Socialist Republic of Vietnam

Government
No. 64/2002/ND-CP Date June 19, 2002

GOVERNMENT DECREE
REGARDING THE TRANSFORMATION OF STATE-OWNED ENTERPRISES TO JOINT STOCK COMPANIES

This is based on

- the Law on Government Organization dated 30 September 1992,

- the Enterprise Law dated 12 June, 1999,

- the State-owned Enterprise Law dated 20 April 1995,

- the request by the Minister of Finance

DECREE

CHAPTER I

GENERAL PROVISIONS

Article 1. The transformation of state-owned enterprises into joint stock companies (hereafter referred to as equitization) aims at the following objectives:

1. Improving the efficiency and competitiveness of enterprises; creating enterprises owned by multiple holders, including by the employees, in order to better manage and utilize the state capital and assets, and to create incentives and dynamic management mechanism for enterprises.

2. Mobilizing fund from the whole society, including individuals, socio-economic domestic and foreign organizations, to renew technology, develop the business,


3. Strengthening the real ownership of employees and share-holders; strengthening investor’s monitoring of the enterprise, as well as balancing the interests of the state, the enterprise, and the employees.

Article 2: Object of application

1. The object of application of this Decree shall include the enterprises and their subsidiaries as mentioned in Article 1 of the State-Owned Enterprise Law (except enterprises that the State needs to retain 100% chartered capital), regardless of their business performance. List of state-owned enterprise classification is decided by the Prime Minister during each period.

2. The equitization of subsidiary enterprises defined in the above item 1 of this article is implemented only when the subsidiary enterprises:

a) meet all requirements for the enactment of an independent accounting.

b) shall not cause any difficulties nor adverse impact for the business performance of the enterprise or of the other non-equitized units.

3. Independent-accounting enterprises defined in item 1 of this article with state-owned capital below VND 5 billion that cannot be equitized shall be transferred, sold, contracted out or leased in accordance with prevailing State rules.

Article 3: Forms of state-owned enterprise equitization

1. The current state capital value in the enterprise is maintained, while new shares are issued to mobilize more funds.

2. Selling part of the existing state capital of the enterprise.

4. Selling all existing state capital of the enterprise.

5. Combining forms 2 and 3 and while issuing new shares to mobilize additional funds.

Article 4: Buyers of shares and conditions to buy shares

1. The following entities have the rights to buy shares from the equitized state-owned enterprises:

a) Domestic economic and social organizations and individuals (hereinafter referred to as domestic investors);

b) Foreign social and economic organizations and individuals (including non-resident Vietnamese and foreign residents in Vietnam, hereinafter referred to as foreign investors).

2. Foreign investors who are interested in buying shares of the equitized Vietnamese enterprises shall be required to open accounts at payment service providing institutions that are operating in the Vietnam’s territory, and observing Vietnamese laws. All transactions in buying and selling shares, receiving dividends and profit repatriation from Vietnam should be conducted through these accounts.

Article 5: The right to buy initial shares of the equitized state-owned enterprises

All entities mentioned in item 1 of Article 4 of this Decree have the right to buy unlimited number of the initial shares from the equitized state-owned enterprises provided that the current state regulations on the minimum number of shareholders and the dominant state shares in the enterprises be respected.

Foreign investors can buy the number of shares valuing up to 30 percent of the chartered capital of the enterprises operating in areas decided by the Prime Minister.

Article 6: The stock and the founding shareholders

1. The stock is a certificate issued by the joint stock company to certify the ownership of one or more shares of the company shareholders. The stock can be bearer or nominated, but should contain all the key parameters as stipulated in Article 59 of the Enterprise Law.

The Ministry of Finance controls the uniform stock format and provides guidelines to the equitized enterprises for their stock printing and management in accordance with regulations in force.

2. Founding shareholders of equitized enterprises are those who

a) participate in the adoption of the initial Charter of the joint stock companies;

b) hold or together hold at least 20 percent of the ordinary shares that are offered for sale;

c) hold at least the minimum number of shares as stipulated in the company’s Charter.

