Circular No. 25-TC/TCDN dated May 15, 1997 of the Ministry of Finance guiding the order, procedures and principles for financial settlement when state enterprises are dissolved
THE MINISTRY OF FINANCE
SOCIALIST REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
Hanoi, May 15, 1997
GUIDING THE ORDER, PROCEDURES AND PRINCIPLES FOR FINANCIAL SETTLEMENT WHEN STATE ENTERPRISES ARE DISSOLVED
In furtherance of Article 15 of Decree No.50-CP of August 28, 1996 of the Government on the establishment, reorganization, dissolution and bankruptcy of State enterprises, the Ministry of Finance hereby provides the following guidances on the order, procedures and principles for financial settlement when State enterprises are dissolved:
I. SUBJECTS OF APPLICATION:
This Circular shall apply to State enterprises which are declared dissolved, including: State corporations, member enterprises of State corporations with independent cost-accounting, independent State enterprises (hereinafter referred to as the enterprises) as defined in Articles 1 and 2 of the Law on State Enterprises.
II. PROCEDURES FOR THE DISSOLUTION OF AN ENTERPRISE:
1. Cases where an enterprise is considered for the dissolution declaration:
An enterprise shall be considered for its dissolution in the following cases:
1.1. The continued existence of the enterprise is no longer necessary under the overall planning of the concerned ministry, branch, locality or corporation for the rearrangement and reorganization of enterprises.
>> See also: Counselling on enterprises dissolution
1.2. The business duration, which is defined in the establishment decision and the business registration certificate, has expired but the enterprise does not apply for the extension thereof or is not allowed to extend its business.
1.3. Having suffered from losses for two consecutive years or more with an amount of cumulative losses equal to three-fourths of its actual capital, but not to the extent that the enterprise loses its capability to repay due debts, and though financial measures and various forms of reorganization have already been applied, the loss situation has not been overcome.
1.4. The enterprise has been unable to fulfill the State-assigned tasks for two years or more even after necessary financial and organizational measures have been applied.
1.5. Even after the financial measures have been applied, the statutory capital of the enterprise is still lower than the prescribed capital required by its business line.
2. Procedures for the dissolution of enterprises:
2.1. When an enterprise falls into one of the five above-said cases, the person who proposed its establishment shall sent a written request to the person who has decided its establishment to issue a decision on its dissolution. If any State functional agency, while performing its duties, discovers that an enterprise is getting into the state of inevitable dissolution, it can request the person who proposed the establishment of the enterprise to request the dissolution of the enterprise or request the person who has decided the establishment of the enterprise to issue a decision on its dissolution. In cases where the enterprise was established under the empowerment of the Prime Minister, the decision on its dissolution must be also empowered by the Prime Minister. The written request for the dissolution of the enterprise must clearly state the reason(s) for the dissolution and be enclosed with a financial statement for the latest two years of the enterprise proposed to be dissolved.
2.2. Within 15 days after receiving the written request for the dissolution of the enterprise, the person competent or authorized to issue a dissolution decision shall have to issue such decision. If the grounds are deemed insufficient to decide the dissolution of the enterprise, the decision maker shall have to notify in writing the person who has requested the dissolution of the enterprise of the reasons for not deciding the dissolution.
2.3. The decision on the dissolution of an enterprise must include the following contents:
- The name and address of the enterprise to be dissolved;
- The date of declaration to dissolve the enterprise;
- The reason(s) for the dissolution of the enterprise;
- The dissolution plan.
2.4. The decision on the dissolution of the enterprise shall be sent to the following agencies:
- The person who requests the dissolution of the enterprise;
- The enterprise to be dissolved;
- The Ministry of Planning and Investment
- The Ministry that manages the economic-technical branch.
Copies of the dissolution decision shall be sent to the following agencies:
- The agency that manages the State capital and assets at enterprises in the locality where the enterprises head office is located;
- The tax agency that directly manages the collection of tax from the enterprise;
- The Statistics Department of the province or city where the enterprises head office is located;
- The Planning and Investment Service of the province or city where the enterprise has made its business registration;
- The Peoples Committee of the province or city where the enterprises head office is located if the dissolved enterprise has been established at the proposal of a Ministry, a central branch or a State corporation.
3. The enterprise dissolution council:
3.1. The person who has decided the dissolution of an enterprise shall set up a dissolution council composed of the following members:
- A representative of the agency that has decided the establishment of the enterprise (for enterprises established before the issue of Decree No.50-CP) or a representative of the agency that has proposed the establishment of the enterprise (for enterprises established under Decree No.50-CP) who shall act as the Chairman of the council.
