THE IMPLEMENTATION OF
THE WHITE PAPER ON CORPORATE
GOVERNANCE
IN SE EUROPE
Progress to date in
Bulgaria
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.
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
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
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 nongovernment 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
Minority Rights Protection - Achievements and Challenges








Overall improvement (2002)
 Minority rights in state
Shareholders’ approval of major owned companies
and related party transactions  Efficient protection in
Redemption rights in case of
case of major and related
reorganization
party transactions
Tender offers regulation was
 Significant role for the
developed providing for fair price
institutional investors
Tradable pre-emptive rights
Proxy voting
Clear rules with respect to dividends
Free transferability of shares
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)
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
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
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)
Trading on the BSE – Sofia (shares)
1999
2000
2001
2002
2003
Official Market
Nbr of Listed Issues
33
30
30
31
35
12.3
8.6
4.4
14.4
60.9
219.1
283.5
195.0
252.9
986.7
Nbr of Listed Issues
828
478
369
325
303
Turnover (mil. BGN)
38.1
23.6
37.8
69.6
120.0
1154.0
1003.0
909.0
1122.3
1742.0
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
82.6
91.1
114.9
244.7
151.2
Turnover (mil. BGN)
Market Capitalization (mil. BGN)
Unofficial Market
Market Capitalization (mil. BGN)
Total
Block Trading (mil. BGN)
10
/0
3
07
/0
3
04
/0
3
01
/0
3
10
/0
2
07
/0
2
04
/0
2
01
/0
2
10
/0
1
07
/0
1
04
/0
1
01
/0
1
10
/0
0
SOFIX Index 2000-2003
500
450
400
350
300
250
200
150
100
50
0
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
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
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
Corporate Bonds – Unofficial Market
Nbr. of Listed Issues
Municipal Bonds
Nbr. of Listed Issues
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