The minimum number of shares held by each founding shareholder as well as the number of founding shareholders shall be decided at the shareholder meetings and stipulated in the company’s Charter.

Article 7: Rights and responsibilities of the equitized enterprises

1. The equitized enterprises have the responsibility to arrange and to make full use of their labor force at the time of the equitization and to provide allowances for workers in compliance with prevailing laws and regulations.

The joint stock companies shall inherit all obligations with employees transferred over from the former state-owned enterprises; they shall have the right to recruit, use the existing labor force as well as to work in coordination with relevant agencies in the settlements with workers in compliance with prevailing laws and regulations.

2. The joint stock companies have the right to use all the equitized assets and capital for their business purposes, and shall inherit all benefits and obligations of the former state-owned enterprises as well as other rights and obligations as stipulated by the Law.

3. The subsidiary enterprises of the equitized state General Corporation where dominant state shares (over 50% of chartered capital) are held remain members of the General Corporation.

Article 8: State protection for investors.

The ownership and all legitimate rights and interests of foreign and domestic investors who buy shares from the equitized enterprises are protected by the state under the stipulations of law.

CHAPTER II
PRINCIPLES FOR FINANCIAL SETTLEMENT AND VALUATION OF THE ENTERPRISE BEFORE EQUITIZATION

Article 9: Assets that are leased, borrowed, contributed to a joint-venture, assets that are not in use and assets that are bought from the bonus fund and welfare fund.

Before equitization, the enterprise shall take inventory, classification of, and settle the assets in the following principles:

1. For assets that do not belong to the enterprise such as rented, borrowed assets or assets contributed to a joint-venture and other assets not belonging to the enterprise: the contract should be concluded or re-negotiated with the owner at the takeover by the joint stock company of the signed contract, or a new contract should be signed.

3. For the assets not in use, idle or awaiting liquidation, the enterprise should liquidate, sell them or report to competent agencies for their allocation of these assets to other enterprises under the current regulations. If this cannot be done at the time of equitization, these assets shall be excluded from the enterprise valuation and shall be assigned to the joint-stock company to preserve, dispose of or transfer to the competent state organizations to settle.

4. The assets in the form of welfare utilities such as kindergartens, nurseries and clinics, etc. that are set up from the Bonus Fund, the Welfare Fund of the enterprise should be transferred to the employees for collective management and use through the labor union.

Separately, houses of the employees including houses provided from the State budget should be transferred to the local Land and Housing Authority to manage or sold to the existing users under the current regulations.

4. Assets currently used for production and business that were made available from the Bonus Fund, Welfare Fund of the enterprise shall be valued and converted into shares for employees of the enterprise at the equitization time taking into consideration of the seniority of the employees.

Article 10: Receivables

The enterprise has the responsibility to review, confirm, and recover or settle all receivables prior to equitization under the current regulations. In case the receivables remain outstanding up to the equitization time, the following principles shall apply for the settlement thereof:

1. For debts that have been sufficiently proven as non-recoverable, or those for the loss of which no individual or organization can be held responsible, the provision fund should be used to recover; if the fund is not sufficient, this amount can be deducted from profit at the equitization time. In case both of the above sources are not sufficient to recover the debt, the deficit shall be deducted from the state capital at the enterprise before the equitization.

2. For unrecoverable debts, which were caused by internal factors, and for which the responsibility has been alleged, the individual or entity at fault should provide physical indemnity. The loss (after recovery) is settled in accordance with item 1 of this article.

3. For the receivable debts that have been overdue for more than 3 years and the debtor is still viable but unable to pay, and the enterprise has taken proactive measures but still cannot recover, then the item 1 of this article shall apply.

4. For other overdue debts, the enterprise should consider selling them to debt buying/selling companies in order to recover parts of the debt. Any remaining losses can be settled as stipulated in item 1 of this article.

Article 11: Payables

1. The enterprise shall be accountable for mobilizing all resources to pay all debts at maturity before equitization, or shall discuss with creditors to have debt-equity swap arrangement.

