| THE GOVERNMENT --------- | SOCIALIST REPUBLIC OF VIET NAM Independence - Freedom - Happiness ---------- |
| No. 109/2007/ND-CP | Hanoi, June 26, 2007 |
DECREE
ON CONVERSION OF ENTERPRISES WITH 100% STATE OWNED CAPITAL INTO SHAREHOLDING COMPANIES
THE GOVERNMENT
Pursuant to the Law on Organization of the Government dated 25 December 2001; Pursuant to the Law on State Owned Enterprises dated 26 November 2003; Pursuant to the Law on Enterprises dated 12 June 1999;
Pursuant to the Law on Securities dated 29 June 2006; On the proposal of the Minister of Finance;
DECREES:
Chapter I
GENERAL PROVISIONS
Article 1. The objectives of and requirements for converting enterprises with 100% State owned capital into shareholding companies (hereinafter referred to as equitization) are:
1. To convert enterprises in which it is unnecessary for the State to continue to hold 100% capital into enterprises with multiple owners; and to mobilize capital from both domestic and foreign investors to increase financial capacity and to renovate both technology and management methods in order to raise the efficiency and competitiveness of the economy.
2. To ensure harmony between the interests of the State, the enterprise, investors and employees of the enterprise.
3. To ensure public notification and transparency based on market principles; to overcome the situation of equitization taking place in secret within enterprises; and to ensure that equitization runs parallel with development of the capital market and the securities market.
Article 2. Entities eligible for equitization:
1. Independent State owned companies of ministries, industries and localities.
2. Parent companies of economic groups (hereinafter abbreviated as groups), State owned corporations (including State commercial banks).
3. Parent companies in parent subsidiary company groups1.
4. Independent cost accounting member companies of corporations for which the State made the decision on investment and establishment.
5. Dependent accounting affiliates of independent State owned companies, groups, State owned corporations, parent companies and [of] independent cost accounting member companies of corporations.
6. Limited liability companies in which the State holds 100% charter capital.
Article 3. Conditions for equitization
1. An enterprise stipulated in article 2 of this Decree may carry out equitization if it satisfies both the following conditions:
(a) It is not an enterprise in the category in which [it is necessary for] the State holds 100% charter capital. The Prime Minister of the Government shall issue a decision in each period on the list of enterprises in which it is necessary for the State to hold 100% charter capital;
(b) It still has State owned capital after finances have been dealt with and the enterprise has been re-valued.
2. A dependent accounting affiliate must also satisfy the following conditions in addition to the conditions specified in clause 1 of this article:
(a) It satisfies all the conditions for maintaining an independent cost accounting system;
(b) It's equitization will not cause difficulties for or adversely affect the production and business efficiency of the enterprise or of the remaining part of the enterprise;
(c) It is identified in the plan for overall restructuring of enterprises approved by the Prime Minister.
3. If the actual value of the enterprise is less than debts payable after finances have been dealt with and the enterprise has been re-valued pursuant to the provisions in Chapters II and III of this Decree, then it shall conduct the form of sale, dissolution or bankruptcy.
Article 4. Forms of equitization:
1. Maintaining the current State owned capital in the enterprise and an additional issue of shares in order to increase charter capital.
2. Selling part of the current State owned capital in the enterprise, or combining the sale of part of the current State owned capital in the enterprise with an additional issue of shares in order to increase charter capital.
3. Selling the whole of the current State owned capital in the enterprise, or combining the sale of the whole of the current State owned capital in the enterprise with an additional issue of shares in order to increase charter capital.
Article 5. Methods of initial share sale
1. The initial share sale shall be conducted by the method of a public auction, underwriting the issue, [or] direct agreement in accordance with the provisions in Chapter IV of this Decree.
2. The body making the equitization decision shall fix the appropriate method of share sale depending on the entities eligible to purchase shares and the conditions for purchasing.
3. The Ministry of Finance shall issue2 detailed guidelines on the methods of initial share sale as stipulated in this Decree.
Article 6. Entities eligible to purchase shares and conditions for purchasing:
1.Domestic investors:
(a)Domestic investors means Vietnamese individuals, economic institutions, and social organizations established and operating pursuant to the law of Vietnam;
(b) Domestic investors shall have the right to purchase an unlimited number of shares in an equitized enterprise, except in the case stipulated in clause 4 of this article.
2. Foreign investors:
(a) Foreign investors means foreign organizations and individuals who spend capital to conduct investment activities in Vietnam;
(b) Foreign investors shall be permitted to purchase shares in an equitized enterprise in accordance with the provisions of this Decree and other relevant laws;
(c) A foreign investor wishing to purchase shares must open a deposit account at an organization providing payment services which is currently operating in the territory of Vietnam, and must comply with the law of Vietnam. All activities being the purchase and sale of shares, the receipt and use of dividends, and other receipts and expenditures from investment in the purchase of shares must be conducted via such account.
3. Strategic investors:
(a) Strategic investors means domestic investors and foreign investors with financial and enterprise management capability; [who] transfer new technology, supply raw materials, [and/or] develop the product consumption market; [and whose] long-term interests are closely connected with the enterprise;
(b) The Steering Committee for Equitization shall submit to the person making the equitization decision [a plan on] the initial share sale to strategic investors and the criteria for selecting strategic investors;
(c) Strategic investors shall be entitled to purchase shares at a price not less than the average successful auction price. If it is absolutely necessary for a group or State owned corporation (including a State commercial bank) to select a strategic investor, then the body making the equitization decision shall report to the Prime Minister of the Government to hold separate tendering between strategic investors;
(d) Strategic investors shall not be permitted to transfer purchased shares for a minimum period of three years from the date on which a business registration certificate is issued to the shareholding company. If in special circumstances these shares are required to be transferred before expiration of the above period, there must be approval from the general meeting of shareholders.
4. Where an enterprise carries out equitization simultaneously with immediate listing on the Stock Exchange/Securities Trading Centre, then the body authorized to approve the equitization plan shall fix the maximum or minimum number of subscribed shares applicable to the public sale in the plan for the initial share issue so that the enterprise after equitization will satisfy all listing conditions. The maximum or minimum number of subscribed shares stipulated in the plan for the initial share issue shall apply to investors in all economic sectors without discrimination.
5. Members of the Steering Committee for Equitization (except for a member being a representative of an enterprise), intermediary financial institutions, and individuals providing consultancy or [conducting the] valuation or auction for sale of shares of the equitized enterprise shall not be permitted to participate in the auction for purchase of shares initially issued by such enterprise.
Article 7. Currency for payment of purchase of shares
Both domestic investors and foreign investors must purchase shares in an enterprise in Vietnamese dong.
Article 8. Equitization expenses
The expenses of conducting equitization shall be deducted from State owned capital or from the proceeds earned from equitization of the enterprise. The Ministry of Finance shall provide guidelines on the contents and level of equitization expenses.
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