What is a state-owned enterprise? Types of state-owned enterprises, characteristics and regulations on state-owned enterprises. Find out now in this article.
What is a state-owned enterprise?
According to the Enterprise Law 2020 effective from January 1, 2021, state-owned enterprises include:
- Enterprises wholly owned by the state and holding 100% of the charter capital;
- Enterprises whose members/shareholders are the State holding more than 50% of charter capital;
- Enterprises whose members/shareholders are the state holding the total number of voting shares in the company.
>> You may be interested in: Comparison of state-owned enterprises and private enterprises.
Types of state-owned enterprises
1. Based on capital ownership ratio
Based on the capital ownership ratio in the enterprise, state-owned enterprises are divided into the following two groups:
➧ Group 1: Enterprises owned by the state and holding 100% of charter capital, including:
- A single-member LLC with 100% state-owned charter capital is the parent company (*) of a state-owned corporation, the parent company of a state-owned economic group, or the parent company in a parent-subsidiary group;
- A single-member LLC is an independent company in which the state holds 100% of the charter capital.
➧ Group 2: Enterprises whose members/shareholders are the state holding more than 50% of charter capital or holding the total number of voting shares, including:
- Joint stock companies, LLCs with 2 or more members whose shareholders/members are the State holding more than 50% of the charter capital, total number of voting shares are parent companies (*) of state-owned corporations, parent companies of economic groups, parent companies in parent company – subsidiary groups;
- A joint stock company or a limited liability company with two or more members is an independent company (**) whose shareholders/members contributing capital are the State holding more than 50% of the charter capital or holding the total number of voting shares.
Note:
Article 7 of Decree 47/2021/ND-CP also provides specific instructions as follows:
(*) The parent company cannot be a subsidiary in an economic group or corporation and other parent company – subsidiary groups.
(**) An independent company is a joint stock company or limited liability company in which the state owns the charter capital or total number of voting shares and does not belong to the parent company – subsidiary group.
The ratio of charter capital ownership and total number of voting shares held by the State in an enterprise is the total ratio of charter capital ownership and voting shares held by the owner representative unit in that enterprise.
2. Based on the purpose of the activity
In addition to the classification by ownership ratio, state-owned enterprises are also classified by operational purpose, including:
- State-owned enterprises operate for the purpose of economic development;
- State-owned enterprises operate for public interest and social security purposes;
- State-owned enterprises operate for national defense and security purposes.
Characteristics of state-owned enterprises
State-owned enterprises also have the following five basic characteristics:
1. Type of business established
- State-owned enterprises are organized and established according to the model of single-member LLC, LLC with two or more members and joint stock company;
- The establishment of state-owned enterprises is based on the principle of only establishing key industries for the economy.
2. Company owner
The State is the owner of the company, holds all or most of the charter capital and has full authority to decide on issues related to the existence and development of the state-owned enterprise. Specifically:
- Regarding existence: The State has the right to decide how to establish, reorganize enterprises (such as division, separation, merger, etc.), transfer part or all of the capital to other individuals/organizations or dissolve the enterprise;
- Regarding development: The State has the right to decide and control the development goals, business strategies, capital mobilization and use processes, and human resources of the company;
- Regarding management organization: Decide on the management organization model, decide on the appointment, dismissal, removal or discipline of personnel of the enterprise management board (such as company chairman, director, general director, etc.).
3. Business assets
- As the investor of the enterprise owner, a part of the assets of the state-owned enterprise is owned by the state;
- For individuals and organizations that are assigned capital by the State to establish and develop enterprises, these individuals and organizations only have the right to manage assets and conduct business, do not have ownership rights over the assets of the enterprise and must be responsible to the State for the assets and capital that the State assigns.
4. Legal liability
- Similar to enterprises, private capital companies, state-owned enterprises also have legal status from the date of being granted a business license;
- As the owner and main investor of a state-owned enterprise, the State must bear limited liability for the debts and other financial obligations of the enterprise corresponding to the proportion of charter capital owned by the State.
