts owed such as economic contracts, loan agreements, the liquidation of contracts, loan commitments and records of comparison of liabilities and other objective documents to prove outstanding debts that are not collected.

b) Books of accounts, vouchers, documents evidencing debts not been recovered by the time of handling debts are being accounted receivable debts by the enterprises on the accounting books of the enterprises.

c) In case of the economic organizations:

- Debtors that have been dissolved, bankrupted: required to have the decisions of the Court to declare enterprise’s bankruptcy under the Bankruptcy Law or decisions of the competent persons for the dissolution of enterprises as debtors, in case of self- dissolution, it must have notice of the unit or certification of the agency decided to establish units or organizations.

- Debtors that have ceased their operation and have no ability to pay: means certification of the agency decided to establish the enterprise or business registration organization on the enterprises, organizations ceased their operation but have no liquidity.

- For receivable debts but debtors decided on removing debts in accordance with law by the competent agencies; the damage difference accepted by the competent authority from selling receivable debts: means the decisions of the competent agencies for removing debts.

- For receivable debts incurred for more than three years that debtors are still exist but can not afford to pay the debts, the enterprises have adopted many measures but not recovered, the enterprises must present the proof such as minutes of comparing debts with debtors, the official dispatches of requesting for making payment of debts, the official dispatches requesting the court to declare bankruptcy according to law. The receivable debts that cost estimates for requesting the payment of debts are larger the value of the receivable debts.

d) In case of individuals:

- A death certificate (copy) or written certification of local authority for debtor who has died without inherited assets to pay debts.

- A wriiten certification of local authority for debtor who is alive or missing, but inability to pay debts.

- An Arrest Command or written certification of legislation agency for debtor who has fled away or is being prosecuted, or serving sentence or written certification of local authority on the debtor or the heritor can not afford to pay debts.

đ) By the time of conducting the determination of enterprise value, the receivable debts have been fully documented to prove that they are not likely to be recovered under the provisions (regardless of the debts already appropriated or not for reserve fund), the enterprises shall use the reserve source for bad receivable debts to cover, the deficit difference shall be accounted into expenses of production, business of the enterprises.

2.3. The loans having inadequate legal documents to prove their debtors or not likely to be recovered as prescribed, shall not be excluded from the enterprise value, enterprises have to clarify the causes for handling as follows:

- For receivable debts having inadequate legal documents to prove their debtors, the enterprises must determine the cause to process the liability of paying compensation of concerned collectives or individuals; the loss after handling of the organizations or individuals (if any) shall be handed over by equitized enterprises to the joint-stock companies for continuing to handle later.

- The receivable debts having no documents to prove in accordance to provisions that there is no ability to recover, the equitized enterprises and joint stock companies shall then continue to complete the documents as prescribed and handle according to the provisions of current law.

2.4. Enterprises are allowed to exclude from the value of the equitized enterprises the receivable debts if they have adequate dossiers documented inability to recover as prescribed.

Equitized enterprises shall hand over the debts not included in the value of the equitized enterprises (including bad debts that have been dealt with by the provision within the preceding 05 years prior to the equitization) together with full dossiers, the relevant documents to the agencies specified in Clause 2 of Article 14 of Decree No.59/2011/ND-CP.

For the receivable debts not likely to be recovered although have been treated but debtors are still exist, the agency receiving the handover is responsible for following-up and organization of the recovery.

During the pending time for the implementation of handover, the time not yet officially converted into joint stock companies, the equitized enterprises shall still continue to monitor and organize the recovery of debts that have been excluded from the value of equitized enterprises.

2.5. For the amounts that enterprises paid in advance to suppliers of goods and services such as rent, land rent, the amounts of long-term insurance purchase, the amounts of goods purchases, wages which have been accounted into expenditures of business, the enterprises based on the contracts of sale of goods and services provision, comparison with debts for accounting reduction of costs (corresponding to the goods or services not yet been provided or unrealized leasing term) and accounting increase for expenses paid before determinating the value of equitized enterprises.

3. Handling liabilities to organizations and individuals:

Based on the results of cross-check for loan classification, the enterprises handle liabilities as prescribed in Article 16 of Decree No.59/2011/ND-CP of which:

a) The liabilities not required to pay upon having all documents and conducting all the procedures for creditors under the provisions of point b clause 2 of Article 5 of this Circular shall be accounted for increasing state capital in the equitized enterprises.

b) For tax debts and other obligations to the state budget: equitized enterprises are responsible for declaring and paying the full tax debts and obligations to the state budget and sending the statement of tax settlement of the time of determining enterprise value together with a written request to the directly managing tax agencies to inspect and determine the tax amounts required to be paid as prescribed. Within 30 days after receiving the written request of equitized enterprises, tax agencies are responsible for appointing officials to inspect the equitized enterprises in accordance with the time of determining enterprise value has been reported.

If, when making the determination of enterprise value that the inspection of tax settlement has not yet been completed, the equitized enterprises shall be used the financial statements made and tax data declared as a basis for the determination of enterprise value (including the determination of tax obligations and the distribution of profits), but it is required to put into the Records of determining equitized enterprise value, the decision on publicizing enterprise value and in the plan of enterprise equitization, to publicize the unfinished inspection of the tax settlement when making disclosure of selling shares to the investors.

The differences of tax obligations for the State (if any) will be adjusted when preparing financial statements at the time the enterprises are granted business registration certificates of the first joint stock enterprises to hand over to joint stock companies.

c) For loans of commercial banks and the Vietnam Development Bank (referred to as lending banks), loans from other organizations or individuals, the equitized enterprises shall have to mobilize lawful capital to pay the due debts before the determination of enterprise value.

d) During the financial process before determining the enterprise value if the equitized enterprises have difficulties in the ability to pay overdue debts of the banks, or accumulated losses, the enterprises shall combinate with the lending banks to handle the loans as follows:

- The equitized enterprises conduct the procedures, records requesting the lending banks for considering and deciding to freeze debts, reschedule, remove interest debts as prescribed by current law.

Within a maximum period of 20 working days from the date of receipt of dossiers of the enterprises, lending banks shall send written reply to the enterprises.

- In addition to the measures of freezing debts, rescheduling debts, removing interest debts mentioned above, the enterprises collaborate with lending banks for handling the overdue remaining principal debts according to method of selling debts for Debts Trading Company of Vietnam under the agreed price. Based on the agreements of debt purchase and sale, the equitized enterprises shall have to acknowledge debts with the Debt Trading Company; and coordinate with Debts Trading Company of Vietnam to set up the plans of restructuring the debt, hanling finance, submit to the agency decided equitization to consider, deal with Debts Trading Company of Vietnam on the plan of tranforming enterprises into joint stock companies.

- Negotiate with the lending banks to convert debts into equity capital. The conversion of debts into equity capital shall comply with the successful auction results of the lending banks or  following the lowest successful bid price. Where the lending banks are selected as strategic investors, the conversion of debts into shares shall be determined according to the price specified at Point đ, Clause 3, Article 6 of Decree No.59/2011/ND-CP.

- The handling of conversion of liabilities of lending organizations and individuals (not banks) into equity capital shall comply with current regulations in Clause 1 of Article 16 of Decree No.59/2011/ND-CP.

