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
- 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
- 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
- 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.