Guidance on the process for transformation of public non-business units into joint stock companies in Vietnam

According to the Appendix attached to the Decree No. 150/2020/NĐ-CP of Vietnam’s Government, the process for transformation of public non-business units into joint stock companies include the following steps:

Step 1. Developing the transformation plan

- Establishing the Steering Committee and assisting group.

+ Based on the list of public non-business units belonging to ministries/sectors/localities approved by the Prime Minister, the agency competent to decide on the conversion of public non-business units shall decide to establish the Steering Committee, the plan and roadmap for implementing the transformation;

+ The Head of the Steering Committee shall select and issue a decision to establish a specialized assisting group to convert non-business units into a joint stock company within 5 working days from the date of issuance of the decision to establish the Steering Committee.

- Preparing of documents: The Steering Committee directs the assisting group to coordinate with the converted public non-business unit in preparing relevant documents and records, including:

+ Legal documents on the establishment of public non-business units;

+ Legal documents on assets, sources of capital and debts of public non-business units;

+ Financial statements and tax finalization reports of the converted public non-business units up to the time of unit valuation;

+ Making estimates of conversion costs according to the prescribed regime;

+ The land use plan of the public non-business unit being managed in accordance with the provisions of the land law, the law on rearrangement and handling of state-owned houses and land in each period approved by competent state agencies;

+ Making the list and plan for the use of employees under management;

+ Choosing the method and form of unit valuation, choosing the time to determine the unit value in accordance with conditions of public non-business units and guiding documents related to the conversion of public non-business units into joint stock companies.

- The Steering Committee directs the assisting group to coordinate with the public non-business unit in preparing relevant dossiers and documents and submitting them to the competent authority specified in Article 39 of this Decree for approval of the cost estimate for conversion and decision on selection of conversion consultant according to the prescribed regime.

- Organizing inventory, handling financial issues and organizing valuation of public non-business units.

+ The public non-business unit shall coordinate with the consulting organization to conduct:

• Inventory and classify assets and make financial and tax finalization, and coordinate with relevant agencies in handling financial issues up to the time of determining the value of the converted public non-business unit;

• Organizing valuation of public non-business units.

+ The Steering Committee directs the assisting team to coordinate with the converted public non-business unit and organize the consulting organization to determine the unit's value according to regulations. In case the consulting organization has a valuation function, it can hire a package to prepare the conversion plan, determine the value of the converted public non-business unit, and organize the sale of shares.

- Decide and announce the value of converted public non-business units.

+ The Steering Committee shall verify the results of inventory and classification of assets and the results of determining the value of the converted public non-business unit, and report it to the competent authority specified in Article 39 of this Decree for decision to announce the value of converted public non-business units;

+ With regard to public non-business units within the scope of auditing specified in Article 30 of this Decree, the Steering Committee shall submit to the agency competent to decide on the value of public non-business units specified in Article 39 of this Decree, and send a written request to the state audit agency to audit the results of valuation consultancy and handle financial issues before officially announcing the value of the converted public non-business unit;

+ The decision on announcement of the value of the converted public non-business unit must clearly state the debts handed over to the Vietnam Debt and Asset Trading Corporation and properties handed over to ministries, ministerial-level agencies, government-attached agencies, provincial-level People's Committees, Hanoi National University, and Vietnam National University Ho Chi Minh City.

- Complete the transformation plan and submit it to the competent authorities for approval.

+ Based on the decision on announcement of the value of public non-business units and the actual situation of the public administrative units, the Steering Committee directs the assisting group to coordinate with the public non-business units in transforming, organizing consulting on the construction of a plan to transform public non-business units. The conversion plan must include the following basic contents:

• Current status of public non-business units at the time of unit valuation;

• Results of determining the value of converted public non-business units and issues that need to be further handled;

• Conversion form and charter capital according to the requirements of production and business activities of the joint stock company;

• Charter capital structure, starting price and method of issuing shares according to regulations;

• Draft of the Charter on organization and operation of the joint stock company in accordance with the provisions of the Law on Enterprises and current legal documents;

• The labor rearrangement plan has been approved by the competent authority;

• The plan for production and business activities for the next 3-5 years (including the plan for management and exploitation of public assets assigned to the enterprise for management, which is not included in the state capital component of the enterprise);

• The land use plan has been approved by the competent authority.