đ) For foreign loans (with guarantee and without guarantee) have expired, the enterprises and the guarantors must negotiate with creditors to have plans for handling in accordance with the laws on management of borrowing and repayment of foreign loans.

e) For social insurance debts, debts of employees, officials, the enterprises are responsible for completely paying before converted into joint stock companies to secure rights for laborers. For the particular expenses to laborers as military uniform, national defense workers and employees (salary for retirement preparation time) in the equitized enterprises under the Ministry of Defense if any arising shall be accounted into the costs of production, business before the financial settlement to hand over equitized enterprises into joint stock companies.

4. The reserves, losses or profits

The handling of the reserves, risk reserve funds of banks, professional reserves of insurance, exchange rate differences, the financial reserve fund and the profits, loss of enterprises, the equitized enterprises comply with the provisions of Article 17 of Decree No.59/2011/ND-CP.

In case the joint stock companies have losses due to exchange rate differences, the equitized enterprises report causes leading to losses due to exchange rate differences with the agencies decided the equitisation to handle each specific case.

Where after equitized enterprises processed the losses in accordance with provisions to the time of determining value but they still owe the credit institutions (including the Development Bank of Vietnam), equitized enterprises shall conduct procedures and dossiers to request the lending banks for considering the handling of removing interest debts according to current regulations of the State on outstanding debts settlement.

The arising profits of the enterprises after used to cover losses (if any) under the provisions of the Law on Enterprise Income Tax, offset the losses incurred on assets not in use, awaiting liquidation, assets impaired, debts not likely to recover, the rest shall be distributed according to current regulations before determining the enterprise value. If the time of determining value of enterprise does not coincide with the time of annual financial statement, the appropriation of funds of enterprises shall comply with the provisions of Clause 2 of Article 10 of this Circular.

5. Long-term capital investments in other enterprises such as capital contribution for joint ventures, associated enterprises and equity capital; capital contribution to establish limited liability companies and other forms of long-term investments are handled as prescribed in Article 18 of Decree No.59/2011/ND-CP.

In case joint stock companies do not inherit capital invested long-term in other enterprises that they sell to their partners or other investors as prescribed by law, the equitized enterprises have to report, collect certification of the tax authorities on results and obligations of tax, on the capital transfer for used as a basis for determining the enterprise value.

6. The reward fund and welfare fund:

Cash balances of the reward fund, welfare fund after used for offsetting the expenses in excess of regime for employees (if any) are used to distribute to the laborers who are working at the time of dertermining value of enterprises by the number of working years in the equitized enterprises.

Enterprise directors cordinate with the trade unions at the equitized enterprises to set up the plans and decide the distribution of cash balances and the value corresponding to the value of assets invested by the reward fund, welfare fund that stock companies continue to use in production, business to employees. The money amounts divided from the welfare fund, reward fund and a list of employees to be entitled under the decisions of enterprises must be publicized to the laborers.

Where enterprises spent over the resources of the reward fund, welfare fund, the enterprises must review the responsibilities of organizations and individuals decided to spend the reward fund, welfare fund but has no more resources and handle as follows:

- For amounts spent directly to the employees named in the regular list at the time of having the decision on equitization and spent to the members of administration, management boards of the companies are not deducted from the state capital in the enterprises. Enterprise directors cordinate with the trade unions at the enterprises to process by recovery or transfer into receivable debts for the joint stock companies to process further later.

- For the expenses exceeding the resources of reward fund, welfare fund that are unidentifiable objects to recover (as expenditures for employees who terminated their jobs or resigned before the equitization decision), the Equitization Steering Committee reports to the agency deciding the enterprise value for handling the receivable debts that are not likely to be recovered.

7. Reward Fund for the Administration, Management Board

For cash balances of Reward Fund for the Administration, Management Boards, the enterprises report owners to decide on the reward for the subjects as prescribed:

Councils of Members, Chairmen of the companies (for the companies having no Councils of Members), the Boards of directors of the companies before determining the enterprise value.

8. The enterprises establish the funds for development of science and technology of the enterprises, upon the implementation of equitisation, the funds’ balances shall be transferred to joint stock companies. The joiny stock companies are responsible for the management and use of funds under the provisions of Circular No.15/2011/TT-BTC dated 9/02/2011 of the Ministry of Finance.

9. Balance of Fund of enterprise support and arrangement at the equitized enterprises (if any) is processed state capital increase accounting in enterprises according to Article 20 of Decree No.59/2011/ND-CP.

Article 10. Financial handling upon the equitized enterprises officially converted into joint stock companies

1. Based on the decisions to announce enterprise value of the competent authorities, the equitized enterprises are responsible for adjusting data in the accounting books by enterprise value that has been published. To perform transfer of assets and receivable debts not included in the enterprise value to the agencies specified in clause 2 of Article 14 of Decree No.59/2011/ND-CP within 30 days after having the the decision to announce enterprise value of the competent authority.

2. In the period from the time of determining enterprise value to the time officially transformed into joint stock companies, the equitized enterprises continue to handle the financial matters in accordance with Article 21 of Decree No.59/2011/ND-CP and make financial statements at the time officially converted into joint stock companies. Of which:

2.1. For investment in fixed assets, investment in works construction uncompleted when determining the value of the enterprise, but to the time officially converted into joint stock companies, it is completed and be approved the settlement by competent authorities, if there is any difference compared to the time of determining enterprise value shall be adjusted according to the approved settlement.

2.2. Determination of the level of fixed assets depreciation is the one defined by the method of assets depreciation that the equitized enterprises registered with tax authorities before doing the determination of enterprise value.

2.3. The distribution of enterprise profits comply with current regulations for one member limited liability company owned by the State.

If the time of determining the value of the enterprise and the time officially transformed into joint stock company does not coincide with the time of making annual financial statements, so it may not be implemented the classification of enterprises as a basis for setting up the funds of enterprises; the equitized enterprise shall appropriate reward fund for administration, management board and reward fund and welfare fund at this time by the following principles:

- Based on the results of enterprise classification of the year preceeding the year done determination of equitized enterprise value.

- The enterprises based on profits that under the regulations are used to appropriate funds for distributing funds of enterprises.

- If from the time of determining enterprise value to the time officially transformed into joint stock companies is full 12 months, the level of appropriating funds is the maximum level as prescribed by the distribution of profits, If from the time of determining enterprise value to the time officially transformed into joint stock companies is less than 12 months, the level of appropriating funds equal to the level of appropriation according to the rules of profit distribution divided 12, multiplied by the number of months from the time of determining enterprise value to the time officially transformed into joint stock companies.

2.4. The equitized enterprises shall appropriate sufficient reserve funds for unemployment allowance as prescribed by the State to use the allowance payment for redundant workers in the process of equitization; when preparing financial statements at the time officially transformed into joint-stock company if the balance remains, shall be accounted in income increase for equitized enterprises.

3. Within 30 days from being granted business registration certificate of initial joint stock company, Equitization Steering Committee directs the helping group, equitized enterprise to complete the financial statements at the time granted business registration certificate of stock company, to audit the financial statements; requests the tax agency to prioritize the inspection of tax settlement and other obligations to the budget; re-determines State capital value at the time officially transformed into joint stock companies; make the settlement statement: on equitization proceeds, payment of benefits for redundant employees, the costs of equitization.

If the time of determining enterprise value is the preceding year, the time officially transformed into joint stock company is the following year, then make only one financial statement of the whole period, not to separate the two statements at the time of 31/12 and at the official officially transformed into joint stock company. Financial statements must be sent to agencies and units in accordance with provisions of the accounting regime.

