FIEs set for share-holding status

Fortuna Hanoi Hotel’s application was unsuccessful

Taya, Interfoods, Austnam, Taicera, Tungkuang and Focal were selected for the restructuring – the first of its kind in Vietnam – from 12 applicants, a ministry official said last week.
“The other six applicants will have to complete certain procedures before being considered the next time,” an MPI official said.
Fortuna Hanoi Hotel and Vinausteel were among the applicants failing to meet set conditions.
The official acknowledged the submission of just six candidates for consideration in the first round was well below the ministry’s target of between 20 and 25 foreign-invested enterprises (FIEs) – despite “considerable interest and support from foreign investors”.
“One of the main reasons for the low numbers was the relatively short amount of time FIEs had to prepare all the necessary documents,” he said.
Last December 29, the MPI and the Ministry of Finance issued Circular 08/2003/TTLT-BKH-BTC detailing the implementation of Decree 38/2003/ND-CP on the trial transformation of some FIEs to shareholding companies.
The circular only gave the FIEs until March 25 this year, or three months, to submit their applications.
“Several FIEs failed to complete the required procedures on time, although they were very interested in equitisation.”
The official said the tough conditions set for FIE equitisation also limited the number of applicants.
“These conditions involved the size of the investment needed to be eligible for consideration, which had to be between $1 million and $70 million, and the non-refundable transfer of assets to the Vietnamese side or the state on the termination of the FIE.”
Under provision (a) of article 1 of Circular 8, FIEs will not be eligible for official consideration for transformation if their foreign partner or partners have pledged to transfer their assets to the State and their Vietnamese partners on a non-refundable basis.
“Some applications have been left unconsidered due to such conditions,” the official said.
The applications by Fortuna and Vinausteel failed because of the non-refundable asset transfer stipulation, despite these companies having pursued equitisation for some time. They will now between the Vietnamese and foreign partners to amend the asset transfer stipulation in their investment licences.

The official suggested the government extend the application deadline to the end of this year so that FIEs could have sufficient time to complete the necessary procedures.

Under current Vietnamese law, foreign-invested companies only exist in the form of a limited liability company, so they are not allowed to issue shares to mobilise capital. Moreover, this also makes the life of investors difficult if one wants to withdraw its stake in the company, since it is often very hard to find an investor to take over their position in the company.