CIRCULAR

GUIDING THE ORDER, PROCEDURES AND FINANCIAL HANDLING UPON DISSOLUTION OF STATE ENTERPRISES

In furtherance of Article 15 of the Government’s Decree No. 50/CP of August 28, 1996 on the establishment, reorganization, dissolution and bankruptcy of State enterprises,
The Finance Ministry hereby guides the order, procedures and financial handling upon the dissolution of State enterprises as follows:

I. APPLICATION OBJECTS, SCOPE AND CONDITIONS

1. The objects of application of this Circular shall be State enterprises, including independent State enterprises, corporations, member enterprises of corporations operating under the State Enterprise Law (hereinafter referred to as enterprises), which belong to the subjects of consideration for dissolution.

2. The scope of consideration for dissolution declaration:

Enterprises shall be considered for dissolution in the following cases:

2.1. Upon the expiry of the business duration inscribed in the establishment decisions and the business registration certificates the enterprises do not apply for the extension thereof or are not allowed to extend.

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2.3. The enterprises have suffered from business losses for three consecutive years and the accumulated loss amounts represent three-fourths or over of the State capital at such an enterprise but the enterprises have not yet fallen into the state of losing their capability to repay their due debts and though various financial measures and re-organizational forms have been applied, the loss situation cannot be overcome.

2.4. The public-utility enterprises have failed to fulfill the State-assigned tasks for two consecutive years though necessary measures have been applied.

3. Conditions for consideration of enterprise dissolution: The enterprises which fall into one of the cases prescribed at Point 2 above and ensure their capability to repay their debts and cover dissolution expenses shall belong to the dissolution subjects.

II. ORDER AND PROCEDURES FOR ANNOUNCEMENT OF ENTERPRISE DISSOLUTION

1. Persons proposing the dissolution of enterprises:

- Persons who propose the establishment of enterprises, including the ministers, the heads of the ministerial-level agencies, the heads of the agencies attached to the Government, the presidents of the People’s Committees of the provinces and centrally- run cities, the Managing Boards of the State corporations.

- The Managing Boards or directors (for enterprises without the Managing Boards) of enterprises propose the dissolution.

2. Dossiers of proposing the enterprise dissolution:

+ The written application for dissolution of the enterprise, clearly stating the reasons and conditions for dissolution of the enterprise.

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+ The enterprise’s financial reports for three consecutive years.

+ The report on the production and business situation and the financial situation of the enterprise at the request of the person who has decided on the establishment of the enterprise or the person who has proposed the establishment of the enterprise.

+ The plan on reorganization of the enterprise of the ministry, the branch, Corporation 90, Corporation 91 (for centrally-run enterprises) or the provincial/municipal People’s Committee (for local enterprises).

3. The competence to decide on the enterprise dissolution:

The persons competent to decide on the dissolution of enterprises are those who have decided the establishment of the enterprises.

For enterprises which have been set up under the Prime Minister’s authorization, the dissolution decisions shall be made under the Prime Minister’s authorization.

4. Enterprise-dissolution councils:

a/ Setting up enterprise-dissolution councils:

Upon receipt of dossiers requesting the dissolution of enterprises, the persons competent to dissolve the enterprises (or the authorized persons) shall set up the enterprise-dissolution councils on the basis of using the assisting apparatus of their own and invite specialists knowledgeable about the contents to be evaluated to join in order to examine the dossiers requesting the dissolution of enterprises.

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b/ The enterprise- dissolution councils have the tasks:

To appraise the enterprise-dissolution dossiers for submission to the persons with the competence to decide on the enterprise dissolution to consider and issue announcements on dissolution or non-dissolution of enterprises. The contents of consideration and appraisal shall cover:

- The validity and completeness of the dossiers proposing the enterprise dissolution.

- The enterprises have actually fallen into one of the four cases subject to dissolution, as provided for at Point 2, Section I above. For the third or fourth case, the careful consideration of the already applied measures to provide support for the enterprises is required.

