CIRCULAR

 PROVIDING GUIDELINES FOR IMPLEMENTATION OF GOVERNMENT’S DECREE NO. 45/2021/ND-CP DATED MARCH 31, 2021 ON ESTABLISHMENT, ORGANIZATION AND OPERATION OF COOPERATIVE DEVELOPMENT ASSISTANCE FUNDS

Pursuant to the Law on State Budget dated June 25, 2015;

Pursuant to the Government’s Decree No. 87/2017/ND-CP dated July 26, 2017 defining functions, tasks, powers and organizational structure of the Ministry of Finance;

Pursuant to the Government’s Decree No. 45/2021/ND-CP dated March 31, 2021 on establishment, organization and operation of cooperative development assistance funds;

At the request of the Director of the Department of Banking and Financial Institutions;

The Minister of Finance of Vietnam promulgates a Circular providing guidelines for implementation of the Government’s Decree No. 45/2021/ND-CP dated March 31, 2021 on establishment, organization and operation of cooperative development assistance funds.

Chapter I

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Article 1. Scope

This Circular provides guidelines for implementation of regulations on financial management, performance evaluation, rating and financial settlement in case of conversion of business model of cooperative development assistance funds in the Government’s Decree No. 45/2021/ND-CP dated March 31, 2021 on establishment, organization and operation of cooperative development assistance funds (hereinafter referred to as “Decree No. 45/2021/ND-CP”).

Article 2. Regulated entities

1. Cooperative development assistance funds (hereinafter referred to as “cooperative funds” or “fund”), including: Vietnam Cooperative Development Assistance Fund (central cooperative fund) and provincial cooperative development assistance funds (provincial cooperative funds).

2. Agencies performing functions of state capital owner in cooperative funds operating under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State.

3. Vietnam Cooperative Alliance and provincial cooperative alliances.

4. Other authorities, organizations and individuals involved in operation of cooperative development assistance funds.

Chapter II

FINANCIAL MANAGEMENT

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1. For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State:

a) The limits on investment in construction and acquisition of fixed assets directly serving operations of the fund shall comply with the provisions of Point a Clause 3 Article 38 of the Decree No. 45/2021/ND-CP;

b) Authority, procedures and other contents concerning investment in construction, acquisition, management, use, depreciation, leasing, mortgaging, pawning, liquidation, transfer, inventory and revaluation of the fund’s fixed assets shall comply with regulations of the single-member limited liability company of which 100% of charter capital  is held by the State, the charter on organization and operation, and regulations on management and use of fixed assets of the fund.

2. For a cooperative fund that operates under the cooperative business model:

Limits on investment in construction and acquisition, authority, procedures and other contents concerning investment in construction, acquisition, management, use, depreciation, leasing, mortgaging, pawning, liquidation, transfer, inventory and revaluation of the fund’s fixed assets shall comply with regulations of law applicable to cooperatives, the charter on organization and operation, and regulations on management and use of fixed assets of the fund.

Article 4. Dealing with asset losses

The cooperative fund shall determine the level, reasons and responsibilities for asset losses and take actions against such losses as follows:

1. Objective reasons, force majeure events (such as natural disasters, epidemics, fire, accidents or political risk) and subjective reasons of the loss shall be determined.

2. If the asset loss is caused by a subjective reason, the individual or group causing such loss shall make compensation for damage and/or incur penalties in accordance with regulations of law. The cooperative fund shall stipulate the compensation, decide the compensation amount which must be conformable with regulations of law, and assume responsibility for its decision.

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4. The financial reserve fund of the cooperative fund shall be used for offsetting the value of asset loss that remains after being offset using compensation amounts of the individual or group at fault, the insurer and/or provisions included in the fund’s expenses. In case the balance on the financial reserve fund is not sufficient to offset the asset loss, the remaining value of asset loss shall be recorded as the fund’s expenses in the period.

Article 5. Revenue recognition principle

1. All revenues of the cooperative fund must be recognized and recorded for the purposes of preparation and presentation of financial statements in accordance with Vietnam’s accounting standards and relevant law provisions, and must be supported by lawful invoices or receipts.

2. With regard to loan interests, the cooperative fund shall evaluate the debt recoverability and classify debts in accordance with Article 28 of the Decree No. 45/2021/ND-CP as the basis for recording of interests receivable as follows:

a) The fund shall record the interests receivable in the period as its revenues in respect of debts classified as standard debts for which the loan loss provision is not required according to SBV’s regulations applicable to microfinance institutions;

b) The interests receivable of debts remaining classified in the standard debt group as a result of implementation of the State policies and the interests receivable in the period of remaining debts shall not be recorded as the fund’s revenues but shall be monitored in off-balance sheet to expedite the debt collection. Such debts shall be recorded as the fund’s revenues, when collected.

3. Deposit interest revenue is the amount of deposit interests receivable during the period.

4. Amounts receivable which have been recorded as income but then are considered unrecoverable or not collected on due dates shall be recorded as the fund’s expenses and monitored in off-balance sheet to expedite the debt collection. Such amounts shall be recorded as the fund’s revenues, when collected.

5. Revenue from other activities shall be recorded in accordance with regulations of laws on taxation and relevant laws.

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Article 6. Revenues

The fund’s revenues are amounts receivable in the period, including:

1. Operating revenues:

a) Loan interests;

b) Fees collected under trusteeship agreements;

c) Revenues from investment and consulting services concerning the fund’s operations; revenues from assistance and training services rendered to the fund’s borrowers in accordance with regulations of law;

d) Other operating revenues as prescribed by law.

2. Revenues from financial activities: 

a) Deposit interests;

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c) Revenues from other financial activities.

3. Other revenues:

a) Earnings from liquidation, transfer or selling of assets;

b) Revenue from leasing of assets;

c) Difference between the compensation for asset loss received from the issuer and actual compensation for asset loss;

d) Recovered amounts of debts which have been charged off;

dd) Revenue from reversal of provisions;

e) Other lawful revenues as prescribed by law.

Article 7. Expense recognition and management principle

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2. Expense management principle:

a) For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State: The cooperative fund shall formulate its regulations on internal expenses which must contain appropriate spending limits for each period and be conformable with regulations of law, and submit such regulations to the fund’s chairperson for promulgation;

b) For a cooperative fund that operates under the cooperative business model: Chairperson of the Board of Directors shall promulgate its regulations on internal expenses after they have been approved and ratified by the fund’s general meeting of members;

c) With regard to expenses paid inconsistently with regulations, expenses which are not yet recorded, and those exceeding the spending limits specified in the fund’s regulations on internal expenses, the fund shall determine responsibilities of relevant organizations and individuals for requesting competent authorities to decide compensation plans.

3. Determination of the fund’s expenses for the tax calculation purpose shall comply with regulations of law on taxation.

Article 8. Expenses

The fund’s expenses are those actually incurred in the period related to its business operations, including:

1. Operating expenses:

a) Loan interests;

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c) Costs associated with offer and acceptance of trusteeship;

d) Contributions to the loan loss provision as prescribed in Article 28 of the Decree No. 45/2021/ND-CP;

dd) Payments for insurance for operational risks and other types of insurance as prescribed;

e) Other operating expenses.

2. Financial expenses:

a) Expenses on exchange rate differences (if any);

b) Other financial expenses.

3. Administrative expenses:

a) Asset-related costs, including: Depreciation of fixed assets; fixed asset leasing costs; costs for repair, maintenance and operation of assets; costs for purchase of tools and devices; costs of purchase of asset insurance and vehicle inspection as prescribed; costs for liquidation, transfer or selling of assets, excluding residual value of fixed assets (if any);

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- For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State: Payments of salaries and wages; salary-based contributions, including social insurance, health insurance, unemployment insurance, and occupational accident and disease insurance contributions, and trade union contributions; shift meal costs; costs of workplace uniforms; compulsory payments for female employees, overtime pay, periodic health checks and other payments for employees made according to regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State.

