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THE MINISTRY OF
FINANCE
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SOCIALIST REPUBLIC OF
VIET NAM
Independence - Freedom – Happiness
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No: 62/1999/TT-BTC
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Hanoi, June 07, 1999
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CIRCULAR
GUIDING THE MANAGEMENT AND USE OF CAPITAL AND ASSETS AT
STATE ENTERPRISES
Pursuant to Decree No. 59/CP of October 3,
1996 of the Government promulgating the Regulation on financial management and
business cost-accounting at State enterprises;
Pursuant to Decree No.27/1999/ND-CP of April 20, 1999 of the Government on
amendments and supplements to the Regulation on financial management and
business cost-accounting at State enterprises, issued together with Decree
No.59/CP of October 3, 1996 of the Government;
The Ministry of Finance hereby guides the management and use of capital and
assets at State enterprises as follows:
I. GENERAL PROVISIONS
1. This Circular shall apply to State
enterprises stipulated in Article 1 of the Regulation on financial management
and business cost-accounting, issued together with the Government’s Decree
No.59/CP of October 3, 1996.
2. Assets of a State enterprise include: fixed
assets and long-term investments, current assets and short-term investments,
created from the State’s capital and other capital sources.
All assets rented, borrowed, kept in custody,
for processing, agency sale or bailment by an enterprise are not assets of its
own.
3. The legal capital of a State enterprise is
the minimum capital required by law for the establishment of a State enterprise
in each business line.
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5. The State-owned capital at an enterprise is
the total value of assets that the enterprise is managing and using minus (-)
its payable debts at the time of reporting.
6. The capital under a State enterprise’s
management and use right shall include: its payable debts and State-owned
capital;
The payable debts shall include short-term debts,
long-term debts and other debts.
7. The Chairpersons of Managing Boards (for
enterprises with managing boards), the directors (for enterprises without
managing boards) shall have to work out regulations on capital and asset
management in order to concretize the provisions of this Circular for their
respective enterprises and with a view to efficiently using capital for
business, preserving and developing the State’s capital and fulfilling the debt
payment obligation.
8. The State enterprises shall take limited
liability for their business activities before law and creditors within the
amount of State-owned capital at such enterprises.
II. INVESTMENT AND ALLOCATION
OF CAPITAL TO ENTERPRISES
1. Capital investment:
1.1. The State shall invest capital in the
newly- set up State enterprises in important branches and domains:
- The newly established State enterprises shall
have to strictly comply with the current order and procedures stipulated in the
Government’s Decree No. 50/CP of August 28, 1996 on the establishment,
re-organization, dissolution and bankruptcy of State enterprises.
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1.2. In the course of business, on the basis of
the production and business efficiency, the socio-economic development tasks
assigned by the State to enterprises as well as the State budgetary capacity,
the State shall consider additional investment in enterprises in case of
necessity.
2. Allocation of capital to enterprises:
The State enterprises shall be allocated State-owned
capital available thereat after being inspected and appraised according to the
current regulations of the State.
2.1. The amount of capital to be allocated to an
enterprise shall be determined as follows:
a/ For a newly established enterprise, it is the
amount of State’s capital stated in the final account settlement of capital
construction investment capital, which is transferred for production and
business; the statutory capital supplemented by the State and other capital (if
any) under the State ownership.
b/ For operating enterprises and re-established
enterprises (after merger, division or splitting), it is the amount of
State-owned capital available at such enterprises or at the member enterprises,
which have been inspected and appraised according to the current stipulations
of the State.
Before the capital allocation, an enterprise
shall have to clearly determine its financial problems (the redundancy,
deficiency, loss, damage, poor quality or degradation of assets; assets, which
are unsaleable, slowly circulated, no longer in use or awaiting liquidation;
bad debt; accumulative losses; expenses without sources to make up for and
other losses of assets), the causes therefor and responsibility of the persons
related to the said problems for handling them according to the current
regulations. For financial problems resulting from the implementation of the
State’s policies, enterprises shall have to report them to the competent State
agencies for handling. The problems which cannot be handled yet shall be
clearly stated in the capital-allocation dossier. A re-established enterprise
or an enterprise which other enterprises are merged with shall inherit the
rights as well as interests and fulfil all obligations of State enterprises
before merger, consolidation, division or splitting.
The capital amounts which increase as the
results of enterprise income tax exemption or reduction during the
implementation of the Law on Domestic Investment Promotion or the return of
State budget remittances under decision of the competent State management
agency shall all be considered the capital of State budget origin.
The above-said capital increase amounts as well
as the amount of capital additionally allocated by the State after the capital
allocation shall all be accounted into the amount of capital allocated by the
State to the enterprise.
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2.3. The Minister of Finance or his/her
mandatary shall be the person who hands over the capital to State enterprises.
