Dear Valued Clients,

For many years, the reorganisation and conversion of public non-business units (PNBUs) into enterprise models under Decree No. 150/2020/ND-CP has revealed a number of difficulties concerning autonomy criteria, asset valuation methods and capital management mechanisms. To improve the legal framework, enhance the operational efficiency of the public service sector, and ensure openness and transparency, on 30 September 2026, Deputy Prime Minister Nguyễn Văn Thắng officially signed and promulgated Decree No. 373/2026/ND-CP providing for the conversion of public non-business units into enterprises.

Taking effect on the date of its promulgation (30 September 2026), Decree No. 373/2026/ND-CP officially replaces Decree No. 150/2020/ND-CP and Article 41 of Decree No. 125/2025/ND-CP. This instrument establishes a unified legal framework governing PNBUs under Ministries, ministerial-level agencies, provincial-level People’s Committees and commune-level People’s Committees.

Below is our in-depth analysis of the new provisions concerning the rights and obligations that public non-business units intending to convert into enterprises should note:

1. Standardisation of Two Conversion Models and Establishment of Conversion Criteria

Unlike Decree No. 150/2020/ND-CP, which provided for only one form of conversion, Article 1 of Decree No. 373/2026/ND-CP specifies and elaborates on two forms of converting PNBUs into enterprises, namely:

• Conversion into a joint-stock company;
• Conversion into a single-member limited liability company of which the State holds 100% of the charter capital.

The addition of the model of a single-member limited liability company with 100% State-owned capital reflects a flexible management approach suited to practical circumstances. It both promotes the conversion of the public service sector to an enterprise-based mechanism and ensures that the State retains absolute control over specific industries and sectors and essential public services.. 

To safeguard the State’s leading role in essential sectors and prevent the commercialisation of basic public services, Article 4 of Decree No. 373/2026/ND-CP establishes the principle that certain groups of PNBUs must not be converted into enterprises. These include PNBUs subject to dissolution or reorganisation; hospitals and healthcare facilities providing basic and essential public services; the education and training system, specialised schools and vocational education institutions; and units performing political tasks, serving State management functions or carrying out social work. In particular, PNBUs that hold a monopoly in the provision of public non-business services are prohibited from being converted into joint-stock companies. Instead, depending on actual circumstances, the managing authority may only choose to retain the PNBU model or convert the unit into a single-member limited liability company of which the State holds 100% of the charter capital.

In parallel with the sector-based exclusions, Article 5 of Decree No. 373/2026/ND-CP sets out specific qualitative and quantitative criteria linked to financial autonomy and the State’s capital management orientation for each enterprise model.

• Conditions for conversion into a joint-stock company: A PNBU must simultaneously satisfy two mandatory conditions: it must not operate in a sector in which the State is required to hold 100% of the capital or in which it has a monopoly on the provision of public services; and it must demonstrate genuine financial capacity by being self-financing in respect of both recurrent and investment expenditure, or by having continuously self-financed recurrent expenditure, for the two most recent years as at the time the conversion is considered.
• Conditions for conversion into a single-member limited liability company with 100% State-owned capital: In addition to meeting the requirement of continuous financial autonomy during the two most recent years, the unit must operate in an industry or sector in which the law requires the State to hold 100% of the charter capital; or fall within specific information and communications sectors (publishing, electronic information, grassroots information or external information); or be a unit holding a monopoly in the provision of public non-business services.

These provisions clearly classify public non-business units with sufficient financial capacity to transition to an enterprise-based mechanism, while ensuring strict State control over essential public-interest sectors and improving the autonomy and operational efficiency of the public service sector.

