|
THE
MINISTRY OF FINANCE
-------
|
SOCIALIST
REPUBLIC OF VIET NAM
Independence - Freedom - Happiness
------------
|
|
No.
19/2003/TT-BTC
|
Hanoi,
March 20, 2003
|
CIRCULAR
GUIDING THE
INCREASING AND REDUCING READJUSTMENT OF CHARTER CAPITAL AND MANAGEMENT OF
TREASURY STOCKS IN JOINT-STOCK COMPANIES
Pursuant to the Enterprise Law and the
documents guiding the implementation thereof;
Pursuant to the State’s legal documents prescribing securities trading and
securities market;
The Finance Ministry hereby guides a number of financial matters in the
increasing and reducing readjustment of charter capital and management (of the
purchase, sale and use) of treasury stocks in joint- stock companies as
follows:
I. GENERAL PROVISIONS
1. Subject to the application of this Circular
are joint-stock companies established and operating under the Enterprise Law.
For financial institutions, credit institutions,
insurance organizations and securities organizations operating in the form of
joint-stock company, the increasing or reducing readjustment of charter
capital, the purchase, sale and use of treasury stocks shall comply with the
provisions of the specialized legal documents.
2. In this Circular the following terms shall be
construed as follows:
a/ Shareholders’ capital at a time is that
determined to be equal to the owner’s capital minus the balance of reward and
welfare funds and joint-venture capital received at that time.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
c/ Enterprise managers are the subjects defined
in Clause 12, Article 3 of the Enterprise Law.
d/ Bonds converted into shares are bonds issued
by companies and converted into share capital contributions to such companies
under the conditions and within the time limit prescribed in the plans on
issuance of convertible bonds already adopted by the shareholders’ congress.
e/ Payment of dividends in form of stocks means
the use of accumulated after-tax profit sources (including the State’s tax
exemption or reduction source) by the joint-stock companies to supplement their
charter capital, and at the same time to increase shares for shareholders
according to the share ownership proportion of each shareholder in such
enterprises.
3. All activities of purchasing and selling
treasury stocks or issuing new stocks to mobilize capital are not considered
financial business activities of joint-stock companies. The increased amounts
due to the purchase or sale of treasury stocks and the differences between
issuance prices of new stocks being higher than their par values shall be
accounted into capital increment accounts, but not as enterprises’ financial
incomes. Enterprise income tax and value added tax shall not be imposed on such
increments.
In cases where the selling prices of treasury
stocks are lower than their purchasing prices and the selling prices of newly
issued stocks are lower than their par values, the differences therebetween
shall neither be accounted into expenditures nor offset by pre-tax profits, but
they shall be offset with incremental capital. In cases where incremental
capital is not enough, the after-tax profit source and funds of companies shall
be used to offset.
II. INCREASING OR REDUCING READJUSTMENT OF
CHARTER CAPITAL
Increase or reduction of charter capital must
comply with the current provisions of law. Before making the increasing or
reducing readjustment of the charter capital, joint-stock companies must
conduct the tax settlement and financial statement audit according to the
State’s current provisions. The managing boards shall work out plans on
increasing or reducing readjustment of the charter capital, then submit them to
the shareholders’ congress for approval according to the following provisions:
A. INCREASING READJUSTMENT OF CHARTER CAPITAL:
1. Charter capital of a joint-stock company
shall be increased in the following cases:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ Conversion of already issued bonds into
shares: The increase of charter capital shall be effected only when the
conditions for converting bonds into shares as prescribed by law and stated in
the plan on issuance of convertible bonds are fully met.
c/ Payment of dividends in form of stocks.
d/ Issuance of new stocks for merging part or
whole of another enterprise into the company.
e/ Carrying forward of the capital increment
source to supplement the charter company.
2. The carrying forward of the capital increment
source to supplement the charter company of joint-stock companies (according to
the provisions in Paragraph e, Point 1, Section A, Part II) must satisfy the
following conditions:
a/ The companies are entitled to use the whole
increase differences between selling prices and original purchasing prices of
treasury stocks to increase their charter capital. In cases where the companies
have not yet sold out their treasury stocks, they shall only be allowed to use
increase differences between the capital increment source and the total
original price of treasury stocks not yet sold to supplement their charter
capital. If the total original price of treasury stocks not yet sold is equal
to or larger than the capital increment source, the companies shall not be
allowed to increase their charter capital with such capital source.
b/ For differences between selling prices and
par values of stocks issued for executing investment projects, joint-stock
companies shall only be allowed to use them to supplement their charter capital
three years after such investment projects are completed and put into
exploitation and operation.
For differences between selling prices and par
values of stocks issued for restructuring debts or supplementing business
capital, the joint-stock companies shall only be allowed to use them to
increase their charter capital one year after the end of the issuance.
c/ The capital increment sources specified in
Paragraphs a and b, Point 2, Section A, Part II above shall be divided to
shareholders in form of stocks according to their stock ownership proportions.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
Quantity of
stocks planned to be issued
=
Capital source
planned to be used to increase charter capital
Par value of
one stock
4. Companies shall not be allowed to use price
differences due to their self-revaluation of assets (pending the State’s
policies) to increase their charter capital.
B. REDUCING READJUSTMENT OF CHARTER CAPITAL
Charter capital of joint-stock companies shall
be reduced in the following cases:
1. Reduction of charter capital upon the
lessening of the companies’ capital demands due to changes in their business
lines and trades or their down-sized reorganization or forcible cancellation of
their treasury stocks.