The chairmen of the managing boards, the general directors or directors (for
enterprises with managing boards), the directors (for enterprises without
managing boards) shall be the persons who sign documents to receive the
capital. For enterprises being members of a State corporation, the person who
hands over the capital shall be the corporation’s general director and the
persons who receive the capital shall be the directors of the member
enterprises.
For State corporations established under the
Prime Minister’s Decisions No.90/TTg and 91/TTg of March 7, 1994, the capital
hand-over must be witnessed by representatives of the agencies that have
decided the establishment of such enterprises.
III. CAPITAL MOBILIZATION
In addition to the State-invested capital, State
enterprises shall have to mobilize capital by themselves in different forms:
issuing bonds and/or shares, borrowing capital, receiving capital contributions
or other forms, for business development and shall take self-responsibility for
such capital mobilization. The capital mobilization must not alter an
enterprise’s form of ownership and must comply with the current provisions of
law.
For State enterprises being commercial banks or
other credit institutions, the capital mobilization must comply with the stipulations
of the Law on the State Bank and the Law on Credit Institutions as well as the
legal documents guiding the implementation thereof.
1. Domestic capital mobilization:
- State enterprises shall be entitled to issue
bonds to mobilize capital for business development in accordance with the
provisions of the Government’s Decree No.120/CP of September 17, 1994 on the
issuance of State enterprise bonds and Circular No.91/TC/KBNN of November 5,
1994 of the Ministry of Finance as well as other current provisions of law.
- Enterprises shall be entitled to sign business
cooperation or joint venture contracts with domestic organizations and/or
individuals in order to supplement their business capital.
- Enterprises shall be entitled to borrow
capital from credit institutions (commercial banks, financial companies…),
other enterprises and individuals (including their workers and employees) for
development investment.
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2. Foreign capital mobilization:
State enterprises shall be entitled to short-,
medium- and long-term loans provided by foreign organizations and individuals
for business development, in strict compliance with the Regulation on the
management of foreign borrowings and foreign debt payment issued together with
the Government’s Decree No.90/1998/ND-CP of November 7, 1998. In special cases
where the foreign borrowings are guaranteed by the State, the Prime Minister
shall decide. Where the Prime Minister does not allow such, the guaranteeing
organizations shall take responsibility for enterprises’ foreign debts under
the already signed contracts.
3. Responsibilities for use and repayment of
mobilized capital:
The capital mobilization must be calculated and
considered thoroughly in term of its economic efficiency. The mobilized capital
shall be used only for business purposes, not for other purposes. The mobilized
capital must be strictly managed and efficiently used. Enterprises shall have
to repay both the principals and interests in strict compliance with their
commitments when mobilizing capital.
The managing boards (for enterprises with
managing boards), the directors (for enterprises without managing boards) shall
take responsibility for ratifying the capital mobilization plans. If a capital
mobilization plan is inefficient, thus leading to the loss of assets, the
managing board or the director of the concerned enterprise shall be held
responsible under the provisions of Article 40 of the Government’s Decree
No.27/1999/ND-CP of April 20, 1999.
The general directors or directors shall have to
work out and implement the capital mobilization plans, use capital for the
right purposes and fruitfully. If submitting inefficient capital mobilization
plans or wrongly implementing such plans, using capital for the wrong purposes,
thus leading to the loss of assets, such general directors or directors shall
be held responsible under the provisions of Article 40, Decree No.27/1999/ND-CP
of April 20, 1999 of the Government.
IV. MANAGEMENT AND USE OF
CAPITAL AND ASSETS
A. MANAGEMENT AND USE OF CAPITAL AND ASSETS
WITHIN ENTERPRISES:
1. Enterprises shall have to open accounting
books and make book entry in order to precisely monitor all their existing
assets and capital in strict compliance with the current regulations on
accountancy cost-accounting and statistics; to honestly and promptly reflect
the situation on the use of and changes in the assets and capital during the
enterprises’ business course.
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Enterprises shall be entitled to change the
structure of their assets and capital for fruitful business development,
capital preservation and development.
State corporations shall be entitled to mobilize
assets belonging to the State-owned capital at their member enterprises
according to the following principles:
- Rationally and efficiently using such assets
within the corporation;
- Not causing losses;
- The mobilization plan must be ratified by the
managing board and decided by the general director; the mobilization shall be
effected on the principle of capital increase or decrease.
Enterprises shall effect the fixed asset
depreciation according to the current regulations.
3. State enterprises shall have to
elaborate regulations on the management, preservation and use of their assets;
clearly determine the responsibilities of each section and individual for the
loss or damage of asset, if any.