- The enterprise dissolution conditions shall comply with the provisions at Point 3, Section I.

c/ The operation duration of a dissolution council:

The operation duration of a dissolution council shall not exceed 30 days. The dissolution council shall terminate its operation by itself when the announcement on dissolution or non-dissolution of the enterprise takes effect.

5. Enterprise-dissolution announcements

- Within 20 days as from the date the dissolution council is set up, it shall submit to the person competent to decide on the enterprise dissolution the appraisal opinions proposing the dissolution of enterprise. The person competent to decide on the enterprise dissolution shall consider and make a written announcement on the dissolution or non-dissolution of the enterprise.

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+ The name and address of the enterprise undergoing the dissolution.

+ The reasons for dissolution.

+ The date of starting to terminate the production and business operation in order to carry out the procedures for enterprise dissolution.

- An enterprise-dissolution announcement shall be addressed to the following bodies:

+ The person proposing the enterprise dissolution.

+ The enterprise undergoing the dissolution.

+ The superior agency (if any) of the dissolved enterprise.

+ The enterprise finance agency: For central enterprises, it shall be sent to the Finance Ministry (The Enterprise Finance Department); for local enterprises, it shall be addressed to the provincial/municipal Finance - Pricing Services.

+ The tax offices directly managing the collection of tax paid by the enterprise.

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- In case of non-dissolution of enterprises, the reasons therefor must be clearly stated.

III. ENTERPRISE LIQUIDATION BOARDS

1. Setting up enterprise liquidation boards

Right after the enterprise dissolution announcement takes effect, the person who has decided on the enterprise dissolution shall set up the enterprise liquidation board, comprising:

- The director of the dissolved enterprise or the person appointed by the enterprise-dissolution decision maker as the head,

- The chief accountant of the enterprise,

- The representative of the Trade Union organization of the enterprise,

- The enterprise finance body: The representative of the Finance Ministry (The Enterprise Finance Department), for central enterprises; the representative of the provincial/municipal Finance- Pricing Service, for local enterprises.

- Representatives of a number of professional sections of the dissolved enterprise.

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In the process of enterprise liquidation, the enterprise liquidation board shall set up assisting teams. The personnel of the assisting teams shall come from the apparatus of the dissolved enterprise.

2. The enterprise liquidation boards shall have the following powers:

- To use the seals of the dissolved enterprises in service of the liquidation of enterprises according to current regulations.

- In the course of enterprise liquidation, if necessary, to invite Vietnamese or foreign organizations and/or specialists to conduct auditing, expertise machinery, equipment and workshops, determine the remaining value of the enterprises.

3. The enterprise liquidation boards shall have the tasks:

- To notify creditors and relevant organizations in writing of the dissolution of enterprises.

- To draw up enterprise dissolution plans and submit them to the persons who have decided on the dissolution of enterprises for adoption.

- To conduct the liquidation of enterprises according to the approved plans, including the liquidation and handling of unfinished economic contracts, liquidation and sale of assets, recovery of debts, handling of labor, payment of debts

- Where the unfinished contracts can be fulfilled during the dissolution time without affecting the liquidation and handling of assets, the enterprise liquidation boards shall continue to organize the performance of these contracts under decisions of the persons who decide on the dissolution of enterprises.

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4. The operation duration of a liquidation board shall not exceed six months as from the date of its establishment. In cases of application for the extension of the enterprise dissolution duration, the extension must be considered and agreed in writing by the persons who decide on the dissolution of enterprise but the extension duration must not exceed two months.

5. The enterprise liquidation boards and assisting specialists teams, if committing the following violations, shall, depending on the nature and seriousness of their violations, be administratively disciplined or examined for penal liability; if causing property damage, they must pay compensations therefor:

- Making lists of assets untruthfully and not according to the law-prescribed procedures;

- Making lists of creditors and debt amounts untruthfully, groundlessly;

- Organizing auctions in contravention of law provisions;

- Dividing the dissolved enterprises properties not according to the approved plans, not according to the priority order and with unequal payments to creditors;

- Illegally using the dissolved enterprises assets;

- Failing to apply protective measures, thus leading to loss of properties of the dissolved enterprises;

- Making financial reports upon the completion of enterprise dissolution untruthfully;

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6. When the enterprise dissolution has not yet terminated, the directors and chief accountants of dissolved enterprises must not be transferred to other jobs.