The debt-equity swap arrangement shall be determined on the basis of the outcome of the auction for share sale or the agreement between the enterprise and the creditors, but the debt-equity swap price shall not be lower than the share price offered to other buyers.
2. In case the enterprise has difficulty in paying its overdue debts, the following principles shall apply:

a. For debts owed to the taxation office and the state budget, the enterprise’s debts shall be frozen, rescheduled, written-off as regulated by the Government.

b. For the overdue debts owed to state-owned commercial banks, the enterprise shall be allowed to reschedule, freeze and write-off the debts, to reduce the interest rate, or to have debt-equity swap arrangement.

The state-owned commercial banks shall be accountable for the debt resolution under the prevailing laws.

c. For overdue debts owed to foreign creditors with guarantee, the enterprise and the guarantor should negotiate with the creditor for debt freezing, scheduling or debt relief, and allocate fund to repay the debts. If the agreement cannot be reached, the guarantor is responsible for repaying the creditor. The enterprise is responsible for repaying the guarantor or swap for equity owned by the guarantor in the company.

d. For non-guaranteed debts owed to foreign creditors, the enterprise shall be responsible for arranging the financial sources to pay the debts or shall discuss with creditors to have the debt-equity swap arrangement in compliance with the laws.

Article 12: Provisions and undistributed profit

The provision fund for devaluation in inventories, hard to recover receivables, securities devaluation, exchange rate fluctuations, severance payment, financial provision, etc. and undistributed profit should be settled under the current regulations before conducting the valuation of the equitized enterprise. If the enterprise has accumulative loss from preceding years, it shall be financed from the pre-tax profit earned as of the equitization time before taking write-off measures as stipulated in points a and b, item 2, article 11 of this Decree.

Article 13. Equity in joint ventures with foreign partners

1. In case the equitized enterprise continues its engagement in the joint venture, all the enterprise’s equity in the joint venture should be valued, based on the principles stipulated in Article 18 of this Decree on valuation of equitized enterprise.

2. In case when the equitized enterprise does not continue the engagement in the joint venture, it should report to the authority concerned for settlement of the equity as follows:
a. Negotiate for the purchase or sale of the equity

b. Transfer its role in the joint venture to another enterprise

Article 14. Cash balance of the Bonus and Welfare Funds

Any remaining cash balance should be distributed to the employees of the enterprise so that they can use the cash to buy shares. Employees do not have to pay taxes for this income.

Article 15: Value of the equitized enterprise

1. The actual value of the enterprise is the value of all existing assets at the time of the equitization, taking into account the profit-making potential of the enterprise, as can be accepted by both the share buyer and seller. The actual value of state capital in the enterprise is the value of the enterprise after subtracting all payable debts, and balance in the Bonus and Welfare Funds.

2. The actual value of the equitized enterprise does not include:

a. Value of those assets stipulated in item 1, Article 9 of this Decree;

b. Value of unused assets awaiting liquidation;

c. Hard to recover receivables that have been subtracted from the enterprise value;

d. Pending capital expenditure of suspended works before the valuation of the enterprise

e. Long-term investment in other enterprises, which the authority concerned decides to assign to other partners.

f. Welfare assets that are invested from the Bonus and Welfare Funds of the enterprise, and houses of the enterprise’s employees.

Article 16. Basis for determining the actual value of the enterprise:

1. The accounting information in the enterprise’s books at the time of equitization.

2. The quantity and quality of the assets, based on the inventories and asset classification at the enterprise at the time of equitization.

3. Asset specifications, demand for using them, and their market price at the time of equitization.

4. The value of land use rights and additional value of the business as derived from favorable geographical location, prestige, monopolistic power embedded in the nature of the enterprise’s product, design, and trademark (if any).

5. The enterprise’s profitability shall be determined on the basis of the previous rate of earning on owner’s equity.

Article 17. Principles for determining the quality of asset, the value of land use rights, and the value of business advantages.

1. The determination of the asset quality should follow the principle of safety in operation and utilization of the asset, insurance of the product quality and the working environment.

