CIRCULAR

GUIDING THE IMPLEMENTATION OF A NUMBER OF ARTICLES OF THE GOVERNMENT’S DECREE NO.71/2013/ND-CP DATED JULY 11, 2013, ON STATE CAPITAL INVESTMENT IN ENTERPRISES AND FINANCIAL MANAGEMENT , OVER ENTERPRISES THAT STATE HOLDS 100% OF CHARTER CAPITAL

This Circular guides a number of articles involving capital investment, management over state capital invested in enterprises and financial management over enterprises that state holds 100% of charter capital in accordance with the Government’s Decree No. 71/2013/ND-CP dated July 11, 2013 (hereinafter abbreviated to Decree No. 71/2013/ND-CP).

1. This Circular applies to subjects defined in article 2 of Decree No. 71/2013/ND-CP

2. Enterprises that State holds 100% of charter capital operating in special sectors with specific regulations on finance shall comply with specific regulations promulgated by competent agencies and implement under other relevant contents specified in Decree No. 71/2013/ND-CP and guides in this Circular.

3. Enterprises that state holds 100% of charter capital shall, base on provisions of Law on enterprises, Decree No. 71/2013/ND-CP and guide in this Circular, promulgate regulations on capital investment and financial management over subsidiary companies that enterprises hold 100% of charter capital.

Apart from terms construed as Article 3 of Decree No. 71/2013/ND-CP in this Circular, the following terms are construed as follows:

1. “The raised capital of enterprise” means capital that enterprise borrows from credit institutions, other financial organizations, domestic and foreign individuals; issues bonds; receives contribution capital and other forms of raising capital as prescribed by law in serve of production and business.

2. “Assets of enterprise” include tangible assets and intangible assets under management and use of enterprise which are formed from the invested state capital, raised capital and other capital sources at enterprises and reflected on accounting balance sheet of enterprise at a defined time (excluding assets that enterprise hires for operation, borrows, keeps, receives for subcontract, sale as agent, receives consignment).

3. “Other enterprises” include enterprises:

- Having shares, contribution capitals of which owners are Ministries, Ministerial agencies, Governmental agencies (hereinafter referred to as Ministries managing sector), or People’s Committees of provinces and central-affiliated cities (hereinafter referred to as the provincial People’s Committees).

- Having shares, contribution capital of One-member limited liability companies which state owns 100% of charter capital.

The state capital investment in enterprises shall comply with section 1, chapter II of Decree No. 71/2013/ND-CP and guides as follows:

1. The state capital investment in enterprises to perform important projects and works of state and other projects and works to establish new enterprises or to develop, expand scale of production and business of the operating enterprises must be suitable with the master plans on economic development of regions, sectors, master plans on land use and must ensure implementation in accordance with the process of and procedures for investment as prescribed by law on works construction investment and relevant laws, already been approved by competent authorities.

2. Investors and enterprises shall perform payment of state capital for investment during the course of implementation of investment projects and finalization of state capital for investment after finishing projects in accordance with current regulations of state on managing payment and finalization of investment capitals financed from state budget capital sources.

3. The state capital investment for maintaining or increasing rate of state capital invested in other enterprises must be approved by competent authorities, ensure procedures in accordance with Law on enterprises, law on investment, law on securities and the guiding documents of competent agencies.

4. The state capital investment to re-purchase part of capital or entire capital of enterprises in other economic sectors must comply with plans elaborated by Ministries managing sector or the provincial People’s Committee with appraisal opinions of the Ministry of Finance, the Ministry of Planning and Investment and approved by the Prime Minister.

Ministries managing sectors, the provincial People’s Committees shall perform rights and duties of owners for state capitals invested in other enterprises through representatives as prescribed in Article 8 of Decree No. 71/2013/ND-CP, in which:

1. To elaborate regulations to inspect, supervise activities of the representatives aiming to timely detect and handle shortcomings, weakness of representatives in performing powers and duties of owners as prescribed by law as basis for assessing the extent of finishing tasks of representative as assigned by owner in managing state capital in other enterprises.

2. To request the representative to quarterly, annually or irregularly sum up, assess production and business, financial situation and propose measures to handle, remove difficulties aiming to increase efficiency of state capitals invested in other enterprises according to Annex No. 02 promulgated together with this Circular, report to capital owner and send to the Ministry of Finance (the enterprise finance department). Time limit for submission of reports by representatives shall comply with provisions on current time limit for submission of enterprises financial statements.

3. To manage implementation of right to purchase shares which are additionally issued, convertible bonds of representative and take responsibilities when the representatives violate implementation of right to buy shares which are additionally issued, convertible bonds specified at Clause 2 Article 6 of this Circular.

1. The representatives shall perform powers and responsibilities in managing state capital invested in other enterprises as prescribed at Clause 1, Clause 4 Article 9 and Clause 2 Article 10 of Decree No. 71/2013/ND-CP and the regulation on operation of representatives promulgated by the Ministry of Finance.

2. The representatives are entitled to buy shares which are additionally issued, convertible bonds under decisions of joint-stock companies specified at item c Clause 2 Article 9 of Decree No. 71/2013/ND-CP.

