Decree 91/2015 on investment and management of State capital will take effect from 1 December 2015 and replace Decree 71/2013 and Decree 09/2009 on the same issues. The following issues arise from Decree 91/2015:

• It is now clear that Decree 9/2009 is no longer valid;

• Decree 91/2015 still fails to clarify if an enterprise could act as an Owner Representative Agency (Cơ quan đại diện chủ sở hữu) which has the authorities to represent the State as the owner of the State capital in another enterprise. On one hand, under Decree 91/2015, Owner Representative Agency is defined to include Ministries, Provincial People’s Committees and organisations established in accordance with laws. Such a broad definition suggests that an enterprise may act as Owner Representative Agency. This is also consistent with Decree 99/2012, which explicitly allows an economic organisation, specifically the State Capital Investment Corporation (SCIC) to represent and manage State capital in enterprises. On the other hand, Decree 91/2015 appears to follow Decree 71/2013 in distinguishing between “State capital invested in other enterprises” (vốn nhà nước đầu tư tại doanh nghiệp khác) and “Outward investment capital of state-owned enterprise” (vốn của doanh nghiệp nhà nước đầu tư ra ngoài doanh nghiệp). The two separate concepts imply that only State agencies such as Ministries or Provincial People’s Committees may act as owners of State capital in an enterprise, whereas capital invested by an enterprise, even a wholly state-owned enterprise, is not regarded as State capital. The issue of whether an enterprise may act as Owner Representative Agency is important to determine if the transfer of capital held by such enterprise is also subject to various pricing and formality requirements which are explicitly applicable to the sale of State capital held by Ministries or Provincial People’s Committees;

• An enterprise wholly owned by the State (100% SOE) appears to be subject to stricter requirement on the grant of guarantees for its subsidiaries. In particular, the concerned subsidiaries are required to have sound financial situations and no overdue debt. In case the guarantee is for a loan used for investment project, such project must undergo review and assessment procedures in terms of efficiency. However, unlike the preceding Decree 71/2013, Decree 91/2015 no longer limits the guarantee percentage for each loan to fall below the ownership level of the 100% SOE in the relevant subsidiaries;

• Decree 91/2015 restates many procedural requirements for the transfer of State capitals in LLCs and JSCs under the current regulations (i.e. Circular 220/2013 of the Ministry of Finance implementing Decree 71/2013, Decision 51/2014 of the Prime Minister on divestment by 100% SOEs, and Decision 41/2015 of the Prime Minister on bidding for large block of shares);

• Owner Representative Agency is required to sell its pre-emption rights to subscribe for new shares of a JSC or make additional capital contribution into a LLC if the Owner Representative Agency decides not to exercise such pre-emption rights. Generally, the sale must be made via public auction with the starting price determined by licensed valuer. That said, if the time limit for exercise of pre-emption rights is determined as insufficient for conducting a public auction then the Owner Representative Agency is allowed to directly negotiate with the investor and determine the sale price of the pre-emption rights. Under Circular 220/2013, only the sale of pre-emption rights in a JSC (not a LLC) is explicitly required to conduct via public auction; and

• Except for the investors acquiring State shares in listed JSCs, the investors of other LLCs/JSCs are strictly required to pay the purchase price within 15 days from the date of publication of auction/competitive offer results or execution of the share purchase agreements.

This post is contributed by Tran Thi Thu Thao, a VILAF associate.