2. Value of land use rights:

a) Primarily, the policies on land rental and land lease are applied in compliance with the prevailing laws.

The People’s Committees of provinces and centrally-managed cities are responsible for recalculating land rental price for advantageous areas to apply for all types of enterprises.

b) For land that is provided by the state for housing and infrastructure trading, the value of the land use right shall be added to the value of the equitized enterprise. The value of the said land use right shall be determined by competent authority and shall not be lower than the spending on the land like compensation, land clearance, etc.

3. The value of the enterprise’s advantages shall be determined on the basis of the average profit-after-tax on state asset ratio of the 3 consecutive preceding years before equitization, compared to the latest ten year Government bonds’ yield multiplied by the value of state capital in the enterprise at the time of valuation.

If the enterprise has a trade mark value accepted by the market, this value shall be determined.

Article 18: Principle for valuation of equity in joint ventures

1. The value of the equity in joint venture that is added to the value of the equitized enterprise shall be determined on the basis of:

a. Value of the equity of the joint venture as per the financial statement of the joint-venture at the time nearest to the valuation of the equitized enterprise, certified by an independent auditor.

b. Ratio of equity contribution of the equitized enterprise in joint venture.

c. The exchange rate between the foreign currency of the equity and Vietnamese dongs as average exchange rate announced by State Bank of Vietnam in the interbank market at the valuation time in case the joint venture conducts its accounting operation in a foreign currency.

2. The valuation of assets contributed to the joint venture following the above principle is the basis for the valuation of the equitized enterprise. Adjustment of the equity value in joint venture in the investment license shall not be allowed.

Article 19. Methods for the valuation of the enterprise:

Various methods can be used to assess the value of the equitized enterprise under the guidance of the Ministry of Finance, taking into account the specific situation and business activities of each enterprise.

Article 20. Organization of valuation of the equitized enterprise.

1. The equitization competent authority shall decide on the establishment of the Council for Equitized Enterprise Valuation, or select an auditing firm, or an economic institution with the valuation function to sign the contract for the valuation of the equitized enterprise with the equitized enterprise.

2. Members of the Council for Equitized Enterprise Valuation shall comprise of the following members:

a. Representative of the equitization authority to act as the Chairman of the Council;

b. Representative of the concerned financial institution;

c. a manager of the equitized enterprise Representative of the General Corporation (if the enterprise is the member of the Corporation);

On the basis of the status of the enterprise and specific requirements, the Council can request assistance from technical, financial or economic experts from within or outside the enterprise to join the evaluation and determination of the real value of every asset item of the enterprise.

3. The Council for Equitized Enterprise Valuation shall have the following responsibilities:

a. Appraise the results of inventory, classify, determine the value of assets of the equitized enterprise, based on the prevailing regulations, within 15 days starting from the establishment of the Council. The results from the Council’s valuation should be recorded in a written memo, with signatures of the official members.

b. Re-determine the value of the enterprise, if requested by the equitization authority.

The Council for Equitized Enterprises shall be responsible for the accuracy of the results of enterprise valuation.

4. The auditing firm and the economic institutions that perform the valuation of enterprise are required to follow all prevailing regulations and shall fulfill their job in due time as stated in the signed contract and ensure the accuracy and legitimacy of the valuation results. The cost for hiring the valuation service is included in the equitization costs of the enterprise.

5. The result of equitized enterprise valuation should be sent to the equitization competent authority for decision and public announcement.

Article 21. Use of the results of enterprise valuation.

The results of the enterprise valuation in the aforesaid principles is the basis for the determination of the share structure at the initial offering, and the implementation of preferential policy for employees and material producers and suppliers, as well as the determination of the “floor” price for shares sold to outside buyers.

Article 22. Adjustment of the value of the equitized enterprise

The equitization competent authority shall consider and decide the adjustment of the enterprise value in the following cases:

1. The equitized enterprise has difficulties to sell its shares as stipulated in item 5, Article 24 of this Decree.

2. Revaluation of the enterprise since the time of valuation to the time when the state-owned enterprise is officially transferred into a joint-stock company.

