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Tightening the management over investment of the state capital

On 25/12/2017, the Government enacted Decree No. 147/2017/ND-CP (“Decree 147”) on amending Decree No. 151/2013/ND-CP (“Decree 151”) on the functions, tasks and operation mechanism of the State Capital Investment Corporation (SCIC). Accordingly, Decree 147 tightened the management over investment of the state capital.

Cases disallowed to invest with state capital

Decree 147 expands the scope of related persons in the regulation on non-investment cases including investment, contribution capital, share purchase, purchasing the whole other enterprise in which its managers, representatives are spouses, biological parents, step parents, biological children, foster children, siblings, brothers-in-law, sisters-in-law of the Chairman and member of the Council of Members, Controllers, General Director, Deputy General Director and chief accountant of SCIC.

In addition, SCIC is not allowed to contribute capital with its subsidiaries to establish joint stock companies, limited liability companies or sign business cooperation contracts.

Restricting the authority to decide an investment

In accordance with Decree 151, SCIC is allowed to proactively decide an investment in Group A and B projects under the list annually approved by MOF and other projects. However, under the amended Decree 147, the Prime Minister will decide the investment policy for projects under its authority in accordance with the Law on Investment; the MOF is authorized to decide the investment policy for the projects capitalized at more than 25% of the equity or above the capital level of Group B project. SCIC conducts the aforesaid project only after the approval of the investment policies by the competent authorities and is eligible to be proactive in deciding investment in projects capitalized at at a maximum of 25% of the equity.

Starting prices upon sale of the state capital

Decree 147 affirms that the starting price upon sale of the state capital consists of the value of intellectual property rights and other tangible assets (if any) of an enterprise at the time of selling capital.

In order to ensure transparency and accuracy in determining the starting price upon sale of the state capital, Decree 147 requires that the actual value of the state capital in the enterprise must be fully reflected, including not only the value generated by the value of the land use right allocated by the State or properly transferred in accordance with the land law (as regulated in Decree 151) but also that of the intellectual property rights and other intangible assets (if any) of the enterprise as prescribed by law at the time of selling the capital.

Specifying the time limit for transfer of the right of the state owner’s representative

Pursuant to Decree 151, the transfer of the rights of the state owner’s representative must be implemented immediately after these enterprises complete their equitization or conversion into limited liability companies without a specific time limit.

Through Decree 147, this time limit is stipulated as follows:

  • meaning the time limit shown in the Decision or within 30 working days of the date of written approval by the Prime Minister for the cases within the authority of the Prime Minister;
  • within 30 working days of the date of completing the announcement of the actual value of the state capital at the time of issuing the first Enterprise Registration Certificate to a joint stock company converted from an independent 100% state owned enterprise;
  • within 30 working days of the effective date of this Decree or within 30 working days of the date of issuing the first Enterprise Registration Certificate to the enterprises subject to transfer.

Decree 151 takes effect from 25/12/2017.