4. Periodically and by the end of a
fiscal year, enterprises shall have to inventory all of their available assets
and capital; accurately determine the redundant, deficient, unsold or
poor-quality assets, as well as causes and responsibilities therefor; which
shall serve as basis for them to make financial reports.
5. Management of debts:
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Periodically (monthly and quarterly) the enterprise
shall have to compare, synthesize and analyze the situation of the to be-
recovered debts; especially, the due debts, overdue debts and bad debts. For
unrecoverable debts, it is necessary to determine clearly the debt amounts, the
causes and responsibilities therefor as well as the handling measures. In case
of subjective causes, the persons who are at fault shall have to pay
compensation therefor. The managing boards, the general directors or directors
(for enterprises without managing boards) shall decide the compensation levels.
The difference between the loss value and the compensation value made by the
involved person, if deficient, shall be made up for by the enterprise’s
financial reserve fund. Where the financial reserve fund is not enough to
offset the deficit, the deficit amount shall be accounted into the irregular
expenditure of the period.
For those debts which actually cannot be
recovered (according to the provisions of Circular No.64-TC/TCDN of September
15, 1998 of the Ministry of Finance guiding the establishment and use of the
reserves for price decrease of unsold goods, bad debts and devaluation of
securities at State enterprises), enterprises shall account such debts into
their business costs and at the same time continue monitoring the debts on
accounting books (with accounts outside the accounting balance sheet) and
regularly urge the debt recovery. The money gained from debt recovery shall,
after covering the debt-recovery costs, be accounted into the enterprises’
irregular revenue.
The managing boards, the general directors or
directors (for enterprises without managing boards) shall take responsibility
before the State for the enterprises’ to be-recovered debts. Depending on the
seriousness of the violations, if the debtors cannot fully repay the debts or
are incapable of repaying their debts, the creditors, who are at faults, may be
administratively sanctioned, pay material compensation; if a crime is
formulated, they shall be examined for penal liability.
6. Leasing, mortgage, sale and liquidation of
assets:
6.1. Leasing, mortgage of assets:
Enterprises shall be entitled to lease the
assets under their management and use right to domestic organizations and
individuals in order to raise the use efficiency and increase their revenues,
but shall have to monitor and recover such assets when the leasing term
expires.
For the leased assets, enterprises shall still
have to make asset depreciation according to the prescribed regime.
Enterprises shall be entitled to pledge,
mortgage or guarantee assets under their management and use right at credit
institutions in strict compliance with the order and procedures prescribed by
law.
Enterprises must not pledge, mortgage or lease
those assets which they have borrowed, rented, kept in custody, pledged or
mortgaged from other enterprises, without the consent of the asset owners.
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6.2. Sale, liquidation of assets:
a/ Sale of assets: Enterprises shall be entitled
to sell redundant and technically obsolete assets in order to recover capital
for use for more efficient business purposes;
For assets being the entire main technological
line of an enterprise as defined by the agency in charge of economic-technical
branch, the sale thereof must be approved in writing by the agency that has
decided the establishment of that enterprise.
b/ Liquidation: Enterprises shall be entitled to
liquidate assets with poor quality or assets which have lost their quality;
irreparable obsolete and damaged assets; technically obsolete assets, which are
no longer in use or are inefficiently used and cannot be sold in status quo.
For assets being the entire main technological line of an enterprise as defined
by the agency in charge of economic-technical branch, the liquidation thereof
must be ratified by the agency that has decided the establishment of that
enterprise.
When selling or liquidating its assets, an
enterprise shall have to set up a council for evaluation of technical
conditions and value of those assets. The assets for sale must be auctioned and
publicized. If the assets are liquidated in form of dismantlement or
destruction, a liquidation council must be set up by decision of the general
director or director of the enterprise.
c/ The difference between the revenue from the
asset sale or liquidation and the assets’ remaining value reflected on
accounting books as well as the sale or liquidation costs (if any) shall be
accounted into the enterprise’s business results (other revenues).
7. Handling of asset losses:
All losses of assets of enterprises must be
recorded in order to determine the loss value, the reasons and responsibility
therefor. If:
7.1. The asset losses are caused subjectively by
collective(s) or individual(s), such collective(s) or individual(s) shall have
to pay compensations therefor as prescribed by law. The managing boards or the
directors (for enterprises without managing boards) shall decide the
compensation levels and take responsibility for their decisions.
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7.3. The loss value, after being made up for by
compensations from collective(s), individual(s) or insurance organization(s),
is still deficient, it shall be offset by the enterprise’s financial reserve
fund. If the enterprise’s financial reserve fund is not enough to cover the
deficit, the deficit shall be accounted into the irregular expenditures of the
period.