CHAPTER III

SALES OF SHARES, MANAGEMENT AND UTILIZATION OF PROCEEDS FROM THE SALE OF STATE CAPITAL AT EQUITIZED ENTERPRISES

Article 23: Structure of shares at the initial offering.

The share structure of the initial offering of the equitized state-owned enterprises should follow the following order of priority:

1. Retaining a necessary portion of shares to ensure the state dominance in enterprises where it is necessary to do so.

2. Selling at concessionary price to the employees as stipulated in items 1 and 2 of Article 27 of this Decree.

3. Selling at concessionary price to the producers and suppliers of raw materials in agriculture, forestry, and aquaculture processing enterprises, as stipulated in item 1 of Article 29 of this Decree.

4. At least 30% of the remaining shares (if available) are sold to other buyers outside the enterprise, with preferences given to investors with advantage in technology, market access, capital and managerial skills.

Article 24: Initial offering of shares.

1. The first batch of shares is sold publicly at the equitized enterprise or through financial intermediaries, based on the structure of the initial offering as approved by the relevant authority in the plan for equitization, including:

a. The sale of shares and the implementation of price preference policy for the employees and the material producers and suppliers of the equitized enterprise are undertaken by the equitized enterprise.

b. The sale of shares to buyers outside the enterprise should be conducted through a financial intermediary that is selected by the competent equitization authority, through auction, or underwriting under the guidance of the Ministry of Finance.

In case when the number of shares sold to outsiders is small, and it is difficult to issue through intermediaries, and the cost of sales exceed the permitted commission, the authority that makes decision on equitization may decide to authorize the enterprise to perform the sale through auction to outsiders.

2. Thirty days prior to the sale of shares, the financial institutions authorized for sale of the first issuance from equitized enterprises to outsiders should publish at the enterprise and on the mass media means the time, location, method of sale, conditions for purchase, the quantity of shares planned to be sold and the other issues pertaining to the share sale.

3. The sale of shares to domestic and foreign investors should be uniformly conducted in Vietnamese dongs. In case the payment is in foreign currency, it should be converted to Vietnamese dongs under the current foreign exchange regulations of the government of Vietnam.

The sale of shares at preferential price to the raw material producers and suppliers of agriculture, forestry, and aquaculture processing enterprises should be implemented under the regulations approved of by the Prime Minister.

In case the parties that participate in the auction of shares pay equal prices, priority should be given to investors with advantages in technology, market access, capital, management skills and those who are willing to convert debt to equity. Foreign investors who cannot directly participate in the auction can negotiate with the share seller on the price in compliance with stipulations in item 2 of article 4 and article 5 of this Decree, and this price should not be lower than the price applicable for domestic investors.

4. The equitized state-owned enterprises that are financially fit for stock market listing should designate their share issuance and sales thereof to outsiders in such a way that still qualifies the joint-stock companies for listing in the stock market.

5.After 60 days since the approval of the equitization plan, if planned number of shares for internal distribution has not been sold out (including preferential share offered to employees, material producers and material suppliers), the equitization authority shall decide to sell the remaining shares to outsiders.

After 30 days from the date of the share sales to outsiders and the shares are not sold out, the equitization authority shall consider and decide on the adjustment of the enterprise value, and adjustment of share sale plan to transform the state-owned enterprises into the joint stock company.

Article 25 Management and utilization of proceeds from selling shares.

1. The proceeds from selling the state capital (after subtracting all costs of equitization) in the equitized state-owned enterprises should be accrued to:

a. The Central Fund for State-Owned Enterprise Restructure in case of a total equitization of the enterprises or subsidiaries of the independent enterprises, which belong to ministries, ministry-equivalents or Government agencies.

b. The Fund for State-Owned Enterprise Restructure at the provincial and municipal level in case of a total equitization of the enterprises or subsidiaries the independent enterprises, which belong to the provinces or centrally-managed cities.

c. The Fund for State-Owned Enterprise Restructure of the state general corporations in case of a total equitization of the dependent enterprises or the whole member enterprise with independent accounting, which belong to the state general corporations.