IV. PLANS FOR ENTERPRISE DISSOLUTION

1. Within 40 days as from the date the announcement on enterprise dissolution takes effect, the enterprise liquidation board must completely draw up the plan for enterprise dissolution (including the plan on handling of the enterprise’s finance) and submit it to the person who has decided the enterprise dissolution and concurrently to the following agencies for their written comments:

- For central enterprises:

+ The Finance Ministry (the Enterprise Finance Department);

+ The Planning and Investment Ministry.

- For local enterprises:

+ The provincial/municipal Finance- Pricing Services;

+ The provincial/municipal Planning and Investment Services.

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3. Basing themselves on the dissolution plans submitted by the enterprise liquidation boards and the written comments of the above agencies, the persons who have decided on the enterprise dissolution shall consider and approve in writing the enterprise dissolution plans. The time for considering and approving an enterprise dissolution plan shall not exceed 15 days as from the date the plan is received.

V. PRINCIPLES FOR FINANCIAL HANDLING UPON DISSOLUTION OF ENTERPRISES

1. The dissolved enterprises assets are those under their lawful management and use, including the current assets and short-term investments, fixed assets and long-term investments.

2. As from the date the enterprise dissolution announcement takes effect, all undue debts shall be considered due and the calculation of interests on debts shall cease.

3. When conducting dissolution, the assets of the dissolved enterprises, which are transferred to units and individuals, must all be sold at the market prices at the time of transfer.

4. The secured creditors mean creditors whose debts are secured with the assets of the indebted enterprises.

The owners of secured debts shall receive the secured assets at the prices set by the enterprise liquidation boards; if the creditors refuse to receive them, such assets shall be put on auction according to current regulations. The proceeds from the auction thereof must be used for payment to the secured creditors; the surplus amount shall be the properties of the dissolved enterprises while the deficit amount shall be considered unsecured debts and handled like other unsecured debts.

5. Persons who have guaranteed for enterprises to borrow capital and paid debts instead of the enterprises, the debt amounts paid instead shall be considered unsecured debts and settled like other unsecured debts.

6. Assets, capital contributed to joint ventures, business cooperation or for investment outside the enterprises shall be recovered through the transfer of capital amounts contributed to joint ventures or shares to other subjects. Where the operation duration of the enterprise dissolution boards have expired while the enterprises have not yet transferred their capital contributed to joint ventures to other partners, the persons who decide to dissolve the enterprises shall designate other enterprises in replacement thereof after reaching agreement with the joint-venture partners on the principle of ensuring adequate sources for payment to creditors. The designated enterprises shall continue acting as joint-venture partners or liquidate the joint-venture contracts according to the direction of the persons who have decided to dissolve the enterprises.

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1. Within five days as from the enterprise dissolution announcement takes effect, the enterprise liquidation board must publish on newspapers ( 01 central daily and 01 local paper) for three consecutive issues the announcement on cessation of operations of the enterprise and carry out the dissolution procedures. The contents published on the newspapers shall include:

+ Name and address of the to-be- dissolved enterprise.

+ The serial number, date and authority of signing the enterprise dissolution announcement.

+ The date of staring the enterprise dissolution.

+ The request for debt comparisons by creditors, clearly stating the time limit for receiving debt papers. Upon the expiry of the prescribed time limit, for creditors who fail to come for debt comparison, the enterprise liquidation boards shall only consider the payment according to the debt amounts inscribed in the vouchers, accounting books of the enterprises. The liquidation boards shall not be accountable for errors brought about by the creditors’ failure to come for debt comparison.

2. After the enterprise dissolution announcement takes effect, the dissolved enterprises shall have to:

- Terminate their production and business activities, except for cases prescribed in fourth em rule, Clause 3, Section III of this Circular.