- A representative of the Planning and Investment agency
- A representative of the Department for the Management of the State Capital and Assets at Enterprises in the locality where the enterprises head office is located.
- A representative of the State Banks office in the province or city where the enterprises head office is located.
- A representative of the Trade Union organization in the dissolved enterprise.
- A representative of the dissolved enterprise.
3.2. The dissolution council shall set up a group of assisting experts who are officials from the agencies having representatives in the dissolution council. The Chairman of the dissolution council shall decide the list of assisting experts recommended by the agencies having representatives in the council.
4. The duties of the dissolution council:
4.1. To appraise the dossier proposing the dissolution of the enterprise then submit it to the person competent to decide the dissolution of the enterprise.
4.2. To receive and manage books, documents and assets handed over by the dissolved enterprise, make comparisons to ensure the agreement between figures in the books and those in reality. In case of a disparity, a report must be made, clearly stating the reason(s) therefore as well as the responsibilities of collectives or individuals for each specific case.
4.3. To draw up a list of creditors and the amount of debt owed to each of them according to the vouchers sent from the creditors, classifying the debts into secured debts, partially secured debts and unsecured debts.
4.4. To recover assets of the dissolved enterprise, including amounts which must be collected, assets which are being leased, lent or put under others bailment, and those defined in Point 7, Section III below.
4.5. To return assets which the dissolved enterprise has rented, borrowed or bailed from other enterprises, organizations and individuals outside the enterprise, provided that the owners of such assets produce sufficient legal evidence of their ownership over such assets
4.6. To settle assets of the dissolved enterprise according to the approved plan.
In cases where assets are sold by auction, a valuation team must be set up to determine their reserve price before the auction is held.
4.7. To repay due debts to creditors by proceeds from the assets of the dissolved enterprise.
4.8. To make final settlement of account of costs for the dissolution of the enterprise.
III. PRINCIPLES FOR RESOLVING FINANCIAL MATTERS WHEN AN ENTERPRISE IS DISSOLVED
1. The assets of a dissolved enterprise are assets under its lawful management and use, including: fixed assets, current assets, incomplete construction projects, capital contributed to joint ventures or associations, amounts which must be collected.
The State reserve assets assigned to the enterprise, and assets leased and borrowed by the enterprise or entrusted under its bailment shall not be included in the assets of the dissolved enterprise.
2. As from the date of declaring the dissolution of the enterprise, all undue debts shall be regarded as due ones, and the interests thereon shall no longer be accounted.
3. All the dissolved enterprises assets transferred to units and individuals must be paid at the market price at the time of transfer.
4. Secured creditors shall receive all secured assets according to the price determined by the valuation team. If a creditor refuses to receive, such assets shall be put on an auction according to current regulations. The proceeds from the auction of secured assets shall be used for paying the creditors of secured debts; the surplus therefore shall be included into the assets of the dissolved enterprise while the deficit shall be considered as unsecured debts and settled like other unsecured debts.
5. Debts paid by the guarantor of the debtor enterprise shall be considered unsecured debts and be settled like other unsecured debts.
6. All proceeds from the dissolved enterprises assets shall be handled in the following order:
6.1. To pay the dissolution expenses (costs for assets recovery, assignment or sale of assets, allowances for members of the dissolution Council and its assisting experts)
6.2. To pay the deferred wages, social insurance, severance allowances and other prescribed interests for laborers at the dissolved enterprise under labor contracts or collective labor agreements.
6.3. To pay tax arrears.
6.4. The remainder after minusing the payments mentioned in Clauses 6.1, 6.2 and 6.3 shall be paid to creditors of unsecured debts. If the remaining amount is sufficient for the payment to the creditors, they shall receive in full their credits. If not, the unsecured debts shall be paid only according to the proportion between the total remainder and the total amount of unsecured debts owed by the enterprise.
- The proceeds from the assets of the dissolved enterprise: 1,600 million
- The expenses for the dissolution of the enterprise: 100 million
- The deferred wages for the enterprises workers and employees: 400 million
- The tax arrears: 300 million
- The unsecured debts: 1,000 million
- The remainder used for payment of unsecured debts is:
1,600 - (100 + 400 + 300) = 800 million
- The proportion between the total remainder and unsecured debts is:
800 : 1,000 x 100 = 80%
Creditor A who has an unsecured debt of 100 million shall be paid as follows:
100 million x 80% = 80 million
6.5. The amount left after minusing the payments mentioned in Clauses 6.1, 6.2, 6.3 and 6.4 shall be remitted by the dissolution council to the State budget.