2. The proceeds from selling the state capital in the equitized enterprise should be used in the following order of priority:

a) To pay severance allowances for workers who voluntarily terminate the labor contract or who lose the job because of the equitization.

b) To pay severance allowances for workers who voluntarily terminate the labor contract or who lose the job after having become transferred to the newly established joint stock companies as defined under item 6, Article 27 of this Decree.

c. To support enterprises’ retraining programs for excess workers so they can be better qualified to work in the newly established joint stock companies.

d. To invest in the equitized state-owned enterprises to maintain the dominant stand of the state where it is required to do so.
e. To support state-owned enterprises which have payment difficulties to settle overdue debts and social security debts before equitization.

f. To pay enterprises’ debts when the sales of their assets are not sufficient to cover such payments.

g. To give financial support to the state-owned enterprises to renovate their technology, improve the competitiveness, and to develop their business.

CHAPTER IV

POLICY WITH REGARD TO WORKERS IN THE EQUITIZED ENTERPRISES

Article 26. Policies applicable for the equitized enterprises.

1. The equitized enterprises shall benefit from tax incentives under the stipulation of the Law on Domestic Investment Promotion, applied to newly established enterprises without the requirement of applying for the certificate of preferred investment.

2. They shall be exempted from registration fee for transferring the assets previously owned by the state-owned enterprises to the joint stock companies

3. They shall enjoy exemption from fee for business registration certificate while transforming from state-owned enterprises to joint stock companies.

4. They can maintain the contracts for housing and other architecture articles rented from the state or from other state-owned enterprises, or prioritized in buying at the market price at the time of equitization for the purpose of stabilizing business activities.

5. In case the value of the equitized enterprise already includes the value of the land use right, the equitized enterprise shall benefit all existing land use rights as stipulated in the Land Law.

6. The enterprises will have continued access to loans from commercial banks, financial companies, and other state credit institutions with the terms and interest rates applicable for state-owned enterprises.

7. The enterprises shall maintain and develop the welfare fund in-kind, in form of cultural facilities, clubs, hospitals, health centers and nurseries, etc. to protect the welfare of the joint stock company’s employees. These assets belong to the collective ownership of the employees under the management of the company, with the participation of the labor union.

8. The expenditures that are actually incurred, justifiable, and necessary for the transformation of state-owned enterprises into joint stock companies (including consultant services, valuation fees) are subtracted from the sales of state shares, following the regulation of the Ministry of Finance. In case the equitization is in the form stipulated in item 1, article 3 of this Decree, the expenses are subtracted from the existing state capital in the enterprise.

Article 27. Policy with regards to the employees in the equitized enterprises

1. Workers who are registered as regular at the time of the equitization decision can buy from the state a maximum of 10 shares for each year that they have worked for the enterprises at a 30% discount of the share’s par price, which is valued at VND100,000.

In case the equitization is in the form as stipulated in item 1, Article 3 of this Decree, the discounted value offered to the employees is subtracted from the existing state capital in the enterprise.

The total value of concessionary shares, including those sold to producers and or raw material suppliers, should not exceed the value of the state capital in the enterprises after deducting the value of shares held by the State.

The employees who own the preferred shares have the right to transfer and other rights in compliance with the laws and the charter of the joint stock company. These preferred stocks are nominated stocks and can only be transferred after three years of the date of purchase. In special cases when the employees are in urgent needs to transfer the stock, such transferences require approval of the Executive Board. The joint stock company shall have the priority to buy back at the market price in that case.

2. Poor employees can buy shares at preferred price on credit, and do not have to pay in three years and pay in installments in the subsequent 7 years maximum without interest. The shares purchased on installments by the poor employees should not exceed 20% of the total state shares sold at preferred price to insiders. The stock of this share is nominated; the shareholders can only transfer after 3 years after buying and after having paid all their debts to the state.

3. Workers transferred to work at the joint stock companies will continue to receive social insurance benefits as per prevailing policies.