+ The Steering Committee directs the assisting group and the converted public service provider to coordinate with the consulting organization to publicize the transformation plan and send it to each department in the unit for study before organizing the labor conference. After the labor conference, the assisting group and the converted public non-business unit shall coordinate with the consulting organization to finalize the transformation plan for submission to the competent authority specified in Article 39 of the Decree on the date of approval.

+ The Steering Committee appraises the conversion plan and reports it to the competent authority for approval.

• In case, after re-valuation, the converted public non-business unit no longer has state capital or the financial handling leads to negative state capital, the Steering Committee shall report to the transformation decision-making body to consider stopping the conversion of public non-business units into joint stock companies. The agency deciding on the transformation shall choose another form of arrangement as prescribed by law for public non-business units;

• In case the plan for production and business activities in 3-5 years after conversion according to the ground level of the value of the public non-business unit is re-determined and according to the financial mechanism, the accounting regime of the enterprise is not feasible, the Steering Committee shall request the public non-business unit to adjust the conversion plan. In case the conversion plan is adjusted but still cannot ensure the ability to continue providing public administrative services of the enterprise converted from a public non-business unit, the Steering Committee shall report to the competent authority to consider stopping the conversion of public non-business units into joint stock companies.

Step 2. Organizing the implementation of the transformation plan

- The Steering Committee directs public non-business units to coordinate with intermediary consulting organizations to organize the sale of shares according to the approved and regulated conversion plan.

- The Steering Committee directs public non-business units to sell preferred shares to employees and organize trade unions at the unit (if any) according to the approved plan.

- Based on the results of the general sale of shares to the subjects specified in the conversion plan, the Steering Committee shall direct the converted public non-business unit to pay revenues from the conversion of the public non-business unit in accordance with regulations.

Note: In case all shares are not sold to the subjects in accordance with the approved conversion plan, the Steering Committee shall report to the agency that decided to approve the equitization plan to issue a decision to adjust the size and structure of shares of the application.

- The Steering Committee shall report to ministries, ministerial-level agencies, agencies attached to the Government, Provincial People's Committees, Hanoi National University, Vietnam National University Ho Chi Minh City for decision to appoint a person to act as the representative of the capital portion in the state-owned joint stock companies to continue participating in the joint-stock company and be responsible for performing the rights and obligations of the representative of the state capital portion in accordance with the law.

Step 3. Completing the transformation of a public non-business unit into a joint stock company

- Organizing the first General Meeting of Shareholders and registering the business.

+ The Steering Committee directs the assisting group, the representative of the state capital portion (if any) and the enterprise to hold the first General Meeting of Shareholders to approve the organization and operation charter, business plan, electing the Board of Directors, Board of Supervisors and executive apparatus of the joint stock company;

+ Based on the results of the first General Meeting of Shareholders, the Board of Directors of the joint stock company shall register the enterprise in accordance with regulations.

- Organizing settlement and handover between the public non-business unit and the joint stock company.

+ Within 90 days from the date of first issuance of the Business Registration Certificate, the Steering Committee directs the assisting team and the enterprise to prepare financial statements at the time the joint stock company is granted the certificate of business registration for the first time, conduct tax finalization, audit financial statements, settle equitization costs, and report to ministries, ministerial-level agencies, agencies attached to the Government, provincial People's Committees, Hanoi National University, Vietnam National University Ho Chi Minh City;

+ Based on the results of re-determination of the value of the state capital portion at the time of enterprise registration of the agency representing the owner, the Steering Committee directs the assisting group and the enterprise to organize the handover between the converted public non-business unit and the joint stock company;

+ Organizing the launch of the Joint Stock Company and making announcements on the mass media according to regulations.

Note: During the implementation process, the agency that decides to convert the public non-business unit, the Steering Committee, the assisting group and the public non-business unit may carry out many steps at the same time to speed up the transformation of a public non-business unit into a joint stock company.

Le Vy

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