On January 12, 2024, the Government issued Decree No. 04/2024/NĐ-CP (“Decree 04”), amending and supplementing certain provisions of Decree No. 118/2014/NĐ-CP (“Decree 118”) on the reorganization, innovation, and development to enhance the efficiency of agricultural and forestry companies. Decree 04 introduces notable amendments and supplements, including:
1. The State shall only hold dominant shares in agricultural/forestry companies having land use plans of at least 500 hectares
Decree 04 completely revises the criteria for determining agricultural/forestry conversion companies subject to state-dominant capital ownership compared to Decree 118. Specifically:
|
No. |
Types of company |
Previous regulation (Decree 118) |
New regulation (Decree 04) |
|
1 |
Agricultural company |
The state holds dominant shares in agricultural companies whose primary business is the cultivation and processing of rubber in strategically important areas, remote regions, and areas associated with national defense and security. |
The state holds dominant shares in agricultural companies with a land use plan of 500 hectares or more. |
|
2 |
Forestry company |
The state holds dominant shares in forestry companies with a production forest area consisting of planted forests and land designated for production forest planting accounting for 70% or more of the allocated or leased land in strategically important areas, remote regions, and areas associated with national defense and security. |
The state holds dominant shares in forestry companies with a land use plan of 1000 hectares or more. |
Therefore, according to Decree 04, the criteria for determining agricultural/forestry companies to be converted into joint-stock companies, of which over 50% of the charter capital must be owned by the State, are based on the land area specified in the company’s operational plan, instead of being based on the business sector and operating area as stipulated in the previous Decree 118.
2. Only legal entities are entitled to purchase state-owned capital contributions in transformed agricultural and forestry companies
According to Decree 04, 100%-state-owned agricultural and forestry companies, which have high-tech production and processing methods meeting both domestic and international market demands, but still have state-owned capital after financial processing, will be converted into multi-member limited liability companies. This conversion will be executed by purchasing a portion of state-owned capital to investors, transforming the company into a multi-member limited liability company.
As such, investors seeking to acquire state-owned capital contributions in these enterprises must satisfy the following conditions:
- Having legal entity status.
- Possessing owner’s equity capital at least twice the charter capital in the multi-member limited liability company establishment plan.
- Having profitable business operations in the last three years up to the registration date for capital contribution or state-owned capital contribution purchase.
- Having a written commitment of the investor when registering to become a member of the multi-member limited liability company as per regulation. This commitment is a mandatory part of the capital transfer contract.
Decree 04 takes effect from March 1, 2024.
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