2. Increasing Transparency in Asset Valuation Procedures and Tightening the Criteria for Strategic Investors

The process for determining the value (valuing the assets) of a PNBU being converted into an enterprise under Decree No. 373/2026/ND-CP (Chapter III, Articles 22 to 31 and Article 41) is carried out in the following specific steps:

Step 1: Inventorying Assets, Reconciling Debts and Preparing Financial Documents

• The PNBU prepares its financial statements and tax finalisation reports, and has its financial statements audited as at the valuation date.
• Conduct an inventory of and classify all assets (assets included in the State capital component, assets excluded from the unit’s value, and assets pending liquidation), and clearly analyse the reasons for any asset surpluses or shortages.
• Reconcile and confirm all receivables and payables; at the same time, prepare a plan for the arrangement and handling of houses and land and submit it to the competent authority for approval before the value is announced.

Step 2: Selecting a Valuation Consultancy Organisation

• The competent authority/Steering Committee decides on the selection of a valuation consultancy organisation that fully satisfies the applicable legal standards (such as having at least five consecutive years of experience in valuation, auditing or conversion consultancy).
• The consultancy organisation is responsible for complying with the valuation procedures, is legally accountable for the accuracy of its results, and must compensate for damage if its violations distort the value.

Step 3: Applying Asset Valuation Methods

• Mandatory principle: At least two different valuation methods must be applied, one of which must be the asset-based method.
• Value floor: The announced actual value of the unit and the value of the State capital portion must not be lower than the value determined using the asset-based method.
• Components of value: The actual value determined using the asset-based method comprises the total value of all the unit’s assets after revaluation (fixed assets, current assets, intangible assets, brand value, if any, and financial investments), less actual liabilities payable.

Step 4: State Audit of the Valuation Results

• Before issuing a decision announcing the unit’s value, the competent authority sends a written request, together with the relevant dossier, to the State Audit Office of Vietnam to audit the valuation results and financial settlement.
• The audit conclusion of the State Audit Office of Vietnam is a mandatory basis for the competent authority to consider and decide whether to announce the value of the State capital portion.

Step 5: Appraisal, Approval and Disclosure of the Unit’s Value

• The Steering Committee reviews the results and reports to the competent authority, which issues a decision announcing the unit’s value within no more than 15 working days from receipt of a complete dossier.
• The results of the valuation of the unit must be published on the electronic portal of the relevant Ministry or provincial-level People’s Committee, and a report must be submitted to the Ministry of Finance.
• Validity period: If a public auction of shares to the public has not been conducted within nine months from the date on which the unit’s value is announced, the unit must conduct a revaluation.

In addition, compared with Decree No. 150/2020/ND-CP, Clause 3, Article 7 of Decree No. 373/2026/ND-CP improves, clarifies and further tightens compliance obligations, compensation mechanisms and financial security measures applicable to strategic investors. Accordingly, domestic and foreign investors participating in equitisation must ensure that they simultaneously satisfy the following criteria:

• Possess full legal entity status in accordance with the law;
• Have recorded profits from business operations in each of the two most recent years and have no accumulated losses;
• Conduct business activities appropriate to the field in which the public non-business services of the PNBU being converted are provided;
• Provide a written undertaking to register as a strategic investor of the PNBU being converted, covering the following:

• An undertaking and plan to support the enterprise converted from the PNBU in improving its financial capacity and corporate governance.
• An undertaking not to transfer shares for a minimum period of three years from the date of issuance of the Enterprise Registration Certificate;

• A mandatory deposit, escrow deposit or bank guarantee equivalent to 20% of the value of the shares registered for purchase, calculated at the starting price.

For ease of reference, the following table provides a detailed comparison of three key aspects concerning strategic investors under Decree No. 150/2020/ND-CP and Decree No. 373/2026/ND-CP:

