STRENGTHENING DECENTRALIZATION OF AUTHORITY IN THE PROCESS OF MANAGING STATE CAPITAL REPRESENTATION IN ENTERPRISES

On July 25, 2024, the Government issued Decree No. 97/2024/ND-CP ("Decree 97") amending and supplementing certain articles of Decree No. 10/2019/ND-CP ("Decree 10") on the exercise of rights and responsibilities of the State's owner representative. Decree 97 introduces several noteworthy new points as follows:

1. Decentralizing the management of enterprises established by the Prime Minister:

1.1. Limiting the list of enterprises represented by the Prime Minister

Decree 97 clearly stipulates that the Prime Minister exercises the responsibilities of the State owner representative for enterprises that the Prime Minister decides to invest capital to establish, including:

1. Viettel Military Industry and Telecoms Group;
2. Vietnam Posts and Telecommunications Group;
3. Vietnam National Coal and Mineral Industries Group;
4. Vietnam Oil and Gas Group;
5. Vietnam Electricity Group;
6. Vietnam Chemicals Group;
7. State Capital Investment Corporation;
8. Enterprises newly established by the Prime Minister's capital investment decision according to regulations.

1.2. Clearly defining the scope of enterprises under the management responsibility of the owner representative agency

The owner representative agency ("Representative Agency") is responsible for managing:

1. Enterprises established by the Representative Agency;
2. Enterprises assigned to be managed by the Representative Agency or directly assigned as the State owner representative, including enterprises established by the Prime Minister before the Law on Management and Use of State Capital Invested in Production and Business at Enterprises took effect and not listed above;
3. State capital invested in joint-stock companies and limited liability companies with two or more members.

Thus, except for the enterprises listed in section 1.1 above, enterprises established by the Prime Minister before the Law on Management and Use of State Capital Invested in Production and Business at Enterprises took effect will be decentralized to lower-level Representative Agencies for management.

2. Strengthening decentralization in the management of enterprises wholly owned by the State

Decree 97 allows enterprises/Boards of Members/Chairmen of Companies wholly owned by the State to be more autonomous in the following issues:

1. Previously, foreign loans under the method of enterprises borrowing and repaying debt on their own (except for foreign loans under the form of deferred import payments) required appraisal and approval from the Ministry of Finance. However, Decree 97 allows these cases to be submitted and approved by the Representative Agency without needing the Ministry of Finance's approval;
2. The Representative Agency will only approve the Board of Members, Chairman of the Company to sign contracts for fixed assets valued over 50% of the enterprise's equity, instead of all assets as previously regulated;
3. The Board of Members, Chairman of the Company can independently decide on the establishment and dissolution of dependent accounting units without needing the Representative Agency's opinions.

3. Strengthening decentralization in the management of State capital invested in joint-stock companies and limited liability companies with two or more members

For enterprises where the State holds 36% or more of the charter capital, the representative of State capital at the enterprise must report and seek opinions from the Representative Agency before participating in discussions, voting, or deciding at the General Meeting of Shareholders, Board of Directors meetings, or Board of Members meetings according to the law and the enterprise's charter.

Decree 97 narrows the scope of contents that must be reported and consulted with the Representative Agency in these enterprises. Accordingly, the representative of State capital does not need to seek opinions on the following issues:

1. Plans to buy and sell assets that are not fixed assets valued at or over 50% of the enterprise's charter capital;
2. Salary, remuneration, and bonus plans for employees and staff who are not enterprise managers.

For the parent company of a state economic group, State Capital Investment Corporation, and enterprises established by the Prime Minister's decision to invest State capital, Decree 97 allows these enterprises to act independently but must notify the Representative Agency within 180 days from the date of establishment, reorganization, or dissolution of dependent accounting units.

Decree 97 takes effect from September 10, 2024.