In cases where asset losses are caused by
natural calamities or enemy sabotage, which cannot be overcome by enterprises
themselves, the managing boards or directors of the State enterprises (for
enterprises without managing boards) shall have to work out plans to handle
such losses and submit them to the financial agency. After receiving a proposal
from the agency that has decided the establishment of the enterprises, the
financial agency shall decide the handling of the said losses or report them to
the Prime Minister for deciding the handling.
After handling losses, the enterprise shall have
to modify its accounting books in line with the handling decision.
8. Re-appraisal of assets:
Enterprises shall be entitled to re-appraise
their assets and make cost accounting of capital increase or decrease with the
difference from the re-appraisal of assets in the following cases:
8.1. Inventorying and re-appraising assets by
decisions of the competent State agencies;
8.2. Effecting equitization, diversifying or
changing the ownership forms of enterprises;
8.3. Using the assets to enter joint-ventures or
contribute stocks (when contributing capital and receiving back the assets);
The cost-accounting of the State’s capital
increase or decrease shall be ratified by the financial agency.
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Enterprises shall be entitled to use their
capital, assets and land use right to invest outside according to the principle
of efficiency, capital preservation and development, increase of revenue and
ensuring the fulfillment of the State budget remittance task; the investment
must comply with the current provisions of law. When the land use right value
is used for investment outside the enterprises, the current provisions of the
Land Law shall apply.
Forms of investment outside the enterprises
shall include: purchase of shares, capital contribution to joint-ventures,
stock contribution and other forms of investment…
For investment in joint ventures:
1. Investment in domestic joint ventures:
- For investment in other State enterprises, the
managing boards or directors (for enterprises without managing boards) shall
decide the plans for joint ventures.
- For investment in enterprises not owned by the
State, the managing boards shall decide the joint-venture projects. For independent
enterprises (without managing boards), the joint-venture projects must be
approved in writing by the agencies that have decided the establishment of such
enterprises.
- State enterprises are not allowed to invest in
enterprises of other economic sectors, where the managers or the main owners
are spouses, parents or offsprings of the managing boards, the general
directors, the directors or chief accountants of such State enterprises.
2. Investment in joint ventures with foreign
investors:
If using assets to invest in joint ventures with
foreign investor(s) in Vietnam or in foreign country(ies), an enterprise must
get approval of its joint venture project from the agency that has decided its
establishment or from its managing board, if the latter is authorized by the
agency deciding the establishment of the enterprise, and submit a report
thereon to the financial agency within 15 days after getting the approval.
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The managing board or the director (for
enterprises without managing boards) shall appoint a person with professional
skills and good qualifications to directly manage the enterprise�s contributed capital in
other enterprise(s), and shall take responsibility for the efficiency of
investment outside the enterprise. The management of the State’s capital at
other enterprises shall comply with the current stipulations of the State.
Overseas investment: State enterprises shall be
entitled to invest their capital and assets directly overseas according to the
provisions of Decree No.22/1999/ND-CP of April 14, 1999 of the Government
"stipulating the investment overseas by State enterprises".
C. PRESERVATION AND DEVELOPMENT OF CAPITAL
Preservation and development of capital is the
obligation of enterprises in order to protect the State’s interests in term of
capital it has invested in the State enterprises, thus creating conditions for
enterprises to stabilize and develop their business efficiently, increase the
laborers’ incomes and fulfil the obligations toward the State.
Measures for capital preservation:
- Strictly complying with the regulations on the
management and use of capital and assets according the stipulations of the
State and this Circular;
- Buying insurance for assets under the
management and use right of enterprises.
The insurance premiums shall be accounted into
the enterprises’ production and business costs.
- The State enterprises shall be entitled to
account into their business cost and the costs of other activities the
following reserves:
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+ The bad debt reserve: for those debts, which
are expected as unrecoverable in the subsequent business period due to the
debtors’ insolvency;
+ The reserve for devaluation of securities in
financial activities;
The establishment and use of the above-said
reserves shall comply with the current regulations.
In addition to the above-said measures,
enterprises shall be entitled to use profits of the subsequent year (the
before- or after-tax profits) to offset losses of the previous years (for no
more than 5 years), and to account a number of losses (caused by natural
calamities, epidemics) into their business costs or business results according
to the stipulations of the State.
V. IMPLEMENTATION PROVISIONS
This Circular shall replace Circular No.
75-TC/TCDN of November 12, 1996 guiding the management and use of capital and
assets at State enterprises and take effect from the effective date of the
Government’s Decree No.27/1999/ND-CP of April 20, 1999.
All the earlier regulations on the management
and use of capital and assets at enterprises which are contrary to this Circular
are now annulled.
In the course of implementation, if any problems
arise, the ministries, branches and enterprises are requested to report them to
the Ministry of Finance for study, amendment and/or supplement.
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THE MINISTRY OF
FINANCE
Tran Van Ta