The reducing readjustment of charter capital and
payment of money to shareholders shall be effected by the following modes:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ Companies shall withdraw and cancel a
quantity of stocks from shareholders with a total par value equal to the
reduced charter capital amount. By this mode:
- Each shareholder in a company shall have a
quantity of his/her shares withdrawn according to the proportion of capital
amount planned to be reduced to the company’s total charter capital at a time
before the readjustment
Quantity of
shares to be withdrawn from each shareholder
=
Quantity of
shares owned by such shareholder
x
Capital amount
planned to be reduced
The company’s
charter capital
- Companies shall have to pay their shareholders
a money amount calculated according to the following formula:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
c/ Reducing readjustment of share par values
without changing share quantity. By this mode, companies shall withdraw stocks
from shareholders and issue new stocks with reduced par values. Companies shall
have to pay to their shareholders a money amount calculated according to the
following formula:
Money amount to be paid to each shareholder (=)
quantity of shares of each shareholder (x) difference between old par value and
new par value
d/ Combination mode:
Basing themselves on the actual situation, joint
stock companies may apply the above-said modes in combination to effect the
reducing readjustment of charter capital.
2. Reduction of charter capital after companies
have conducted business operation at a loss for three consecutive years and
suffer an accumulative loss equal to 50% or more of shareholders’ capital but
they have not yet lost their capability to repay due debts.
The modes for reducing charter capital shall
comply with the provisions in Paragraph b or c, Point 1, Section B, Part II of
this Circular, the joint-stock companies shall not return money to their
shareholders.
III. TREASURY STOCKS
1. Joint-stock companies are entitled to
purchase back no more than 30% of the total ordinary shares they have already
sold, part or the whole of shares of other types already sold according to the
provisions in Article 65 of the Enterprises Law. Joint-stock companies shall be
only entitled to use the capital source of their shareholders to purchase
treasury stocks in the following cases:
a/ They purchase back shares at their
shareholders’ requests according to the provisions in Article 64 of the
Enterprise Law.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
c/ They purchase back shares for resale to their
laborers (including enterprise management boards) at preferential prices or
give rewards in form of stocks to laborers according to resolutions of the
shareholders’ congress.
The use of treasury stocks as rewards must ensure
that there are payment sources therefor from the welfare and/or reward funds.
The prices of treasury stocks sold to laborers
shall be lower than market prices thereof at the time of sale, provided that
they are not lower than their purchasing prices of treasury stocks.
d/ They purchase back shares for reducing
readjustment of their charter capital according to resolutions of the
shareholders’ congress.
e/ They purchase back shares for use for other
purposes, provided that the use thereof must comply with the provisions of the
Enterprise Law, organization and operation charters of companies as well as
resolutions of shareholders’ congress.
2. Conditions for materializing plans on
purchase of treasury stocks:
a/ Companies have plans adopted by the shareholders’
congress, for cases where they purchase back over 10% of the total already
issued shares; or plans decided by their managing boards, for cases where they
purchase back under 10% of the total already issued shares.
b/ Companies have financial capabilities to
ensure the full repayment of their debts and fulfillment of their financial
obligations.
3. Joint stock companies are not allowed to
purchase treasury stocks in the following cases:
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
b/ They are carrying out the procedures for
issuing securities to mobilize more capital;
c/ They have overdue debts;
d/ The total amount of their receivable debts is
larger than 10% of their shareholders’ total capital;
e/ They fail to fully meet the requirements for
increase of charter capital or legal capital according to the current
provisions of law.
f/ They use borrowed capital and capital being
debt arrears owed to financial institutions, credit institutions, legal persons
and/or individuals to purchase treasury stocks.
4. Companies are not allowed to purchase shares
of the following subjects to use as treasury stocks:
a/ Enterprise managers and subjects being their
spouses, parents and foster parents, children and adopted children, blood
siblings (except for cases where they are entitled to purchase back shares
according to the provisions in Article 64 of the Enterprise Law).
b/ Persons owning conditionally transferable
shares as defined by law and company charters.
c/ Shareholders having controlling shares, except
for cases where enterprises are entitled to re-purchase the State’s shares.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
In cases where the companies have purchased
treasury stocks, but not used them for 3 years, and the capital of their
shareholders is smaller than their charter capital, they shall have to cancel
treasury stocks and at the same time reduce their charter capital.
6. The purchase and sale of treasury stocks by
joint- stock companies which have registered for listing at the Securities
Trading Centers shall also comply with the procedures prescribed in legal
documents on securities trading.
7. Management and accounting of treasury stocks:
a/ Treasury stocks are under the common
ownership of the companies and excluded from the division of dividends
(dividends in cash and dividends in stocks).
b/ Values of treasury stocks on the accounting
balance sheets are expressed as the reduction of the enterprises’ owner capital
in their business.
c/ Expenses for the purchase and sale of
treasury stocks are accounted as follows:
- Purchase expenses: shall be accounted into
original prices of treasury stocks.
- Sale expenses: shall be offset against the
proceeds from the sale of treasury stocks.
d/ Shareholders’ congresses shall decide on the
maintenance, use or cancellation of treasury stocks, and at the same time
effect the reducing readjustment of their charter capital corresponding to the
canceled stock volume.
...
...
...
Please sign up or sign in to your Pro Membership to see English documents.
This Circular takes effect 15 days after its
publication on the Official Gazette.
Any problems arising in the course of
implementation should be promptly reported to the Finance Ministry for study,
amendment and supplement.
FOR THE MINISTER OF FINANCE
VICE MINISTER
Le Thi Bang Tam