Socialist Republic of Vietnam

GOVERNMENT

No.: 73-2000-ND-CP Hanoi, 6 December 2000


DECREE PROMULGATING REGULATIONS ON MANAGEMENT OF STATE’S SHARE OF EQUITY IN OTHER ENTERPRISES


GOVERNMENT

Pursuant to the Law on Organization of the Government dated 30 September 1992;

Pursuant to the Law on State Owned Enterprises dated 20 April 1995;

On the proposal of the Minister of Finance;

Decrees:

Article 1

To issue with this Decree the “Regulations on Management of State share of equity in other enterprises”.

Article 2

This Decree shall be of full force and effect after fifteen (15) days from the date of signing. The provisions on management of State share of equity in other enterprises, which are inconsistent with these Regulations shall be hereby repealed.

Article 3

Ministers, heads of ministerial equivalent bodies, heads of Government agencies, chairmen of people’s committees of cities and provinces under central authority, boards of management, general directors and directors of State owned enterprises shall be responsible to implement this Decree.

On Behalf of the Government
For the Prime Minister
Deputy Minister
NGUYEN TAN DUNG

GOVERNMENT SOCIALIST REPUBLIC OF VIETNAM
Independence – Freedom – Happiness


REGULATIONS
ON MANAGEMENT OF STATE SHARE OF EQUITY IN OTHER ENTERPRISES
(issued with Decree 73-2000-ND-CP dated 6 December 2000 of the Government )


I. General Provisions

Article 1

The State shall exercise its management of its share of equity in other enterprises through a person representing the State share of equity and a person directly managing State share of equity in other enterprises.

Article 2

The terms used in these Regulations shall be construed as follows:

1. “Other enterprises” means enterprises operating under the Law on Enterprises; the Law on Foreign Investment in Vietnam and the Law on Co-operatives.

2. “The State share of equity in other enterprises” means the State owned capital amount funded by the budget or invested by a State owned enterprise in other enterprises; including State share of equity in a State owned enterprise which has been equitized.

3. “Representative of State share of equity in other enterprises” (hereinafter abbreviated as the representative) means an organization or individual stipulated in Article 6 of these Regulations who shall represent the State in exercising the ownership right over the State share of equity in other enterprises.

4. “The person directly managing the State share of equity in other enterprises” (hereinafter referred to as the direct manager) is a person appointed by the representative to exercise rights and perform obligations of a person making capital contributions or a State shareholder. The direct manager may work on a full-time or part-time basis. In the case where there are a number of direct managers in another enterprise, the representative shall appoint a person in charge of co-ordinating the direct managers in exercising rights and performing assigned obligations.

Article 3 Equity of the State in other enterprises comprises:

1. Capital amount owned by the State in State owned enterprises, including money, value of land use right or land rental, value of State owned assets which is invested in other enterprises by State owned enterprises, or capital contributions made to a joint venture with a domestic or foreign organization or individual.

2. Capital contributions sourced from the State Budget to other enterprises.

3. Value of equity of the State in a State owned enterprise which has been equitized already, including the value of shares granted by the State to employees of the enterprise for the purpose of entitlement to dividends upon the equitization of the State owned enterprise for the period before Decree 44-1998-ND-CP of the Government dated 29 June 1998 came into effect.

4. Profits derived from investment by the State in other enterprises and used for re-investment in such enterprises.

Article 4

In the case where the State does not hold controlling shares of the total shares of another enterprise, it may not be necessary to appoint a direct manager. However, the representative shall organize his, her or its work to ensure the monitoring of the capital amount already invested by the State and its distributed profits derived from the invested portion of capital in the enterprise by the State, and shall assign a person to exercise the rights of a shareholder as set out in the charter of the enterprise.

Article 5

1. Other enterprises with State invested capital shall operate under relevant laws and the charter of an enterprise; and shall comply with the regime for financial reporting and statistical reporting as provided for by law. When submitting reports to competent State bodies, an enterprise shall at the same time send copies of the reports to the representative of the State share of equity.

2. Authorized State bodies shall conduct inspection and supervision in accordance with their function of State administration with respect to activities of enterprises without intervening in business activities of enterprises.


