Foreign firms get thumbs up to go public

January 12, 2004 | 17:42
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Foreign-invested enterprises can now form shareholding companies, with the issue of a long-awaited circular from the Ministries of Finance, and Planning and Investment. Inter-ministerial Circular No.08/2003/TTLT-BKH-BTC details the implementation of Decree 38/2003/ND-CP dated April 15 last year on the conversion of foreign-invested enterprises (FIEs) into shareholding companies.
It is the second business form allowed to foreign investors, the first being limited liability companies.
Under the new guidelines, FIEs satisfying the conditions set by Circular No.8 will have to submit their applications for conversion to the Ministry of Planning and Investment (MPI) before March 25 for consideration. The selection of enterprises for conversion is slated for completion before May 25.
An official at the MPI’s foreign investment agency said that around 30 FIEs had registered for conversion and that some of these had completed their preparation and were waiting for the enforcement of Circular No.8 so they could finalise the procedures, including asset evaluation.
“We have been engaged in preparation since the MPI released the government’s policy on conducting a trial for the conversion of some FIEs into shareholding companies,” said Tran Tuan Anh, administrative manager of Vinausteel Joint Venture Company.
“We are now prepared to complete the procedures required by the guiding circular. We see no problems for us in complying with the provisions of the circular.”
Vinausteel has hired professional consultants to undertake their preparation and complete required procedures. An equitisation board has been founded by the two-party joint venture, which is 70 per cent owned by Australian Vietnam Industrial Investment with the remaining stake held by Vietnam Steel Corporation.
Anh said his company’s management had discussed conversion options that might maintain the current two parties and sell shares to a third party to comply with the stipulation that there must be a minimum of three shareholders.
He said many foreign investors he had contacted were eager to see the new investment model actualised in Vietnam.
For Vinausteel, he said, the transformation into a shareholding company would bring greater convenience. Capital raising in particular would be simplified through share issues, and staff loyalty would be enhanced if they could own shares in the business.
He said another advantage would be the ability of the foreign shareholder in the new entity to transfer or sell their stake if necessary.
But under the strict conditions stipulated by Circular No.8, not all interested FIEs share Vinausteel’s initial advantages.
“We are in a predicament,” said Nguyen Quoc Tuy, deputy general director of Fortuna Hotel Hanoi Joint Venture, referring to a provision of the circular concerning the non-refundable transfer of assets to the Vietnamese party on the termination of a FIE.
Provision (a) of Article 1 states that FIEs will not be eligible for official consideration for transformation if their foreign partner or partners (in the case of joint ventures), or the foreign investors (in the case of wholly foreign-owned companies) have pledged to transfer their assets to the Vietnamese State and their Vietnamese partners on a non-refundable basis.
Tuy said this was the case for the Fortuna Hotel, which had long pursued a transformation plan.
He suggested that where Vietnamese and foreign parties were willing to see their joint ventures transformed the investors could negotiate for the amendment of the asset transfer stipulation in their investment licences.
“But we don’t know whether the relevant state management bodies will approve such amendments,” he said.
Tuy said his company would continue to pursue its plan, although he acknowledged that it would be difficult.
The transformation of his joint venture into a shareholding company would enable it to mobilise investment capital by floating shares on the local stock market in lieu of taking up high-cost commercial loans, he said.

By Thu Ha

vir.com.vn

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