4. Workers who are eligible for retirement at the time of equitization shall get benefit as per prevailing policies.

5. Workers who lose their jobs or voluntarily resign at the equitization time shall get severance payment as stipulated by the law.

6. After the state-owned enterprise converts to joint stock companies, if business restructuring or technology changes cause the workers to lose their jobs even when they voluntarily choose to leave the following principles shall apply:

a. In the 12 months following the date on the joint stock company’s business license the workers who terminate the labor contract or voluntarily resign due to business restructuring as excess workers as categorized in Decree No. 41/2002/ND-CP dated 11 April, 2002 by Govt., shall receive benefits from the Labor Redundancy Support Fund.

The other workers who become excess laborers shall get severance allowance as per prevailing policies and shall also be supported by the Labor Redundancy Support Fund.

b) If the workers lose their jobs any time during the following four years, the joint stock company shall pay 50% of total severance benefits as stipulated by the Labor Code, the remaining 50% shall be covered by the Fund for SOEs Restructuring and Equitization.

7. For workers who need to be trained or retrained to meet new job requirements in new positions of the joint stock company, the State shall provide parts of the training and retraining expenses from the Fund for SOEs Restructuring and Equitization under the guidance of the Ministry of Finance.

CHAPTER V
RIGHTS AND OBLIGATIONS OF SHAREHOLDERS WHO ARE FOREIGN INVESTORS AND RAW MATERIAL PRODUCERS AND SUPPLIERS FOR AGRICULTURAL, FORESTRY, AND AQUACULTURE PROCESSING BUSINESSES

Article 28: Benefits and obligations of shareholders who are foreign investors:

1. Foreign investors have the right to participate in the management of the joint stock companies, as stipulated by the laws and the charter on the organization and operations of the joint stock companies.

2. Foreign investors can use their stock as collateral in credit transactions in Vietnam.

3. Foreign investors can convert the dividend earnings and the income from selling shares into foreign currency and repatriate these amounts, after fulfilling all tax obligations as required by Vietnamese laws.

In case the investors use the dividend earnings to reinvest in Vietnam, they can benefit from all preferences defined in the Law on Domestic Investment Promotion.

4. After the joint stock company becomes listed on the stock market, foreign investors can participate in trading transactions in the Vietnamese stock market, and have obligations to comply with all regulations of the government of Vietnam regarding the foreign party’s participation in Vietnam’s stock market.

5. Foreign investors have other rights and obligations as stipulated in Vietnamese Laws, and the charter for the organization and operations of the joint stock companies.

Article 29. Rights and obligations of producers and suppliers of raw material for agriculture, forestry, and aquaculture processing enterprises:

1. To buy shares, even preferential shares in the enterprises, to which they supply raw materials, at 30% discount of the par value. The total value of discount should not exceed 10% of the state share in the enterprise. The stock of these shares is nominated, and the transfer is subject to the same conditions applicable for the transfer of preferred stock owned by the employees in the equitized enterprises.

2. To mortgage the stock in credit transactions in Vietnam

3. To be responsible for supplying raw materials to the enterprise as committed in the signed contract.

4. To have other benefits and obligations as stipulated by the laws and the charter of the joint stock companies.

CHAPTER VI

IMPLEMENTATION

Article 30: Rights and responsibilities of Ministries, provincial and municipal People’s Committees, Executive Board of State Corporations

1. Ministers, heads of ministerial-level agencies and government agencies, chairmen of provincial and municipal People’s Committees, and Executive Board of State Corporations 91 are responsible for the establishment of comprehensive plans to restructure the enterprises under their respective managerial scope, for submitting these plans to the Prime Minister for approval, and for implementing these plans. If the implementation is not carried out as having been approved, disciplinary measures will be taken against enterprise management authorities as in manners defined in the prevailing regulations.