Aspect of comparison	Decree No. 150/2020/ND-CP (Clause 3, Article 6)	Decree No. 373/2026/ND-CP (Clause 3, Article 7)
1. Compliance obligations	• Must have legal entity status; must have been profitable in the two most recent years and have no accumulated losses. • Business lines must be consistent with the public non-business services. • Written undertaking: not to transfer shares for at least three years; and a plan to support improvements in financial capacity and management. • The competent authority is specified as deciding whether to “sell shares” to the strategic investor.	• Retains the core criteria concerning legal entity status, financial capacity (profitability for two years) and a minimum three-year restriction on share transfers. • Legislative drafting is standardised into separate sub-items (b1, b2, b3 and b4). • Expressly provides that the competent authority decides whether to “sell or not sell shares” to the strategic investor.
2. Compensation mechanism	Provides that an investor who breaches a signed undertaking must compensate for all losses based on actual damage, and that the State has the right to decide on all shares purchased.	Adds and specifies that, if an investor fails to fulfil its undertakings or breaches the rules on share transfers, the investor must compensate for all losses incurred in accordance with the undertaking agreement and applicable law.
3. Financial security measures	A deposit, escrow deposit or bank guarantee equal to 20% of the value of the shares registered for purchase at the starting price is mandatory. If the investor relinquishes the right to purchase, the deposit will not be refunded or a monetary penalty of an equivalent amount will be imposed.	Retains the requirement for a deposit, cash escrow or bank guarantee equal to 20% of the value of the shares registered for purchase at the starting price. If the investor relinquishes the right to purchase, the deposit is forfeited or a monetary penalty of an equivalent amount is imposed.

 

The tightening of valuation procedures and strategic investor criteria establishes a robust risk-control mechanism. It helps prevent the loss of State capital and assets while ensuring that investors with genuine financial and management capabilities are attracted to support the enterprise over the long term.

3. Preferential Policies for Employees and Talent Attraction

The preferential share sale mechanism for employees of PNBUs undergoing conversion is designed to protect the rights and interests of existing employees while encouraging high-quality personnel to remain with the enterprise over the long term:

• Preference based on length of service: Employees working in the State sector may purchase up to 100 shares for each year of actual service at a price equal to 60% of the par value (VND 10,000 per share), and must undertake to hold the shares for at least three years.
• Extended preferences for experts and skilled workers: Employees who undertake to work for the long term (at least three years) may register to purchase additional shares. In particular, highly qualified experts and workers with advanced technical and professional qualifications may purchase up to 800 additional shares for each year of their undertaking, subject to a maximum total of 8,000 additional shares per person.
• Handling redundant employees: Officials and employees who cannot be assigned positions at the new joint-stock company will be dealt with under the applicable staff downsizing regime or receive employment contract termination allowances in accordance with current regulations.

4. Obligations to Disclose Information Transparently and Register as a Public Company

Decree No. 373/2026/ND-CP strengthens public accountability and post-conversion oversight by tightening information transparency mechanisms and establishing a strict compliance timeline for enterprises after conversion.

Under Articles 48 and 49 of this Decree, to ensure the oversight rights of the State and the community, a converted PNBU is responsible for fully disclosing information on the electronic portal of the supervising Ministry, ministerial-level agency or provincial-level People’s Committee. Information required to be disclosed includes: the implementation roadmap and progress; the land-use plan; financial settlement matters; the method and results of determining the unit’s value; the conversion plan; the management and use of land; the plan for arranging employees and their purchase of shares; and the draft enterprise charter. These data must also be reported to the Ministry of Finance, the Steering Committee for Enterprise Reform and Development, and the Steering Committee for Reforming the Operating Mechanism of Public Non-Business Units for close monitoring.

Furthermore, under Articles 40 and 49, where a public non-business unit has been converted into a joint-stock company and satisfies the conditions to qualify as a public company under the Law on Securities, the law imposes a strict compliance deadline. Within a maximum of 90 days from the date on which it officially becomes a joint-stock company, the enterprise must complete the following procedures: submit an application for registration as a public company; register its shares for centralised registration with the Vietnam Securities Depository and Clearing Corporation (VSDC); and register for trading on the UPCoM trading system or register for listing on a Stock Exchange.

As always, we hope you find this article useful and look forward to accompanying and supporting you in the time ahead.

Yours sincerely,

ENT Law LLC