7. Within 6 months before the date of declaring the dissolution of an enterprise, the following acts committed by the enterprise shall be considered invalid:
- Dispersing the enterprises assets in any forms;
- Paying undue debts;
- Renouncing the right to claim receivable amounts;
- Converting unsecured debts into secured debts;
- Selling assets at a price lower than their actual value.
The dissolution council shall be entitled to recover the above-said assets and include them into the enterprises assets.
When effecting the recovery of the above-said assets the dissolution council shall produce the decision of its chairman and clearly explain the reason for recovering the assets to the concerned parties. All disputes over the recovery of assets of dissolved enterprises shall be settled by the Court.
IV. ORDER OF DISSOLVING ENTERPRISES
1. When a dissolution decision is issued, the dissolved enterprise shall have to publish an announcement on its dissolution on central and local daily newspapers for three consecutive issues.
Such announcement shall include the following contents:
- The name and address of the dissolved enterprise;
- The serial number, date and the level of signing the dissolution decision;
- The date on which the enterprise terminates its operations (date of declaring the dissolution);
- Request to claim debts by creditors.
2. From the date of declaring its dissolution, the dissolved enterprise shall have to:
2.1. Terminate all business, purchase and sale activities, the payment of all due debts, the lease, lending and acceptance of assets entrusted under its bailment;
2.2. Close the account book, take stock of its assets, match all credits and debits (including receivable and payable amounts). Make a financial statement as of the time of declaring the dissolution. Within 30 days after the date of declaring the dissolution, the dissolved enterprise must complete the financial statement and send it to the dissolution council;
2.3. Draw up a list of creditors and debts payable which are classified into secured, partially secured and unsecured debts, a list of debtors and amounts receivable which are classified into recoverable and irrecoverable debts.
2.4. Recover all leased and lent assets and assets put under the others bailment and receivable debts;
2.5. Hand over to the dissolution council the following:
- Accounting books and other records and documents of the dissolved enterprise;
- All assets under the management and use by the enterprise (including assets not yet recovered), rented and borrowed assets, assets entrusted under the enterprises bailment.
- The list of creditors and the list of debtors of the enterprise.
The hand-over of assets must be carried out immediately after the enterprise completes the asset inventory. The accounting books and lists of creditors and debtors must be handed over immediately after the financial statement is completed.
3. Within 60 days from the date the first newspaper announcement on the enterprises dissolution is published, the creditors shall have to send to the dissolution council their debt claims enclosed with documents evidencing such debts. The debts must be clearly indicated as secured, partially secured or unsecured.
Within 15 days from the deadline for sending debt claims, the dissolution council shall have to make a list of creditors, compare it to the list of creditors handed over by the enterprise and post it at the head office of the dissolved enterprise.
Within 10 days from the posting, the dissolution council shall finalize the list of creditors to serve as the basis for distributing the assets of the dissolved enterprise.
4. Within 30 days from the date the first newspaper announcement on the dissolution of the enterprise is published, the creditors whose assets are leased or borrowed by the dissolved enterprise or entrusted under its bailment shall have to present documents evidencing their lawful ownership or management (for State enterprises) so as to receive back their assets. For an asset leased by the dissolved enterprise which has paid the rent in full but the lease duration has not yet expired the lessor must reimburse the rent for the remainder of such duration so as to receive back his/her asset.
5. The dissolution council shall recover the assets of the enterprise declared to be dissolved. When so doing, it shall have to produce the decision to declare the dissolution of the enterprise. If discovering that the assets of the dissolved enterprise are misappropriated and not yet included in the list of assets handed over by the dissolved enterprise, the chairman of the dissolution council shall issue a decision to recover such assets and organize the recovery.
The dissolution council may request the concerned State agencies to assist in the recovery of assets.
6. The dissolution council shall set up a valuation team to determine the value of all assets of the dissolved enterprise, including pledged and mortgaged assets to serve as the basis for the auction thereof. The valuation team shall consist of:
- The chairman of the dissolution council as its head.
- A representative of the Finance and Pricing Service of the province or city where the enterprise has its head office.
- A representative of the Department for Management of the State Capital and Assets at Enterprises of the province or city where the dissolved enterprise has its head office.
- Representatives of a number of concerned agencies as proposed by the chairman of the dissolution council.
The chairman of the dissolution council shall invite those creditors having secured debts to join the valuation team to determine the value of assets used as securities for such creditors.
The valuation team shall make decisions by majority of votes. When the numbers of votes for and against are equal the vote of the head of the valuation team shall be the decisive .
7. Assets of the dissolved enterprise shall be auctioned openly according to the Regulation on auctioning of assets issued together with Decree No. 86-CP of December 26, 1996 of the Government. If a professional auctioning organization is not available, the dissolution council shall organize the auction according to the Regulation on auctioning of assets The sale of assets which are banned or restricted from circulation shall comply with relevant regulations of the State.