If a representative is appointed to act as representative at many joint-stock companies, he is only entitled to select for buying shares additionally issued, convertible bonds at one joint-stock company where he is appointed to act as representative. He shall report to owner for decision on implementation of his right to purchase shares as mentioned above; his right to buy shares which are additionally issued, convertible bonds at the remaining joint-stock companies which owners of state capital have right to buy at other enterprises (except for case where representatives are entitled to buy under right of existing shareholders).

1. When other enterprises have plan on increasing charter capital, the representative must elaborate plan on adding state capital invested in other enterprises and report to owner for decision as prescribed in Article 7 of Decree No. 71/2013/ND-CP Plan on adding capital includes contents:

a) Legal basis for increasing capital of other enterprises.

b) Financial status, result of production and business of other enterprises in 03 years before performing plan on increasing capital.

c) Strategy, plan on production and business, plan on development investment and use of the increased capital source of enterprise.

d) Assessment on economic benefits attained and influences of increasing the investment capital of State in other enterprises.

dd) Proposal for sources to add state capital in other enterprises.

2. Case of plan on adding capital to invest in other enterprises from fund for supporting the enterprise arrangement and development, ministries managing sectors, the provincial People’s Committees shall make dossier and send to the Ministry of Finance for appraisal and submission to the Prime Minister for consideration and decision.

3. For other enterprises not operating in sectors, fields that State needs further invest more capital according to criteria, list of state enterprise classification as promulgated by the Prime Minister, Ministries managing sectors, the provincial People’s Committees shall consider and decide on transfer of right to buy shares that are issued additionally, convertible bonds to other organizations and individuals.

The principle in transferring right to buy shares, convertible bonds shall comply with method of open auction. The determination of reserve price shall be performed through an organization with price appraisal function as prescribed by law on price appraisal. In case where duration for shareholders to perform right to buy shares, convertible bonds under the issue plan of joint-stock company is short, not enough for organization of auction and transfer, owner may consider and decide on transfer price under regulations and ensure efficiency.

Persons competent to decide on transfer of right to buy shares, convertible bonds are not entitled to decide on transfer to enterprises of which managers are their spouses, father, adoptive father, mother, adoptive mother, children, adoptive children, brothers and sisters and not entitled to decide on transfer to all individuals with relation as above.

4. Amounts received from transfer of right to buy shares, convertible bonds at other enterprises after deducting costs related to transfer of right to buy shares, finishing tax liabilities as prescribed by law, the rest will be remitted to fund of support for enterprise arrangement and development.

5. The ministries managing sectors, the provincial people's committees which are owners shall implement reduction of a part of capital or recovery of entire state capital invested in other enterprises according to the method of transfer specified in Article 8 of this Circular.

Method to transfer the state capital invested in enterprises shall comply with Article 14 of Decree No. 71/2013/ND-CP and guides as follows:

1. The transfer of state capital in One-member limited liability companies that state holds 100% of charter capital under form of equitization or enterprise sale according to plan on enterprise arrangement and renovation already approved by the Prime Minister shall comply with Government’s regulations on equitization or sale of State-owned enterprises.

2. Transfer of state capital at One-member limited liability companies to become limited liability companies with two or more members:

a) The transfer of a part of state capital at One-member limited liability companies that state holds 100% of charter capital according to plan on enterprise arrangement and renovation already approved by the Prime Minister.

b) Transfer of capital under form of open auction or direct agreement:

- The open auction when transferring capital valued from 10 billion VND or more shall be performed at the Stock Exchange (SE). In case of transfer of capital valued less than 10 billion VND, enterprises may hire a financial organization as auction agent, or self-organize auction at enterprises, or perform auction at the Stock Exchange (SE).

- Sale by direct agreement between capital owner (or function agencies which are authorized by owners, assigned tasks in writing) with investor in case there is only one investor registering for purchase or cases already allowed by the Prime Minister for sale by direct agreement.

When transferring capital under direct agreement form, persons competent to decide on transfer of capital transfer are not entitled to decide on transfer to enterprises of which managers are their spouses, father, adoptive father, mother, adoptive mother, children, adoptive children, brothers and sisters and not entitled to decide on transfer to all individuals with relation as above.

- The determination of reserve price for state capital before organizing open auction or agreement which is performed through an organization with price appraisal function as prescribed by law on price appraisal must ensure the principle in which the actual values of state capital at enterprise are determined fully including values created by the land use right values and values of intellectual property right (if any) of enterprise as prescribed by law, at time of capital transfer.

3. Transfer of state capital invested in Limited Liability Companies with two or more members or at Joint-stock companies:

a) Ministries managing sectors, the provincial People’s Committee shall, base on investment portfolio at enterprises not in sectors, fields state holds capital, direct the representative to make plan on capital transfer to report to the owner for deciding on capital transfer plan after having opinions of the Ministry of Finance, the Ministry of Planning and Investment as prescribed in Article 15 of Decree No. 71/2013/ND-CP.

b) Plan on capital transfer includes the following contents:

- Legal grounds, purpose of capital transfer.

- Assessment on benefits attained and influences of transferring the State capital invested in other enterprises.

- Form of capital transfer.

c) Transfer of state capital invested in Limited Liability Companies with two or more members:

- If owner of state capital requests a Limited Liability Company with two or more members to re-buy its contributed capital, the determination of transfer price shall comply with Article 43 of the 2005 Law on enterprises.

