GOVERNMENT DECREE No
GOVERNMENT DECREE No. 120-CP ON THE 17th OF SEPTEMBER 1994, PROMULGATING THE PROVISIONAL REGULATIONS ON THE ISSUE OF BONDS AND SHARES OF STATE-OWNED BUSINESSES
Proceeding from the Law on Organization of the Government on the 30th of September, 1992,
At the request of the Minister of Finance and the Directors of the branches concerned,
To issue together with this Decree, the Provisional Regulations on the issue of bonds and shares of State-owned businesses, except the State banks, for experimental purpose.
The Minister of Finance is responsible for guiding the implementation of the Regulations enclosed with this Decree and selecting the pilot businesses.
The Governor of the State Bank shall select the State-owned Commercial Banks and Investment and Development Banks and shall guide them in experimental issue of bonds.
After one year of trial operation, the Minister of Finance and the Governor of the State Bank shall review it, summarize experiences, supplement and perfect the statutory provisions, and submit them to the Government for consideration and for promulgation of the official Regulations together with other statutory provisions on stock and the stock exchange market.
Article 3.- This Decree takes effect as from the 1st of October 1994.
Article 4.- The Ministers, the Heads of State agencies of ministerial level, the Heads of agencies attached to the Government, and the Presidents of the People's Committees of provinces and cities under the Central Government are responsible for implementing this Decree.
On behalf of the Government
For the Prime Minister
Deputy Prime Minister,
PHAN VAN KHAI
PROVISIONAL REGULATIONS ON THE ISSUE OF BONDS AND SHARES OF STATE-OWNED BUSINESSES
(issued together with Government Decree No. 120-CP on the 17th of September, 1994).
Bonds of State-owned businesses are chits acknowledging time and interest-bearing debts issued by State-owned businesses to borrow capital to invest in expanding the scale of production and business or in renewing their equipment and technology.
Article 2.- Shares of State-owned businesses are chits acknowledging the capital of share-holders issued by State-owned businesses to mobilize capital for State-owned businesses in operation or to establish new businesses of which the State is the founder.
Article 3.- The bonds and shares of State-owned businesses are bought and sold in the Vietnamese Dong. In case the buyer of bonds has only gold or a foreign currency, it will be converted into the Vietnamese Dong at the exchange rate or gold price announced by the State Bank at the time of buying.
Article 4.- Bonds and shares of State-owned businesses can be bought, sold, transferred, inherited, and used as collateral in credit relations; they shall not be used as substitution for cash in payment or as tax payment to the State.
Article 5.- The following are eligible to buy bonds and shares of State-owned businesses:
a) All Vietnamese citizens within and outside Vietnam and foreigners working and residing in Vietnam.
b) Vietnamese businesses in all economic branches and sectors.
With regard to State-owned businesses, the Commercial Banks, financial companies, credit organizations, the Insurance Company, the insurance funds and the investment funds, the buying of bonds and shares of State-owned businesses is done in accordance with the regulations of the Ministry of Finance and the State Bank.
c) Associations and mass organizations.
d) Foreign-invested businesses operating in accordance with the Law on Foreign Investment in Vietnam which are permitted by the Vietnamese Government to buy bonds and shares.
e) State institutions, armed forces units and social organizations are strictly forbidden to buy bonds and shares of State-owned businesses with State-allocated funds.
Article 6.- The State-owned businesses which issue bonds and shares are obliged:
- To fully pay principal and interest in time to share-holders;
- To pay dividends to share-holders, and the remaining value of shares in case a business is dissolved, merged, or declared bankrupt.
Bonds and shares of State-owned businesses are issued in the following ways:
a) Directly at State-owned businesses.
b) Through the intermediary of financial organizations which act as agents: The Commercial Bank, the Financial Company, the Insurance Company.
Those agents which distribute bonds and shares of State-owned businesses are entitled to a distribution fee set by the Ministry of Finance.
c) The distribution of bonds of State-owned businesses can be made at a bidding in accordance with the regulation issued by the Ministry of Finance. The organization which wins the bidding may re-sell bonds to those stipulated at Article 5 of these Regulations.
Those State-owned businesses which want to issue bonds and shares must fully meet the conditions set in Article 18 and Article 25 of these Regulations, and must send to the Ministry of Finance a dossier asking for permission to issue bonds and shares as stipulated at Article 19 and Article 26 of these Regulations.
