On Tuesday, 10 September, the Economic, Agricultural, Environmental and Regional Policy Committee of the Saeima expressed conceptual support for a new draft law which sets forth rules on how a public entity must manage its capital shares and capital companies. 

Jānis Ozoliņš, Chairman of the Committee, explains that the new draft law lays down the procedure according to which capital companies belonging to public entities are founded, operated and liquidated, as well as the procedure for managing capital shares, including setting of goals and assessment of operations. The draft law provides for the introduction of partially centralised management of state-owned capital shares; it sets forth the procedure by which the State Capital Shares Management Bureau will be set up the principles of its operation. Furthermore, the draft law stipulates the procedure by which the portion of profits to be paid out in dividends is determined, the introduction of a motivating salary system for board and council members of capital companies, criteria for establishing a council of a capital company, as well as the expropriation of capital shares, the Chairman of the Committee explains.

The new law will replace the Law on State and Local Government Owned Capital Shares and Capital Companies.

As Daniels Pavļuts, Minister for Economics, informed the members of the Committee today, the objective of the new draft law is to introduce standards of management, a high degree of transparency in the management of state and local government owned companies, thus improving the contribution of this resource to the state and local government budgets, as well as the national economy as a whole. Until now, each ministry has managed its capital companies as it saw fit; however, the new draft law will set forth how to best manage these companies, for example, by stipulating an obligation to elaborate medium-term strategies for capital companies, as well as to elect the board of the company for the duration of the strategy. The new draft law provides a choice: a capital company will be managed either by a ministry or a centralised management institution, which will have powers of general supervision over whether the strategies and dividend policies the government has decided on are adhered to, Pavļuts explained.

In turn, Juris Pūce, State Secretary of the Ministry of Economics, informed Committee members that the new draft law will apply to all public entities, including ports and theatres, and there will be new requirements regarding availability of information, e.g., what information capital companies will be obliged to make available to the public. Furthermore, the draft law provides for a new remuneration procedure for board members, based on the operational results of the company.

Klāvs Olšteins, member of the Committee, asked the Minister to explain the principles by which the new Management Bureau will be set up, what decisions it will take, and whether it will not be an overly large centre of power managing all state capital companies. Pavļuts repudiated doubts about excessive centralisation, explaining that the Cabinet of Ministers will be able to decide which capital companies are to be managed by the Bureau and which are to remain subject to ministries.  Pūce also said that the Bureau will consist of 12 employees, of whom half will be civil servants, and the other half – regular staff members.

Ingmārs Līdaka, member of the Committee, said that this reform must abolish the principle of two managers; that is, the responsibilities and functions of the Capital Shares Management Bureau and the relevant ministries must be clearly defined.

Today, members of the Economics Committee also conceptually supported amendments to the Law on Privatisation of State and Local Government Property, which set forth that by 1 January 2015 state stock company Privatizācijas Aģentūra will pass on to the State Capital Shares Management Bureau all state capital shares intended for privatisation.

The Draft Law on Management of Public Entity Owned Capital Companies and Capital Shares, as well as amendments to the Law on Privatisation of State and Local Government Property are still to be considered in three readings by the Saeima.

Saeima Press Service