- If owner of state capital transfers its capital to other member or transfer to organizations and individuals not being members in company, it must comply with Article 44 of the 2005 Law on enterprises, in which:

+ Case of transfer to other members in company, the owner of state capital must agree transfer price with other members. The determination of sale price shall be agreed on the basis of price appraisal result made by an organization with price appraisal function as prescribed in Clause 2 of this Article.

+ Case of transfer to organizations and individuals not being members in company, the open auction or direct agreement as prescribed at Clause 2 this Article 44 shall be applied.

d) Transfer of state capital in joint-stock companies:

- For joint-stock companies listed in securities market or registered for transaction on Ucom floor, the capital transfer (transfer of shares) shall be implemented under transaction methods (matching of orders, agreement) as prescribed by law on securities. Case of transfer under agreement method, the agreement price must fall in the transaction price range of securities code at day of transfer.

- For joint-stock companies not yet been listed or registered for transaction on Ucom floor, the capital transfer shall comply with clause 2 this article.

The determination of charter capital level and investment in charter capital for enterprises shall comply with Article 18 of Decree No. 71/2013/ND-CP specified:

1. For enterprises have just been established:

a) Dossier to determine charter capital:

- Investment projects, scheme on enterprise establishment approved by competent authorities;

- Decision on enterprise establishment of competent authorities.

b) Method to define charter capital:

- New enterprises established on the basis of projects on investment in works construction already been finished and put into operation, the charter capital level of enterprises shall not exceed 30% over total capital for investment in works construction already been approved by competent authorities.

If an investment project has investment capital of state more than the rate of 30% over total investment capital forming assets of enterprises, the charter capital level shall be determined equal to the capital invested by state.

- For newly-established enterprises not associating to project on investment in works construction, base on scale, tasks, business trades determined in scheme on establishment to decide on the initial charter capital level ensuring for enterprise to operate normally.

- Newly-established enterprises with trades in fields required to have legal capital as prescribed by law, and trades in fields not required to have legal capital, the charter capital of enterprise shall be determined not less than the legal capital under business trades of enterprise.

2. For enterprises which are operating:

a) The principles to adjust increase of charter capital level:

- Determination of demand and adjustment of charter capital of enterprises which are operating must base on objectives, tasks, strategies of development and expansion of scale, trades in production and business of enterprises under plans, planning already been approved by competent authorities.

- The adjustment to increase charter capital of enterprise must base on capital demand to perform investment, asset procurement projects in serve of the main production and business activities of enterprise; capital demand for production of products, trading in goods, services; capital demand for investment outside enterprise under plan already been approved by competent authorities.

- The increased charter capital shall be applied minimally in 03 years since the owner approves and must ensure the association with plan on capital sources to add sufficient charter capital from the fund for investment and development which are deducted from the annual after- tax profit or other lawful sources under regulations.

- If passing 03 years, enterprise still has not enough sources to add sufficient charter capital as approved, the owner shall base on situation of enterprise to re-adjust objectives, tasks and strategies of development under the plan assigned to enterprise or in necessary case, to perform task of production and business already been approved, the owner shall allocate additionally lack of charter capital to enterprise as prescribed at Clause 4 Article 19 of Decree No. 71/2013/ND-CP.

b) Method to define adjustment to increase charter capital: Enterprises may determine under the following general formula:

In which:

- V_{dl approved} means the charter capital already been approved by competent authorities before adjustment.

- Total capital demand for investment, procurement to form assets in serve of main business activities of enterprise includes:

+ Total investments of investment projects approved by competent authorities in list of 5-year development investment plan or in planning on sector development already been approved by competent authorities. For projects with implementation duration of more than 03 years, the investment level as the basis for re-determining the charter capital of enterprise shall only be calculated under capital demand to perform project in duration of adjusting charter capital in 03 years (not calculated under the investment level of entire project).

+ Case where investment project has been finished but not yet been included in determination of charter capital of previous adjustment, it may be included in determination to adjust charter capital at this time.

+ Projects, construction works invested by mixture capital source in which include capital invested from state budget, base on capital level invested from state budget for project to record the increase of charter capital of enterprise.

+ Case of project on investment in works construction (of which investor is other agency or unit) handed over for enterprise to manage, exploit, use, entire invested state capital of project under finalization of project on investment in works construction already been approved by competent authorities shall be included in the increase of the adjusted charter capital.

+ In case where an investment project which is performing and is temporarily stopped under decision of competent authorities or is adjusted scale, enterprise must base on demand of project investment capital under decision on adjustment of competent authorities to determine (re-adjust) the charter capital level of enterprise.

+ In case where enterprise has plans to invest outside enterprise already been approved, base on rate of capital contribution of enterprise at subsidiary companies, associate companies to calculate total investment capital of projects when determining the charter capital of enterprise.

- V_sxsp-kdhhdv means capital demand for production of products, trading in goods and services of enterprise.

Method to define as follows:

The increase difference between total capital demand for production of products, trading in goods and services till the third year from the year of re-determining the charter capital level in comparison with capital demand for production of products, trading in goods and services implemented in previous year of year the charter capital level is re-determined shall be calculated by basing on the implementation turnover of production and business activities in the audited financial statements of enterprises in previous year of year charter capital level is re-determined and the annual average turnover growth rate under the 5-year production and business plan already approved by competent authorities calculated till the third year from the year of re-determining the charter capital level.