Financial statements that have been audited, the settlement dossiers of the equitization process (equitization proceeds, payment of benefits for redundant employees, the costs of equitisation) and related documents of enterprises are sent to the agencies deciding the enterprise equitization and related agencies to coordinate the inspection and handling of problems in finance and implement approval of financial statements, approval of the settlement of the enterprise equitization process.

a) When preparing financial statements to hand over from the equitized enterprises into joint stock companies, the enterprises carry out the revaluation of the financial investments, investments in securities (if any) defined in the value of the equitized enterprises; if the total value of the financial investments, investment in securities arises increase compared with the value defined in the enterprise value that has been publicized and accounted in the accounting books, the equitized enterprises may appropriate reserve of impairment for financial investments, investment in securities and account in costs in accordance with current regulations.

Where the total value of financial investments, investment in securities arises increase, the increased difference compared with the value ​​determined in enterprise value that has been published and accounted in the accounting books, the enterprises may account income increase.

b) For the dividends from capital contribution investments activities (with the Resolution of the Management Board, the Council of Members), actually to the time converted into joint stock companies, that the equitized enterprises have not yet collected the money but used to increase investment capital in other enterprises, when making the financial statements at the time officially converted into joint stock companies must record increase the actual value of state capital in the joint stock companies and implement the settlement of proceeds from equitization for joint stock companies.

When conducting handover settlement from the state companies into joint stock companies, investment capital values ​​from interests mentioned above are the investment values of joint stock companies in other enterprises.

c) For shares that equitized companies are received extra without making payment, when making financial statement at the time converted into joint stock companies, the enterprises based on the number of shares received extra and the transaction price by guidance in clause 8 of Article 17 of this Circular to record increase for the actual value of the State capital in the equitized enterprises.

When conducting handover settlement from the state companies into joint stock companies, the number of shares to be transferred is under the ownership of the joint stock companies.

d) Where the period from the due date to pay for purchase of shares by investors to the time the company is granted the business registration certificate prolongs more than 3 months, the enterprises shall be calculated loan interest costs to pay for investors in the following principles:

- Only calculating interest from the fourth month onward on total par value of the shares purchased. For shares the employees are purchased by discounts, if the purchase price of preference shares is lower than par value, only calculate the interest on the amount actually paid.

- Interest rate does not exceed short-term interest rate at the same period of commercial bank where equitized enterprise opens its account at the time of calculating interest.

- For the amount of paying for interest to investors, the equitized enterprises shall be accounted in production and business costs but must ensure not exceeding the payable amount under the provisions and equitized enterprises are not reported loss as making financial statements to be transfer into the joint stock companies.

đ) From the date of receiving the written request of equitized enterprises till by the time as prescribed required to approve the financial statements for transfer, the tax agencies shall give priority to appoint officials to inspect the tax settlement and other amounts payable to budget in accordance with time that equitized enterprises are transformed into joint stock companies.

Where over the time as prescribed required to approve the financial statement for transfer but the inspection of the tax settlement has not been completed, equitized enterprise is used financial statement made and tax data declared as a basis for handover to the joint stock company. the joint stock company is responsible for inheritance and payment for all taxes and other arrears payable to state budget upon handover.

After officially converted into joint stock companies, if incurred losses due to not inspecting the tax settlement, it shall be handled as prescribed in Clause 3 of Article 52 of Decree No.59/2011/ND-CP.

4. Within 30 days after receiving the financial statements of the enterprises that have been audited, reported the tax settlement (if any), the agencies competent to decide the enterprises equitization shall coordinate with the relevant authority to inspect and handle the existing financial matters of the enterprises and issue decisions approving the financial settlement, proceeds settlement from equitization, the settlement of equitization expenses, the settlement of funds supportting redundant workers, and the decision to publish the actual value of the State capital at the time equitized enterprises officially transformed into joint stock companies as the basis for the handover between equitized enterprises and joint stock companies.

For equitized enterprises approved the equitization plan by the Prime Minister, The Minister managing branch shall approve the settlement of financial statements and the reports of settlement of: equitization proceeds, payment for redundant workers, the expenses of equitization.

Council of members of the parent company of the economic group; special corporation decided to establish by Prime Minister shall approve the settlement of financial statements and the reports of settlement of: equitization proceeds, payment for redundant workers, the expenses of equitization of equitized enterprises authorized by the Prime Minister the decision to publicize value of the enterprise, the decision approving the equitization plan.

Directors and Chiefs Accountant of the equitized enterprises shall make and sign the financial statements, reports of determining value of the State capital at the time of conversion into joint stock companies, the reports of settlement of: equitization proceeds, payment for redundant workers, the expenses of equitization and take responsibility for the truthfulness and accuracy of the statements.

Management Board of joint-stock company (new) is responsible for creating conditions for leaders of the equitized enterprises to fulfill their tasks and signed, stamped and certified by signature of the above titles of equitized enterprises in the financial statements and the settlements related to equitization process.

Where Directors, Chiefs accountants of equitized enterprises have not completed the above tasks and equitized enterprises have not completed the handover into joint stock companies, shall not be transferred their jobs or retired under the regime.

5. The differences between the actual value of the State capital at the time the equitized enterprises converted into the joint stock companies with the actual value of the State capital at the time of determining enterprise value are handled in accordance provisions in Clause 3 of Article 21 of Decree No.59/2011/ND-CP Where decreased differences are arisen (including cause of loss due to business), it must clarify the reasons of objectivity and subjectivity before handling, in which:

5.1. The decreased differences due to objective reasons are the losses caused by natural disasters or calamities, the State policy changes or fluctuations of international markets and other unforeseen reasons, but state capital has not been negative in the equitized enterprises at the time converted into the joint stock companies, the agencies that are competent to decide the equitization plan consider the submission to the General Meeting of shareholders to adjust the size, structure of charter capital of joint stock companies.

Where decreased differences are arisen leading the value of state capital in the equitized enterprises at the time converted into joint stock companies are negative, enterprises report the agencies that are competent to decide the equitization plans for reviewing to decide on the use of proceeds from the sale of shares (after made payment of benefits to redundant workers and equitization expenses) and compensation insurance (if any) to offset; after being offset but the value of state capital remains negative and equitized enterprises were granted business registration certificates of the initial joint-stock companies, the Management Boards shall convene irregular general meeting of shareholders to vote the handling of losses and maintain the operation of the enterprise.

5.2. The remaining cases of capital reduction defined as subjective causes shall be handled as prescribed in point b Clause 4, Article 21 of Decree No.59/2011/ND-CP The agencies that are decide equitization are not selected and nominated the individuals taking responsibility for losses leading to capital decrease to be representatives for state capital contribution in the joint stock companies.

Article 11. Handover between equitized enterprises and joint stock companies

Based on the decision approving the financial settlement; settlement of proceeds from equitization; settlement of equitization costs; settlement of funds supportting for redundant workers; and decision to publish the real value of state capital at the time the equitized enterprises officially converted into joint stock companies of the agencies deciding the enterprise equitization, Steering Committees of Equitization direct the equitized enterprises to adjust accounting books, make records for handover and organize handover between the equitized enterprises and joint stock companies. Handover completion time is not more than 30 days from the date of having approval of financial settlements at the time equitized enterprises converted into joint stock companies.

Joint stock companies are used all assets (tangible and intangible), capital have been handed over for organization of production, business; inheritted all the rights, obligations and responsibilities of equitized enterprises handed and have the rights and obligations as prescribed by law.