- For a cooperative fund that operates under the cooperative business model: Expenses on managers and employees shall comply with regulations of the Law on cooperatives, the fund's charter on organization and operation, and the fund’s regulations on payment of salaries and wages to managers and employees approved by the fund’s general meeting of members;

c) Management and administration expenses:  Electricity and water expenses, telephone, internet and postal service charges, costs of printing materials and papers, stationery; costs of business trips and consulting about the fund’s operations, payment and auditing service charges; costs of hiring of domestic and foreign experts/specialists; remunerations paid to part-time employees, expenses on scientific research and technology innovation; costs of professional training activities; expenses on grant of rewards for initiatives in improving and increasing labor productivity, costs of environmental protection and workplace security tasks; medical expenses, fuel expenses, expenses on fire prevention and fighting tasks, costs of vehicles, costs of information dissemination, advertisement, marketing and sales promotions; expenses on organization of conventions and reception activities as prescribed by law;

d) Allowances paid to dual office holders (if any);

dd) Other administrative expenses as prescribed by law.

4. Expenses prescribed in Point i Clause 2 Article 42 of the Decree No. 45/2021/ND-CP.

5. Expenses on establishment of provision for devaluation of inventories, provision for bad receivable debts, provision for asset loss and financial investments, and other provisions made according to regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State (if the cooperative fund operates under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State) or regulations of the law applicable to cooperatives (if the cooperative fund operates under the cooperative business model).

6. Other expenses:

a) Costs for transfer, sale and liquidation of assets (if any), including the residual value of fixed assets transferred, sold or liquidated;

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c) Amounts which have been recorded as revenues but actually unearned;

d) Payment of breach of economic contract penalties;

dd) Court fees, judgment enforcement charges and other costs of proceedings as prescribed by law;

e) Expenses on social activities as prescribed by the Law on taxation;

g) Membership fees paid to domestic and foreign trade associations of which the fund is a member as prescribed by law (if any);

h) Expenses on activities of communist party and trade union;

i) Other expenses as prescribed by law.

7. Limits on expenses specified in Clauses 1, 2, 3 and 4 of this Article are prescribed as follows:

a) For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State: The fund shall comply with regulations of law applicable to single-member limited liability companies of which 100% charter capital is held by the State. In case regulations on these expenses are not available or do not provide specific spending limits, depending on its financial capacity, the cooperative fund shall decide and include spending limits in its regulations on internal expenses in an appropriate and efficient manner, and shall take legal responsibility for its decision;

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Article 9. Expenses which cannot be recorded as a fund’s expenses

1. Damage which has been financially supported by the State or compensated by the insurer or the party at fault.

2. Fines which must be incurred by violating individuals for administrative violations, on environmental offences, overdue fines due to subjective reasons, or fines for violations against financial policies.

3. Expenses which are not supported by lawful and valid invoices or receipts as prescribed by law.

4. Expenses covered by other sources of funding.

5. Individuals’ contributions to local governments, social organizations or other authorities.

6. Expenses in excess of the spending limits prescribed in this Circular and relevant legislative documents.

Article 10. Approval for financial statements

The cooperative fund shall annually submit financial statements to the cooperative alliance of the same level (if the cooperative fund operates under the business model of a single-member limited liability company of which 100% of charter capital  is held by the State) or the general meeting of members (if the cooperative fund operates under the cooperative business model), and distribute financial results after the annual financial statements have been audited by an independent audit organization in accordance with regulations of law on auditing and given appraisal results of controllers.

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1. Cooperative funds shall comply with the provisions on reporting set forth in Article 44 of the Decree No. 45/2021/ND-CP.

2. Data closing duration:

a) A report for the first 06 months shall include data collected from January 01 to June 30 inclusively of the reporting year;

b) An annual report shall include data collected from January 01 to December 31 inclusively of the reporting year.

3. Report forms:

a) Financial statements specified in Point a Clause 3 Article 44 of the Decree No. 45/2021/ND-CP shall be prepared according to the fund’s accounting policies;

b) Reports on the fund’s lending activities specified in Point c Clause 3 Article 44 of the Decree No. 45/2021/ND-CP:

- Provincial cooperative funds shall prepare these reports using the form in Appendix 1a enclosed herewith and submit them to the central cooperative fund for consolidation;

- The central cooperative fund shall prepare a consolidated report using the form in Appendix 1b enclosed herewith and submit it to competent authorities;

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- Provincial cooperative funds shall prepare these reports using the form in Appendix 2a enclosed herewith and submit them to the central cooperative fund for consolidation;

- The central cooperative fund shall prepare a consolidated report using the form in Appendix 2b enclosed herewith and submit it to competent authorities;

d) The deadlines for submission of reports shall comply with the provisions of Clause 4 Article 44 of the Decree No. 45/2021/ND-CP.

4. Financial disclosure:

a) Cooperative funds operating under the business model of a single-member limited liability company of which 100% of charter capital is held by the State shall make financial disclosure in accordance with regulations of law applicable to enterprises of which 100% of charter capital is held by the State;

b) Cooperative funds operating under the cooperative business model shall make financial disclosure in accordance with regulations of law applicable to cooperatives.

Article 12. Preparing annual financial plans

1. For a cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State:

a) Formulation of the annual financial plan: the cooperative fund shall formulate its annual financial plan, including the annual financial plan, the plan on revenues and expenses, the plan for investment in fundamental construction and asset acquisition, and the plan for mobilization and use of capital using the forms in Appendix 3, Appendix 4, Appendix 5 and Appendix 6 respectively, and submit it to the cooperative alliance of the same level;

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- Vietnam Cooperative Alliance shall consider giving approval for the annual financial plan of the central cooperative fund;

- Provincial cooperative alliances shall consider giving approval for the annual financial plans of provincial cooperative funds after obtaining approval from provincial People's Committees, and provide provincial People's Committees and finance authorities of the same level with the approved plans for management and supervision purposes.

2. For a cooperative fund that operates under the cooperative business model:

a) Formulation of the annual financial plan: the cooperative fund shall formulate its annual financial plan, including the forms in Appendix 3, Appendix 4, Appendix 5 and Appendix 6 enclosed herewith, and submit it to the general meeting of members for approval;  

b) Deadline for approving the financial plan: Before April 30 of the planning year, the general meeting of members shall consider giving approval for the fund’s annual financial plan for implementation.

Chapter III

PERFORMANCE EVALUATION AND RATING OF COOPERATIVE FUNDS

Section 1: COOPERATIVE FUNDS OPERATING UNDER BUSINESS MODEL OF A SINGLE-MEMBER LIMITED LIABILITY COMPANY OF WHICH 100% OF CHARTER CAPITAL IS HELD BY THE STATE

Article 13. Methods for determining performance evaluation criteria

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a) Criterion 1: Growth of loan outstanding balance (including direct loans and loans granted under trusteeship) is the ratio (%) of the difference between the outstanding balance as at December 31 of the evaluation year and the outstanding balance as at December 31 of the previous year divided by the latter;

b) Criterion 2: Bad debt ratio is the ratio of bad debts on which the fund incurs risks according to SBV's regulations on debt classification by microfinance institutions to total outstanding debts on which the fund incurs risks (including direct loans and loans granted under trusteeship);

c) Criterion 3: Annual financial performance is the difference between total revenues earned and total expenses incurred in the evaluation year, and determined according to the cooperative fund’s audited financial statements;

d) Criterion 4: Compliance with regulations on investment, management and use of capital of the fund, fulfillment of obligations to state budget, and compliance with regulations on financial statements: The fund is considered compliant with laws, if it has no acts of violations, omission, partial or late implementation, or failure to comply with regulations. These violations include those committed by the fund, or any individual who acts in the name of the fund or its manager.

2. When calculating the performance evaluation criteria specified in Clause 1 of this Article, the fund may exclude the objective reasons as prescribed in Clause 2 Article 45 of the Decree No. 45/2021/ND-CP.

Article 14. Methods for rating of cooperative funds

Business performance of the cooperative fund shall be evaluated and ranked by means of comparison between its actually achieved performance and the criteria assigned in the fund’s financial plan. To be specific:

1. Criterion 1: Growth of loan outstanding balance

a) The cooperative fund is given “A” rating if the achieved value is equal to or higher than the planned one;

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c) The cooperative fund is given “C” rating if the achieved value is lower than 90% of the planned one.

