Conditions and forms of equitization of state-owned enterprises

There are three forms of equitization of state-owned enterprises, including maintaining existing state capital in the enterprise and issuing additional shares to increase charter capital.

Prime Minister Nguyen Xuan Phuc has just signed and issued Decree No. 126/2017/ND-CP of the Government on conditions and forms of equitization of state-owned enterprises.

The state does not provide additional capital.

According to the new regulations, state-owned enterprises include: Single-member LLCs with 100% charter capital held by the State, which are parent companies of economic groups, parent companies of state-owned corporations including state-owned commercial banks, parent companies in parent-subsidiary groups; Independent single-member LLCs with 100% charter capital held by the State; Enterprises with 100% charter capital held by the State that have not yet been converted into single-member LLCs.

One of the two conditions for equitization is that the enterprise must not be state-owned and must hold 100% of the charter capital.

In addition, a single-member LLC with 100% charter capital invested by a state-owned enterprise (level 2 enterprise) is allowed to be equitized when it satisfies the following two conditions:

- Not in the category of enterprises in which the State must hold 100% of the charter capital. The list of enterprises in which the State holds 100% of the charter capital is decided by the Prime Minister in each period.

- State capital remains after financial settlement and re-evaluation of enterprise value.

Decree No. 126/2017/ND-CP clearly stipulates that enterprises, after having been financially processed and re-valued according to regulations, if the actual value of the enterprise is lower than the payable amounts, shall perform as follows:

- For enterprises in the list of enterprises in which the State continues to hold more than 50% of total shares upon equitization according to the Prime Minister's decision, the owner's representative agency shall direct the enterprise to coordinate with the Vietnam Debt Trading Company and the enterprise's creditors to develop a debt trading plan to restructure the enterprise.

In case the debt purchase plan for enterprise restructuring is not feasible and effective, then switch to other forms of conversion according to the provisions of law.

- For the remaining enterprises, the owner's representative agency decides to switch to other forms of conversion according to the provisions of law.

The State does not provide additional capital for equitization, including enterprises according to the Prime Minister's regulations on promulgating criteria, lists, and classification of state-owned enterprises when implementing equitization in which the State holds more than 50% of total shares.

3 forms of shares

Decree No. 126/2017 also stipulates 3 forms of equitization including:

- Maintain existing state capital at the enterprise, issue additional shares to increase charter capital.

- Sell a part of the existing state capital in the enterprise or combine selling a part of the state capital and issuing additional shares to increase charter capital.

- Sell all existing state capital in the enterprise or combine selling all state capital with issuing additional shares to increase charter capital.

According to VnEconomy