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Expert Discussion: Current Issues of Corporate Governance in Bulgaria


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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