DECISION

PROMULGATING THE REGULATION ON SALE OF EQUITIES TO FOREIGN INVESTORS

THE PRIME MINISTER

Pursuant to the Law on Organization of the Government of September 30, 1992;
Pursuant to the Law on Domestic Investment Promotion (amended) of May 20, 1998;
Pursuant to the Government’s Decree No.44/1998/ND-CP of June 29, 1998 on transformation of State enterprises into joint stock companies;
At the proposal of the Minister of Finance,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on sale of equities to foreign investors, which shall apply to the equitized Vietnamese State enterprises and joint stock companies.

Article 2.- The Minister of Planning and Investment, the Minister of Finance, the Chairman of the State Securities Commission, the Governor of the State Bank of Vietnam and the concerned ministries and branches shall guide the implementation of this Decision.

Article 3.- This Decision takes effect 15 days after its signing.

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THE GOVERNMENT




Phan Van Khai

REGULATION

ON SALE OF EQUITIES TO FOREIGN INVESTORS

(Issued together with Decision No.145/1999/QD-TTg of June 28, 1999 of the Prime Minister)

I. GENERAL PROVISIONS

Article 1.- The sale of equities to foreign investors aims to mobilize capital, technologies and enterprise management methods from foreign countries, thus raising the production and business efficiency, the products’ competitiveness and expanding the market for investment in the development of Vietnamese enterprises.

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1. State enterprises which have been equitized;

2. Joint-stock companies and enterprises of other types which have obtained the competent authorities decisions on issuance of shares for their transformation into joint-stock companies.

Article 3.- The terms used in this Decision shall be understood as follows:

1. "Foreign investors" are foreign economic organizations or foreigners owning or purchasing equities of Vietnamese enterprises.

2. "Vietnamese enterprises" are enterprises entitled to sell their equities to foreign investors according to Article 2 of this Regulation.

Article 4.- Foreign investors purchasing equities of Vietnamese enterprises shall have their interests guaranteed by the State of the Socialist Republic of Vietnam and shall have to fulfill their obligations according to this Regulation and other provisions of Vietnamese laws.

Article 5.- The purchase of equities and the overseas transfer of dividends and proceeds from the equity sale by foreign investors shall be effected directly or via Vietnamese financial institutions or banks or foreign ones operating in the Vietnamese territory. The involved foreign investors may open accounts at such financial institutions or banks.

Article 6.- The total value of equities sold by a company to foreign investors must not exceed 30% of such company’s charter capital. In cases where many foreign investors subscribe to equities with a value exceeding 30% of the company’s charter capital, an equity auction shall be organized.

Article 7.- The equities shall be sold to foreign investors in Vietnam dong. Convertible foreign currencies used for purchase of equities shall be converted at the interbank average exchange rates announced by the State Bank of Vietnam at the time the equities are sold.

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Article 8.- Share certificates of foreign investors that purchase equities of Vietnamese enterprises are registered share certificates printed and managed by the Ministry of Finance. The nominal value of one equity inscribed on each share certificate shall be 100,000 Vietnam dong.

Article 9.- The State enterprises selling equities to foreign investors and laborers working therein shall enjoy preferences provided for in Articles 13 and 14 of the Government’s Decree No.44/1998/ND-CP of June 29, 1998 on transformation of State enterprises into joint-stock companies.

II. SPECIFIC PROVISIONS

Article 10.- The enterprise value and the selling price of equities

1. Equities shall be sold at the same price to foreign investors and Vietnamese investors as well. Such price must be accepted by both the enterprise’s owner (seller) and foreign investor (purchaser).

2. For the equitized State enterprises, their directors shall draw up options on the selling price and organize the determination of such enterprises’ value and the value of the State’s capital at such enterprises according to the current regulations, then report them to the immediate managing agencies or the Ministry of Finance for decision.

3. For joint-stock companies, the shareholders’ congress or the board of management shall decide after consulting the issuance underwriting agency and foreign investors.