The duties and responsibilities of equitized enterprises determined additionally after settled and handed over to the joint stock companies shall not be of the responsibility of the joint stock companies. Where due to inadequate handover, so the joint-stock companies do not take responsibility of inheritance of debt obligations of equitized enterprises, the directors, chiefs accountant of the equitized enterprises and other concerned organizations and individuals are completely responsible for paying the debts.

After a period of 60 days from the date signing record of handover, joint stock companies must complete the dossiers of assets, land and send to the competent authorities according to provisions to implement the transfer of the rights of management, use of assets from the equitized enterprises into ownership of joint stock companies; the allocation of land and payment for land use fees, grant or regrant of certificates of land use rights as stipulated in the Land Law and documents guiding the implementation of the Land Law.

1. Dossier for handing over equitized enterprise to joint stock company include:

- Dossier of determining enterprise value and decision to publish enterprise value.

- Financial statement at the time officially converted into joint stock company has been audited and approved by the competent authority.

- Decision of determining the value of the State capital at the time converted into joint stock company of the company authority.

- Minutes of handing over assets and capital have been made at the time of handover (a detailed table of debts handed over to joint stock company for continuing inheritance and existing financial problems in further processing - if any ).

- The report on the situation of labor and land use of the enterprise.

2. Handover components include:

- Representatives of ministries, ministerial-level agencies or People's Committees of provinces and cities directly under the Central Government and representatives of the Ministry of Finance (for equitization of Economic Group, Corporation, the parent company).

- Representatives of Economic Group, Corporation, the parent company (if the equitization of member enterprises of economic group, corporation, subsidiaries), Directors, Chiefs Accountant of equitized enterprises representing the handing over party.

- Chairman of the Management Board, director, chief accountant and representative of trade union of the joint stock company representing the handed over party.

- Representatives of the Corporation of Investment and Trade of State capital for the equitized enterprises subject to transfer of the right to represent state capital owner to the Corporation for Investment and Trade of the State capital.

3. Handover record must contain the full signature of handover components and must specify:

- The situation of assets, capital and labor available at the time of handover.

- The rights and obligations of joint stock company continued inheritance.

- The existing problems that joint stock company shall continue to deal with.

Chapter III

DETERMINATION OF VALUE OF EQUITIZED ENTERPRISES

SECTION I. ORGANIZATION OF DETERMINATION OF ENTERPRISE VALUE

Article 12. Consultancy for determination of enterprise value

1. Equitized enterprises with total value of assets under accounting books from 30 billion VND or more, or the value of state capital under accounting books from 10 billion VND or more must hire the organizations functioning price valuation to implement the consultancy to define enterprise value as prescribed in Article 22 of Decree No.59/2011/ND-CP.

2. When organizations with the function of valuation are the auditing companies, securities companies, domestic and foreign enterprises of valuation (hereinafter referred to as a valuation consultancy organizations) register to provide consultancy services determining value of equitized enterprises, must meet the conditions specified in clause 5 of Article 22 of Decree No.59/2011/ND-CP and to be of the list of eligible enterprises performing the evaluation function notified annually by the Ministry of Finance.

3. Based on the list of valuation consultancy organizations to be published, the agency deciding equitisation chooses a valuation consultancy organization and is responsible for its choice.

Where there are two valuation consultancy organizations or more to registere to participate in providing valuation consulting services for determining enterprise value, agency deciding equitization conducts the form of bidding to select valuation consultancy organization.

4. Based on the decision to select valuation consultancy organization of the agency deciding equitisation, director of equitized enterprise signs contract with valuation consultancy organization. Consultancy contract for determining enterprise value needs to be shown the full responsibilities of equitized enterprise and the responsibilities of valuation consultancy organization and the following contents:

a) Method of valuation that consultants use to determine the enterprise value.

b) Time to complete: not exceeding 60 calendar days from the date of receipt of full information related to the determination of equitized enterprise value of economic groups, corporations, parent companies; less than 30 days for the remaining objects.

Where the equitized enterprises with large scale and specific characteristics (multi-matters, handling of complex finance ...) required to prolong the time must be approved by the agency deciding equitization.

c) Responsibilities of equitized enterprises: equitized enterprises are responsible for the implementation of the works related to the valuation, such as inventory and classification of assets, financial processing, formation of the plan of production, business, provision of relevant documents and take responsibility before law for the accuracy and legality of the documents provided.

d) Responsibility of the valuation consultancy organization: valuation consultancy organization is responsible for selection of methods of determining suitable enterprise value to valuate, complying with the provisions of determining enterprise value; clearifying the circumstances that value of revaluated assets lower than the value of assets recorded in the accounting books and explaining other issues related to the determination of enterprise value as required by the competent agency; completing on time according to the signed contract; and being responsible for the results of determining enterprise value.

Where the results of determining enterprise value do not guarantee proper provisions of the State, the agency deciding equitization shall send a written notice of refusal to make payment for fees of performing services and consider to eliminate from List of organizations eligible to participate in consultancy of valuation. If causing damages to the State, the valuation consultancy organization must pay compensation according to law provisions.

đ) Costs of valuations and price of payment and settlement:

Valuation consultancy costs shall be agreed by equitized enterprises and valuation consultancy organization according to the bidding result. In case of not bidding, the Equitization Steering Committee negotiates with valuation consultancy organization on costs and submits to the agency deciding equitisation for making decision. Cost level for equitization shall comply with the provisions of Circular No.196/2011/TT-BTC dated 26/12/2011 of the Ministry of Finance.

The payment for valuation consultancy costs: When making a decision of publicizing enterprise value, equitized enterprises make a payment equal to 80% of the value specified in the contract. When having the decision approving the equitization plan, equitized enterprises shall pay the remaining amount under the contract to the valuation consultancy organization.

5. In the process of implementing the equitisation plan, valuation consultancy organization shall coordinate with the enterprise to explain the contents related to the valuation.

6. Equitized enterprises that are not subject to renting valuation consultancy organization in accordance with provisions in clause 1 of Article 22 of Decree No.59/2011/ND-CP the enterprises shall self-determine enterprise value and report to the agencies competent to decide the enterprise value. Where these enterprises hire the consultancy organization to determine enterprise value, the enterprises shall self-select valuation consultancy organization without required to hold bidding. Other provisions for valuation consultancy organizations and equitized enterprises in the implementation of hiring valuation consultants to determine enterprise value shall comply with the provisions of this Article.

Article 13. The methods used to determine the enterprise value

Valuation consultancy organization selects the method of determining the value of the enterprise:

1. Asset method: means a method of determining the enterprise value based on the actual value of all intangible, tangible assets of the enterprise at the time of determining enterprise value.

The bases for determining the enterprise value by the asset method as prescribed in Article 30 of Decree No.59/2011/ND-CP include:

- Financial statements, data by accounting books of the enterprise at the time of determining the enterprise value.

- Data of the inventory, classification and assessment of quality of the enterprise’s assets at the time of determining the enterprise value.

- Market price of assets at the time of holding valuation.

- The value of the assigned land use rights, re-determined land rent value in case enterprise has paid lump-sum for the entire lease period and the value of goodwill of the enterprise.

2. Discounted cash flow method is a method of determining the enterprise value based on the profitability of the enterprise in the future, regardless of the value of the assets of the enterprise.

Bases to determine enterprise value under the discounted cash flow method as prescribed in Article 35 of Decree No.59/2011/ND-CP include:

- Financial statements of the enterprise for 05 consecutive years, before the time determining the enterprise value.

- Plans for production and business operations of enterprises in 03 to 05 years after conversion into joint stock companies.

