On June 23, 2021, the Ministry of Finance issued Circular No. 46/2021/TT-BTC guiding on financial handling and enterprise valuation when converting a State-owned enterprise/one-member limited liability company with 100% charter capital invested by the State-owned enterprise into a Joint Stock Company (“Circular 46”). Circular 46 replaces Circular 41/2018/TT-BTC.
Accordingly, the financial handling when implementing equitization has some changes compared to Circular 41/2018/TT-BTC and must ensure the following principles:
– For enterprises in which 100% charter capital is held by the State: Must proactively handle financial problems according to current regulations.
– For the land area that the enterprise is not allowed to keep, continue to use but is actually monitoring and using and has no plan to recover it: Report and explanation must be made as a basis for handing over to the competent authority when officially switching to operate under the Joint Stock Company model.
– Not adjust the data in the accounting books and financial statements at the time of enterprise valuation according to the enterprise valuation results decided by the owner’s representative agency and published.
– In case, after having financial treatment and re-determining the enterprise value, the actual value of the enterprise is lower than the payables, the settlement shall be handled according to the guidance of the law.
– When the equitized enterprise is granted the certificate of Joint Stock Company registration for the first time, the enterprise shall prepare financial statements and handle financial matters under relevant laws.
– The process of financial handling and valuation of equitized enterprises must comply with market principles, publicity, transparency, strict assurance, and compliance with State regulations.
– If it is discovered that the inventory is lacking or omitted, leading to a decrease in the value of the enterprise and the state capital in the equitized enterprise, it shall be handled according to regulations.
– The owner’s representative agency is responsible for settling and handling financial issues during the equitization process and arising financial problems (if any) related to the equitization process after officially being transformed into a Joint Stock Company.
– Enterprise valuation consulting organizations: Must determine enterprise value by asset method, and at the same time may choose at least one other enterprise valuation method according to the provisions of the law on prices and appraise the price for submission to the owner’s representative agency for consideration and decision.
– Equitized enterprises must explain and provide information to investors in the equitization plan and prospectus of information on existing assets at the enterprise (infrastructure assets; other assets under management and use; assets being investment works in progress) invested with public investment capital and identified as public assets.
Circular 46 takes effect from August 7, 2021.