- Terminate activities of buying and selling not in service of the dissolution process; pay all debts; as well as of property lease or lending;

- Terminate the signing of new economic contracts;

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3. Within 30 days as from the date the enterprise dissolution announcement takes effect, the enterprise liquidation board must complete the financial report at the time the enterprise dissolution announcement takes effect. This financial report shall be addressed to the person who has decided to dissolve the enterprise, the enterprise finance agency and the tax office of the locality where the enterprise has registered tax payment.

4. Within 60 days as from the date the enterprise dissolution announcement is published on the first paper issue, the creditors must send to the enterprise liquidation board the debt comparison papers clearly stating the secured debt amounts, the partly secured debt amounts and the unsecured debts.

Within 15 days as from the end of the time limit for debt comparison already inscribed in the announcement, the enterprise liquidation board must complete the list of creditors and the payable debt amounts (including secured debts, partially secured debts and unsecured debts); the list of customer debtors and the receivable debt amounts (including the recoverable debts and irrecoverable debts). The enterprise liquidation board shall publicly post up the lists of creditors, or debtors as well as debt amounts at the head-office of the dissolved enterprise.

Within 10 days after the posting up, the enterprise liquidation board shall finalize the list of creditors for use as basis for division of assets of the dissolved enterprise.

5. Within 30 days as from the date the announcement on termination of production and business activities of the enterprise is published on the first paper issue and the dissolution procedure is carried out, the persons who have leased, lent or deposited their assets to the dissolved enterprise must produce papers evidencing their lawful ownership or management over such assets in order to receive them back. If the dissolved enterprise has leased the assets and already paid up the rentals while the leasing term has not yet expired, the lessors must pay back the surplus amount to the lessee as agreed upon in the contract before taking back the assets.

6. The enterprise liquidation boards shall liquidate the asset-leasing contracts and recover the leased, lent, depositedassets. Upon the recovery thereof, the enterprise liquidation boards must produce the enterprise dissolution announcements.

7. The enterprise liquidation boards shall set up valuation teams or hire professional valuation organizations in order to value the whole property of the dissolved enterprises, including pledged or mortgaged assets, for use as basis for property auctions. A valuation team is composed of:

+ The head of the enterprise liquidation board, who acts as the team leader.

+ A representative of the enterprise finance agency participating in the enterprise liquidation board.

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+ A representative of the Technical Section.

If necessary, the head of the Enterprise Liquidation Board may invite a number of specialists knowledgeable about the to be-valued assets from the outside to join the valuation team.

The Enterprise Liquidation Board shall invite the creditor with secured debts to join the team valuing assets to be used as secured objects for such creditor.

The valuation team makes decisions by majority. When the number of votes is split equal, the opinion backed up by the vote of the valuation team’s head shall be the decisive one.

8. The dissolved enterprises assets shall be auctioned through professional auction organizations or publicly by the Enterprise Liquidation Boards in strict accordance with the provisions of the current Regulation on Property Auction. Where many persons offer the same auctioning prices, the creditors of the dissolved enterprises shall be given priority to buy the auctioned assets. When many creditors wish to buy, the one who has a larger total debt amount shall be entitled to by the assets first. The sale of banned assets or those restricted from circulation must comply with the State’s regulations.

The sale of property related to the land use right must comply with the Land Law.

9. Five days at most after the decisions to set up the Enterprise Liquidation Boards come into force, the heads of the Enterprise Liquidation Boards must open accounts at the State Treasury in the localities where the enterprises are headquartered to deposit the proceeds from asset liquidation and/or sale and the recovered debts of the dissolved enterprises. The heads of the Enterprise Liquidation Boards shall be the owners of these accounts.

The whole proceeds from the enterprise dissolution which include the capital in cash, the money earned from asset sale or liquidation and the recovered debts of the dissolved enterprises must be deposited into the accounts of the Enterprise Liquidation Boards right on the date they are collected. Those who deliberately delay such deposits must pay the compensations therefor according to the demand savings interest rates announced by the banks and shall be administratively disciplined depending on their faults.

10. For creditors who have accounts at banks or State Treasury, the heads of the Enterprise Liquidation Boards shall carry out the procedures to transfer the debt repayment money into such creditors accounts. If they have no accounts, the Enterprise Liquidation Boards shall notify the creditors to come for direct receipt thereof or transfer such money by post to the creditors. The postal charges shall be subtracted from the money amounts paid to the creditors.

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1. The whole money amounts earned from the enterprise dissolution, after making payments to the secured creditors, shall be handled in the following order:

a/ Payment of expenses for the enterprise dissolution.

The enterprise dissolution expenses shall include:

+ The expenses associated to the liquidation of economic contracts, expenses for the recovery, transportation, preservation and keeping of assets of the dissolved enterprises;

+ The expenses related to the organization of property auctions;

+ The expenses for arrangement, archival and preservation of documents of the dissolved enterprises and other expenses related to the implementation of the enterprise dissolution. These expenses shall be settled according to the actually spent amounts approved by the heads of the Enterprise Liquidation Boards. The heads of the Liquidation Boards shall be accountable for their decisions.

+ Salaries and wages paid to officials and employees of the dissolved enterprises, who are mobilized to join the Boards for liquidation of the dissolved enterprises and the assisting organizations.

b/ Payment of salaries and wages, social insurance premiums and other prescribed interests to laborers in the dissolved enterprises according to contracts or collective labor agreements and the current regulations of the enterprises.

The regime of and funding for allowances to laborers in the dissolved enterprises shall comply with the provisions in the Government’s Decree No.41/2002/ND-CP of April 11, 2002 on redundant labor regime and other current legal documents.

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The payment to creditors shall be based on the proportion between the total money amount paid each time and the total unpaid debt amount. The Enterprise Liquidation Boards are entitled to prioritize the payment of small debts without complying with the above-said proportion and take responsibility for their decisions.

Example: The proceeds from the assets of a dissolved enterprise in drive I is VND 3,000 million. The enterprise’s debts include the secured debt: VND 1,000 million, the unsecured debt: VND 5,000 million, the dissolution expense, wage debt and social insurance debt: VND 500 million.

The remaining money amount for payment to unsecured creditors shall be: VND 3,000 million - 1,000 million- 500 million = VND 1,500 million.

The proportion between the money amount paid in this drive and the unsecured debt amount shall be VND 1,500 million/ VND 5,000 million = 0.3 (30%).

The payment to creditors shall be effected as follows:

Creditor A has an unsecured debt amount of VND 500 million and shall be paid with: 30% x VND 500 million = VND 150 million.

Creditor B has an unsecured debt amount of VND 1,000 million and shall be paid with: 30% x VND 1,000 million = VND 300 million.

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The money amounts collected in the subsequent drives shall be spent to pay up all the outstanding unsecured debt amounts.

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2. The remaining money amounts after the payment of all debts shall belong to the State Budget. Within five days as from the end of the payment to the creditors, the Enterprise Liquidation Boards shall have to remit all these sums into the State Enterprise Reorganization and Equitization Support Fund.

3. Where the money amount collected from the enterprise dissolution (including the State subsidy amount for payment to laborers) is not enough for the payment of all payable debts, the persons who decide on the enterprise dissolution shall notify the creditors and concerned agencies that the enterprises have fallen into the state of insolvency. So, the handling shall not comply with the provisions on enterprise dissolution but with the procedures for enterprise bankruptcy.

VIII. TERMINATION OF THE ENTERPRISE DISSOLUTION

1. Upon the expiry of the time limit for enterprise dissolution, problems left unsolved, if any, must be reported by the Enterprise Liquidation Boards to the persons who decide the enterprise dissolution for consideration and settlement.

2. Within seven days after the end of the payment to the creditors, the Enterprise Liquidation Boards must make reports on the enterprise dissolution. Such reports shall be addressed to the persons who decide on the enterprise dissolution, the enterprise finance agencies (for the central enterprises, to send them to the Enterprise Finance Department of the Finance Ministry; for local enterprises, to the provincial/municipal Finance-Pricing Services) and the superior managing agencies of the dissolved enterprises.

