Regulations on converting forestry companies of which 100% charter capital is held by the State into multi-member limited liability companies in Vietnam

Regulations on converting forestry companies of which 100% charter capital is held by the State into multi-member limited liability companies in Vietnam (Image from the internet)

Regarding this matter, LawNet responds as follows:

On January 12, 2024, the Government of Vietnam issued Decree No. 04/2024/ND-CP amending Decree No. 118/2014/ND-CP regarding the arrangement, renovation, and development, enhancing the operational efficiency of agricultural and forestry companies.

Regulations on converting forestry companies of which 100% charter capital is held by the State into multi-member limited liability companies in Vietnam

Conversion of forestry companies of which 100% charter capital is held by the State into multi-member limited liability companies as follows:

(1) A State-occupied 100% charter capital forestry company can be converted into a two-member limited liability company or more when it meets the following conditions:

- Has a production, processing plan applying high technology, meeting domestic and international market needs according to the following criteria:

+ Applies high technology listed in the prioritized high-tech investment development list according to the law on high technology to produce agricultural products;

+ Implements environmentally friendly measures, energy-saving production, and quality management of agricultural products complying with Vietnam's standards, technical regulations; in case Vietnam's standards, technical regulations are not available, it shall apply international specialized organization standards.

- Has remaining state capital after financial handling and re-evaluation of enterprise value.

(2) Conversion method and state controlling rights

- Conversion method: Sell part of the existing state capital in the one-member limited liability company held 100% by the state to investors and convert it into a two-member limited liability company or more as per the provisions of Clause 2, Article 33 of Decree No. 23/2022/ND-CP.

- State controlling rights: The state holds controlling capital contributions to forestry companies with a land use plan of 1,000 ha or more.

(3) Selected investors must meet the following conditions:

- Have legal entity status according to the law;

- Have owner equity at least twice the charter capital of the proposed two-member limited liability company or more;

- Have profitable business activities in the past 3 years up to the time of registering to contribute capital or buy state capital;

- Written commitment from the investor when registering to become a member of the two-member limited liability company or more, including:

+ Maintain the main business line of the enterprise for at least 3 years from the date the two-member limited liability company or more is issued the first Enterprise Registration Certificate according to the Enterprise Law;

+ Not transfer the capital contribution within 5 years from the date the two-member limited liability company or more is issued the first Enterprise Registration Certificate according to the Enterprise Law;

+ Support plan for the company after establishing the two-member limited liability company in transferring new technology, training human resources, enhancing financial capacity, corporate governance, supplying raw materials, developing product consumption markets;

+ Compensation obligations for breaches of the committed agreement with the compensation determined according to actual damage and the state's right to dispose of the entire investor's contributed capital when violating the committed agreements;

+ Other commitments (if any).

- The commitment mentioned above is a mandatory part of the capital transfer contract.

(4) Conversion principles, content of the conversion plan, responsibility for conversion implementation, management, and use of proceeds from converting state-occupied 100% charter capital forestry company into a two-member limited liability company or more shall follow the provisions at Articles 34, 35, 36, and 38 of Decree No. 23/2022/ND-CP.

Nguyen Ngoc Que Anh

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