An economic group or a corporation has at most 3 levels of enterprises

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This is one of the contents prescribed at the Decree No. 69/2014/ND-CP dated July 15, 2014 of the Government on state economic groups and state corporations.

In particular, from September 01, 2014, an economic group or a corporation has at most 3 levels of enterprises and is structured as: The parent company (below referred to as level-I enterprise) is an enterprise in which the State owns 100% of charter capital or holds controlling rights; subsidiary companies of the level-I enterprise (below referred to as level-II enterprises) are enterprises in which the parent company holds the controlling rights.

A level-II enterprise shall be organized in the form of single-member limited liability company, in case the parent company owns 100% of its charter capital, or joint-stock company or limited liability company with two or more members, in case the parent company holds the controlling rights over it and subsidiary companies of level-II enterprises (below referred to as level-III enterprises). The Decree also emphasizes that economic groups and corporations established before September 01, 2014 have more than three levels of enterprises shall, within two years, reorganize and arrange subsidiary companies of existing level-III enterprises. Agencies representing the owner shall monitor and supervise the reorganization and arrangement of these economic groups and corporations.

Accordingly, from September 01, 2014, 3, a to-be-established economic group must fall into the sectors and fields which produce products or provide services of special importance to national economic security; create the foundation for national economic infrastructure; and create a driving force for increasing the competitiveness of enterprises and the whole economy. The Prime Minister shall determine business sectors and fields eligible for consideration for establishment of economic groups in each period.

The economic group’s parent company must have a charter capital of at least VND 10 trillion. In case the parent company is organized in the form of joint-stock company or limited liability company with two or more members, state capital must account for at least 75% of its charter capital. The Prime Minister shall consider and decide on the case in which a parent company’s charter capital or the ratio of state capital to its charter capital is lower than the prescribed level.

For economic groups and corporations established before September 01, 2014, fail to meet the establishment criteria shall be transformed into corporations or company groups relevant to their actual conditions within two (2) years after September 01, 2014.

This Decree takes effect on September 1, 2014.