The Government issued Decree 126/2017/ND-CP (Decree 126) dated November 16, 2017 guiding the conversion of state owned enterprises (“SOEs”) and one-member limited liability companies of which their charter capital is 100% invested by an SOE into joint stock companies.

Question: What are the regulations on supplementary method of SOEs initial public offering and ending of financing any capital for equitization?


In addition to the current methods of initial public offering that are being applied under the current regulations (including public auctions, direct deals and underwritings), Decree 126 supplements the method for book building.

The subjects of application under this book building method will be decided by the Prime Minister and guided by the Ministry of Finance.

Ending of financial support for equitization

Decree 126 stipulates that the State does not finance more capital for equitization, even for enterprises where the State holds more than 50% of the total shares. Accordingly, after their financial treatment and revaluation, if enterprises have their actual value lower than the payables, they will comply with the following:

For enterprises on the list where the State continues to hold more than 50% of the total number of shares, the SOE owner agency will direct the enterprise to coordinate with the Viet Nam Debt and Asset Trading Corporation and its creditors in formulating the debt purchase and sale plans for its restructuring. In cases where the debt purchase plans for restructuring enterprises are not feasible and effective, they should be adjusted to other forms of conversion as provided for by law;

For the remaining enterprises, the SOE owner will decide to adjust to other forms of conversion in accordance with the law. However, pursuant to this decree, the total cost of enterprise equitization has been loosened. Pursuant to the old regulations in Circular No. 196/2011/TT-BTC, the total maximum cost of equitization is determined at the highest rate of VND500 million based on the enterprise value, while pursuant to Decree 126, the cost of equitization is approved by the SOE owner agency with regard to cost estimate and finalization. The General Director (or Director) of the equitized enterprise will decide the specific cost level according to the contents already approved by the SOE owner agency and take responsibility before law for his/her decision.

This Decree takes effect on January 1, 2018.