The sale of assets associated with the land-use right shall comply with the Land Law.
8. Not later than 5 days from the date a dissolution decision is issued, the chairman of the dissolution council shall have to open an account at the State Treasury in the locality where the enterprise has its head office for depositing proceeds from the sale of the dissolved enterprises assets. The chairman of the dissolution council shall be the holder of this account.
All the proceeds from the sale of the dissolved enterprises assets shall be deposited into the account of the dissolution council immediately on the day they are collected. If the proceeds are collected at the end of a working day, they shall have to be deposited immediately on the following working day. Any person who delays in depositing such proceeds shall pay compensation at the interest rate for non-term savings announced by the bank and be administratively disciplined depending on the seriousness of his/her fault.
9. The distribution of the dissolved enterprises assets shall have to follow the order defined in Point 6, Section III above.
The payment may be made in several installments on the basis of equality and rationality according to the proportion between the actual value of recovered assets (after minusing all priority payments) and the total unsecured debts. Each creditor shall receive back their debts according to the same proportion. If the debt is too small for which the payment in many installments is deemed unnecessary, the chairman of the dissolution council may decide to pay it in one or two installments but shall have to ensure the equality and take responsibility for his/her decision.
10. For a creditor who has an account at the bank or State Treasury, the chairman of the dissolution council shall fill in the procedures for depositing the debt payment into the formers account. If the creditor does not have an account, the chairman of the dissolution council shall ask the creditor to directly receive the debt payments or mail it to the creditor. The mailing charge shall be deducted in the debt payment.
11. Not later than 5 days after all priority payments are deducted and all debts are paid, any remainder of the proceeds from the sale of the dissolved enterprises assets shall be remitted into the State budget.
12. Within seven days after completing the payment of debts to the creditors, the dissolution council shall have to make a financial report on the dissolution of the enterprise. The report shall be sent to the agency which decides the dissolution, the agency managing the State capital and assets at enterprises in the locality where the dissolved enterprise has its head office and its superior managing agency (if any).
The agency managing the State capital and assets at enterprises shall examine the financial report of the dissolution council and, if there is no problem therein, issues a decision to accept the financial statement. In case of any doubt, it shall request the explanation by the dissolution council before issuing such decision.
13. If the dissolution council and the team of assisting experts commit the following violations, they shall be administratively disciplined or examined for penal liability, depending on the seriousness of the violation, if any damage is caused to the assets, compensation must be made:
- Making inventory of assets not faithful to the reality, or not in accordance with the procedures prescribed by law;
- Making a false or groundless list of creditors and debts;
- Setting up the valuation team or organizing the auction at variance with the provisions of law;
- Distributing the dissolved enterprises assets not in accordance with the approved plan and with the order of priority, making unfair payments of debts to creditors;
- Illegally using assets of the dissolved enterprise;
- Failing to apply protection measures thereby causing losses of the dissolved enterprises assets or committing acts of causing losses of the dissolved enterprises assets;
- Making false financial statements upon the completion of the enterprises dissolution;
- Abandoning their duties or performing their duties improperly, thus obstructing the operation of the dissolution council or causing losses of the dissolved enterprises assets;
14. The director and the chief accountant of the dissolved enterprise shall not be moved to other jobs before the process of dissolving the enterprise is finished.
V. COST OF THE ENTERPRISE DISSOLUTION
The costs of the dissolution of an enterprise shall be accounted into the value of the assets of the dissolved enterprise prior to payment of other costs, including:
1. Expenses on the inventory, transport, recovery, evaluation, maintenance, and auction of assets and other expenses in relation to the execution of the decision to dissolve the enterprise. Such expenses shall be settled according to the actual spendings approved by the chairman of the dissolution council.
2. Daily remunerations for members of the dissolution council, the valuation team, team of experts assisting the dissolution council and people involved in the recovery of the dissolved enterprises assets, which shall be equal to daily stay allowances under the State regime on travel allowances.
VI. IMPLEMENTATION PROVISIONS:
This Circular takes effect 15 days after the date of signing for its issue and replaces Circular No.54-TC/CN of January 13, 1990 of the Ministry of Finance guiding the financial settlement when State-run enterprises are dissolved. All provisions which are contrary to this Circular shall cease to be effective.
This Circular shall not apply to cases of merger, division and splitting of enterprises or transformation of enterprises into non-business establishments by decision of the competent levels.
Any problem or difficulty arising in the course of implementation shall be reported to the Ministry of Finance for consideration and solution.
FOR THE MINISTER OF FINANCE
Pham Van Trong