Example:

+ In 2014, enterprise request for determination and adjustment to increase charter capital; in 2013 (the previous year of year the charter capital is re-determined) the implemented turnover of production and business recorded in financial statements of enterprise is 1000 billion VND.

+ According to the 5-year plan on production and business of enterprise already been approved, the annual average turnover growth rate of the 5-year plan is 5%/year.

+ In 2016 (the third year since the charter capital is re-determined and in duration of the approved 5-year production and business plan).

+ The increase difference of capital demand for production of products, trading in goods and services for each year till the third year (2016) since the charter capital is determined shall be determined as follows:

In 2014, 1000 billion VND x 5% = 50 billion VND.

In 2015, (1000 billion VND + 50 billion VND) x 5% = 52.5 billion VND.

In 2016, (1000 billion VND + 50 billion VND + 52.5 billion VND) x 5% = 55.12 billion VND.

+ The increase difference between total capital dement for production of products, trading in goods and services till the third year (2016) in comparison with the previous year of year the charter capital is re-determined (2013) as the basis for adjustment to increase charter capital of enterprise shall be: 157.62 billion VND (50 billion VND + 52.5 billion VND + 55.12 billion VND).

+ The increased charter capital for production of products, trading in goods and services of enterprise calculated for 3 years from 2014 thru 2016 shall be: V_sxsp-kdhhdv = 30% x 157.62 billion VND = 47.2 billion VND.

c) Dossier and order of approval:

Dossier includes:

- Decision on approving the charter capital level of competent authorities before adjusting to increase the charter capital of enterprise.

- Plan on adjusting the charter capital of enterprise, including:

+ A written explanation on method to determine the adjusted charter capital level and the enclosed concerning documents to prove (such as decision on approving the 5-year plan; decisions concerning approval of projects on construction investment or decisions concerning the temporary stop of investment project, decision on adjusting objectives, tasks of plan on production and business, tasks as assigned by state…)

+ Explanations on capital sources to add charter capital (as prescribed at Clause 4 Article 18 of Decree No. 71/2013/ND-CP)

The quarter and annual audited financial statements at time of adjusting the charter capital and previous year of year the charter capital is adjusted of enterprise.

Order of approval:

- For enterprises which are established under decisions of the Prime Minister, make a dossier under regulations and send it to Ministry managing sector, within 15 days after receiving dossier of enterprises, the Ministry managing sector shall check dossier to ensure it made under regulations and send a written request (enclosed with dossier of enterprise) to the Ministry of Planning and Investment for giving out opinions and the Ministry of Finance for appraisal. Within 15 days, after receiving a written request of the Ministry managing sector and dossier of enterprise, the Ministry of Planning and Investment and the Ministry of Finance shall reply in writing and send to the Ministry managing sector to finish dossier and report to the Prime Minister for decision on adjusting the charter capital level of enterprise.

- For enterprises which are established under decisions of the Ministries managing sector, make a dossier under regulations and send it to Ministry managing sector, within 15 days after receiving dossier of enterprise, the Ministry managing sector shall check dossier to ensure it made under regulations and send a written request (enclosed with dossier of enterprise) to the Ministry of Finance for agreement opinion. Within 15 days, after receiving the written request of the Ministry managing sector and dossier of enterprise, the Ministry of Finance shall send a written agreement on charter capital level and source for adding charter capital of enterprise to the Ministry managing sector to decide on adjusting the charter capital level of enterprise under its competence.

- For enterprises established under decisions of the provincial People's Committees, make dossier under regulations and send it to the provincial People's Committee. Within 15 days, after receiving dossier of enterprise, the provincial People’s Committee shall check dossier to ensure it made under regulations, appraise data and decide on adjusting the charter capital level of enterprise under its competence.

- During receipt and handling of dossiers of adjusting the charter capital level of enterprises, in case where a dossier of an enterprise fails to ensure to be made under regulations, within 15 days after receiving dossier, the Ministry managing sector (for enterprises managed by central level), the provincial People’s Committees (for enterprises managed by local level) and relevant agencies, shall have a written request for such enterprise to supplement and complete dossier in accordance with regulations, case of refusal for dossier of adjusting the charter capital of enterprise, competent authorities and relevant agencies must send a reply in writing (stating reason thereof) to enterprise.

1. Enterprises shall raise capital in accordance with Article 19 of Decree No. 71/2013/ND-CP

2. Enterprises are entitled to guarantee for subsidiary companies which enterprises own 100% of charter capital or subsidiary companies which enterprises have dominant shares or contribution capital for borrowing loans at banks or credit institutions as prescribed by law. In which:

a) Subsidiary companies guaranteed by enterprises must have strong financial status, no overdue debts, the guarantee for borrowing loans to perform investment projects must base on efficiency appraisal of project; the guaranteed companies must make a commitment on ensuring solvency for the guaranteed loans.

b) Enterprises may guarantee for each loan of subsidiary companies at a rate (%) of contributed capital of enterprises in charter capital of subsidiary companies and total values of guaranteed loans for a subsidiary company does not exceed the actual contributed capital of enterprises at such subsidiary company.

