the implementation of the white paper on corporate governance in se europe progress to date in...
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THE IMPLEMENTATION OFTHE WHITE PAPER ON CORPORATE
GOVERNANCE IN SE EUROPE
Progress to date in Bulgaria
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Institutional Framework – Achievements and Challenges
The legal framework is largely brought into line with the relevant EU acquis.
The institutions required are in place are effectively functioning.
Registration of ownership and transactions with securities are fast and reliable.
Wide network of brokerage services
Supervisory body to monitor the accounting and auditing profession.
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Regulatory Authorities - Achievements and Challenges
FSC’s powers have been enhanced and broadened (2000) - licensing, monitoring, compulsory measures, fines, requiring information, investigations
FSC is independent Law enforcement and implementation
relay mostly on the market regulator Most of the measures initiated by the
FSC may be appealed in court Professional Arbitration for BSE
Increase the expertise and the capacity of courts
Increase the role of BSE as regulator
Implementing and enforcing the new legal rules in an effective and balanced way
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The Private Sector – Achievements and Challenges
All public companies are required (2003) to have CG programmes
Best international practices of CG based on OECD Principles
Annual reports on the implementation
All public companies are required to have investor relations officer
The bulk of companies have gone public in an administrative way
Many public companies don’t posses the appropriate profile
Companies with an essentially public profile are not public or are on their way to abandon this status
Public status is considered as a burden rather than as an opportunity
To a large extent the sector remains still uncommitted to the CG reform
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CG Training – Achievements and Challenges
Over the past years many international donors have assisted the FSC under different programmes and projects
There have been training programmes for accountants and auditors
Ad hoc training by non-government organizations under international projects
Training for board members and judges needs to be further enhanced.
Training for accountants and auditors in the field of CG
Corporate governance curricula are usually not available at universities
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Minority Rights Protection - Achievements and Challenges
Overall improvement (2002) Shareholders’ approval of major and
related party transactions Redemption rights in case of
reorganization Tender offers regulation was developed
providing for fair price Tradable pre-emptive rights Proxy voting Clear rules with respect to dividends Free transferability of shares
Minority rights in state owned companies
Efficient protection in case of major and related party transactions
Significant role for the institutional investors
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Board’s Duties – Achievements and Challenges
Elaborated legal rules regarding boards’ duties of care and loyalty
One third of the members are required to be independent directors
Criteria for independence are set forth in the Securities Law
Access to information
Real MoB independence Committees for some of
the essential functions Remuneration linked to the
performance (shares)
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Accounting Reform – Achievements and Challenges
New Accountancy Law (2003, IAS)
New Independent Financial Audit Law (ISA, EU VIII-Directive)
Organized training by the Ministry of Finance and the (ICPAB)
Financial reporting and auditing procedures are in a period of transition
More extensive training for practicing accountants, auditors, tax authorities and market regulators.
New educational curricula in a different philosophy
Regulation
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Disclosure – Achievements and Challenges
Far-reaching upgrade in the legal framework (end of 2003)
The content of prospectuses and periodic disclosure reports are harmonized with the best international standards
Disclosure requirements for significant events
Broad definition of price-sensitive information plus a non-exclusive list of events, typically considered as material
Efficient communication by CP institutions
Efficient communication by companies
Greater role of the media
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Stakeholders’ Rights – Achievements and Challenges
Labour Law Social Insurance Law Representation in the GM Guarantee Fund Insolvency legal framework has
been revised and improved several times
Amendments to the Civil Procedure Code
Amendments to the Registered Pledges Law
Effective communications with relevant stakeholders
Stakeholder policies should be established
Effective redress mechanisms for employees (arbitration or specialised courts)
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Trading on the BSE – Sofia (shares)
1999 2000 2001 2002 2003
Official Market
Nbr of Listed Issues 33 30 30 31 35
Turnover (mil. BGN) 12.3 8.6 4.4 14.4 60.9
Market Capitalization (mil. BGN) 219.1 283.5 195.0 252.9 986.7
Unofficial Market
Nbr of Listed Issues 828 478 369 325 303
Turnover (mil. BGN) 38.1 23.6 37.8 69.6 120.0
Market Capitalization (mil. BGN) 1154.0 1003.0 909.0 1122.3 1742.0
Total
Nbr of Listed Issues 861 508 399 356 338
Turnover \ Capitalization (%) 3.7 2.5 3.8 6.1 6.6
Capitalization \ GDP (%) 6.9 5.7 3.7 4.3 7.9
Block Trading (mil. BGN) 82.6 91.1 114.9 244.7 151.2
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SOFIX Index 2000-2003
0
50
100
150
200
250
300
350
400
450
500
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Trading on the BSE – Sofia (bonds)
1999 2000 2001 2002 2003
Corporate Bonds – Official Market
Nbr. of Listed Issues 1 3 3 3 7
Nominal Value (mil. BGN) 0.3 4.1 4.1 13.7 44.7
Turnover (mil. BGN) 0.0 3.3 0.8 2.5 41.5
Corporate Bonds – Unofficial Market
Nbr. of Listed Issues 0 0 4 6 10
Nominal Value (mil. BGN) 0.0 0.0 10.6 28.1 61.1
Turnover (mil. BGN) 0.0 0.0 0.3 17.1 26.0
Municipal Bonds
Nbr. of Listed Issues 0 0 0 1 2
Nominal Value (mil. BGN) 0.0 0.0 0.0 3.0 4.0
Turnover (mil. BGN) 0.0 0.0 0.0 0.0 0.0
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The Broad Picture - Achievements and Challenges
The majority of the recommendations have been implemented in the legal and institutional framework
All aspects of the CG reform have been touched
Signs that the capital market has responded in a positive way to the CG reform
CG reform effort is not yet completed
Certain aspects are in an advanced phase, while others are at an early stage
Some significant changes have been adopted very recently (2002, 2003)
The effectiveness of enforcing the new legal rules remains a major challenge
Educational efforts are needed