3. The persons who decide on the enterprise dissolution shall examine the dissolution reports and issue decisions on enterprise dissolution after obtaining the written opinions of the enterprise finance agencies through the dissolution reports.

The enterprise dissolution decisions shall be addressed to the following agencies:

- The persons who decide on the enterprise dissolution (if any);

- The enterprise finance agencies (the Enterprise Finance Department of the Finance Ministry, for the central enterprises; the provincial/municipal Finance-Pricing Services, for the local enterprises);

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- The provincial/municipal Statistical Departments of the localities where the enterprises are headquartered;

- The tax offices directly managing the collection of tax from the enterprises.

4. After the end of the enterprise dissolution process, the entire dossiers and accounting books of the dissolved enterprises, the books related to the enterprise dissolution process must be archived at the agencies which have decided on the establishment of the enterprises strictly according to the regulations on documentation.

IX. IMPLEMENTATION PROVISIONS

This Circular takes effect after its signing for promulgation and replaces Circular No.25-TC/TCDN of May 15, 1997 guiding the order, procedures and principles for financial handling upon the dissolution of State enterprises. Other provisions contrary to this Circular are not valid for implementation.

This Circular shall not apply to cases of merger, division or separation of enterprises or transformation of enterprises into non-business units under decisions of competent authorities.

Any problems or difficulties arising in the course of implementation shall be reported to the Finance Ministry for study and solution.

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APPENDIX

ENTERPRISE DISSOLUTION PLANS

I. PLANS ON HANDLING ECONOMIC CONTRACTS

The total number of economic contracts being performed at the time of dissolution. Of which, the economic contracts to be immediately liquidated and the economic contracts to be possibly continuously performed during the time of enterprise dissolution must be clearly defined.

1. The economic contracts to be immediately liquidated: clearly stating the total revenue or expenses (if any) for the liquidation of contracts.

2. The economic contracts which can be further performed, clearly explaining the following contents:

+ The total contractual value.

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II. PLANS FOR HANDLING ASSETS OF THE DISSOLVED ENTERPRISES:

1. For assets in kind:

+ To inventory and classify the existing assets owned by the enterprises and determine the market value of such assets.

+ The plan on asset liquidation, sale.

+ The plan on handling assets associated to the land use right.

+ The plan on handling assets used as security, mortgage objects.

2. For receivable debts:

+ The total receivable debt amount, classifying them into debts with secured assets, due debts, undue debts, recoverable debts, irrecoverable debts.

+ Debt-recovering measures, duration estimated for debt recovery.

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- Form of assignment

- The expected assignment value...

IV. Financial plans:

A. Money amount expected to be collected from the enterprise dissolution, including:

1. Cash, balances in the deposit accounts (Vietnamese and foreign currencies), value of gold, silver, precious stones and the value of all the payment instruments of the enterprise.

2. The proceeds from asset sale or liquidation (including the assets used as security and mortgage objects).

3. The proceeds from the transfer of capital contributed to joint-ventures, invested outside the enterprises.

4. Money amounts recovered from receivable debts.

5. Other revenues.

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1. Expenses for enterprise dissolution.

2. Expenses for payment to laborers, including payment of wages, social insurance premiums

3. Payment of payable debts of the enterprises.

4. Payment of tax debts and other budgetary debts.

5. Other expenses.

C. Revenue-Expenditure difference (A-B)

V. Plans for handling of labor:

1. The list of regular laborers of the enterprise at the time of dissolution.

2. Plan on arrangement of jobsfor laborers of the enterprises after the dissolution:

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+ Laborers abandoning their jobs according to regimes.

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3. Lists of laborers to whom the enterprises have to pay severance allowances, job-loss allowances under the current regulations. The severance and job-loss allowances must be paid by the enterprises to every laborer according to the current regulations of the State.

VI. Proposals.-

FOR THE FINANCE MINISTER
VICE MINISTER




Tran Van Ta