Financial Consulting - Equitization Consulting

SCIC provides financial consulting services – advising state-owned companies and organizations that have the tendency and goal of equitization based on the latest financial report, we examine and assess value based on the combination of various methods such as asset method, discounted cash flow method … for each item towards determining the total enterprise value according to market value so that your enterprise has a basis for orientation based on financial resources to operate effectively or has a basis to continue to carry out the next steps for equitization.

Equitization is the abbreviated term for converting state-owned enterprises into joint-stock companies in Vietnam. According to Decree 59/2011/ND-CP and Decree 189/2013/ND-CP, the equitization process is carried out in the following order:

Step 1: Build the Equitization Plan

1. Establish the Equitization Steering Committee and the assisting team.

1.1. The agency deciding on equitization issues a decision to establish the Equitization Steering Committee simultaneously with the decision on equitization of the enterprise.

1.2. The head of the Steering Committee selects and issues a decision to establish the Equitization Assisting Team within 5 working days from the date of the decision to establish the Equitization Steering Committee.

2. Prepare documentation:

Within a maximum of 10 working days from the date of the decision to establish the Equitization Assisting Team, the Steering Committee is responsible for directing the Assisting Team together with the enterprise to carry out:

2.1. Select the method and form of determining the enterprise value, choose the appropriate time to determine the enterprise value in accordance with the conditions of the enterprise and related guiding documents on equitization.

2.2. Prepare the following documents:

• Legal documents on the establishment of the enterprise.
• Legal documents on the assets of the enterprise (including the area of land allocated or leased).
• Documents on debts (especially outstanding debts, debts that have been handled according to regulations before the time of determining the enterprise value).
• Documents on unused assets, materials, goods that are stagnant, poor, or of low quality (if any), assets formed from the reward and welfare fund.
• Documents on unfinished basic construction projects (including projects that have been suspended).
• Documents on long-term investments in other enterprises such as: joint venture capital contributions, equity contributions, limited liability company establishment contributions, and other forms of long-term investment.
• Financial statements, tax settlement reports of the company up to the time of determining the enterprise value.
• Prepare an estimate of equitization costs according to regulations.

3. Inventory, address financial issues and organize the determination of enterprise value:

The Assisting Team and the enterprise coordinate with consulting organizations (if any) to carry out:

3.1. Inventory, classify assets and settle finances, settle taxes, coordinate with relevant agencies to address financial issues up to the time of determining the enterprise value.

3.2. Determine the enterprise value:

• The Equitization Steering Committee selects (or bids to select) a valuation organization to assign the enterprise to sign a valuation contract or assign the
• Assisting Team, the enterprise to self-determine the enterprise value.

In case the consulting organization has the function of valuation, it can be hired for a complete package: to prepare the equitization plan, determine the enterprise value, and organize the sale of shares.

3.3. The Steering Committee reviews the results of the inventory, classification of assets, and the results of determining the enterprise value, reports to the agency deciding the enterprise value and the Ministry of Finance.

The time to complete the tasks at points 3.1, 3.2, 3.3 is no more than 90 working days from the date of completing the documentation for economic groups, corporations, parent companies; no more than 60 days for other cases.

3.4. Decide and announce the enterprise value:

Within no more than 10 working days from the date of receiving the report from the Equitization Steering Committee, the agency deciding the enterprise value must issue a decision to announce the equitized enterprise value.

4. Based on the time of the decision to announce the enterprise value, the enterprise prepares:

• A list of employees whose names are on the regular list of the enterprise at the time of the decision to announce the enterprise value to determine the number of shares that employees are expected to buy at a discount.
• Prepare a list of regular employees working at the company at the time of the decision to announce the enterprise value, classify employees according to categories: indefinite contracts, contracts with a duration of 1-3 years, surplus employee lists…

5. Complete the Equitization Plan:

5.1. Prepare the Equitization Plan:

Based on current regulations and the actual situation of the enterprise, the Steering Committee considers deciding to hire a consulting organization or assign the Assisting Team and the enterprise to prepare the Equitization Plan with the following main contents:

a) Introduction about the company, including a brief description of the company's establishment process and organizational model; the situation and results of the company's production and business activities in the 3 – 5 years preceding the equitization.

b) Assess the current status of the company at the time of determining the enterprise value, including:

– Current status of assets (including the area of land allocated or leased).

– Current status of finances, debts.

– Current status of labor.

– Issues that need to be addressed.

c) Labor rearrangement plan:

– The number of employees whose names are on the regular list at the time of the decision to announce the enterprise value.

– The number of employees to continue recruiting.

– The number of surplus employees and the resolution plan for each category.

d) Production and business activity plan for the next 3 – 5 years, clearly stating:

– The plan to restructure the enterprise when converting to a joint-stock company: rearranging departments within the enterprise, innovating business sectors; investing in technology renewal, enhancing production and business capacity.

