Vietnam: Liability classification upon equitization of state-owned enterprises

According to Circular No. 41/2018/TT-BTC of the Ministry of Finance of Vietnam, the equitized enterprise shall compare, verify and classify liabilities and make lists of debtor and creditor-based liabilities at the date of enterprise valuation and the following contents:

1. Accounts receivable:

- Compare and verify debts receivable of each debtor including:

+ All debts that are due, not due or overdue.

+ Bad debts identified as overdue debts specified in the contracts and undue debts of business entities (such as sole proprietorships, cooperatives and credit institutions) going bankrupt or going through formalities for dissolution or of debtors that are missing, prosecuted, on trial, or escaping or serving a sentence or dead.

- Review all contracts to determine advances paid to suppliers of goods and services that have been recorded as business expenses, including payments for house rents, land rents, purchasing goods, long-term insurance, salaries, wages, etc.

- If debts cannot be compared and verified despite sufficient documents at the date of enterprise valuation, the equitized enterprise must notify it to a competent authority for considering and handling.

2. Accounts payable to organizations or individuals including due debts, undue debts and overdue debts at the date of enterprise valuation:

- Based on contracts, debit notes, check and make a list of creditor-based loans; determine tax debts and other payables to state budget, analyze loans under loan agreements (domestic or foreign loans), secured loans, loans from bond issuance; undue, due or overdue debts; principals, interests, debts not required to be repaid.

- Debts not required to be repaid include:

+ Debts to bankrupt or dissolved enterprises but agencies or individuals inheriting rights as creditors cannot be identified according to bankruptcy or dissolution plans.

+ Debts to a dead person whose legal heirs cannot be identified.

+ Debts to other creditors that are overdue but not verified by such creditors.

Circular No. 41/2018/TT-BTC of the Ministry of Finance of Vietnam takes effect from June 18, 2018.

- Thanh Lam -

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