- Government bond interest rate of 05 year term at the latest time, before the implementation of determining enterprise value and cash flow discount coefficient of the enterprise to be valued.

- The value of the assigned land use rights, re-determined land rent value in case enterprise has paid lump-sum for the entire lease period.

3. Valuation consultancy organizations are selected other methods (other than the two above methods) to determine the enterprise value. Other methods must ensure scientifically and reflect the proper enterprise value, which are widely used internationally and straightforward to apply in calculating the valuation of the enterprise.

Article 14. State Audit for equitized enterprises

For equitized enterprises subject to state audit in accordance with provisions in Article 27 of Decree No.59/2011/ND-CP:

1. Based on the decision approving the plan of arrangement and renewal of enterprise has been approved by the Prime Minister, the agency deciding enterprises equitization shall send notice of list, time (schedule) performing equalization of enterprises to the State Audit agency for this agency to have programs, plan to audit results of determining enterprise value of the valuation consultancy organization and handle financial matters before officially announcing value of equitized enterprise.

2. After the valuation consultancy organization has completed the records of result of determining enterprise value in accordance with provisions, agency deciding equitisation shall send written notice to the State Audit agency together with records of determining equitized enterprise value for this agency to audit the results of determining enterprise value of the valuation consultancy organization.

The Equitization Steering Committee, equitized enterprises and valuation consultancy organization shall provide documents and explanations of the contents related to the handling of finance, determination of enterprise value of the valuation consultancy organization as required by the state auditor.

3. Within 15 days after receipt of the request of the authority that is competent to decide the value of equitized enterprise, the State Audit agency shall audit results of valuation consultancy and financial processing of equitized enterprises. Time to complete, publish the audit results shall not exceed 60 days from the date of the audit. The State Auditor is responsible for the audit results in accordance with the law provisions.

In case of prolonged the duration to audit results of determining the enterprise value of valuation consultancy organization under the provisions of Article 27 of Decree No.59/2011/ND-CP the State Audit Agency shall send a written request to the agency that is competent to decide the publication of enterprise value for coordination in handling to ensure the time to announce enterprise value as specified in Article 15 of this Circular.

4. The audit of results of determining the enterprise value of valuation consultancy organization by the State Audit Agency for Parent company of Economic Group, state corporations and other enterprises (including one member limited liability company owned by equitized enterprise) is at the request of the Prime Minister.

Article 15. Announcement of enterprise value

1. Consultancy organization of determining the enterprise value together with equitized enterprise make dossiers to determine the enterprise value, including:

a) Financial statement of equitized enterprise established at the time of determining the enterprise value.

Equitized enterprises are responsible for auditing the annual financial statements according to the State provisions for use upon determining enterrise value. If the time of determining value of enterprise does not coincide with the time of annual financial statements, the enterprises may use the quarterly financial statements or financial statements made at the time of determining enterprise value (as defined not required to audit) to determine the enterprise value as decided by the agency deciding equitization of enterprises.

b) Report of result of asset classification and handling of the existing financial items of the enterprise.

c) Minute of determining the enterprise value (Form of Minute as Appendix 1, 1a, 2, 2a together with this Circular).

d) Copies of detailed records of problems arising requested for handling as determining the enterprise value.

đ) Other necessary documents under the provisions of Article 30, Article 35 of Decree No.59/2011/ND-CP of the Government (depending on the application of different methods when determining the value of the enterprise).

2. The decision to announce enterprise value

The decision to publish the equitized enterprise value of the competent authority must be appraised on  the order and procedures, compliance with the provisions of law on enterprise valuation as prescribed in Article 24 of Decree No.59/2011/ND-CP by the Steering Committee of enterprises equitization.

a) For the equitized enterprises when determining the value of enterprise not subject to audit as prescribed in Clause 1 of Article 27 of Decree No.59/2011/ND-CP within a period not exceeding 10 days after receiving the report of the Steering Committee of equitisation and dossier of determining the value of the enterprise, agency that is competent to decide the value of enterprise issues the decision to publicize the value of equitized enterprise.

b) For equitized enterprises when determining the value of enterprise subject to audit as prescribed in Clause 1 of Article 27 of Decree No.59/2011/ND-CP within a period not exceeding 10 days after receiving the audit result of the State Audit Agency, Equitization Steering Committee shall report to the agency deciding the enterprise value, if consistent with the result of the State Audit Agency, within the period not exceeding 10 days after receiving the report of the Steering Committee of equitization, the agency deciding the enterprise value issues the decision to publicize the value of equitized enterprise.

Where agency that is competent to decide the value of equitized enterprise is not consistent with the result of the State Audit Agency, they should organize to discuss with each other or report to the Prime Minister for consideration and decision before publicizing the value of enterprise within its jurisdiction.

3. Time to publicize the value of equitized enterprise of the competent authority is required to ensure away from the time of determining enterprise value not exceeding 6 months in case of determining enterprise value by the method of assets valuation and not more than 9 months for the case determining enterprise value by the method of the discounted cash flow and other methods.

Where the above time limit has exceeded but the value of equitized enterprise has not been announced, agency deciding equitization shall consider, decide on extending the time to publicize the value of enterprise but it must be ensured the principle that publication of enterprise value and the organization of the first sale of shares of equitized enterprise is away the time to determine enterprise value not more than 12 months unless the particular cases decided by the Prime Minister.

4. For the economic groups, state corporations and enterprises operating in specific sectors such as insurance, banking, telecommunications, aviation, mining coal, petroleum, exploiting other rare mines decided by Prime Minister on approving the equitization plan, Equitization Steering Committee sends report and dossiers of determining the enterprise value to the Ministries managing its branch, the People's Committees of provinces and centrally-run cities to make the decision on publicizing enterprise value, and at the same time send to the Finance Ministry to carry out supervision.

5. Councils of Members of one member limited liability companies held 100% charter capital by the State to be the parent companies of the economic groups; special corporations decided to establish by Prime Minister are authorized by Prime Minister to decide on announcing enterprise value, decide on approving the equitization plan of the member enterprises. After making the decisions, the Councils of members of economic groups, special corporations report to the central Steering Committee of Innovation and Development of enterprises and the Ministry of Finance for examination and supervision to ensure compliance with provisions of legislation.

Form of decision to announce enterprise value is in Appendix No. 04 attached to this Circular.

Article 16. Adjustment of the value of the enterprises

1. Equitized enterprises must adjust the value of the enterprise announced in accordance with provisions in Article 26 of Decree No.59/2011/ND-CP.

2. Responsibilities of equitized enterprises and the authorities that are competent to decide equitization when adjusting enterprise value:

a) Where because of objective reasons to affect the value of enterprise, equitized enterprises must take the initiative to organize the inventory, determine the extent of the loss and promptly report in writing to the agency that is competent to decide equitization for consideration and decision on readjustment of enterprise value.

Within 15 days after receiving the reports of equitized enterprises, the agencies that are competent to decide equitization shall inspect and re-determine the value of equitized enterprises and direct the Equitization Steering Committee to coordinate with the enterprises to revise the plans of equitization.

b) If after 12 months from the time of determining the enterprise value, the enterprises have not made the sale of shares, the agency deciding equitization must request the enterprises to suspend implementation steps of plan of equitization approved, clarify the cause, handle responsibility for concerned collectives and individuals. At the same time, direct the Equitization Steering Committee to organize the re-determination of the enterprise value and adjust the equitization plan (if necessary), the costs of redetermining enterprise value and adjusting the plan of equitization (after deducting compensation of the concerned individuals) is deducted from proceeds from equitization of enterprises.

SECTION II. DETERMINATION OF VALUE OF EQUITIZED ENTERPRISES BY THE METHOD ASSETS

Article 17. The actual value of the equitized enterprises

1. Enterprise value by accounting books is the total value of assets shown in balance sheet of the enterprises.

2. The actual value of the equitized enterprise is the value of all existing assets of the enterprise at the time of equitization taking into account of the profitability of the enterprise that the buyers, the sellers of shares may accept.

3. The actual value of the equitized enterprise does not include items not included in the value of enterprise for equitization shall be considered the decision by persons who are competent to decide the value of enterprise and take responsibility before law for the accordance with the provisions of Article 29 of Decree No.59/2011/ND-CP.

4. The actual value of the equitized enterprises includes land use right value as prescribed in Article 31 and the value of goodwill as prescribed in Article 32 of Decree No.59/2011/ND-CP.

5. For the financial institutions, credit institutions, when determining value of enterprise by the method of assets, they are used results of audit of financial statements to determine the capital assets in cash, debts, but required to make inventory and evaluate fixed assets, long-term investments, unfinished expenses related expenses for compensation, clearing, leveling and land use right value according to the State regulations.

Article 18. Determination of the actual value of assets of the enterprise

The actual value of assets is determined in Vietnam dong. Assets that has been accounted in foreign currencies are converted into Vietnam dong at the average exchange rate on the inter-bank foreign exchange market announced by State Bank at the time of determining enterprise value.

1. For assets as in kind:

1.1. It only revaluates assets which the joint stock company continues to use.

1.2. The actual value of assets equals (=) The original price by the market price at the time of valuation organization (x) The remaining quality of assets at the time of valuation.

Of which:

a) Market price is:

- New asset price of the same category being bought or sold on the market, including transportation and installation costs (if any). If they are specific assets that are not available on the market, the purchase price of assets is calculated under the new purchase price of similar assets, with the same producing countries, the same capacity or equivalent features. Where there is no equivalent assets, it is calculated by the price of assets recorded on the accounting books.

- Unit price of basic construction, investment rate defined by the competent agency at the time closest to the time of valuation for assets as basic construction products. Where there  is not regulations, it is calculated by the book price, taking into consideration the drift of prices in basic construction.

Particularly for works newly completed construction within 03 years before determining the enterprise value: use value of the work settlement approved by the competent authority. In special cases, if the work has not been approved by the competent authority but was put into use, temporarily calculated by the price recorded in accounting books.

b) The quality of assets is determined by the percentage compared with the quality of assets of the same type procured newly or newly invested, constructed, in accordance with State regulations on safety conditions in use and operation of the assets; ensuring the quality of production products; environmental sanitation under the guidance of the Ministry of managing economy, techniques. If there  is not state regulations, the quality of the  assets as machinery, vehicles is evaluated not less than 20% compared with the quality of assets of the same type procured newly; of workshops, architectural objects is evaluated not less than 30% compared with the quality of assets of the same type newly invested, constructed.

1.3. Fixed assets depreciated and recovered enough capital; working tools and management instruments that have been allocated all value in business expenses, but the joint stock company still continues to use, it must be reevaluated to include in the enterprise value by the principle of not less than 20% of value of assets, tools, equipment bought newly.

1.4. For equitized enterprises having assets in kind as rubber garden, as valuation of equitized enterprises, the value of rubber garden is determined under the provisions of Circular No.132/2011/TT-BTC dated 28/9/2011 of the Ministry of Finance.

2. Monetary assets include cash, deposits and other valuable papers (bills, bonds, ...) of the enterprise are defined as follows:

a) Cash is defined according to fund inventory records.

b) Deposits are determined by the balance compared and confirmed with the bank where the enterprise opens its account.

c) The valuable papers are determined by the market trading price. If there is no transaction, is determined by the par value of the papers.

3. The receivable debts included in the enterprise value is determined by the actual balance in the accounting books and after being compared shall be handled as specified in Clause 2 of Article 9 of this Circular.

4. The unfinished costs of production, business, investment in basic construction, unfinished expenses related to compensation, site clearance, leveling and land use right value shall be determined by actual arising accounted in the accounting books.

5. Value of assets of short and long term collateral, deposits is determined by the actual balance in the accounting books which have been compared and certified.

6. The value of intangible assets (if any) is determined by the remaining value being accounted in the accounting books.

7. The value of goodwill

The value of goodwill included in the value of equitized enterprises as stipulated in Article 32 of Decree No.59/2011/ND-CP as brand name value, development potential is determined as follows:

a) The value of goodwill included in the value of equitized enterprises as brand name value is determined on the basis of actual costs for the creation and protection of trademarks, trade names in the process of the enterprise’s operation before the time of enterprise valuation (including the costs of establishment of enterprise, employees training costs, advertising costs incurred before the establishment of enterprise, domestic and abroad advertising and dissemination costs to promote and introduce products, company, building websites ...).

b) The value of goodwill included in the value of equitized enterprises as the development potential of the enterprises is evaluated on the basis of profitability of the enterprise in the future when compared to the profit rate of enterprise with interest rates of government bonds as follows:

Of which:

- The actual value of state capital in the accounting books at the time of valuation (the time of determining value of enterprise) is determined by the value of the enterprise by accounting book (as total value of assets shown in the accounting balance sheet of the enterprise prescribed in Clause 1 of Article 17 of this Circular) except for liabilities under the accounting books at the time of valuation.

- Equity is defined include balance: investment capital of the owner - Account 411; development investment fund - Account 414 and investment capital of basic construction - Account 441 according to Decision No.15/2006/QD-BTC dated 20/03/2006 of the Minister of Finance on the issuance of corporate accounting regime. The determination of the equity of the equitized enterprises as the credit institutions is under the guidance of the State Bank of Vietnam.

- After-tax profit rate is determined as follows:

8. The value of long-term investment capital of enterprises in other enterprises shall be determined as prescribed in Article 33 of Decree No.59/2011/ND-CP Of which:

- Upon determining the equity value of other enterprises to determine the value of long-term investment capital of equitized enterprises in other enterprises (non-joint stock companies), it is excluded undistributed profits (if any) used to appropriate the reward fund, welfare fund, reward fund for the executive Board, divide profit for general partners (under Resolution of the Council of members of other enterprises).

- The profits divided from other enterprises to the equitized enterprises, equitized enterprises account in production and business results of enterprises.

- In case equitized enterprises with short-term investments (investments with a term of less than one year) in other enterprises, the valuation of short-term investments of equitized enterprises is performed as for the long-term investments.

9. The value of land use rights

The determination of land use right value to include in the value of the enterprise shall comply with the provisions of Article 31 of Decree No.59/2011/ND-CP of which:

9.1. Before conducting the valuation of enterprises, equitized enterprises are responsible for setting up plans for land use to submit to the competent agencies for reviewing, making decisions to implement. Land use plans of the enterprise must ensure compliance with the provisions of the plan on reorganization, processing houses and land as decided by the Prime Minister and must be sent to the People's Committees of provinces and centrally-run cities in the areas before performing the valuation of enterprises. Enterprises may choose the form of land lease or land allocation under the provisions of the Land Law.

Equitized enterprises are responsible for sending written requests together with the land use plans approved by the competent authorities, concerned dossiers and documents on land to the local Departments of Finance where equitized enterprises have used land. Within 30 working days after receiving complete dossiers, the Finance Department coordinates with the concerned Departments, Branches to determine land price to calculate for land use levy and submit to the People's Committees of provinces and cities for making decision or collecting the official opinion for the land area that the enterprises will continue to use after equitization and land price as a basis for determining enterprise value.

