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Ukraine’s Parliament to consider bill on corporate governance of state-owned companies

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The Verkhovna Rada (Ukraine’s Parliament) Committee on Economic Development recommended that the Verkhovna Rada pass Bill No. 5593-d, which improves corporate governance in state-owned enterprises, in its second reading and in general.

Source: The corresponding decision was made by members of the relevant committee at a meeting on 5 February, as reported by the press service of the Ministry of Economy

Details: According to MP Oleksii Movchan, Deputy Chairman of the Verkhovna Rada’s Economic Committee, bill No. 5593-d will help solve the problem of inefficient state ownership of government-owned enterprises.

According to Movchan, combining the functions of owner, manager, and controller in one person is ineffective and poses numerous corruption risks.

The Ministry of Economy stated that the purpose of bill No. 5593-d is to introduce effective and transparent work in state-owned enterprises.

According to the ministry, as of April 2023, 3,107 state-owned enterprises were under the control of the central bodies of state power, with only 859 operational and 433 profitable. At the same time, the department identified every third such enterprise as unprofitable and potentially posing fiscal risks.

“The lack of an approved strategy for managing state property, the true independence of members of supervisory boards, slow corporatisation, and a low level of transparency and accountability are all factors that impede the effective operation of state-owned enterprises.

Bill No. 5593-d regulates a wide range of state enterprise activities. This is particularly relevant to the implementation of the State Property Policy, for which the government has the authority to approve. At the same time, the State Property Policy will include the Remuneration Policy for managers and members of the supervisory boards of state enterprises, as well as the State Dividend Policy”, the statement said.

The bill requires the supervisory boards of all state-owned enterprises to approve strategic development plans, as well as investment and financial plans.

At the same time, the state commercial enterprise’s financial plan must include separate financial indicators in the areas of profitability, liquidity, and solvency related to the formation of the state budget, which will be included in the owner’s waiting lists, according to the Ministry of Economy.

Additionally, with the adoption of the bill, the procedure for remuneration of heads of state-owned enterprises and members of supervisory boards will change. The remuneration policy, which will contain principles and methodological approaches, will be approved by the government. Based on these policies, supervisory boards will set the amount of remuneration for heads of enterprises, the ministry explained.

The bill also governs the procedure for dismissing members of supervisory boards: previously, they could be dismissed without formal grounds; now, an exhaustive list of grounds for dismissal is introduced.

Background: As part of the IMF’s Extended Fund Facility (EFF), Ukrainian authorities have agreed to improve corporate governance in state-owned enterprises.

According to the Memorandum with the IMF signed in March 2023, Bill No. 5593-d was to be adopted by October 2023.

The Memorandum with the IMF was updated in December 2023, and this bill is expected to be adopted in early 2024.

In July 2021, the Verkhovna Rada passed Bill No. 5593-d on corporate governance in state-owned enterprises in its first reading.

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