In the conditions of a complex socio-political context, the appearance in the public space of a draft of an emergency order, which proposes significant changes to the legislation on corporate management of state-owned companies, went relatively unnoticed. If the most important proposal, namely that a number of companies will be exempted from the application of corporate governance rules, will attract the attention, even limited, of public opinion[1]the same cannot be said for several additional proposals with a similar impact.

First of all, it is proposed to create a new body with the status of a legal entity under the General Secretariat of the Government, which, among other things, will take over the responsibilities of the Ministry of Finance in monitoring the application of corporate governance. rules, as well as sanctions for violations. This measure is envisaged by the PNRR and is aimed at creating a strong institutional framework to ensure compliance with the principles of corporate governance. Unfortunately, the proposal ignores several important shortcomings of the current system, which jeopardizes the effectiveness of the approach.

First, it is the lack of separation of regulatory and administrative functions (separation of regulation and ownership), which we discussed another time (here). Although this separation is also contemplated by the PNRR, the proposed changes do not address this issue. More precisely, the order only provides for the possibility for the Government to delegate to a new body the function of representing the state, which is performed by the relevant ministries, and to implement it in practice by exercising the rights of the state as a shareholder in the general meetings of shareholders of the respective companies. In other words, in the absence of such a clear delegation, these rights remain with the relevant ministries. Given that the company’s articles of association may give shareholders additional powers to make operational decisions (such as approving contracts above a certain value), the absence of such separation can significantly reduce the effectiveness of any measure. limit the intervention of the political factor, including the appointment of competent, politically neutral administrators.

The second is the involvement of the relevant ministries in the appointment of temporary administrators, if the positions have become vacant. Even though the draft decree imposes restrictions in this regard, requiring the appointment of persons previously registered in the national register of administrators based on a procedure organized by the new body, ministries will still have important discretion. More specifically, they would be able to appoint any person registered in the relevant register, regardless of the appointee’s experience in a particular sector. Thus, there is a risk of continuation of the old practices of appointing politicians to temporary positions, which are then retained for a long time. It would be much more appropriate for the designation attribute to belong to the new body to be created, provided it has real independence.

Regarding this last aspect, the subordination of the new body to the General Secretariat of the Government raises serious questions about limiting the interference of the political factor. The draft ordinance does not contain details regarding the organization and activities of this new body, these details will be determined by by-laws, but the direct mention of subordination indicates the preservation of political influence. As I have shown elsewhere, in the article mentioned above, the independence of such a body is necessary, given that it has the role of applying sanctions to ministers responsible for non-fulfillment of the obligations of the relevant ministries created in the legislation.

Secondly, the draft stipulates the obligation to increase the authorized capital of state-owned companies at the expense of the value of the land, in respect of which the procedure stipulated by the current legislation has not been completed. We are talking about lands for which it was necessary to issue the famous certificates of ownership, the value of which should have increased the social capital of companies whose shareholder is the state, even after privatization. If the current legislation contains clear provisions that allow other shareholders to retain their participation by using the preemptive right of purchase, the provisions included in this project do not contain such a mechanism, and the whole procedure is vaguely regulated. I hope that the explanation lies in the preliminary nature of this draft and that similar protection will eventually be included in the draft before its approval. Otherwise, the dilution of the participation of minority shareholders, which would result from the non-compliance with the right of pre-emption, would be destructive for the capital market in Romania. Read the whole article and comment on Contributors.ro