Vietnam: How is the financial settlement at the date of enterprise valuation?

According to Vietnam’s new regulations, financial settlement at the date of enterprise valuation shall be carried out as follows:

1. The enterprise shall settle its financial issues on the date of enterprise valuation in accordance with regulations in Article 14 through 20 in Decree No. 126/2017/ND-CP of Vietnam’s Government.

2. According to the results of asset inventory and classification, with regard to asset surplus or deficit, the equitized enterprise must reason out such surplus or deficits and handle as follows:

- For asset deficit, the equitized enterprise shall determine the responsibility of relevant organizations or individuals for material compensation in accordance with the law in force; the value of asset deficit after being deducted from the amount compensated by organizations or individuals (if any) must be recorded to the business results of the enterprise when such enterprise makes financial statement at the date of enterprise valuation.

- For asset surplus, the equitized enterprise must reason out the surplus and responsibility of relevant organizations and individuals for handling in according with provisions of the law in force; the value of the asset surplus that are not paid must be recorded to the business results of the enterprise when such enterprise makes financial statement at the date of enterprise valuation.

3. Accounts receivable, exclusive of outstanding loan of the equitized commercial bank, will be identified as uncollectible debts and excluded from the enterprise value if they could be conclusively proved uncollectible through relevant documents, specifically as follows:

- Accounting book, documents or documentation proving that the debts fail to be collected at the date of debt recovery or debt accounting on the accounting book of the equitized enterprise such as: economic contracts, loan agreements, loan commitments, contract liquidation, etc.

- With regard to business entities:

+ Debtors going bankruptcy as judged by the Court in compliance with the law on bankruptcy;

+ Debtors stop running business, escaping or being dissolved according to verification by the agency issuing the decision on enterprise establishment or business registration organization or supervisory tax authority; or the debts have been brought to the Court by the enterprise as regulated and judged by the Court or verified by the judgment enforcement authority to be uncollectible as such enterprise has no asset or the value of its asset fail to make up the debts.

+ Debts that are written off as decided by competent authorities in accordance with provisions of laws; difference of loss for debt sale decided by competent authorities.

- With regard to individual debtors:

+ Certified copy or duplicate of original death certificate or verification of dead debtors by local authorities.

+ Pursuit order or verification of escaping or prosecuted debtors or debtors serving a sentence by legislative body.

+ Confirmation by local authorities of debtors that are claimed missing by the Court in accordance with the Civil Code.

- Debts of which the estimated debt recovery expenses are greater than debt value approved and cared for by the representative agency in compliance with provisions of laws.

More details can be found in Circular No. 41/2018/TT-BTC of the Ministry of Finance of Vietnam, which takes effect from June 18, 2018 and replaces Circular No. 127/2014/TT-BTC.

- Thanh Lam -

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE