Conditions for establishing a wholly state-owned enterprise in Vietnam

Conditions for establishing a wholly state-owned enterprise in Vietnam (Internet image)

1. Conditions for establishing a wholly state-owned enterprise in Vietnam

According to Article 4 of Decree 23/2022/ND-CP, a wholly state-owned enterprise may be established when all of the following requirements are satisfied:

- The enterprise’s business lines fall within the scope of state investment in business establishment as prescribed in the Law on management and use of state capital invested in manufacturing and business operations of enterprises.

- It has adequate charter capital as prescribed in Article 5 of Decree 23/2022/ND-CP.

+ When being established, the enterprise must have a charter capital of not less than VND 100 billion.

+ If an enterprise engages in a business line requiring the legal capital, in addition to the requirement set out in Clause 1 of Article 5 of Decree 23/2022/ND-CP, the enterprise’s charter capital must not be lower than the legal capital required for that business line.

+ With regard to enterprises that provide essential public products and/or services, or social security services or engage in some business lines, sectors or areas, and require state investment to establish enterprises, the enterprise’s charter capital may be lower than the amount specified in Clause 1 of this Article but shall not be lower than the prescribed legal capital for business lines that require legal capital.

- It has a valid application for enterprise establishment as prescribed in Article 6 of Decree 23/2022/ND-CP.

- The enterprise establishment is conformable with socio-economic development strategies and plans and national sector planning.

2. Application for establishment of wholly state-owned enterprises in Vietnam

Application for establishment of wholly state-owned enterprises in Vietnam according to Article 6 of Decree 23/2022/ND-CP includes:

- In case of an enterprise established under the Prime Minister’s decision, an application for establishment includes:

+ The application form for enterprise establishment;

+ The scheme for enterprise establishment as prescribed in Clause 3 of Article 6 of Decree 23/2022/ND-CP;

+ The draft Charter of the enterprise as prescribed in Clause 4 of Article 6 of Decree 23/2022/ND-CP.

- In case of an enterprise established under decision of the owner’s representative agency, an application for approval of establishment policies submitted to the Prime Minister includes:

+ The application form for enterprise establishment;

+ The scheme for enterprise establishment as prescribed in Clause 3 of Article 6 of Decree 23/2022/ND-CP.

- The scheme for enterprise establishment shall, inter alia, include the following contents:

+ Legal grounds, objectives, and necessity of enterprise establishment;

+ Name, organizational model, and operating duration of the enterprise;

+ Headquarters address, location of business facility and used land area; branches and representative offices (if any);

+ Tasks assigned by the State; business lines; list of products and services to be provided by the enterprise;

+ Assessment of the conformity of the enterprise establishment with socio-economic development strategies and plans, and national sector planning;

+ Market situations, market demands and prospects for each product or service rendered by the enterprise; technologies applied to production and business; production, business and investment plan for a period of 05 years after establishment;

+ Charter capital; estimated total investment (in case of establishment of a wholly state-owned enterprise associated with implementation of an investment project); funding sources and methods of raising funds other than the State initial investment; methods for repaying raised funds; demands and methods for generating working capital;

+ Expected economic - social efficiency;

+ Estimated supply of labour, materials, fuels, technologies and other conditions necessary for the enterprise’s operations after established.

- The draft Charter of the enterprise shall, inter alia, include the following contents:

+ Name and headquarters address of the enterprise; addresses of branches and representative offices (if any);

+ Business lines; operational objectives; tasks assigned by the State;

+ Charter capital and methods for making changes in charter capital;

+ Name and address of the enterprise's owner;

+ Rights and obligations of the enterprise's owner;

+ Organizational structure;

+ Enterprise’s legal representative; division of rights and obligations between legal representatives if the enterprise has more than one legal representative;

+ Voting method for ratifying the enterprise’s decisions; principles for resolving internal disputes;

+ Mechanisms for financial activities, principles for distribution of post-tax profits and settlement of business losses; grounds and methods for determination of remunerations, salaries and bonuses of executives, Board of Controllers, and controllers.

+ Rights and obligations of Chairperson and members of the Board of Members or company’s President, General Director and holders of other managerial positions in the enterprise;

+ Cases of dissolution, procedures for dissolution and liquidation of the enterprise’s assets;

+ Procedures for revising the enterprise’s charter;

+ Other contents which are decided by the authority or organization assigned to perform rights and obligations of the enterprise’s owner but shall not be contrary to regulations of law.

- In case of establishment of a wholly state-owned enterprise associated with formulation of an investment project, investment procedures shall be followed in accordance with the Law on investment.

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