Vietnam: Ensuring policies for employees when converting public non-business units into joint stock companies

According to the Appendix attached to the Decree No. 150/2020/NĐ-CP of Vietnam’s Government,

1. The policy of selling shares to employees when converting a public non-business unit into a joint stock company

According to Clause 1 Article 37 of the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, the policy of selling shares to employees at converted public non-business unit is ensured as follows:

- Entities subject to buying shares at preferential prices include:

+ Public employees;

+ Employees working under labor contracts in public non-business units at the time of determining the value of converted public non-business units.

- The above subjects are allowed to buy up to 100 shares per year they actually work in the state sector (including all time worked at units/organizations in the state sector) at a selling price equal to 60% of the value of 01 share at par value (10,000 VND/share).

- The difference between the selling price for public employees and employees and the par value of the shares (10,000 VND/share) shall be deducted from the value of the state capital share upon settlement at the time the public non-business unit is officially transformed into a joint-stock company.

- Employees must hold the number of shares sold at the above preferential price and must not transfer within 03 years from the time of payment for buying preferred shares.

Note: The total value of shares sold at preferential prices to employees calculated at the maximum par value must not exceed the value of the state capital according to the accounting books at the time of determining the value of the public non-business unit.

2. Employees are allowed to buy more shares of public non-business units converted into joint stock companies

According to Clause 2 Article 37 of the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, public employees and employees working under labor contracts in public non-business units at the time of determining the value of converted public non-business units, who is subject to needed-personnel by the converted public non-business unit and have a commitment to long-term working for the joint stock company for at least 03 years (from the date the enterprise is granted the certificate of enterprise registration for the first time) will be entitled to purchase additional shares according to the following provisions:

- Buy more at the rate of 200 shares/year for each year of commitment to continue working in the business, but not more than 2,000 shares per employee.

Note: Particularly, employees who are good experts with high professional qualifications are allowed to buy shares at the rate of 800 shares/year for each year of commitment to continue working in the business, but not more than 8,000 shares per employee. Converting public non-business units, based on the specificity of their professions and business fields, develop criteria to identify good and highly qualified experts, which shall be approved at the labor conference of the public non-business unit before converting into a joint stock company and submitting to the agency approving the conversion plan for decision.

- The selling price of shares for employees to additionally buy shares is the starting price approved by the competent authority in the equitization plan.

- Each employee is only entitled to the right to purchase additional shares according to a specified level as above;

- The number of additional shares purchased by the employee is determined according to the period of commitment to continue working until reaching full retirement age for employees under normal working conditions as prescribed in the current Labor Code of Vietnam;

- The additional shares purchased by employees will be converted into common shares after the end of the commitment period.

Note: 

- In case the Joint Stock Company changes the structure, technology, relocates or narrows the production and business locations at the request of the competent state agency, leading to the employee having to terminate the labor contract, quit the job, lose their job in accordance with the provisions of the Labor Code before the committed deadline, the additional shares purchased will be converted into common shares. If the employee wishes to resell these shares to the enterprise, the joint stock company shall be responsible for re-buying them at the market transaction price.

- In case the employee terminates the labor contract before the committed term, he/she must sell back to the Joint Stock Company all the additional shares purchased at the market transaction price but not exceeding the price purchased at the time of conversion.

3. Some other welfare policies for employees when converting public non-business units into joint stock companies

According to Clauses 3, 4, 5 2 Article 37 of the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, some other welfare policies for employees when converting a public non-business unit into a joint stock company include:

- Employees wishing to buy more shares in addition to the number of shares purchased as prescribed in Sections 1 and 2 shall register for auction.

- To be divided in cash balance of the Bonus Fund, Welfare Fund, and Income Supplement Fund according to regulations.

- Employees in converted public non-business units may continue to participate and enjoy benefits of social insurance, health insurance and other regimes according to current regulations when transferring to a joint stock company.

- Employees in the converted public non-business units are entitled to the retirement regime and other benefits according to the current regime if they have fully met the conditions at the time of announcement of the value of the public non-business units.

4. Policy for redundant employees after the public non-business unit is transformed into a joint stock company

According to Article 38 of the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, policy for redundant employees after the public non-business unit is transformed into a joint stock company is ensured as follows:

- For public employees and managers working at converted public non-business units: At the time of valuation, if the unit cannot arrange jobs at the Joint Stock Company according to the labor use plan, he/she will be entitled to the policy of downsizing according to regulations.

- For employees working under labor contracts of converted public non-business units: At the time of valuation, if the unit cannot arrange jobs at the Joint Stock Company according to the labor use plan, he/she will be entitled to policies for redundant employees when rearranging a one-member limited liability company owned by the State according to regulations.

Le Vy

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