II. RIGHTS AND OBLIGATIONS OF A REPRESENTATIVE OF STATE SHARE OF EQUITY IN OTHER ENTERPRISES

Article 6

A representative of the State share of equity in another enterprise shall be determined as follows:

1. The Ministry of Finance in the following cases:

(a) The State share of equity in other enterprises which is sourced from the Central budget.

(b) The State share of equity in an enterprise which was equitized from an independent State owned enterprise where the entire enterprise has been equitized by the ministry or branch which made the desicion on establishment.

(c) The State share of equity in a joint venture enterprise established as the result of the contribution of the whole capital to the joint venture by an independent State owned enterprise which was established under the decision of a ministry or branch and which no longer has legal status as a State owned enterprise.

2. People’s committees of cities and provinces under central authority with respect to the following cases:

(a) The State share of equity in other enterprises which is sourced from local budgetary contributions.

(b) The State share of equity in an enterprise developing from an independent equitized State owned enterprise, the entire equitization of which is carried out by the chairman of the provincial or municipal people’s committee making a decision on its establishment.

(c) The State share of equity in a joint venture enterprise established as the result of the contribution of the whole capital to the joint venture by an independent State owned enterprise which was established under the decision of the chairman of the provincial or municipal people’s committee and which no longer has legal status as a State owned enterprise.

3. Boards of management (with respect to State owned enterprises having boards of management) or managers of enterprises (with respect to independent State owned enterprises not having boards of management) with respect to the following cases:

(a) The State share of equity in other enterprises resulting from partial equitization of an independent State owned enterprise.

(b) The State share of equity in other enterprises resulting from partial or wholly equitization of a subsidiary enterprise of a corporation.

(c) An enterprise invests part of the State share of equity in another enterprise or makes [capital] contributions to a joint venture with domestic and foreign individuals and organizations.

With respect to State owned corporations, the board of management may authorize the manager of a member enterprise to represent the State share of equity in other enterprises in the case where part of the member enterprise is equitized or part of the equity of the member enterprise is contributed to a joint venture. The authorization must be provided for in the charter of the corporation.


Article 7 A representative shall be entitled:

1. To appoint, dismiss, remunerate, and discipline the direct manager.
In the case where the representative is the Ministry of Finance as stipulated in clause 1 of article 6 of these Regulations, the head of the relevant ministry or branch shall make decisions after reaching agreement with the Ministry of Finance.

2. To request the direct manager to make periodical or extraordinary reports on business status, financial management, management of capital and assets, and business results of other enterprises with State-invested capital. To assign tasks and request the direct manager in charge of the controlling shares of the State in a shareholding company to make reports on the utilization of State-owned controlling shares for the purpose of working out strategies, objectives, and long-term and annual plans of these enterprises.

3. To inspect and supervise activities undertaken by the direct manager and to identify in a timely manner shortcomings and weaknesses for prevention and correction.

4. To make decisions, or make submissions to the authorized person to decide, on the investment to increase capital or recovery of State owned capital in other enterprises in accordance with the law and the charter of the enterprise.

5. In the case where a number of State owned enterprises make capital contributions to another enterprise from funds of the State budget, representatives [of such enterprises] shall appoint one of them to take the main role and to co-ordinate among the representatives in order to protect the rights and benefits of the State in other enterprise(s).

6. To exercise other rights in accordance with the provisions of the law.

Article 8 A representative shall be obliged:

1. To exercise rights of the controlling shares of the State in order to make orientations for activities of other enterprises with an aim of achieving the objectives stipulated by the State.

2. To make reports on a periodical basis or at the request of the Ministry of Finance regarding the status of business activities, financial results, financial management, management of capital and assets of other enterprises, recalling of shares the State granted employees for entitlement to dividends, recovery of loans borrowed by employees from the State to purchase shares, re-collection of amounts owed by the enterprise’s poor employees purchasing shares on credit.

With respect to representatives stipulated for in clause 3 of article 6, reports shall also be submitted to the body deciding on the establishment of the State owned enterprise making capital investment in other enterprises.

