CIRCULAR

PROVIDING GUIDELINES ON REGULATIONS ON CAPITAL CONTRIBUTION AND PURCHASE OF SHARES BY FOREIGN INVESTORS IN VIETNAMESE ENTERPRISES

Implementing Decision 36/2003/QD-TTg of the Prime Minister of the Government dated 11 March 2003 issuing Regulations on Capital Contribution and Purchase of Shares by Foreign Investors in Vietnamese Enterprises (hereinafter referred to as the Regulations issued with Decision 36), the Ministry of Finance hereby provides the following guidelines on a number of financial issues:

I. GENERAL PROVISIONS

1. Applicable entities and governing scope:

1.1. This Circular shall apply to the following entities:

- Foreign investors contributing capital to and purchasing shares in Vietnamese enterprises as stipulated in article 2 of the Regulations issued with Decision 36/2003/QD-TTg dated 11 March 2003.

- Vietnamese enterprises receiving capital contribution from or selling shares to foreign investors, comprising: State owned enterprises conducting equitization, shareholding companies (including shareholding companies formed as a result of conversion of State owned enterprises as well as shareholding companies established pursuant to the Law on Enterprises), limited liability companies, partnerships, co-operative unions and co-operatives conducting business in sectors, industries and trades which the Prime Minister of the Government determines or authorizes the Minister of Planning and Investment to publish from time to time.

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1.2. Governing scope:

This Circular shall govern activities of capital contribution and purchase of shares by foreign investors in Vietnamese enterprises pursuant to the Law on Promotion of Domestic Investment and in the forms stipulated in article 5 of the Regulations issued with Decision 36.

This Circular shall not apply to activities of capital contribution and purchase of shares by foreign investors pursuant to the Law on Foreign Investment in Vietnam.

2. Level of capital contribution and purchase of shares by foreign investors in Vietnamese enterprises:

The maximum level of capital contribution and purchase of shares by foreign investors in a Vietnamese enterprise shall be thirty (30) per cent of the charter capital of the Vietnamese enterprise.

- Where foreign investors purchase shares in the initial share issue of an equitized enterprise, the capital level shall not exceed thirty (30) per cent of the proposed charter capital in the equitization plan approved by the minister or the head of the ministerial equivalent body (applicable to enterprises under central management) or by the chairman of the people's committee of a province or city under central authority (applicable to enterprises under local management).

- Where a number of foreign investors register to contribute capital or purchase shares at a value higher than thirty (30) per cent of the charter capital of an enterprise, a decision may be made by the enterprise based on the actual situation to select the party(ies) either with or without an auction (the enterprise may itself hold an auction or do so via an intermediary financial organization).

- Where only one foreign investor contributes capital or purchases shares in a Vietnamese enterprise, the maximum level of thirty (30) per cent of the charter capital of the enterprise shall still apply.

3. Authority to make decisions on receipt of capital contribution from and sale of shares to foreign investors:

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- The minister or the head of the ministerial equivalent body shall make the decision in the case of an enterprise under central management.

- The chairman of the people's committee of a province or city under central authority shall make the decision in the case of an enterprise under local management.

3.2. Articles 6.2 and 6.3 of the Regulations issued with Decision 36 shall apply to shareholding companies, shareholders in shareholding companies, limited liability companies, partnerships, co-operative unions, co-operatives and members of such organizations.

II. SPECIFIC PROVISIONS

1. Conducting purchase and sale of shares or making capital contribution:

1.1. Sale of shares:

1.1.1 Applicable to State owned enterprises conducting equitization:

- A State owned enterprise conducting equitization which has the requirement and the ability to attract foreign capital, technology or management experience must determine the value of shares proposed to be sold to foreign investors as part of the initial share sale structure in its equitization plan and submit the plan for approval to the minister or the head of the ministerial equivalent body (in the case of an enterprise under central management) or to the chairman of the people's committee of the province or city under central authority (in the case of an enterprise under local management).

- The initial share structure of an equitized enterprise and the sale of shares proposed to be sold to foreign investors shall be implemented in accordance with article 23 of Decree 64/2003/ND-CP of the Government dated 19 June 2002 on conversion of State owned enterprises into shareholding companies. After determining the number of shares the State must hold, shares for sale at incentive rates to employees of the enterprise, and shares for sale at incentive rates to producers and suppliers of raw materials, the remainder may be sold outside the enterprise, including sales to foreign investors.

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1.1.2. Applicable to currently operating shareholding companies:

- The board of management or the director of the company shall prepare a plan for investment and issuance of additional shares to raise capital, including sales to foreign investors, and submit the plan for decision to the general meeting of shareholders or to the board of management (pursuant to the provisions in the charter on organization and operation of the shareholding company).

If a shareholding company sells treasury shares to foreign investors, the board of management or the director of the company must also prepare a plan and submit it for decision to the general meeting of shareholders or to the board of management (pursuant to the provisions in the charter on organization and operation of the shareholding company).