Article 9.- Within 45 days after it receives a file asking for permission to issue bonds and shares of State-owned businesses, the Ministry of Finance must consider and grant a license for the business concerned to issue bonds and shares. In case the business concerned does not meet the conditions for issuing bonds and shares, the Ministry of Finance must notify if of the reason.
Article 10.- Within 30 days after receiving the permission to issue bonds and shares of State-owned businesses, the State-owned business concerned must publicly announce the contents concerning the issue of bonds and shares through the mass media and carry out the plan of issuing bonds and shares as approved.
Article 11.- If the time limit set for the issue of one or more series of bonds and shares expires as indicated in the permit, but the amount of investment capital expected has not been fully collected, the State-owned business concerned may request the Ministry of Finance to extend the time limit, but this time limit shall not necessarily be extended till the business has collected the full amount.
Article 12.- After closing the issue of a series of bonds and shares, the State-owned business concerned is obliged to report the results to the Ministry of Finance and the State managing office at the higher level.
Article 13.- All the proceeds from the issue of bonds and shares of State-owned business must be fully accounted for in accordance with the State's regulations currently in force, and must be used for the purpose of the project already approved. The business concerned must regularly report it to the Ministry of Finance.
Article 14.- The owners of bonds and shares are responsible for any damage or loss of the bonds and shares of State-owned business which they have bought. With regard to the loss of signed bonds, if the owner can prove his ownership of the bonds and if the bond has not been fraudulently cashed by another person, it will be repair when due.
The owners of bonds and shares can leave their bonds and shares at the Commercial Banks for safe keeping and must pay a fee as stipulated by the Ministry of Finance.
Article 15.- Any forgery and distribution of counterfeit bonds and counterfeit shares shall be punished in accordance with law in the same way as the forgery and circulation of counterfeit banknotes.
THE ISSUE OF BONDS OF STATE-OWNED BUSINESS
Article 16.- There are two kinds of bonds of State-owned business: signed or unsigned with a term of one year or longer. The buyers of bonds of State-owned business can choose the most suitable form and buy an unlimited number of bonds.
Article 17.- The buyers of bonds of State-owned business are guaranteed to enjoy a positive interest rate allowing for the inflationary rate and the benefits of the business's production and business operations.
The Ministry of Finance shall together with the State Bank set the interest rate of bonds of State-owned business in the following forms:
1/ A fixed interest rate for the whole term of bonds.
2/ A fixed interest rate for each year of the term of bonds.
3/ An interest rate suggested for organizing a bidding to choose a suitable interest rate for bonds.
Article 18.- Those State-owned businesses which want to issue bonds must satisfy the following conditions:
1/ To have a license for production and business.
2/ To operate the investment project with efficiency, and this is to be verified by the sponsoring organization.
3/ To have made profits in its production and business during the three years before the business applies for permission to issue bonds, to have sound financial accounts and a good prospect for development.
4/ To make no violation of State laws and financial discipline.
5/ To have a guarantee from the Ministry of Finance or a prestigious intermediary financial organization.
6/ To hand in collateral to the guaranteeing organization. The procedure of handing in collateral and returning it is stipulated by the Ministry of Finance.
Article 19.- A State-owned business which wants to issue bonds must send a dossier to the Ministry of Finance, including:
1/ The investment project ratified by the authorized institution.
2/ The plan of issuing bonds of the State-owned business.
3/ An application for issuing bonds.
4/ An application to the Ministry of Finance for guarantee in accordance with the form issued by the Ministry of Finance, or a guarantee contract with a financial organization.
5/ The financial reports of three consecutive profitable years before applying for the issue of bonds which has been verified by an audit organization or an institution authorized to ratify financial statements of accounts.
Article 20.- The transfer of ownership of bonds with a signature and the re-payment of bonds when they are due, are to be done at the place of issue or at places convenient to the owners of bonds. The principal of bonds is repaid when due. The interest of bonds is paid at the set terms or paid wholly when due.
Article 21.- Bonds of State-owned businesses will be repaid from the depreciation funds and from the profits gained by the project invested with proceeds from the issue of bonds after it has paid taxes in accordance with law. If the bonds are due to be repaid and the revenue sources mentioned above are not enough, the State-owned business concerned must repay the bonds from other funds and lawful capital sources; it is prohibited from issuing new bonds to get funds to repay the bonds that are due. After the business concerned has used all available sources without being able to fully repay the bonds, the guaranteeing organization must repay the owners of the bonds when they are due.
