Guideline on converting public service units into joint stock companies

Question: What are the new regulations on converting public service units into joint stock companies?

Answer: Decision 22 took effect since August 10, 2015 and stipulates fresh regulations on converting public service units into joint stock companies.

1. Conditions for conservation

Under Decision 22, a Public Service Unit conducts conversion into a joint stock company upon meeting the following conditions:

a)  Ensuring self-sufficiency in the entire regulation cooperation expenses in the most recent year compared with the time of converting or having capacity to ensure self-sufficiency in the entire regular operation expenses after such conversion.

b)   Being on the list of conversion into a joint stock company as decided by the PM.

2.  Form of conversion

The conversion of a public service unit into a joint stock company may follow several forms: (i) Maintaining the existing state capital in public service units, issuing more shares to rise charter capital; (ii) Selling part of the existing state capital; and (iii) any combination of both sale of part of state capital and issuance of more shares to increase charter capital.

IPO shares can be sold through such methods as public auction, issuance underwriting and issuance agreement.

3. Subjects and conditions of share purchase

Domestic investors are not subjected to any restriction on quality upon buying shares of a Public Service Unit, except as members of the Steering Board for equitisation, the intermediary financial institutions, and the individuals directly involved in consulting, valuation, auction organization for the sale of shares of a Public Service Unit are ineligible to participate in the auction to buy IPO shares of such Public Service Unit.

Foreign investors including foreign organizations and individuals defined in the Regulations on capital contribution and share purchase in Vietnamese enterprises by the foreign investors as decided by the PM from time to time with the percentage of ownership as prescribed by the law on equitization and conversion of state enterprises.

Strategic investors including domestic investors and foreign investors qualified for financial capacity, transfer of new technologies, training of human resources and issuance of a written commitment by the competent person on a long term partnership for the benefit of the Public Service Unit.

4.   Preferential policy for the joint stock company converted from a public service unit

Joint stock companies converted from public service units are entitled to the following incentives: (i) Being exempted from the registration fee for the transfer of assets under management and use of a Public Service Unit to a joint stock company;  (ii) Being exempted from the fee for issuing the Business Registration Certificate; (iii) Re-signing the contracts for land lease, lease of buildings and structures of the state agencies under the registration on land and property; (iv) Maintaining and developing welfare funds in kind such as cultural facilities, clubs, dispensaries, nursing homes, kindergartens; (v) the incentives related to scientific, technological activities and socialization encouraging policies still continue to be applied to them like before.