Summary 
On 10 October 2008, the Government of Vietnam issued Decree No. 109/2008/ND-CP ("Decree 109") on the Sale and Transfer of 100% State-Owned Enterprises ("SOE"). Decree 109 provides a master plan for SOE reform and sets out new regulations on the change of ownership of SOE which may be carried out under two forms: sale of SOE and transfer of SOE.
 
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Under Decree 109, sale is defined as the assignment of ownership with payment of money of the whole or a part of the stake held by the State in a SOE to a collective, individual or another legal entity ("Private Investor"); while transfer of SOE refers to the change of ownership without payment of money of the entire stake held by the State in a SOE to its current employees with specification of ownership of each employee ("Employee Collective").

Sale of SOE

Under Decree 109, only those SOEs satisfying the following conditions shall be sold:
a. they fall into the category of enterprises to be sold under the master plan for arrangement of 100% State owned enterprises approved by the Prime Minister; or
b. they fall into the category of enterprises to be equitised under the master plan for arrangement of 100% State owned enterprises, but they are unable to be equitised.
Private Investor allowed to buy stake in a SOE include:
a.  Employee Collective of the SOE;
b. the current employee(s) of the SOE;
c.  Vietnamese and foreign corporate investors, including wholly foreign-invested enterprises,  excluding intermediary foreign financial institutions providing consultancy services for enterprise  evaluation or auction; and
d.  Vietnamese and foreign individual investors.
For SOE operating in the sectors subject to Vietnam's market access roadmap under its international commitments, corporate and individual foreign investors are allowed to join with another Vietnamese party to purchase only a part of the State stake up to the limits set out in Vietnam's international commitments. Under the current laws of Vietnam, foreign equity in those SOEs shall be limited to a maximum of 49% stake. There are additional restrictions applicable to unlisted companies and banking institutions.

The above foreign equity limit is not applicable for SOEs operating in sectors which are not subject to the market access roadmap.

If there are two or more registered purchasers, the sale of SOE must be carried out by auction. For registration purpose, the proposed purchasers are required to submit an application for bids and pay a deposit no later than five working days before the date of auction.

Foreign investors interested in purchasing stake in SOE are required to open an account at a financial institution licensed to operate in Vietnam. All payments in relation to the sale of the SOE must be transacted through this account.
 
Transfer of SOE
Under Decree 109, the transfer of SOE to its Employee Collective shall be considered in accordance with the following provisions:
a.  the book value of the proposed SOE is less than VND 15 billion (about US$ 900,000);
b. the proposed SOE is in a disadvantaged situation in respect of land area;
c.  the Employee Collective voluntarily registers to accept the transfer of the proposed SOE; and
d.  a three-year minimum period is imposed to ensure workers' job and full payment of social  insurance, as well as to maintain the SOE without selling, leasing or dissolving it, except in case  of bankruptcy.
Decree 109 takes effect as from 7 November 2008 and repeals Decree No. 80/2005/ND-CP dated 22 June 2005 of the Government of Vietnam on the Transfer, Sale, Contracting and Leasing of SOE.
 
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