On January 13, 1999,
an expert discussion on "Current Issues of Corporate Governance in
Bulgaria" was held at the Center for the Study of Democracy. The
representatives of Securities and Stock Exchange Commission, Center
for Mass Privatization, Bulgarian Association of Licensed
Investment Intermediaries, Securities Holders Association,
non-governmental organizations, financial institutions, Bulgarian
and foreign companies attended the discussion.
The meeting's goal was
to present the experts' opinions on the current situation and the
perspectives for the development of corporate governance in
Bulgaria.
Most of the experts
think that the corporate governance in the country doesn't exist in
the models and forms, typical for the developed market economies.
The reasons are:
- During the first wave of mass
privatization the most of ex-privatization funds have bought the
majority stake of different enterprises. They don't have enough
power and resources to manage them and to carry out an effective
control.
- The enterprises, which have been
privatized in the first stage of mass privatization, and those who
are to be privatized, are too small. The corporate governance can't
exist in too small companies. It is typical for companies with
significant capital, because the interests of small investors can
be guaranteed and assured.
- Another problem is that the real
diversification between public and private companies doesn't exist.
The biggest part of the companies became public by "force", as a
result of mass privatization. An enterprise must become public by
the willingness of its shareholders, not by
"force".
- more than 2/3 of the public companies
in Bulgaria are transformed in public companies by
force.
- Bulgaria does not have a clear and
precise legislation, dealing with the establishment of public
companies, which creates most of the corporate governance problems.
It's difficult to understand when a company transforms into a
public company - from the moment when the legal environment is ripe
enough for it, or automatically after the description in the
register of the Securities and Stock Exchange
Commission.
- The public companies exist in
Bulgaria as a legal subject since April 1998. Until now, there are
not any envisaged legal decrees for minority shareholders' rights
protection. It isn't clear if this issue is settled in the new Law
on Securities. It is necessary to know the possibilities for
drawing dividends and the rules for participation in the general
meeting of shareholders and the joint-stock
companies.
- The majority shareholders disregard
minority shareholders' interests.
- The privatization funds in the
country don't have liquidity of their assets.
- The system of cumulative voting does
not exist. The minority shareholder cannot integrate with other
minority shareholders.
- The information of listed companies,
their reports, balances and cash flows is not
available.
- Many privatization funds have bought
the main stake of different enterprises just with the purpose to
sell the shares, and not to manage them.
- No one of the corporate governance
models is applied completely in Bulgaria.
Also, some
recommendations, concerning the development of corporate governance
and the improvement of companies' activities, were
given.
- The regular publication of
information about the different enterprises is very important and
necessary. It must implement rules of voting by letter of attorney
and specify the responsibilities of directors. The courts in the
USA elaborate such responsibilities, but they can be regulated by
the law, as well. Usually, there are two responsibilities,
specified by the court. One of them is the loyalty to the company,
and the other - the concern for the company. The decisions are not
always correct, but they are supported with the necessary
information. That's a suitable variant for protection of minority
shareholders' rights and interests in Bulgaria.
- The so-called "conception of nominal
shareholder" does not exist, but it could be applied in Bulgaria.
According to this conception, the shareholders remain owners of
their shares, but they give in the banks just the right of
voting.
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