Concurrently, total values of guaranteed loans for subsidiary companies does not exceed equity capital of enterprises and in limitation of payable debt coefficient over equity capital specified at Clause 3 Article 19 of Decree No. 71/2013/ND-CP.

c) The actual contribution capital of enterprise at a subsidiary company is determined as follows:

- For a subsidiary company which enterprise owns 100% of charter capital, the value of actual contribution capital of enterprise shall be determined by basing on equity capital (code 410) on the accounting balance sheet in financial statements of last quarter in comparison with time of guarantee of subsidiary company.

- For a subsidiary company which has dominant shares, contribution capital of enterprise, the value of actual contribution capital of enterprise shall be determined by basing on equity capital (code 410) on the accounting balance sheet in financial statements of last quarter in comparison with time of guarantee of subsidiary company multiplied (x) to rate of contribution capital of enterprise according to the charter capital of the guaranteed subsidiary company.

d) If an enterprise conducts guarantee in excess of level specified above or decide on guarantee resulting loss of its capital and assets, person competent to decide on guarantee shall be responsible as prescribed by law.

dd) Contracts of guarantee for borrowing loans of enterprises for subsidiary companies which are performed under the Circular No. 117/2010/TT-BTC dated August 05, 2010 of the Ministry of Finance shall be further performed until they are expired as signed.

3. Enterprises without operational function of credit institutions as prescribed by Law on credit institutions shall not be entitled to use their capital for providing loans to other enterprises, organizations and individuals. In special case, enterprises must report to owners to submit to the Prime Minister for decision.

1. Enterprises may conduct the outside investment in accordance with Articles 29, 30, 31, 32 and 33 of Decree No. 71/2013/ND-CP In which:

a) Enterprises are not permitted to use assets which enterprises are hiring for operation, borrowing, keeping, receiving for sub-contracts, agent sale, and consignment for investment outside enterprises.

b) For investment outside enterprises, when receiving quantity of shares issued by joint-stock companies without payment in money (including quantity of shares received and being monitored by quantity in the description of periodical financial statements under regulations), enterprises must monitor and make entries in accounting books of enterprises, specified:

- For shares received where joint-stock companies divide dividend (dividing dividend by shares), enterprises must account to increase turnover of financial operation and increase value of investments outside enterprises proportional to the divided dividends.

- For the remaining shares received without payment (shares received not from dividend division), enterprises may base on quantity of received shares and face value of shares to record increase of turnover from financial operation and increase value of investments outside enterprises.

2. Enterprises transfer outside investment capital in accordance with Article 30 of Decree No. 71/2013/ND-CP and guides as follows:

a) Method to transfer capital invested outside enterprises:

- The transfer of capital invested outside enterprises at subsidiary companies being One-member limited liability companies which enterprises hold 100% of charter capital to transform into limited liability companies with two members or more shall be conducted under form of open auction or direct agreement as prescribed at Clause 2, Article 8 of this Circular.

- The transfer of capital invested outside enterprises at subsidiary companies being limited liability companies with 02 or more members shall comply with point c Clause 3, Article 8 of this Circular.

- The transfer of capital invested outside enterprises at joint-stock companies shall comply with point d Clause 3, Article 8 of this Circular. Especially the hire of an organization to conduct auction and determination of the sale price in case of agreement sale, enterprises shall comply with point c Clause 1 Article 30 of Decree No. 71/2013/ND-CP

- According to Clause 2 Article 30 of Decree No. 71/2013/ND-CP the transfer of capital invested outside enterprises must comply with principles of market price at time of sale. In which:

+ If the tentative transfer price is near by the market price (the appraised price according to legislations on price appraisal, Vietnam standards of price appraisal), but still less than the value recorded on accounting books of enterprises, if enterprises have make appropriation of provision under regulations and appropriation of provision is equal to or more than difference between the tentative sale price in comparison with the value recorded on accounting books, Members' Council or president of company shall decide on transfer to recover capital invested outside.

+ If appropriation of provision is still less than difference between the value of investment recorded on accounting books and the tentative transfer value, Members' Council or president of company must report to owner for consideration, decision before transfer.

- For transfer of bonds which enterprises have invested to enjoy interest, the transfer shall comply with regulations upon issuing or the issue plan of the issuers. If an enterprise transfers bonds sooner than term, the transfer price must ensure the principle of recovering sufficient the invested values and having interest.

For transfer of bonds registered for deposit, list and transaction on securities market, enterprises shall comply with law on securities.

b) Accounting of revenues from transfer of outside investments:

Amounts collected from transfer of investments outside enterprises after deducting value of invested capital recorded on accounting books of enterprises, costs for transfer and implementation of tax liability under regulations, enterprises may account the rest in business result of enterprises.

Enterprises are responsible for preservation and development of equity capital at enterprises as prescribed in Article 34 of Decree No. 71/2013/ND-CP specified:

1. Preservation of capital:

Base on criteria of interest, loss of enterprises under the quarter and annual financial statements to assess the extent of preservation of capital of enterprises

a) For enterprises obtaining profit or not suffering loss, the extent of preservation of capital of enterprises shall be determined according to H coefficient:

In which:

- equity capital of enterprises to determine the extent of preservation of capital includes the investment capital source of owner (code 411), fund for development investment (code 417), capital source of fundamental construction (code 421) on the accounting balance sheet according to the quarter or annual financial statements (Form No. B 01-DN promulgated together with Decision No. 15/2006/QD-BTC dated March 20, 2006, of Minister of Finance and the amended and supplemented documents, if any).