2. Criterion 2: Bad debt ratio

a) The cooperative fund is given “A” rating if the achieved ratio is equal to or lower than the planned one;

b) The cooperative fund is given “B” rating if the achieved ratio is higher than, but not higher than 110%, of the planned one;

c) The cooperative fund is given “C” rating if the achieved ratio is higher than 110% of the planned one.

3. Criterion 3: Annual financial performance

a) The cooperative fund is given “A” rating if the achieved value is equal to or higher than the planned one;

b) The cooperative fund is given “B” rating if the achieved value is lower than, but not lower than 90%, of the planned one;

c) The cooperative fund is given “C” rating if the achieved value is lower than 90% of the planned one.

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a) The cooperative fund is given “A” rating, if, in the evaluation year, the fund is not facing any penalties imposed by competent authorities for understatement of tax amounts payable or overstatement of tax amounts eligible for exemption, reduction, refund or non-collection or tax evasion; it is not reminded in writing or is given only 01 written reminder by owner’s representative agency/finance authority of its invalid or late submission of any of reports serving the financial supervision, report on business performance evaluation or financial statements;

b) The cooperative fund is given “B” rating, if, in the evaluation year, the fund incurs administrative penalties imposed by competent authorities for not more than 01 violation concerning the understatement of tax amounts payable or overstatement of tax amounts eligible for exemption, reduction, refund or non-collection or tax evasion; it is given 02 written reminders by owner’s representative agency/finance authority of its invalid or late submission of any of reports serving the financial supervision, report on business performance evaluation or financial statements;

c) The cooperative fund is given “C” rating, if, in the evaluation year, the fund incurs administrative penalties imposed by competent authorities for 02 different violations, or more, concerning the understatement of tax amounts payable or overstatement of tax amounts eligible for exemption, reduction, refund or non-collection or tax evasion; or for its tax evasion as defined in the Government’s regulations on administrative penalties for violations against regulations on tax and invoices; it is given 03 written reminders by owner’s representative agency/finance authority of its invalid or late submission of any of reports serving the financial supervision, report on business performance evaluation or financial statements; or during their performance of tasks, a fund’s manager commits violations against regulations on investment, management and use of capital, obligations to state budget, preparation of financial statements and reports serving financial supervision according to announcements or conclusions given by competent authorities. Each violation committed by the fund’s manager shall be once considered during the performance evaluation of the fund.

d) Violations against tax procedures shall not be considered when carrying out the performance evaluation of the fund.

Article 15. Rating of cooperative funds

1. A fund is rated "A" if it has no criterion rated "C", and has at least 2 criteria rated "A".

2. A fund is rated "C" if it has 2 criteria not rated “A” and remaining criteria rated “C”.

3. A fund is rated “B” in other cases.

4. Based on the performance evaluation criteria specified in this Circular, the fund shall submit the report on performance evaluation and rating results to the cooperative alliance of the same level for appraisal and approval by May 31 of every year.

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Article 16. Business performance evaluation and rating of cooperative funds operating under cooperative business model

Every cooperative fund that operates under the business model of a cooperative shall, pursuant to the provisions of Chapter III of this Circular, and based on its charter on organization and operation, and management requirements, submit its own regulations on business performance evaluation and rating, assessment and ranking of its managers and controllers to its general meeting of members for promulgation and implementation provided that such regulations must be conformable with the provisions of the Government’s Decree No. 45/2021/ND-CP, the Law on cooperatives, and their relevant guiding, amending or superseding documents (if any).

Chapter IV

CONVERSION OF BUSINESS MODEL OF COOPERATIVE FUNDS

Article 17. Converting business model from a single-member limited liability company of which 100% of charter capital is held by the State into a cooperative

1. The cooperative fund that wishes to covert its business model shall formulate a plan for dissolution of the existing cooperative fund and the plan for establishment of the cooperative fund operating under the new business model (including financial plan, plans for management and administration, loan outstanding balance and relevant contents), and submit them to the cooperative alliance of the same level for appraisal and submission to competent authorities for decision according to the provisions of Articles 46 and 50 of the Decree No. 45/2021/ND-CP.