5. Business fields and sectors
The business lines of state-owned enterprises mainly focus on key business lines to meet the socio-economic goals assigned by the state. Therefore, the scope of state investment capital is often limited to a number of areas such as:
- Providing services to ensure national defense and security goals such as: explosives production, electricity, air traffic services, maritime services, etc.;
- Providing products and services for social security purposes;
- High-tech application activities, large investments, create momentum to promote other industries and economic development.
Regulations on state-owned enterprises
1. Applicable regulations
- Enterprises with 100% state-owned charter capital are organized and managed according to the model of a single-member LLC according to the provisions of Chapter IV and other relevant provisions of the Law on Enterprises. In case of any discrepancy between the provisions of this Law, the provisions of Chapter IV shall apply;
- Enterprises in which the State owns more than 50% of the charter capital are organized in the form of a limited liability company with 2 or more members according to the provisions of Section 1, Chapter III of the Law on Enterprises;
- Enterprises in which the State owns the total number of voting shares are organized according to the joint stock company model according to the provisions of Chapter V of the Law on Enterprises.
2. Regulations on management structure
The owner’s representative agency decides to organize the management of a state-owned enterprise in the form of a single-member LLC according to one of the following two models:
- One is the company chairman, director or general director, board of supervisors;
- Second, the board of members, director or general director, board of supervisors.
3. Regulations on periodic information disclosure
➧ Group 1: Enterprises with 100% state-owned charter capital must periodically publish information on the enterprise’s website and on the website of the owner’s representative agency.
Information to be disclosed includes:
- Announce basic information about the enterprise and its charter;
- Announce the general objectives, specific objectives and targets of the annual business plan before March 31 of the implementation year;
- Announce the report evaluating the results of implementing the annual production and business plan before June 30 of the following year;
- Announce the report on the results of implementing public service tasks assigned by the State according to the plan/bidding and other social responsibilities before June 30 of the following year;
- Announce the report on the management status and organizational structure of the enterprise in the first 6 months before July 31 every year;
- Publish annual reports on governance status and organizational structure before June 30 of the following year;
- Announce the audited mid-year financial statements (including the parent company’s financial statements and consolidated financial statements, if any) before July 31 every year;
- Publish the audited annual financial statements (FS) and summary (including the parent company’s FS and consolidated FS, if any) within 150 days from the end of the fiscal year.
➧ Group 2: Enterprises in which the State owns more than 50% of the charter capital or total number of voting shares must periodically disclose information on the enterprise’s website and on the website of the owner’s representative agency.
Information to be disclosed includes:
- Announce basic information about the enterprise and its charter;
- Announce the report evaluating the results of implementing the annual production and business plan before June 30 of the following year;
- Announce the report on the management status and organizational structure of the enterprise in the first 6 months before July 31 every year;
- Publish annual reports on governance status and organizational structure before June 30 of the following year;
- Announce the audited mid-year financial statements (including the parent company’s financial statements and consolidated financial statements, if any) before July 31 every year;
5. Regulations on extraordinary information disclosure
State-owned enterprises must publish on their websites, publications (if any) and post public notices at their headquarters, business locations, business portals and send to the owner’s representative agency any unusual information within 36 hours of the occurrence of one of the following events:
- Business accounts are frozen/allowed to operate again after being frozen;
- Suspend part or all of business operations;
- Revoked business registration certificate, establishment license or other related documents;
- Change the contents of business registration certificate, establishment license or other related documents;
- Change of members of the board of members, change of company chairman, director, deputy director, general director, deputy general director, change of chief accountant, head of finance and accounting department, head of the board of controllers, controller;
- There are disciplinary decisions, prosecution decisions, verdicts, and court decisions against state-owned enterprise managers;
- There is a conclusion from the inspection agency or tax authority on the enterprise’s violation of the law;
- There is a decision to change the independent auditing organization or the financial statements are refused to be audited;
- There is a decision to establish, dissolve, consolidate, merge, convert subsidiaries, branches, representative offices; decision to invest, reduce capital or divest investment in other companies.
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