Банкеръ Weekly



The amendments to the Public Offering of Securities Act are not likely to be soon passed by Parliament, but a considerable part of the projected changes are already known. The provisions are to be made precise juristically, and the drafters should agree them with the State Commission on Securities, whose experts are also working in the same direction. The amendments are expected to lay the beginnings of the revolution on the Bulgarian capital market, promised by the incumbent Deputy Premier and Minister of Economy Nikolai Vassilev during the pre-election campaign. Representatives of the investment underwriters and of the US Agency for International Development (USAID) are participating in the drafting of the amendments, which practically concern all sections of the Public Offering of Securities Act and are basically connected with introducing more transparency into the activities of public companies and the protection of minority shareholders' rights.
It seems that most attention has been paid on the section on the revealing of information. After the amendments are enforced, the public companies will be obliged to publish quarterly accounting reports, instead of doing that each six months as is the current practice. The announcements for inviting general meetings and other events pertaining to the issuers' activities shall not be published in dailies of small circulation that are not read by investors, but will be publicly displayed - probably on the Stock Exchange. Moreover, the managers will have to make public their assessment about their company's situation each quarter. They should also give their forecasts about the expected financial results of their companies on a quarterly basis. Directors will have to make public statements in cases when circumstances of significant material importance for their companies occur. And shareholders will be obliged to make public their future intentions when they acquire a significant portion of paper in a public company.
Revolutionary changes are projected as well with regard to the payment of dividends. Presently, shareholders have to keep an eye on the set terms, or travel hundreds of kilometers to the head office of the respective company in order to get their shares of the profit. A possibility for remitting the dividends has been stipulated as well, although is concerns primarily shareholders that are juristic persons. The process of paying dividents is currently lagging for a long time and some companies are still distributing dividends for 1997.
After passing the new provisions, the dividends shall be distributed by the Central Depository into the accounts of investment intermediaries, which shall on their part transfer them into their clients' accounts. Thus, the companies will have no other obligation except remitting the due amounts to the Central Depository.
The amendments to the Public Offering of Securities Act will also settle the so-called proxy voting, which is a means of distance voting at a general meeting. This will enable more people to take part in these forums. Public companies will be sending to their shareholders forms including the items on the meetings' agendas. The shareholders can fill them in and return them to the head office, and thus effect their voting rights.
The prepared amendments to the Public Offering of Securities Act project a significant expansion of the State Commisson on Securities' rights. Its representatives will have broader possibilities ro investigate into the activities of public companies and investment underwriters. The maximum amount of sanctions to managers and companies, which violate the rights of minority shareholders through transferring prices and sale of assets, will go up as well.
Introduction of incentives and aids for the issuers is expected as well. The profit tax for public companies might be reduced, but this has not been agreed with the Ministry of Finance yet. A department for consultancy services on drafting of prospects and issuance of new public issues of shares and bonds will be established at the State Commission on Securities.
The amendments to the Public Offering of Securities Act are obviously an important step towards the increase of trust in the local capital market. But they will hardly be sufficient for revving up the Bulgarian Stock Exchange, as practice shows that owners, determined to elude the rights of minority shareholders, always find a legal loophole to do so. Therefore, interest of enterprises to take advantage of the opportunities for financing through launching new issues of securities, offered by the capital market, will continue to be the corner-stone for its development.

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