9.2. Where enterprises choose the form of land allocation, the determination of land use right value to calculate the enterprise value is implemented as follows:

a) For the land areas that equitized enterprises are performing the form of land lease changed to the form of land allocation with collection of land use levy to state budget, must be calculated the value of land use right in the value of equitized enterprises.

Land price to determine the land use right value included in the value of equitized enterprises shall comply with the provisions of Point a, Clause 2 of Article 31 of Decree No.59/2011/ND-CP.

Where the People's Committees of provinces and cities directly under the Central Government have not yet replied their official opinions on land prices stipulated in point a clause 2 of Article 31 of Decree No.59/2011/ND-CP the agencies that are competent to decide value of equitized enterprises use land prices announced by the People’s Committees of provinces and cities directly under the Central Government at the latest time as prescribed by land law for determining the value of land use rights included in the value of equitized enterprises; at the same time, the agencies that are competent to decide plans of equitization must direct the enterprises to publicize in the equitization plan and disclose information when making the sale of initial shares for investors to know that the equitized enterprises receive the allocation of land and land prices applied to calculate temporarily the value of land use rights included in the value of equitized enterprises.

When performing the allocation of land, the People's Committees of provinces and cities under central government review and determine officially the duty to pay the land use levy allocated close to prices of transfer of the land use rights with similar purpose of use on the market at the time of land allocation. Equitized enterprises shall pay the entire amounts to the state budget (including the difference with temporarily calculated price - if any) to be granted land use right certificates in accordance with provisions of current legislation on land.

Where land prices applied to determine the land use right value included in the value of equitized enterprises when determining the enterprise value have been replied opinions by the People's Committees of provinces and cities under central Government close to the actual price of transfer of land use right on the market in the normal condition, when the joint stock companies are decided to assign land by the competent authorities and the enterprises conduct procedures for granting land use right certificates according Land Law and documents guiding the implementation of the Land Law, joint stock companies must pay land use levy by the land prices applied to calculate the land use right value in the value of equitized enterprises (not required to adjust the land price land according to the price at the time conducting land allocation to the enterprise).

b) For the land areas of the equitized enterprises allocated and paid land use levy to the state budget or received transfer of lawful land use rights from organizations and individuals (paid proceeds from the transfer, have been completed or have not yet completed the procedures for granting, renewing certificates of land use rights), including land areas allocated and received transfer of enterprises to build houses for sale or lease, hotel business, commerce, services; to construct infrastructure for assignment or for lease, it must revaluate the land use right value at the land price stipulated in Clause 2 of Article 31 of Decree No.59/2011/ND-CP if there is any increased difference compared with the value being accounted on the accounting books, then include in the value of equitized enterprises and increase the state capital in the equitized enterprises.

c) Where the equitized enterprises assigned land for construction of houses, infrastructure for transfer or lease with transferring a part of area of building to other agencies to use as head office or trading, the land use right value included in the value of the enterprise is included only for the area of house, ​​infrastructure used by equitized enterprises (as fixed assets of the equitized enterprises), it is defined as follows:

The value of land use rights allocated to the area of transfer house is determined on the basis of the selling price of each floor or by distribution coefficient (x) with the house area of each object used as follows:

Distribution coefficient is determined by the ratio of between house building land area and total house area of the use objects.

Where houses have basements, 50% of the basement’s area is added to the total house area of objects used to calculate the distribution coefficient.

d) Where the equitized enterprises assigned land to implement projects of construction of houses for sale or lease, the hotel business, commerce, services, construct infrastructure for transfer or lease with using part of land for the construction of public welfare works and handed over to locality for management, use the land use right value included in the value of equitized enterprises or in the house selling price, house lease is determined by the land area allocated for trading houses and infrastructure (not including land area for the construction of public welfare works handed over to locality).

đ) Where the equitized enterprises assigned land for construction of houses, infrastructure for sale, and land use levy required to pay when the allocation of land under the provisions of the Land Law and documents guiding the implementation of the Law Land included in the price of selling houses, infrastructure to the buyers, shall not include land use right value in the value of equitized enterprises.

e) Where the enterprises implement conversion of land use purpose allocated it must pay additionally the difference amount of value of land use right by the purpose converted in accordance with provisions of land law to the state budget and included in the value of equitized enterprises.

g) Where the land use right value re-determined is lower than the actual cost of land use right being accounted in accounting books is calculated by the price enterprise is accounting.

9.3.In case the enterprise performs the form of land rent:

a) For rent land area by the method of paying the annual rent, the anual payable rent under the provisions of the Land Law and documents guiding the implementation of the Land Law shall be accounted in expenses of production, business of the enterprise.

b) For the equitized enterprises paid land rent once for the entire land lease period prior to 01/7/2004 (effective date of the 2003 Land Law) must be recalculated value of land rent at the land lease price at the time of determining enterprise value.

Equitized enterprises based on land lease contract, land lease unit price and leasing land price defined by the People's Committees of provinces and cities where the enterprises have leased land area to re-determine the value of land rent of the remaining land lease period. The increased difference by determining the value of land rent is calculated in the value of enterprises and increasing state capital in the equitized enterprises at the time of enterprise valuation.

Joint stock companies shall inherit (or resign the land lease contracts) and use land for right purposes under the provisions of land law. Joint stock companies are not required to pay rent for the remaining period of the land lease contract paid land rent.

c) For the equitized enterprises allocated land by the state with collection of land use levy and paid land use fees into the state budget, now switch to choose the form of land lease with payment for annual land rent, the land use right value determined when conducting the previous land allocation is not included in the value of the equitized enterprises.

Equitized enterprises have to complete procedures switching to land lease and send to the agencies deciding equitization and land management agencies in the localities before converted officially into joint stock companies.

9.4. Equitized enterprises are given priority of inheritance of rights and legitimate interests on land use in accordance with provisions of the law on land when converting into stock companies as stipulated in Clause 3 of Article 47 of Decree No.59/2011/ND-CP; the equitized enterprises allocated land and paid land use fees into the state budget or received transfer of the lawful land use right has re-determined land prices when determining the value of enterprises at the prices closest to the actual price of land use right transfer with same use purpose on market, value of land use rights increased due to redetermination of land price have been recorded increase of the state capital in the equitized enterprises, when making procedures of renewal of certificates of land use rights from the equitized enterprises into joint stock companies, the joint stock companies are not required to pay land use levy.

10. When determining the enterprise value by the assets method, the entire value constitutes the total enterprise value of assets and is calculated in the actual value of the equitized enterprise, through the purchase of shares of equitized enterprise to convert into assets of the joint stock companies invested by capital of shareholders. The joint stock companies shall depreciate and include in costs of doing business under the current regulations (for the value of property increase of fixed assets); the other increased property values included in the value of equitized enterprises: land use right value, the value of goodwill, the enterprises are done gradual allocation into business expenses, are deducted when determining the income subject to enterprise income tax within a period of not exceeding 10 years since the equitized enterprises converted into joint stock companies.

Article 19. The actual value of state capital in the enterprises

1. The actual value of state capital in the enterprise is equal to the actual value of the enterprise minus (-) of liabilities actually payable and the balance of business funds (if any). In particular, liabilities actually payable is the total value of the liabilities of the enterprise minus (-) debts are not required to pay.

