CORPORATE GOVERNANCE AND
THE STATE AS A PRINCIPAL
THE BULGARIAN CASE
Prof. Bistra Boeva, Commissioner
BULGARIAN NATIONAL SECURITIES COMMISSION
OECD/APG Session
September 19-20, 2000
Budapest
Presentation Topics
 Corporate Governance: the
Main Initiatives
 Corporate Governance: Basic
Characteristics and Patterns
 Corporate Governance and the
State as a Principal
 Is the Future Bright?
Corporate Governance: Main
Initiatives
 Large scale change of ownership due to the voucher,
cash and mass privatization.
 Government initiated transformation of companies,
privatized via vouchers, into public companies.
 Establishment of a regulated capital market.
 State initiated launch of the legal framework for
corporate governance.
Shareholders’ Ownership Patterns
and Corporate Governance Models
 Highly dispersed pattern of shareholders’
ownership - typical for ex privatization
funds/holding companies and investment companies
to have from 6,000 to 100,000 shareholders.
 Currently 3,5 million shareholders in these
enterprises.
“Market controlled type of corporate governance”
Shareholders’ Ownership Pattern
and Corporate Governance Models
 Highly concentrated pattern of shareholders’
ownership - typical for the majority of public
companies.
 In 614 public companies, out of a total of
1,142, the strategic investors own more than
50% of the shares.
“Insider controlled type of corporate governance”
Some Trends and Problems in the
State as a Principal
 Lack of modern rules and legal framework for state
participation in public companies and the exercise of their
corporate governance rights.
 Several types of behavior by the state as a principal in
public companies:
 Modern attitude and active position of the principal’s
representatives in corporate governance.
 Lack of interests in cases of minority shareholder
status.
 Interference of the principal’s representatives
beyond their authority as shareholders.
 Positive changes in behavior patterns from
conflicts/tensions toward public/private partnership.
Corporate Governance and the
State in a Transition Economy
The State As A Regulator
 Establishes the legal framework for Corporate
Governance.
 Monitors compliance with the Law and the Rules.
 Encourages capital market development and
corporate governance “best” practices.
Corporate Governance and the
State in a Transition Economy
The State As A Principal In The Public Companies

Majority or minority shareholder.

Legal framework: Privatization Act.

Organizational framework: Various ministries, following their
own policy and procedures, exercise the State’s shareholder
rights, e.q. Ministry of Industry; Ministry of Regional
Development; Ministry of Transport, etc.
Corporate Governance Patterns in
Bulgaria
One or Few Models?
 Market controlled pattern or two-tier system
 Supervisory Board and Board of
Directors
 Insider controlled pattern or one-tier system.
 Managing Board
Is the Future Bright?
 BNSC’s policy of encouraging corporate
governance development.
 Other corporate governance initiatives for
Bulgaria.
 Proactive policy of improvement
of corporate governance practices in
Bulgarian public companies.
 Special initiative for the equal
treatment of the State in its capacity
as a shareholder - legal, economic
and educational measures.
 Future privatization of enterprises and the
State’s position as a shareholder.
Public Companies in Bulgaria
1200
1142
921
NUMBERS
1000
640
800
600
400
200
0
1998
1999
YEARS
09.2000
Registered Economic Units By Kind And
Ownership As Of December 31,1998
Privatized Assets Compared To Assets Subject
To Privatization
In The Period January 1,1993 - August 31, 2000
24,3%
53,6%
22,1%
Assets privatized by cash privatisation
Assets privatized by mass Privatisation
Non-divested assets of state owned enterprises
Assets of state owned enterprise in B G N
383,000,000
Assets privatised by cash privatization
250,380,831
100,0%
35,6%
Assets privatised by mass privatization
84,557,246
22,1%
Privatized Assets Compared To Assets Subject
To Privatization
In The Period January 1,1993 - August 31 ,2000
50,0 %
50,0%
Assets privatized by cash privatization
Non-divested assets of state owned enterprises
Assets of state owned enterprise in BGN
580,000,000
100,0%
Assets privatized by cash privatization
289,938,007
50,0%
Bulgarian National Securities Commission
The Bulgarian National Securities Commission has approximately 120
employees. The Commission supervises:

104 investment intermediaries (76 non-banking institutions
and 28 banks);

4 investment companies (one open-end investment company);
 The Bulgarian Stock Exchange;
 The Central Depository AD; and
 More than 1,000 public companies.
Bulgarian National Securities Commission
The BNSC’s efforts target:
- development of an efficient and transparent
capital market as an important prerequisite
for the successful transition of the economy;
- protection of shareholders;
- increase confidence of local and foreign
investors in the Bulgarian capital market; and
- establishment of pension funds, mutual
funds, etc.
Law on Public Offering of Securities Effective
January, 2000
An important merit of the new law is the detailed
statutory elaboration of the public company,
concerning a considerable number of unprofessional
participants on the capital market, as a result of the
voucher privatization. Statutory guarantees have
been set up concerning the rights of the
shareholders, avoidance of the infringement of
these rights and non-admission of speculations with
them. A number of new points have been
introduced, not existing in the hithero prevailing
legislation and in the Company Law of the country.
Bulgarian National Securities Commission
Considerably more alleviated regime has been
introduced of the tender offer as a particularly
important element of the trade in securities and the
restructuring of the economic entities. Where a
person owns 50% of the voting right in a public
company which secures to him a control over the
same, he should make a mandatory offer to the
remaining shareholders with a voting tight to
purchase their shares or to transfer the necessary
number of shares, so that he may own directly or
through related persons less than 50% of the votes.