Conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam

Conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam
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Below are the conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam.

Conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam
Conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam (Internet image)

1. Conditions for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam

According to Article 33 of Decree 23/2022/ND-CP, a wholly state-owned enterprise may be converted into a multi-member limited liability company if:

- It meets the same conditions as those for equitization of enterprise (except conversion of agricultural enterprises and forestry enterprises).

- It is subject to the Prime Minister’s consideration and decision in case the number of capital contributors is limited because of national defense and security reasons or other cases.

Conversion of a wholly state-owned enterprise into a multi-member limited liability company shall be carried out by transferring a part of state capital at converted enterprise.

2. Contents of plan for conversion of a wholly state-owned enterprise into a multi-member limited liability company in Vietnam

Contents of plan for conversion of a wholly state-owned enterprise into a multi-member limited liability company in Vietnam according to Article 35 of Decree 23/2022/ND-CP include:

- The actual status of the enterprise at the time of enterprise valuation.

- Enterprise valuation results and issues that need to be dealt with.

- Criteria for selection of investors receiving transfer of state capital in connection with business lines, scope of operation, financial capacity, administration capacity, technology and market.

- Charter capital required for the enterprise’s business operations.

- Structure of charter capital, starting price and method of transfer of state capital which adhere the following principle: Based on scale, business lines and development requirements, the minimum amount of capital to be received by each investor must be determined so as to ensure that no more than 50 investors will be selected as prescribed by the Law on enterprises. The provision on minimum amount of capital to be purchased by each investor included in the conversion plan shall abide by the principle of equality for investors of all economic sectors.

- The draft charter on organization and operation of the multi-member limited liability company that is drawn up in accordance with the Law on enterprises and other legislative documents in force.

- The plan for rearrangement of existing employees.

- The business plan for the following 3-5 years.

- The land use plan approved by a competent authority.

3. Rules for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam

Rules for conversion of wholly state-owned enterprises into multi-member limited liability companies in Vietnam according to Article 34 of Decree 23/2022/ND-CP are as follows:

- Financial settlement, determination and adjustment of enterprise value, use of valuation consulting service, determination of starting price and formulation of the conversion plan shall comply with the Government’s regulations on conversion of wholly state-owned enterprises into joint-stock companies.

- Based on the structure of charter capital, offering rate and criteria for selection of investors approved by competent authorities under the Plan for conversion of a wholly state-owned enterprise into a multi-member limited liability company, an auction shall be conducted to transfer state capital in accordance with regulations on conversion of wholly state-owned enterprises into joint-stock companies. Successful bidders shall be selected in descending order and limited to 50 investors as prescribed in Clause 5 Article 35 of Decree 23/2022/ND-CP.

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