Could SOEs dissolve after 3 straight years of loss?

Picture for illustration.

According to the Draft, the condition to establish an SOE as a One member limited company includes sectors, fields, areas of operation under the State capital investment as prescribed by law, ensure charter capital of at least 100 billion vnd with well-formed documents and approved by the Prime Minister, and the establishment of the SOE is in accordance with the plan, strategy development of the sector, field and economic region.

For the establishment of economic groups, the draft rules for State owned economic groups are that the companies of the group must meet the requirements of: having main business sectors in manufacturing, supplying products, or the services sector which is particularly important for ensuring national economic security; The parent company in the economic group must be an SOE with charter capital of at least 10 trillion vnd.

Each economic group must have at least 50% of its subsidiaries operating in key areas of the main business sector and the total value of shares, the parent company’s equity in those subsidiaries is at least 60% of the parent company’s total invested capital in its subsidiaries and affiliates.

The Draft Decree also regulates that SOEs are only sold when the sale is approved by the Prime Minister in the general scheme on arrangement with 100% State owned capital and the enterprise is subjected to equitization in the Scheme but can not implement equitization.

The sale of the business after paying into the State budget for the value of land use rights (if any) is used for paying the costs which serve for the sale of business, and the implementing policies for the sale of the business’s employees. The rest is paid into the Enterprises Restructuring Fund of the parent company in the case of the sale of its subsidiaries, the dependent bodies on the parent company are paid into either One member limited company in the case of sale of the One member limited company’s enterprise, or the Enterprises Restructuring Fund in the case of the sale of One member limited company.

For dissolving SOEs, the Draft rules state that SOEs are considered to be dissolved when: the expiration of operation written on the charter of the company without expansion decision; Having a revoked Business Registration Certificate; Having 3 years in a row of loss and accumulated loss by ¾ of State capital or more but not yet fallen into bankruptcy; or the enterprise does not complete the tasks assigned by the State in 2 consecutive years after applying necessary measures and maintaining the company’s operations.

The Draft also stipulates that the enterprise can only be guaranteed to dissolve when it pays off its debts and other obligations of its assets. SOEs dissolution must be in accordance with the general scheme on arrangement, reform, restructure of SOEs approved by the Prime Minister. If SOEs dissolution has not been defined in the scheme, the authority which decided to establish the SOEs must submit to the Prime Minister to consider and make a decision.