2. Based on the restructuring plan as approved by the Prime Minister:

a) The Executive Board of State Corporation should make plans for the equitization of member enterprises and submit to the Minister of concerned Ministries or Chairmen people’s committees of provinces or centrally-managed cities for review and approval.

b) Ministers, heads of ministerial-level agencies and government agencies, Chairmen of People’s Committees of provinces or centrally-managed cities should decide on the equitization of the enterprises under their respective administration, conduct the enterprise valuation, approve of the valuation results and the method of equitization to be used in order to transform the state-owned enterprises into joint stock companies under the guidance of competent agencies. For the equitized enterprises where the state continues to hold dominant shares, the plan should be submitted to the Prime Minister for approval.

3. Ministers, heads of ministerial-level agencies and government agencies, Chairmen of People’s Committees of provinces or centrally-managed cities shall decide or adjust the enterprise value. In cases when the actual value of state capital at the enterprise is less than the recorded book value by VND500 million or more, adjustment will require written approval by the Minister of Finance.

4. The supporting documents for enterprise valuation, method of state-owned enterprise equitization, and equitization documents in circulation in ministries, ministerial-level agencies, government agencies, people’s committees of provinces and centrally-managed cities, and State General Corporations should be sent to the National Steering Committee for Enterprise Renovation and Development and the Ministry of Finance for monitoring, consolidation and report to the Prime Minister.

5. The National Steering Committee for Enterprise Renovation and Development and the Ministry of Finance are responsible for assisting the Prime Minister on the provision of guidance to, monitoring, and supervision of ministries, ministry- equivalents, government agencies, People’s Committees of provinces and centrally-managed cities and General Corporations to implementequitization as stipulated by the laws and to implement the approved SOEs restructuring plans.

Article 31: Business registration by the joint stock company.

After selling shares and having the shareholders’ assembly as stipulated by the Enterprise Law, the state-owned enterprises shall have to be registered for business operations as stipulated by Decree 02/2000/ND-CP dated February 3, 2000 of the Government that governs business registration; they shall officially become joint stock companies and placed under the governance of the Enterprise Law starting the date of the business registration.

Article 32: Management of state capital in joint stock companies:

1. The state capital in the joint stock companies is managed as stipulated by Decree 73/2000/ND-CP dated 6th December 2000 of the government on the issuance of the state capital management regulation in other enterprises. Those who work at State-owned enterprises at the time of the equitization and who are assigned with the management of state capital at the enterprises are entitled to purchasing shares like the other employees of the enterprises.

2. For the equitized state-owned enterprises in which the state does not own the dominant share nor special share, the representative of state ownership in the joint stock company shall consider and decide on the further sale of state shares in the joint stock company after three years from the date the joint stock company starts its operations.

Article 33. Ministries and provinces shall be accountable for settlement of problems incurred at the equitized enterprises, within their power; responses to the enterprises’ queries should be available within 15 days from the date of receipts. Cases beyond the local authorities’ power should be reported to the Prime Minister for timely reaction.

CHAPTER VII
IMPLEMENTATION PROVISIONS

Article 34. This Decree supercedes Decree 44/1998/ND-CP dated 29th June 1998 of the government, and shall come into effect 15 days after the date of signature. Other previous issued legal documents on equitization that stipulate differently from this Decree are no longer valid for implementation.

Article 35. Ministry of Finance, Ministry of Labor, War Invalid, and Social Affairs, State Bank of Vietnam, State Commission of Securities, General Department for Land Administration, and other related agencies and ministries should issue guidelines for the implementation of this Decree.

Article 36. Ministers, heads of ministry equivalent agencies, heads of government agencies, chairmen of people’s committees of provinces and centrally-managed cities, and executive boards of state general corporations 91 are responsible for implementing this Decree.

Prime Minister

Phan Van Khai

co:

- Party’s Secretariat

- Prime Minister, Deputy Prime Ministers

- Ministries, ministry equivalent agencies, government agencies

- People’s Council, People’s Committees of provincial and municipal level

- Office of National Assembly

- Office of the President

- Office of the Central Party Committee, and Party’s committees

- Supreme Investigation Bureau

- Supreme People’s Court

- Headquarters of mass organizations

- 91-type state corporations

- Chamber of Commerce and Industry

- Press Release

- Office of Government: departments and divisions

- Archived