2. When performing equitization of the parent company in the economic groups, the State Corporations, the parent company in the combination of parent company - subsidiary (hereinafter referred to as the parent company) is:

- The subsidiaries owned 100% of charter capital by parent company (equitized enterprise) must conduct determination of enterprise value as prescribed in this Circular as for equitized enterprise, to determine the actual value of the parent company’s the capital in the subsidiaries.

- The actual value of the equitized enterprise (parent company) is the value of parent company and value of the enterprises accounting-dependently parent company defined under the provisions of this circular.

- The actual value of the state capital at the parent company by the actual value of the enterprise – parent company is defined as above except for the debts actually payable and the balance of business funds (if any) as provided in general.

SECTION III. DETERMINATION OF EQUITIZED ENTERPRISE VALUE BY THE METHOD OF DISCOUNTED CASH FLOW

Article 20. Enterprise value under the discounted cash flow method

1. Determination of the enterprise value by the discounted cash flow method is the method of determining the enterprise value based on the profitability of equitized enterprises in the future, regardless of the value of enterprise’s assets.

2. Equitized enterprises determining value of enterprises according to discounted cash flow method are the enterprises having had the operation time before determining the enterprise value at least 5 years, with average after-tax profit rate on State capital of 5 years preceding the determination of value of equitized enterprises higher than interest rates of government bonds with a term of 5 years issued at the time closest to the time of enterprise valuation.

3. Under this method, data on profits, the state capital of equitized enterprises in the past year is used to calculate when the determination of value of equitized enterprises, based on data on profits, the state capital in accordance with provisions of financial regulations for equitized enterprises.

Where the equitized enterprises invest capital in other enterprises, the profits brought  from the investment of capital in other enterprises are the bases for valuation of equitized enterprises.

4. Under the discounted cash flow method, the determination of after-tax profit figures for future years and use of this data to calculate norms (profit rate/capital; growth rate of dividends) as a basis for converting value of dividends, capital of the future years to the current year (year of determining value of enterprises) is as follows:

- Based on average growth rate of after-tax profit in the past year to determine after-tax profit of the years in the future. If the enterprise uses after-tax profit figures of the years in the future as profit of targets, plan, the company must prove that profitable data of targets, plan is feasible.

- The distribution of after-tax profit of the future years is agreed under the assumption to use for the dividend as 50% and to supplement capital as 30% (regardless of profits of future years when use for calculation is defined according to the profitable data of the past years or according to the profitable data of targets, norms).

5. The actual value of the enterprise including the actual value of the State capital, liabilities, business fund balance (if any).

Article 21. The actual value of state capital in the enterprises

The actual value of the State capital by the discounted cash flow method is determined by the following formula:

In particular:

1. The targets and determination of targets

i : order of the following years from the year of determining value of enterprise (i:1n).

D_i : The after tax profit used for distributing the yearⁱ dividends.

n : means the number of future years to be selected (3 - 5 years).

P_n : Value of the yearⁿ state capital and is determined by the formula:

D _n+1: The after tax profit used for distributing the yearⁿ⁺¹ expected dividends

K : The discount rate or required return rate of investors upon buying shares and is determined by the formula:

K = R_f + R_p

R_f : Profit rate earned from investments without risk, this target is calculated by interest rate of government bonds having a term of 5 years issued at the time closest to the time of enterprise valuation.

R_p : Risk surcharge rate upon investment in buying shares of companies in Vietnam, this target is determined according to the risks surcharge index table for international stock in the Prices Valuation or determined by valuation companies for each enterprise but must not exceed the ratio of profit earned from investments without risk (R_f).

g: annual growth rate of dividends and is defined as follows:

g = b x R

of which: b is the ratio of the after tax profit left for capital supplement.

R is the ratio of the after tax profit on average equity of future years.

2. The difference in value of land use rights shall be determined as prescribed in Clause 9 of Article 18 of this Circular.

Examples for illustrating the valuation of enterprises according to discounted cash flow method is under the guidance in Appendix 3, 3a, 3b together with this Circular.

Article 22. Determination of the actual value of the enterprises

1. The actual value of the enterprise at the time of determining enterprise value by the discounted cash flow method is defined as follows:

In particular:

Payable debts in reality = Total liabilities in the accounting books minus (-) The value of the debt not required to pay plus (+) Value of land use rights required to pay to the state budget of allocated land area, transfer of purpose of allocated land use is determined in accordance with provisions in Clause 9, Article 18 of this Circular.

2. Increased difference between the actual value of the State capital by the discounted cash flow method and the value of state capital by the accounting books at the time of determining enterprise value is included in the value of equitized enterprises, through buying shares of equitized enterprises to transfer into the property of joint-stock company invested with capital of shareholders. Joint stock companies are accounted gradually into business expenses, are deducted when determining the income subject to enterprise income tax within a period of not exceeding 10 years from the time equitized enterprises officially converted into the joint stock company.

SECTION IV. DETERMINATION OF EQUITIZED ENTERPRISE VALUE BY THE OTHER METHODS

Article 23. Determination of equitized enterprise value by the other methods

Apart from two methods of determining the enterprise value specified in Section II, Section III, Chapter III of this Circular; valuation organization determining enterprise value is applied other valuation methods to determine the equitized enterprise value. The methods of determining the enterprise value must ensure science and reflect really the value of enterprise and applied widely by international bodies, easy to understand, easy to use in the calculation; time of determining the enterprise value by other methods must be the time ending quarter or year closest to the time of equitization decision.

Article 24. Selection and use of results of determining enterprise value

1. The results of determining the enterprise value by the discounted cash flow method or other methods must be compared with the results of determining the enterprise by the method of assets at the same time to choose by the principle: value of the enterprise determined and announced shall not be less than the enterprise value determined under the asset method.

2. Records and results of determining the enterprise value identified and selected according to the provisions of Decree No.59/2011/ND-CP and this Circular are the bases for the competent agency to decide on publication of equitized enterprise value, to determine the size of charter capital, structure initially-issued shares and the price of initial point to auction sale of shares.

Chapter IV

ORGANIZATION OF IMPLEMENTATION

Article 25. Organization of implementation

1. The equitized enterprises that have had decisions on publication of the enterprise value prior to 05/09/2011 (effective date of Decree No.59/2011/ND-CP) as stipulated in Decree No.109/2007/ND-CP dated 26/6/2007 of the Government and Circular No.146/2007/TT-BTC dated 06/12/2007 of the Ministry of Finance shall not be required to make adjustments of the enterprise value according to guidance in this Circular.

2. The equitized enterprises that the equitization plans approved by the competent authorities under Decree No.109/2007/ND-CP dated 26/6/2007 of the Government, till 05/09/2011, the effective date of Decree No.59/2011/ND-CP dated 18/07/2011 of the Government, that the enterprises have not been approved the financial statements, determined value of state capital by the competent authorities at the time equitized enterprises officially converted into joint stock companies, shall implement financial handling for the financial investments and stock investment from the time of determining value of enterprise to the time officially converted into joint stock companies in accordance with provisions of Article 10 of this Circular.

Article 26. Effect

1. This Circular takes effect from February 15, 2012 and replaces the regulations on financial handling and valuation of equitized enterprises in Circular No.146/2007/TT-BTC on 6/12/2007 of the Ministry of Finance guiding Decree No.109/2007/ND-CP dated 26/6/2007 of the Government on the transformation of state companies into joint stock companies.

2. In the course of implementation if any problem arises, the agencies and enterprises should reflect to the Ministry of Finance for study, and supplements./.