Conversion of state owned enterprises into one member limited liability company

On 19 March 2010, the Government of Vietnam issued the Decree No. 25/2010/ND-CP on conversion of state owned enterprises into one member limited liability company ("SLLC") and the organization and management of SLLC owned by the State. Decree 25 has a number of noteworthy provisions as follows:

First, it expands the list of subjects that can be converted, including:
• An independent state owned enterprise;
• A State owned enterprise which is parent company of a state business group; a parent company of a state corporation; a parent company of a state corporation under a state business group; a parent company in the model of parent company - subsidiary companies (the "parent company").
• An independent accounting company under a state corporation or a state business group.
• A dependent accounting company under a state corporation, a parent company of a state business group, a parent company of a state corporation.
• An agricultural company, a forestry company, state-run agricultural farms, state-run forestry farms.

Second, Decree 25 provides for allocation and delegation of exercising State rights in the converted SLLC which is 100% owned by the State. It also specifies the state administration functions of other authorities in order to prevent such authorities from directly involving in the operation of the conversed SLLCs.

Third, regarding to the conversion conditions, Decree 25 on one hand removes the conditions on the minimum charter capital, and on the other hand provides for specific conditions applicable to each subject in order to speed up the conversion process.

Forth, Decree 25 provides for other contents regarding the making-decision authority and examination procedures; mode to evaluate the charter capital, assets and debts of the converted subject; organizational structure, rights and obligations of key persons of the conversed company, etc. Decree 25 also encourages other political organizations and social-political organizations to convert their subsidiaries into SLLCs.

Decree 25 shall take effect from May 05, 2010 and replace the Decree No.95/2006/ND-CP dated September 08, 2006 on the same subject matter.