- When determining coefficient of preservation of capital under regulations mentioned above, enterprises must remove objective elements influencing to change of capital in the report term such as: State capital invested additionally in enterprises, state capital transferred from other places

Method to assess the extent of preservation of capital: If H coefficient – 1, enterprise preserved capital, if H coefficient > 1, enterprise developed capital.

b) In case where an enterprise suffers loss (fails to preserve capital), Members' Council or president of company must have a report to send it to owner and the Ministry of Finance about cause of loss, failing to preserve capital. Owner shall base on loss status of enterprise to decide on conducting financial supervision, or special financial supervision for enterprise under current regulations.

The settlement of loss of Enterprise shall comply with current law on enterprise income tax.

2. Method to preserve capital:

Enterprises conduct methods to preserve capital as prescribed at Clause 2 Article 34 of Decree No. 71/2013/ND-CP in which the setting up of provisions including provision for inventory price reduction; provision for bad debts; provision for loss of long-term financial investments; provision for product, goods and construction and installation works warranty shall comply with Circular No. 228/2009/TT-BTC dated December 07, 2009 and Circular No. 89/2013/TT-BTC dated June 28, 2013 of the Ministry of Finance (hereinafter abbreviated to regulations on appropriation of provision of the Ministry of Finance). For outside investments, enterprises may conduct appropriation of provision under regulation on appropriation of loss provision for long-term financial investments at the Circular mentioned above.

1. Enterprises shall invest, build, procure, manage, use and depreciate fixed assets during business operation as prescribed in articles 20, 21, 22, 23 of Decree No. 71/2013/ND-CP Circular No. 45/2013/TT-BTC dated April 25, 2013 of the Ministry of Finance, guiding regulation on management, use and depreciation of fixed assets and the amending, supplementing or replacing Circulars (if any).2. For typical business trades with specific regulations on investment, procurement, management and use of fixed assets under specialized sectors, apart from implementation of regulations mentioned above, regulations of specialized legal documents shall also be applied.

3. The liquidation and sale of fixed assets of enterprises shall comply with Clauses 2, 3 Article 23 of Decree No. 71/2013/ND-CP  and guides as follows:

a) Assets subject to liquidation or sale:

Enterprises are entitled to take initiative to perform liquidation or sale of fixed assets which has broken, has obsolete technique, which enterprises has no use demand or fail to use in order to recover capital.

b) Order of and procedures for liquidation or sale of fixed assets:

- President of Members' Council or president of company decides establishment of council for liquidation or sale of fixed assets at enterprise Members of Council include: General Director or Director, chief accountant, heads of relevant divisions and some experts mastering technical features of fixed assets (if any).

- Tasks of Council for liquidation or sale of enterprise’s fixed assets:

+ To determine actual technical conditions, the remaining value of assets subject to liquidation or sale.

+ To determine causes, responsibilities of relevant collectives and individuals in case where a fixed asset newly invested fails to bring economic efficiency, must sell but has no ability to recover sufficient investment capital, case where asset has not yet been depreciated but has broken and cannot be repaired, must conduct liquidation for sale so as to report to owners for handling under regulations.

+ To organize determination or hire an organization with price appraisal function to determine value may be recovered of assets subject to liquidation or sale.

+ To organize auction or hire an organization with function of auction of kinds of assets subject to liquidation or sale as prescribed by relevant law.

- Council for asset liquidation or sale shall terminate operation by itself after finishing liquidation or sale of enterprise’s fixed assets.

c) The accounting of turnover and costs involving liquidation and sale of fixed assets of enterprises shall comply with Clause 3 Article 35 and Clause 2 Article 36 of Decree No. 71/2013/ND-CP

d) When an enterprise perform a project on construction investment approved by competent authorities, and it must dismantle or destroy the old fixed assets, the handling and accounting of old fixed assets upon being dismantled or destroyed of enterprises shall be implemented like case of liquidation or sale of fixed assets.

Inventory management of enterprises shall comply with Article 27 of Decree No. 71/2013/ND-CP In which:

1. Enterprises must elaborate regulation on managing goods, raw materials, materials, tools and instruments in stock, on transport; unfinished products during production, finished products not put into store, finished products in stock, finished products sent for sale. The regulation must define clearly the coordination of each division in enterprise and responsibilities of each division, each individual related to monitoring, management of assets of enterprises mentioned above.

2. For inventory subject to appropriation of provision, the set up and use of provision for price reduction of inventory shall comply with guide on appropriation of provision of the Ministry of Finance.

1. The management and handling of collectible debts of enterprises shall comply with clause 1 Article 25 of the Government’s Decree No. 71/2013/ND-CP and Decree No. 206/2013/ND-CP dated December 09, 2013, on managing debts of enterprises which state holds 100% of charter capital.

2. For collectible debts subject to appropriation of provision, the set up and return of provision of bad collectible debts shall comply with guide on appropriation of provision of the Ministry of Finance.

The recording, assessment and handling of exchange rate differences in enterprises shall comply with Article 26 of Decree No. 71/2013/ND-CP and Circular No. 179/2012/TT-BTC dated October 24, 2012 of the Ministry of Finance, on the recording, assessment, and settlement of the exchange differences in enterprises and the amending, supplementing or replacing Circulars (if any).