Reporting regime and criteria shall be in accordance with regulations provided by the Ministry of Finance.

3. To report to the Ministry of Finance and the body deciding on the establishment of enterprises on measures to recover the State share of equity in other enterprises; the implementation of duties by the representative or the direct manager in the case of dissolution or bankruptcy of enterprises with State-invested capital.

4. To instruct the direct manager to take measures in a timely manner to protect the amount of State owned capital in the case where enterprises with State invested capital incur losses, lose capital or are subject to consideration for dissolution, or face the danger of bankruptcy.

5. To supervise the recovery of the State capital amount lent to employees to purchase shares when equitization of State owned enterprises is carried out, recalling of shares granted to an employee for entitlement to dividends when he/she dies but has no heir or when he/she voluntarily returns shares sold on credit to poor employees in State owned enterprises upon equitization in accordance with Decree 44-1998-ND-CP(in respect of enterprises conducting equitization before Decree 44-1998-ND-CP of the Government dated 29 June 1998 became enforceable).

6. To supervise the recovery of distributed profits derived from capital amount invested by the State in other enterprises.



III. RIGHTS AND OBLIGATIONS OF A DIRECT MANAGER

Article 9 A direct manager shall be entitled:

1. To stand for posts in the managing and operating apparatus of other enterprises in accordance with the charter of the enterprises.

2. To exercise rights of shareholders, capital contributors as provided for by law and in the company charter. To request other enterprises to transfer distributed profits to the address as stipulated in article 12 of these Regulations.

3. A direct manager of controlling shares shall take part in making decisions on measures of management and operation of enterprises through the utilization of rights of controlling shares in accordance with provisions of the law.

4. To request the representative to enable him/her to accomplish his/her assigned duties;

5. The direct manager participating in the executive committee of an enterprise with State invested capital shall be entitled to salary, allowances and bonuses provided by the enterprise in accordance with the regulations of the enterprise.

The direct manager working part-time without participating in the executive committee of an enterprise shall be paid by the entity for which he mainly works.

Article 10 A direct manager shall be obliged:

1. To study and propose measures to manage and operate enterprises, orientations and his working methods to the representative for approval. With respect to important matters of enterprises to be put forth for discussion by boards of management at the general meeting of shareholders such as the enterprise’s production tasks and orientations, further raising of equity, distribution of dividends among shareholders and so on, the direct manager shall obtain opinions from the representative before participating in the voting.

2. The direct manager of controlling shares of the State in other enterprises shall propose to the representative for approval, orientations, objectives, and measures to exercise rights of controlling shareholders aimed at orientating operations of the enterprise in line with State targets.

If it is discovered that an enterprise deviates from the State directions, [the direct manager] must report such discovery in a timely manner and propose his/her opinions on resolution to the representative. To study and make proposals for the representative of controlling shares in the enterprise to make decisions on the enterprise’s important matters in accordance with provisions of the law.

3. To undertake the tasks assigned by the representative, regularly analyze and assess the status of business activities and financial operations of other enterprises with State-invested capital in order to identify possibilities of making a loss or losing the enterprise’s capital in order to report them fully and in a timely manner to the representative.

4. To monitor and conduct the recovery of the State share of equity provided to employees for entitlement to dividends, lent to employees to purchase shares when the State owned enterprise is equitized (with respect to enterprises conducting equitization prior to the effective day of Decree 44-1998-ND-CP of the Government 29 June 1998), to collect amounts owed by poor employees having purchased shares on credit in a State owned enterprise equitized in accordance with Decree 44-1998-ND-CP.

5. To monitor the receipt of distributed profits sourced from the State share of equity invested in other enterprise(s).

6. On a periodical basis or at the request of the representative, to report fully and accurately on the status of business activities, financial management and management of capital and assets of other enterprise(s) with State owned capital, financial results and sharing of profits of the enterprise, recovery of the equity amount granted to employees for entitlement to dividends or the equity amount lent to employees to purchase shares.

With respect to the case stipulated in clause 1 of article 6 of these Regulations, the direct manager shall send reports to the representative and, at the same time, send one copy to the technical and economic ministry or branch.

