1. The procedure of state divestment invested in the joint-stock company and multiple-member limited liability companies
1.1. State divestment principles
– According to criteria for the classification of state enterprises following the law;
– Must adhere to the principle of the market, public dis
closure, transparency, and conservation of state investments of state enterprises that held 100% of charter capital at the highest level as well as maximum restriction on losses incurred from the transfer of investments
1.2. State divestment principles
After the Prime Minister releases the list of state enterprises subject to restructuring in stages, the enterprise having transferred state capital conducts the following procedure hereafter:
a. Determination of start price
The owner’s representative entity hires an accredited price assessment organization to determine the start price and ensure compliance with regulations on price assessment.
b. The owner’s representative entity hires an accredited auctioning organization or another consultancy organization that provides services related to the state divestment to organize necessary activities of transfer of state enterprise’s capital invested.
c. Approach to the state divestment
– In joint-stock companies which have been listed or register their transactions on stock exchanges: carry out approaches to trading of shares on stock exchanges
– In joint-stock companies which have not been listed yet (or have listed or registered their transactions in securities markets, but not on stock exchanges): carry out in order of the open auction approach; the competitive bidding; the arrangement approach.
– At multiple-member limited liability companies:
+ The owner’s representative entity requires that companies repurchase state enterprise’s contributed capital in these companies;
+ In case companies refuse to buy state contributed capital after receiving the request for this from these state enterprises, the owner’s representative entity shall be entitled to transfer part or all of contributed capital at the ratio equivalent to their portion of contributed capital at companies based on valuation results;
After company members refuse to buy or do not buy it up, the owner’s representative entity may transfer capital according to the transfer approach which is the same as the approach applied to the state divestment at joint-stock companies that have not yet been listed or registered their transactions on stock exchanges.
d. Establish the plan for the state divestment
e. Organize to carry out the state divestment
f. Report on divestment results at multiple-member limited liability companies
Within the permitted duration of 15 days after completion of the state divestment, the owner’s representative entity shall report on divestment results and send such report to the Ministry of Finance
g. Periodic review reports on state divestment
Within the maximum duration of 15 working days after the end of each quarter, the owner’s representative entity shall be responsible for reporting to the Ministry of Finance on the results of the state capital divestment in enterprises according to the approved list of transferrable capital
2. Problems and inadequacies in state divestment
– Inconsistency between companies’ charter and auctioning regulations:
In some companies (such as foreign-invested capital companies), there are some regulations about limiting transferring shares, and capital contribution as a condition for transferred investors in their Charter or Shareholder’s agreement. For example, the transfer of the capital of Shareholders/members must be agreed upon by other Shareholders/members.
However, according to the Law on Property Auction, besides the conditions for registering to participate in the auction as prescribed by law, the person having the auctioned asset or the asset auction organization is not allowed to place additional requirements, against auction participants.
– Inconsistency between the Enterprise Law and regulations on state divestment at multiple-member limited liability companies:
According to the law, before transferring the state capital to other members of the Company, the owner’s representative entity must request the Company to repurchase the contributed capital.
Meanwhile, according to the provisions of the Enterprise Law, the state divestment at multiple-member limited liability companies must give priority to the transfer to the members of the company and the request for the company to repurchase can only be done in certain cases when a member votes against a resolution of Board of Directors.
Thus, it can be seen that state divestment, depending on the specific case and time, will have very complicated problems. Not only that but state divestment also needs to ensure both of the following criteria: compliance with legal regulations and the achievement of the goal of recovering state capital at the highest level, avoiding losses in state divestment.
DTLaw is a unit with many years of experience in consulting related to the state capital and state-owned enterprises. In case, customers have needs, please contact us for specific advice, review, and evaluation.