Management of turnover, other incomes and costs of enterprises shall comply with Articles 35, 36 and 37 of Decree No. 71/2013/ND-CP In which:

1. Members' Council or president of company General Director, Director of enterprise shall be responsible before owner and before law, for managing strictly, ensuring the accuracy and legality of turnovers, other incomes and costs from production and business of enterprise.

2. All turnovers, other incomes and costs from production and business of enterprise that arise must have sufficient vouchers under law on accounting and be reflected sufficiently in accounting books of enterprise according to the current regulations on accounting in enterprises.

3. Turnover and other income shall be determined in Vietnam dong, cases of collection in foreign currency must be converted into Vietnam dong as prescribed by law.

4. Enterprises must calculate rightly, sufficiently costs for production and business, cover all costs with revenues of enterprises and take responsibilities for their results of business operation.

Distribution of profit of enterprises shall comply with Article 38 of Decree No. 71/2013/ND-CP In which:

1. Basis to set up the fund of commendation, fund of welfare, fund of reward for managers of enterprises shall be determined as follows:

a) Regarding classification of enterprises A, B, C as the basis for setting up of funds shall comply with guides of regulation on financial supervision and assessment on operation efficiency and disclosure of financial information for State-owned enterprises and enterprises with state capital promulgated together with Government’s Decree No. 61/2013/ND-CP dated June 25, 2013 and Circular No. 158/2013/TT-BTC dated November 13, 2013 of the Ministry of Finance.

b) Regarding the implementation monthly wage as the basis for setting up of funds:

- For fund of commendation and fund of welfare of enterprises: Base on the implementation wage fund of employees in financial year of enterprises determined according to Government’s Decree No. 50/2013/ND-CP dated 14/5/2013, on managing laborers, wages and bonuses for employees working in State-owned one-member limited liability companies, divided (:) by 12 months.

- For set up of fund of reward for managers of enterprises: Base on the fund of the implementation wages and remunerations for managers (full time and part time) defined in Government’s Decree No. 51/2013/ND-CP dated 14/5/2013, on wages, remunerations, and bonuses of members of the member assembly, the company’s president, the controller, the general director or director, the deputy general director or deputy director, and the chief accountant of state-owned single member limited companies, divided (:) by 12 months.

2. President of Members' Council or president of company decides allocation of fund of commendation and fund of welfare after reaching unified opinion with the Executive Board of Trade Union of enterprise.

3. The remaining profit after distribution and setting up of funds under regulations, enterprises shall remit to fund of support for enterprise arrangement and development as prescribed at point dd, Clause 3, Article 38 of Decree No. 71/2013/ND-CP

Members' Council or president of company shall direct General Director or Director to finish remittance of profit to the fund of support for enterprise arrangement and development before June 30 of next year of report year. If an enterprise delays remittance (remittance after 30/6) or fails to remit, apart from assessment on extent of failing to finish tasks of managers of such enterprise, such enterprise must pay interest of fine due to delay, be applied coercive measures under regulation on management and use of fund of support for enterprise arrangement and development promulgated together with Decision No. 21/2012/QD-TTg dated 10/5/2012 of the Prime Minister.

For the remaining profit of 2013 and 2014 after setting up funds according to Decree No. 71/2013/ND-CP and guide in this Circular, the enterprises shall remit them according to Government’s Decree No. 204/2013/ND-CP dated 05/12/2013, detailing and guiding implementation of National Assembly’s Resolution on some solutions to perform state budget in 2013, 2014 and guides in Circular No. 187/2013/TT-BTC dated 02/12/2013 of the Ministry of Finance.

4. For enterprises directly serving defense, security, enterprises established to perform essential and regular tasks of stabilizing production and providing public products and services as assigned by state under plan, apart from profit distribution as prescribed in this Circular, enterprises shall be enjoyed the support regime from fund of commendation and fund of welfare according to specific regulation of Government.

1. Use of fund for development investment, fund of commendation, fund of welfare and fund of reward for managers of enterprises shall comply with Clauses 2, 3, 4, 5, 6, 7 Article 39 of Decree No. 71/2013/ND-CP and guides as follows:

a) Fund for development investment shall be used to add charter capital of enterprise. If enterprises have equity capital more than charter capital approved by competent authorities, the Ministry of Finance shall have plan to report to the Prime Minister for moving fund for development investment of enterprises to fund of support for enterprise arrangement and development as prescribed at Clause 4, Article 38 of Decree No. 71/2013/ND-CP

- The moving of fund for development investment of enterprises shall only be determined after enterprises have used fund to add sufficient charter capital as approved by competent authorities on 31/12 of year of financial statements.

- Within 05 days after issuing decision on moving of the Prime Minister, enterprises shall remit in fund of support for enterprise arrangement and development and make accounting to reduce fund for development investment respectively with the amounts remitted in fund of support for enterprise arrangement and development. If an enterprise delays remittance or fails to remit, apart from assessment on extent of failing to finish tasks of managers of such enterprise, such enterprise must pay interest of fine due to delay, and enterprise will be applied coercive measures under regulation on management and use of fund of support for enterprise arrangement and development promulgated together with Decision No. 21/2012/QD-TTg dated 10/5/2012 of the Prime Minister.

b) For use of fund of commendation, fund of welfare, and fund of reward for managers of enterprises, enterprises must elaborate regulations on management and use of funds as prescribed by law, ensure democracy, transparency with participation of the Executive Board of Trade Unions of enterprises and publicize regulations in enterprises before implementation.