7. To be responsible before the representative for the performance of rights and assigned duties with respect to the management of the State share of equity in other enterprises.

8. To prepare files for enterprises with State-owned capital as stipulated by the authority for financial management of enterprises.

A part-time direct manager shall fulfil the obligations stipulated in clauses 3, 4, 5, 6, 7 and 8 of this article.

Article 11 Criteria for [selection of] a direct manager

A direct manager is the person who satisfies the following criteria:

1. Being a Vietnamese citizen and permanently residing in Vietnam. In the case of appointment by the board of management or by the director of a State owned enterprise (with respect to State owned enterprises having no board of management), the direct manager must belong to such State-owned enterprise.

2. Having good virtues and being able-bodied to undertake his duties.

3. Having a good understanding of laws and a sense of complying with the law.

4. Having professional expertise on enterprise finance or the business field of other enterprise(s) with State-owned capital, having capabilities of doing business and organizing enterprise management. In respect of direct managers of the State share of equity in a joint venture with a foreign party, a sufficient command of a foreign language is required so that they can work directly with foreigners in the joint venture without the aid of an interpreter.

5. Not being a relation (father, mother, husband or wife, children, natural sibling) of any member of the board of management or the director of an enterprise making capital contributions to the enterprise which such person is assigned to directly manage; having no relations resulting from capital contribution, capital funding, and signing of procurement contracts with an enterprise with State-owned capital which such person is assigned to manage directly.


IV. PRINCIPLES FOR RESOLUTION OF SHARE OF PROFITS DISTRIBUTED AND CAPITAL RECOVERED FROM OTHER ENTERPRISES

Article 12 In respect of the share of profits distributed from other enterprises, direct managers shall be responsible to request enterprises:

1. To transfer [such profits] into the Support Fund for structuring and equitization of State owned enterprises in the case where the Ministry of Finance or the people’s committee of a city or province under central authority acts as the representative as stipulated in clause 1 or clause 2 of article 6 of these Regulations.

2. Transfer to State owned enterprises making capital contributions to other enterprises in the case where boards of management or directors of State owned enterprises act as representatives as stipulated in clause 3 of article 6 of these Regulations.

Article 13 The use of distributed profits to increase the State share of equity in other enterprises or to reduce the State share of equity in other enterprises is provided for as follows:

1. In the case where the Ministry of Finance acts as the representative as stipulated in clause 1 of article 6 of these Regulations, the Minister of Finance shall consider and make decisions after obtaining opinions from heads of the bodies in charge of relevant branches or fields.

2. In the case where the provincial people’s committee acts as the representative as stipulated in clause 2 of article 6 of these Regulations, the chairman of the people’s committee of a city or a province under central authority shall consider and make decisions.

3. In the case where the board of management or the director of a State owned enterprise acts as the representative as stipulated in clause 3 of article 6 of these Regulations.

(a) With respect to State owned enterprises having boards of management, the board of management shall make decisions.

(b) With respect to State owned enterprises having no boards of management, the director of a State owned enterprise shall make a decision after obtaining opinions from the body making a decision on establishment of such enterprise.

4. Methods for increasing or reducing the State owned capital in other enterprises shall comply with provisions of the law and charters of enterprises.

Article 14

The amount of State owned capital recovered upon decision on reduction of the State share of equity in other enterprises or upon dissolution or bankruptcy of other enterprises; collection of loans borrowed by employees to purchase shares upon equitization of State owned enterprises, the value of shares distributed to employees for entitlement to dividends and shares sold on credit to poor employees (with respect to State owned enterprises to be equitized after [the issuance of ] Decree 44-1998-ND-CP) shall be dealt with as follows:

1. To be included in the Fund for structuring and equitization of State owned enterprises with respect to the cases stipulated in clauses 1 and 2 of article 6 of these Regulations.

2. To be transferred to State owned enterprises making capital contributions to other enterprises with respect to the cases stipulated in clause 3 of article 6 of these Regulations.