Article 22.- The interest of bonds of State-owned businesses and the expense for the distribution of bonds of State-owned businesses are added to the value of the project invested with proceeds from the issue of bonds.
THE ISSUE OF SHARES OF STATE-OWNED BUSINESS
Article 23.- The share-holders have the following privileges and responsibilities:
1/ To take part in the share-holders' congress, to stand for election to the managing board, and to vote by a show of hands on important issues on the amendments and supplements to the Regulations, business plan, and division of dividends...
2/ To receive dividends on the basis of the results of the business's production and business.
3/ To enjoy the privileges in tax payment as defined for the income from dividend in accordance with the current Tax Law.
4/ To bear the risk when the business is dissolved (or bankrupt) in accordance with the Regulations of the business and the Law on Insolvency.
Article 24.- Each share-holder can buy one or more shares, but he/she shall not own more shares than stipulated by the Regulations of the business.
Article 25.- Those State-owned businesses which are permitted to issue shares must satisfy the following conditions:
1/ For businesses currently in operation, only those which have a production and business license and are permitted to be equitized in accordance with the State's regulations are eligible to issue shares.
2/ Newly established businesses must have permission for establishment granted by the authorized institution in accordance with the State's current regulations and must ensure that the value of the State's shares is not less than 30% of the total capital of the business.
The capital generated by the issue of shares must be deposited at the State Treasury while it is not in use. In case the proceeds from the issue of shares are not enough for the establishment of the project, the business must repay the share-holders both principal and interest at the interest rate of treasury bonds.
Article 26.- A State-owned business which wants to issue shares must send to the Ministry of Finance the following dossier:
1/ An application for issuing shares.
2/ The statute of the business.
3/ The production and business plan or an economic and technical feasibility study approved by an authorized institution.
4/ The plan of issuing shares.
5/ A draft announcement for issuing shares according to the stipulations of the Ministry of Finance.
Article 27.- A State-owned business which is permitted to issue shares must:
- Observe all the regulations and procedures on financial management and on financial report as proscribed by law.
- Publicize the plan for the issue of shares, the statute of the business, the results of financial activity, the qualifications of the managing board and other details through the mass media.
- Pay the cost of printing of shares, the fee for the granting of the permit, the fee for distribution agents, and the fee for the deposit of shares as stipulated by the Ministry of Finance.
THE RESPONSIBILITY AND POWERS OF STATE INSTITUTIONS
Article 28.- The Ministry of Finance has the responsibility:
- To coordinate with other ministries, with the production and business managing branches, and with the Presidents of the People's Committees of provinces and cities directly under the Central Government in selecting those State-owned businesses that are eligible to issue bonds and shares, and in granting permits for the issue of bonds and shares of State-owned business.
- To define the forms and procedures for issuing bonds and shares.
- To stipulate the contents for the issue of bonds and shares and check the truthfulness of the information about the business which is to issue bonds and shares.
- To supervise the process of issuing bonds, using the proceeds gained from the issue of bonds, and repaying the bonds.
- To check and supervise the division of dividends and the payment of interest to the share-holders.
- To control the printing of bonds and shares.
- To set the fee for distribution agents (Article 7), the fee for safe keeping of bonds and shares (Article 14), and the expenses for distribution and repayment of bonds and shares of State-owned business;
- To suspend the issue of bonds and shares by those businesses which have violated these Regulations;
- To consider extending the permits for businesses in issuing bonds and shares;
- To check the guarantee for repaying bonds of State-owned business;
- To coordinate with the Vietnam State Bank in announcing the interest rate of State-owned business bonds.
Article 29.- The institution directly responsible for the State management of the business concerned has the responsibility:
- To check and decide the investment project for production and business of the State-owned business concerned, or forward it to the competent level for decision.
- To review the plan for issuing State-owned business bonds and shares and submit it to the Ministry of Finance.
- To supervise the issue of bonds and shares and the use of proceeds for the right purpose and with efficiency.
- To check and supervise the retrieval of investment capital, the repayment of bonds when due, and the division of dividends.
- To cooperate with the Ministry of Finance and the State Bank in reviewing and drawing experiences from the experimental issue of State-owned business bonds and shares.
Article 30.- The State Bank has the responsibility:
- To define the modalities for the buying of bonds and shares by the Commercial Banks and Financial Companies.
- To define the modalities in the use of bonds and shares as collateral in credit relations.
On behalf of the Government
For the Prime Minister
Deputy Prime Minister
PHAN VAN KHAI