- In the case of a shareholding company listed on the securities market, the sale shall be a public sale on the securities market in accordance with the laws of Vietnam on securities and the securities market.

- In the case of a shareholding company which is not listed on the securities market, the sale may be held at the enterprise or via an intermediary financial organization established pursuant to the provisions of law. The shareholding company shall be required to make a public announcement by means of the mass media of the sale of shares to foreign investors (the number of shares, proposed selling price, date of commencement, and so forth), including provision of necessary information to foreign investors about the business status of the company and its capital and funds in the year of such report and for the two preceding years. The shareholding company and foreign investors may reach agreement amongst themselves and make the decision on the purchase and sale of shares.

A shareholding company may hire an intermediary financial organization to conduct a sale of shares to foreign investors in accordance with the provisions in Circular 80/2002/TT-BTCof the Ministry of Finance dated 12 September 2002 providing guidelines on auction and underwriting of the issue of shares for sale outside the enterprise.

1.1.3 Applicable to shareholders in shareholding companies: Shareholders in a shareholding company which sell their shares to foreign investors must comply with the provisions of the Law on Enterprises and the provisions of the company charter and must register with the company to ensure that the level of foreign invested capital in the company does not exceed thirty (30) per cent of the charter capital of the enterprise.

1.2. Receipt of capital contribution from foreign investors:

The receipt of capital contribution from foreign investors by limited liability companies, partnerships, co-operative unions and co- operatives shall be implemented in accordance with the provisions in articles 9.2 and 11.3 of the Regulations issued with Decision 36.

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2. Selling price of shares and price of capital contribution:

2.1. Selling price of shares:

- The selling price of shares in the initial share issue of an equitized enterprise shall be determined in accordance with the provisions of Decree 64/2003/ND-CP of the Government dated 19 June 2002 on conversion of State owned enterprises into shareholding companies and of Circulars of the Ministry of Finance 79/2002/TT-BTCdated 12 September 2002 and 80/2002/TT-BTCdated 12 September 2002 providing guidelines for implementation of Decree 64/2003/ND-CP on conversion of State owned enterprises into shareholding companies.

- The selling price of shares in a shareholding company listed on the securities market shall be the share market price.

- The selling price of shares in a shareholding company not listed on the securities market shall be the price agreed between the purchaser and seller, but may not be less than the selling price to domestic investors.

- The selling price of shares belonging to shareholders shall be the price agreed between the shareholder and the foreign investor at the discretion of the shareholder, but may not be less than the share market price (in the case of a company listed on the securities market) or the selling price to domestic investors (in the case of a company not listed on the securities market).

2.2. Price of capital contribution:

- The decision on the price of capital contribution by a foreign investor to become a new member in a limited liability company, partnership, co-operative union or co-operative shall be made by the following entity after agreement with the capital contributing party: by the council of members (in the case of a limited liability company with a number of members), by the owner (in the case of an one member limited liability company), by the capital contributing members (in the case of a partnership), and by the general meeting of the co-operative members (in the case of a co- operative union or co-operative).

- The price for acquisition of the capital contribution share of a member in a limited liability company, partnership, co- operative union or co-operative shall be the price agreed between the member and the foreign investor, but may not be less than the selling price to a member within the enterprise.

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3.1. Information prior to sale of shares and receipt of capital contribution:

Within a time-limit of thirty (30) days prior to conducting a sale of shares to or receiving capital contribution from foreign investors (irrespective of whether an auction is held or the sale is conducted without an auction), the Vietnamese enterprise shall provide essential information, being its name and address, the number of shares for sale or the amount of the capital contribution to be received, and necessary information about the business status of the enterprise and its capital and funds in the year of the report and for the two preceding years; conditions for participating in the auction; payment method and other relevant matters on the mass media (radio, television, central and local newspapers) on a minimum of three consecutive occasions.

3.2. Announcement of results of sale of shares to or receipt of capital contribution from foreign investors:

Within a time-limit of fifteen (15) days of completion of a sale of shares to or receipt of capital contribution from foreign investors, the enterprise concerned shall submit a report to the following bodies:

- A State owned enterprise conducting equitization shall submit its report to the minister or the head of the ministerial equivalent body (applicable to enterprises under central management) or to the chairman of the people's committee of the province or city under central authority (applicable to enterprises under local management).

- A shareholding company, limited liability company, partnership, co-operative union or co-operative shall submit its report to the body which issued its business registration certificate.

4. Rights and obligations of foreign investors:

The rights and obligations of foreign investors shall be implemented in accordance with articles 15 and 16 of the Regulations issued with Decision 36.

III. ORGANIZATION OF IMPLEMENTATION

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FOR THE MINISTER OF FINANCE
DEPUTY MINISTER




Le Thi Bang Tam