Vinashin, which is one of the last enterprises changing its operational model, was converted from a parent company into a Limited liability company with a sole member owned by the State according to Decision No. 984/QD-TTg dated 25 June 2010 of the Prime Minister.

Prior to the conversion, the Prime Minister had promulgated a decision to restructure the Vietnam Shipbuilding Industry Group.

Is this move a provisional solution for an State-owned enterprise (SOE) which that is immersed in a debt crisis before stepping into the equalitarian playground of international integration? This article is going to analyse the restructuring of Vinashin from the legal perspective in order to considerits effectiveness.


“It is too late to lock the stable door after the horse has bolted“


According to a brief report entitled: “The Implementation of Policies and Laws on the Management, Use of Capital and Assets in Corporations and State Corporations” issued on 4 November 2009 to the Standing Committee of the National Assembly, the total liabilities ratio on proprietary capital of Vinashin up to 31 Dec 2008, was 10.9 times and debts of the Vinashin were VND 19,885 billion, making up 15.44% of the total fiduciary debt of seven economic groups. Overdue debts were VND 3812 billion making up 19.17% of the Corporation’s outstanding liabilities and accounting for 91.4% of the total overdue debt of the seven economic groups. At present, the total property of Vinashin is valued at over VND 90,000 billion while total outstanding debt is more than VND 80,000 billion. After restructuring, about VND 20,000 billion of the liabilities of Vinashin were transferred to PVN and Vinalines. Therefore Vinashin is more likely to fall into a situation where it cannot afford to pay its creditors.
Prior to making the decision to convert Vinashin into Limited liability company with a sole member, the Prime Minister promulgated the Decision No. 926/QD-TTg about the restructuring of the Vietnam Shipbuilding Industry Group on 18 June 2010 (“Decision 926”). In order to explain a reason for the restructuring at the time before converting the business, via a press release on 1 July 2010, the Ministry of Communication and Transportation (MCT) explained that the current economic crisis resulting in a world economic depression in 2008 were the overt causes of the problem.  It was further said that the investment in the field, the restrictions in project management, liabilities, and restricted cash flow underlying causes.  Both groups of causes combined to push Vinashin into its present arduous state.  Consequently, there was a “need to urgently and determinedly restructure both in production and business organization, and financial investment” (MCT).


In accordance with the restructuring project, Vinashin will deliver over business and uncompleted projects in industries not associated with the main production and business industry to other commercial entities  that are more suited to carrying out the tasks and which have better conditions for efficient management, investment and mining. For instance, Petro Vietnam Oil and Gas Group is going to receive the following: Lai Vu Shipbuilding Industrial Park (Hai Duong Province), Nghi Son Shipbuilding Industrial Park (Thanh Hoa Province), Nhon Trach Shipbuilding and Ship Equipment Producing Factory (Dong Nai Province), Dung Quat Shipyard, Soai Rap Shipbuilding Industrial Park (Tien Gian Province), and a capital contribution share in the Hoang Anh Shipbuilding Industry JSC (Nam Dinh Province).
The Vietnam National Shipping Line Corporation (Vinalines) is going to receive from Vinashin the following: Hai Ha Maritime Port Industrial Park (Quang Ninh Province), Vinashin Dinh Vu Port (Hai Phong City), Hau Giang Industrial Park and Shipyard, Nam Can Port and Shipyard (Ca Mau Province), Bien Dong Shipping Co., Vinashinlines Co. Ltd with a sole member and the capital contribution shares in other shipping companies.
Through these assets and on-going commercial concerns of Vinashin will be transferred to other companies, it can be seen that they are integral to the main businesses of the Corporation (general contractor business, ships; equipment; floating facilities;  building and repairing; water works constructive design; shipyards; dismantling of old ships etc). Meanwhile, Decision 984/QD-TTg still allows Vinashin to perform business activities in industries that are relatively unfamiliar with the main industry. For example, financial, banking activities, insurance agency, drill rig construction, hotel services, maritime supply, logistics services, advertising, crude oil shipping, oil and gas products, property investment, civil projects, urban areas and house building. One wonders, with the continuous maintenance of business industries in the field, if can Vinashin effectively operate after its restructuring? According to Decree 09/2009/ND-CP on 5 Feb 2009 of the Government about statutes relating to the financial management of State-owned companies and the management of the State’s capital used to invest in other businesses, State-owned companies must use at least 70 % of their total capital in order to invest to businesses that belong to the main business industry of the companies. Therefore, the transfer of assets and commercial activities belonging to the main line of business of Vinashin, while continuously maintaining non-core activity related commercial activities may generate many concerns about the effectiveness of the restructuring in the current context.

What are the Directions for Restructuring?


The restructuring by transferring projects, subsidiaries, capital contribution shares in other businesses belonging to the category of “other forms according to the Law’s ordinance” in State-owned companies which do not change the ownership of companies according to Article 73, Chapter VII of State Business Law. The Vinashin restructuring was decided by the Prime Minister on Decision No.926/QD-TTg
On the point of  legal effectness, a decision issued by the Prime Minister is valid as a legal document according to Article 2 of the Law on Promulgation of Legal Documents on 3/6/2008. Consequently, Decision 926/QD-TTg is completely appropriate to the Law’s ordinance with respect to the reorganizing or restructuring of State-owned enterprises both in substance and form.


However, the time and method of the Vinashin restructuring generate many concerns with regard to the effectiveness of the restructuring. The story of this restructuring may be a provisional solution for a State-owned enterprise seeking to convert in to Limited Liability company operating under the Business Law. A more fundamental solution is to find a sustainable solution for the debt crisis of the Vietnam Shipbuilding Industry Group. It is clear that the restructuring of one of seven corporations cannot be done overnight and limited to the transfer of a number of institutions and branches to other companies. The answer is still left open.

How do an issue “after restructuring”: for example, keeping business accounts and the books of State-owned enterprises with respect to the transfer of projects and subsidiaries. And how to solve problems regarding  the use of land and labour, and the value of brand names  ? math which is being found the key.