- The fund of commendation of an enterprise is used to reward according to content and for objects specified at clause 3 Article 39 of Decree No. 71/2013/ND-CP In which:

+ Objects of fund of commendation are all employees of enterprise including General Director or Director, Deputy General Director or Deputy Director, and chief accountant who work under labor contracts.

+ Fund of commendation of an enterprise is not used to reward for managers of enterprises.

- The fund of welfare is used to pay for contents involving welfare and objects specified at clause 3 Article 39 of Decree No. 71/2013/ND-CP including managers of enterprise.

- Fund of reward for managers of enterprise:

+ Members' Council or president of company shall, base on fund of reward for managers of enterprise which have been set up, to determine amounts payable to owner and the Ministry of Finance (case where enterprise has controllers appointed by the Ministry of Finance) to reward for controllers (full time and part time) under regulations.

+ The amounts used to make fund of reward for managers of enterprise (after deducting amounts used to reward controllers under provision mentioned above), shall be used to reward for other managers of enterprise.

+ The payment to reward from funds for managers of enterprise shall comply with the Government’s Decree No. 71/2013/ND-CP dated 14/5/2013 and Circular No. Decree No. 19/2013/TT-BLDTBXH dated 09/09/2013 of the Ministry of Labor - Invalids and Social Affairs.

2. Handling of surplus of fund for financial provision and profit divided according to equity capital:

When making financial statements in 2013, all surplus of fund for financial provision on 31/12/2013 and surplus of profit divided according to equity capital on 31/12/2012 (if any), enterprises may carry forward in fund for development investment of enterprise to use for adding the lacked charter capital already been approved by competent authorities under regulations.

Enterprise shall elaborate the long-term and annual financial plans in accordance with Article 40 of Decree No. 71/2013/ND-CP Criteria and forms to make annual financial plan shall comply with guide of the Ministry of Finance.

1. For enterprises which are established under decisions of the Prime Minister and the Ministries managing sectors:

a) Base on the production and business plan already been approved by Members' Council or president of company, enterprises shall assess situation of production and business of report year and make financial plan of next year and send it to the Ministry managing sector and the Ministry of Finance before 31/7 every year.

b) The Ministry managing sector shall assume the prime responsibility for, and coordinate with the Ministry of Finance in reviewing financial plan made by enterprise and give out formal opinion in writing for enterprise to complete its financial plan. The completed financial plan under decision of Members' Council or president of company shall be basis for the Ministry managing sector and the Ministry of Finance to supervise, assess production and business activities of enterprise.

2. For enterprises established under decisions of the provincial People's Committees:

a) Base on the production and business plan already been approved by Members' Council or president of company, enterprise shall assess situation of production and business of report year and make financial plan of next year and send it to the Service of Finance before 31/7 every year.

b) The provincial Services of Finance shall review financial plan made by enterprise and report to the provincial People’s Committee to give out formal opinion in writing for enterprise to complete its financial plan. The completed financial plan under decision of Members' Council or president of company shall be basis for Service of Finance to assist the provincial People’s Committee in supervising, assessing production and business activities of enterprise.

Enterprises must perform the regime of accounting and statistics as prescribed by law, sufficiently record the initial vouchers, update accounting books, reflect fully, timely, honestly, exactly, objectively the financial activities; perform the audit of annual financial statements as prescribed by law.

Enterprises make financial statements and other reports in accordance with Article 41 of Decree No. 71/2013/ND-CP In which:

1. End of financial year, enterprises must make and send on time financial statements, reports on supervision, reports on statistics to agencies under current regulations. To perform financial disclosure under regulations.

2. The annual financial statements of enterprises shall be made according to forms specified at decision No, 15/2006/QD-BTC dated 20/3/20006 of Minister of Finance, the amending and supplementing and replacing documents, if any, and adding form No. 02b-DN “Report on implementation of obligations with state budget year ……” according to Annex No. 01 promulgated together with this Circular.

3. In addition to making and sending of annual financial statements, when finish reports on supervision and assessment, classification of enterprises promulgated together with Circular No. 158/2013/TT-BTC dated November 13, 2013 of the Ministry of Finance, enterprises must send owner and the Ministry of Finance (for central enterprise), Service of Finance (for local enterprises).

4. Apart from periodical financial statements under regulations stated above, enterprises shall also make and send irregular report at the request of owners and state management agencies. For enterprises having domestic and foreign loans which are guaranteed by Government, they shall send reports under current law on management of debts guaranteed by Government.

1. This Circular takes effect on February 15, 2014 and applied to financial year from 2013.

2. This Circular replaces Circular No. 117/2010/TT-BTC dated 5/8/2010 of the Ministry of Finance, guiding the financial regime of State-owned one-member limited liability companies and Circular No. 138/2010/TT-BTC dated 17/9/2010 of the Ministry of Finance guiding the regime on profit distribution for State-owned one-member limited liability companies. The guides on capital investment, management of state capital invested in enterprises and financial management for enterprises which State holds 100% of charter capital promulgated by Ministries, sectors, agencies and units in contrary to Decree No. 71/2013/ND-CP and this Circular also are annulled.

3. In the course of implementation, any arising problems should be reported to the Ministry of Finance for study and settlement.