2. Based on the plan for dissolution of the existing cooperative fund and the plan for establishment of the cooperative fund operating under the new business model approved by competent authorities as prescribed in Clause 1 of this Article:

a) Regarding the dissolution of the existing cooperative fund: Required documents, procedures and financial settlement upon dissolution of the fund shall comply with regulations of law on dissolution of a single-member limited liability company of which 100% of charter capital is held by the State;

b) Regarding the establishment of the cooperative fund operating under the new business model: The establishment of the new cooperative fund operating under the business model of a cooperative shall comply with the provisions of Article 15 of the Decree No. 45/2021/ND-CP.

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1. The cooperative fund that wishes to covert its business model shall formulate a plan for dissolution of the existing cooperative fund and the plan for establishment of the cooperative fund operating under the new business model (including financial plan, plans for management and administration, loan outstanding balance and relevant contents), and submit them to the provincial cooperative alliance for appraisal and submission to competent authorities for decision according to the provisions of Articles 46 and 50 of the Decree No. 45/2021/ND-CP.

2. Based on the plan for dissolution of the existing cooperative fund and the plan for establishment of the cooperative fund operating under the new business model approved by competent authorities as prescribed in Clause 1 of this Article:

a) Regarding the dissolution of the existing cooperative fund: Required documents, procedures and financial settlement upon dissolution of the fund shall comply with regulations of law on dissolution of a cooperative set out in the Law on cooperatives and its guiding and amending documents (if any).

b) Regarding the establishment of the cooperative fund operating under the new business model: The establishment of the new cooperative fund that operates under the business model of a single-member limited liability company of which 100% of charter capital is held by the State shall comply with the provisions of Article 15 of the Decree No. 45/2021/ND-CP.

Chapter V

RESPONSIBILITYIES OF RELEVANT AUTHORITIES

Article 19. Responsibilities of Ministry of Finance of Vietnam

1. Fulfill the responsibilities defined in Article 51 of the Decree No. 45/2021/ND-CP.

2. Play the leading role and cooperate with relevant authorities in reviewing and studying on amendment of this Circular when deemed necessary.

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1. Fulfill the responsibilities defined in Clause 2 Article 55 of the Decree No. 45/2021/ND-CP.

2. Direct Chairpersons of cooperative funds and cooperative funds to comply with financial mechanisms, carry out business performance evaluation and rating, and settle financial issues upon conversion of the fund’s business model as prescribed in this Circular.

3. Direct Provincial Departments of Planning and Investment to instruct cooperative funds to follow procedures for re-issuance of certificate of registration of cooperative fund as prescribed in Point d Clause 5 Article 58 of the Decree No. 45/2021/ND-CP.

Article 21. Responsibilities of cooperative alliances at all levels

1. Fulfill the responsibilities defined in Article 8 and Article 56 of the Decree No. 45/2021/ND-CP.

2. Appraise and submit the plans for conversion of business model of cooperative funds to competent authorities for approval according to Article 50 of Decree No. 45/2021/ND-CP and the provisions of this Circular.

Article 22. Responsibilities of cooperative funds

Comply with financial management mechanisms and other contents concerning operations of cooperative funds as prescribed in Decree No. 45/2021/ND-CP, the provisions of this Circular, and relevant legislative documents.

Chapter VI

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Article 23. Effect

1. This Circular comes into force from October 01, 2022.

2. This Circular supersedes the Circular No. 81/2007/TT-BTC dated July 11, 2007 of the Ministry of Finance of Vietnam.

Article 24. Implementation organization  

1. Chairpersons/Chairpersons of Boards of Directors, and executive boards of cooperative funds, and relevant organizations and individuals are responsible for the implementation of this Circular.

2. Difficulties that arise during the implementation of this Circular should be reported to the Ministry of Finance of Vietnam for consideration./.

PP. MINISTER
DEPUTY MINISTER




Nguyen Duc Chi

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Thông tư 52/2022/TT-BTC hướng dẫn Nghị định 45/2021/NĐ-CP về thành lập, tổ chức và hoạt động của Quỹ hỗ trợ phát triển hợp tác xã do Bộ trưởng Bộ Tài chính ban hành