V. RESPONSIBILITIES OF STATE ADMINISTRATIVE BODIES IN RESPECT OF MANAGEMENT OF THE STATE SHARE OF EQUITY IN OTHER ENTERPRISES


Article 15 The Ministry of Finance [is responsible]:

1. To monitor and supervise activities of direct managers in the cases stipulated in clause 1 of article 6 of these Regulations; to monitor and supervise the implementation of duties of representatives stipulated in clause 3 of article 6 of these Regulations.

2. To analyze and make general reports, evaluate the efficiency of capital contributions by the State, the status of profit-making in other enterprises. To make a general assessment of the status of capital investment, recovery of State owned capital, status of profit-making by other enterprises with State-invested capital, the status of collection of loans provided to employees to purchase shares of equitized State owned enterprises; recalling of shares granted to employees for entitlement to dividends, [recovery of] loans provided for poor employees in enterprises to purchase shares in accordance with rights and obligations of representatives prescribed in clauses 1 and 2 of article 6 of these Regulations.

3. To request representatives stipulated in clauses 2 and 3 of article 6 of these Regulations to make extraordinary reports on the status of business operations, management of capital and assets, financial management and financial results of other enterprises and on the implementation of duties of representatives and direct managers.

4. To request representatives to take measures to strengthen management of State-owned capital invested in other enterprises to conserve and develop State owned capital.

Article 16 Ministries, bodies in charge of technical and economic sectors, and people’s committees of cities and provinces under central authority shall:

1. Approve plans for utilization of profits for further contribution to the charter capital or reduction of the State share of equity invested in other enterprises with respect to State owned enterprises having no boards of management stipulated in clause 3(b) of article 13 of these Regulations.

2. Co-operate with the body in charge of financial management of enterprises in monitoring and supervising the implementation of the duties of representatives stipulated in clause 3 of article 6 of these Regulations.

3. Analyze and assess the efficiency of capital contribution made to other enterprises and the effects thereof on operations of State owned enterprises making capital contributions in the cases provided in clauses 1 and 2 of article 6 of these Regulations.

4. Have rights to request representatives stipulated in clause 3 of article 6 of these Regulations, to make extraordinary reports on the status of business activities, financial management, sharing of profits of other enterprises and the implementation of duties of representatives and direct managers.


VI. DEALING WITH BREACHES

Article 17

Any representative who fails to fully perform, or who abuses his/her rights and obligations, causing loss to the State share of capital in other enterprises, depending on the seriousness of the breach, shall be disciplined administratively or shall be prosecuted for criminal liability if such breach constitutes a crime. In the case of failure to identify in a timely manner the state of making a loss or losing capital, or default in paying due debt by other enterprises, or in the case of identification thereof but failure to deal with the incident in a timely manner, thus causing a loss to the State owned capital in other enterprises, then apart from being administratively disciplined, ten (10) per cent shall be deducted from the concerned representative’s salary for the year of the incident. If [a representative] commits an act which directly causes material damage, he/she shall make compensation in accordance with provisions of the law. In the case where representatives are organizations, responsibility of each individual for the breach must be clearly defined and individuals committing a breach shall be dealt with as stipulated above.

Article 18

Any direct manager who fails to fully perform, or who abuses his/her rights and obligations, causing damage to the State share of capital in other enterprises, depending on the seriousness of the breach, shall be disciplined administratively or shall be prosecuted for criminal liability if such breach constitutes a crime; in the case of failure to supervise the work relating to the distributed profits, which is appropriated by other enterprises as a result, the direct manager concerned shall pay compensation based on the interest on short-term bank loans. The period for determining liabilities to compensate shall start on the thirty first day as from the day when an enterprise approves plans for profits distribution and conclude on the day when enterprises transfer distributed profits to places as stipulated in article 12 of these Regulations. If [a direct manager] commits an act which directly causes material loss, he/she shall make compensation in accordance with provisions of the law.

Article 19

State administrative bodies which fail to fully perform their duties of inspecting and supervising and, therefore, fail to discover faults by representatives or which discover [such faults] but fail to report or take preventive measures resulting in damage to the State owned capital in other enterprises shall jointly shoulder the responsibility with representatives and direct managers.



On Behalf of the Government
For the Prime Minister
Deputy Prime Minister
NGUYEN TAN DUNG