– The production and business plan for the following years regarding products, output, market, profit … and solutions regarding capital, raw materials, production organization, labor wages, …

e) Draft Charter for the organization and operation of the joint-stock company according to the provisions of the Enterprise Law and current legal documents.

5.2. Complete the Equitization Plan.

a) Based on the decision to announce the equitized enterprise value, the Assisting Team together with the enterprise coordinates with the consulting organization (if any) to complete the Equitization Plan and send it to each department in the company for review before organizing an extraordinary employee conference.

b) Organize an extraordinary employee conference to gather opinions to finalize the equitization plan.

c) After the employee conference, the Assisting Team, the enterprise coordinates with the consulting organization (if any) to finalize the Equitization Plan for submission to the competent authority for approval.

d) The Steering Committee evaluates the equitization plan and reports to the agency deciding on equitization for approval.

The time to complete the contents specified in point 5.2 of this step is no more than 20 working days from the date of the decision to announce the equitized enterprise value.

5.3. Approve the equitization plan.

The agency deciding on equitization reviews and issues a decision to approve the equitization plan within no more than 5 working days from the date of receiving the report from the Steering Committee.

Step 2: Organize the sale of shares.

1. The Equitization Steering Committee selects the method of selling shares according to regulations.

2. Organize the sale of shares:

2.1. Organize auctions for ordinary investors:

a) For the case of direct auctions at the enterprise:

The Equitization Steering Committee and the enterprise organize the auction of shares for investors.

b) For the case of selling shares at financial intermediary organizations:

The Steering Committee selects a financial intermediary organization to assign the enterprise to sign a contract.

The Steering Committee and the enterprise coordinate with the financial intermediary organization to carry out the sale of shares according to regulations.

c) For the case of selling shares at the stock exchange, Securities trading center.

The Equitization Steering Committee has the right to register with the agency deciding on equitization about the expected time of selling shares, the number of shares expected to be sold so that the agency deciding on equitization can decide on the selection of the organization selling shares, register the auction plan with the stock exchange, Securities trading center, and simultaneously report to the Ministry of Finance to decide the time for the auction of the enterprise's shares.

2.2. Based on the average successful auction price of ordinary investors, the Equitization Steering Committee:

Directs the enterprise to sell shares at a discount to employees and the labor union organization at the enterprise (if any).

Proceeds to sell shares to strategic investors or negotiate with selected strategic investors.

3. Summarize the results of the share sale and report to the agency deciding on equitization.

4. Report to the agency deciding on equitization to adjust the scale and structure of shares of the equitized enterprise in cases where shares are not sold to the subjects according to the approved equitization plan.

(The time to implement Step 2 is no more than 3 months from the date of the decision to approve the equitization plan).

Step 3: Complete the conversion of the enterprise into a joint-stock company.

1. The first General Meeting of Shareholders.

The Equitization Steering Committee directs the Assisting Team and the enterprise to organize the first General Meeting of Shareholders to approve the Charter of organization and operation, the production and business plan, elect the Board of Directors, the Supervisory Board, and the executive apparatus of the joint-stock company.

2. Based on the results of the first General Meeting of Shareholders, the Board of Directors of the joint-stock company carries out business registration, submits the seal of the old enterprise, and requests the engraving of the seal of the joint-stock company.

(The time to complete the contents specified in points 1 and 2 of Step 3 is no more than 30 days)

3. Prepare financial statements at the time the joint-stock company is granted the first business registration certificate, carry out tax settlement, equitization cost settlement, and report to the agency deciding on equitization.

Submit the money collected from equitization to the economic group, corporation, parent company, state-owned company, or the enterprise arrangement support fund at the State Capital Investment Corporation.

4. The joint-stock company purchases or prints shares to issue to shareholders according to current regulations.

5. Organize the launch of the joint-stock company and carry out announcements in the mass media according to regulations.

In case the enterprise determines that it will immediately list on the stock market, it shall prepare a dossier to apply for listing sent to the Ministry of Finance (State Securities Commission) according to current regulations.

6. Organize the handover between the enterprise and the joint-stock company.

During the implementation process, the agency deciding on equitization, the Equitization Steering Committee, the Assisting Team, and the enterprise can simultaneously carry out many steps at once to accelerate the equitization process of state-owned companies.

5. Tổ chức ra mắt công ty cổ phần và thực hiện bố cáo trên phương tiện thông tin đại chúng theo  quy định.

Trường hợp doanh nghiệp xác định sẽ thực hiện niêm yết ngay trên thị trường chứng khoán thì lập bộ hồ sơ xin cấp phép niêm yết gửi Bộ Tài chính (Uỷ ban chứng khoán Nhà nước) theo quy định hiện hành.

6. Tổ chức bàn giao giữa doanh nghiệp và công ty cổ phần.

Trong quá trình thực hiện, cơ quan quyết định cổ phần hoá, Ban chỉ đạo cổ phần hoá, Tổ giúp việc và doanh nghiệp có thể tiến hành đồng thời nhiều bước một lúc để đẩy nhanh tiến độ cổ phần hoá công ty nhà nước.