The price level announced by the competent agencies according to the current responsibility assignment for the equitized State enterprises and/or joint stock companies shall serve as the reserve price when an auction of equities to foreign investors is organized

Article 11.- Issuance of shares

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2. The issuance underwriting organization shall contact each foreign investor to determine: the volume of equities, the equity selling price and other requirements of the issuing enterprise, in order to select foreign investors to purchase such enterprise’s equities.

3. The issuance underwriting organization shall organize an auction according to the current regulations on auction when many foreign investors subscribe to the enterprise’s equities.

4. The level of expenses to be paid to a under-writing organization or an issuance agent shall be agreed upon by the two parties to be included in equitization expenses or present a certain percentage (%) of the total value of the issued shares.

Article 12.- The rights of shareholders being foreign investors

1. To be entitled to participate or not to participate in the management of joint-stock companies according to provisions of the Law on Companies and such joint-stock companies’ organization and operation charters.

2. To be entitled to convert their revenues being dividends or proceeds from the assignment of equities in Vietnam into foreign currency(ies) for overseas remittance after fulfilling their tax obligations prescribed in the Law on Foreign Investment in Vietnam and the current tax laws.

In cases where foreign investors use their dividends for reinvestment in Vietnam, the provisions of the Law on Domestic Investment Promotion shall apply.

3. To be entitled to pledge or mortgage their shares in credit transactions in Vietnam.

4. To be granted multiple exit and/or entry visas during the time they invest in the purchase of equities in Vietnam.

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Article 13.- Shareholders being foreign investors shall fulfill the obligations prescribed in the Law on Companies, the Law on Foreign Investment in Vietnam and the Law on Domestic Investment Promotion of the Socialist Republic of Vietnam and the organization and operation charters of the concerned joint stock companies.

Article 14.- Foreign investors shall only be entitled to assign their shares 3 years (if they participate in the management of joint-stock companies), or one year (if they don’t participate in the management of joint-stock companies) from the date they become owners of such companies’ equities.

III. ORGANIZATION OF IMPLEMENTATION

Article 15.- The order for selling equities to foreign investors:

1. The equitized State enterprises shall draw up their own plans according to the order prescribed in Government’s Decree No.44/1998/ND-CP of June 29, 1998 and the guiding documents of the concerned ministries, which must clearly state: the proportion of equities to be sold to foreign investors, the proportion of the State’s equities (if any) and the proportion of equities to be sold to Vietnamese individuals and legal persons; the share issuance underwriting organizations or agents.

The joint-stock companies shall also have to draw up their own plans for selling their equities to foreign investors according to the above-said contents, then submit them to the People’s Committees of the provinces and centrally-run cities.

2. The plans for equitization and sale of equities to foreign investors shall be submitted to the People’s Committees of the provinces and centrally-run cities or the branch-managing ministries or the managing boards of State corporations established under the Prime Minister’s decisions (corporations 91).

3. The People’s Committees of the provinces and centrally-run cities, the branch-managing ministries and the managing boards of corporations 91 shall have to evaluate each enterprise’s plan, then submit them all to the Prime Minister for decision.

4. After obtaining the Prime Minister’s decisions, the enterprises shall sign contracts with the underwriting agencies and publicize on the mass media the sale of their equities to foreign investors, and shall complete the work within 6 months after the Prime Minister’s decisions are issued.

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THE GOVERNMENT




Phan Van Khai

APPENDIX

THE LIST OF STATE ENTERPRISES OF DIFFERENT BRANCHES ENTITLED TO SELL THEIR SHARES TO FOREIGN INVESTORS
(Issued together with the Prime Minister’s Decision No. 145/1999/QD-TTg of June 28, 1999)

1. Textile and garment.

2. Footwear.

3. Leather processing.

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5. Production of other consumer goods.

6. Production of construction materials.

7. Land-road, inland waterways and container transportation.

8. Production of learning aids.

9. Production of children’s toys.

10. Trading, services, hotels.

11. Mechanical engineering manufacture.

12. Enterprises producing export goods belonging to the goods lines specified above.-