BASIC PRINCIPLES OF CORPORATE MANAGEMENT OF STATE COMPANIES IN BULGARIA MINISTRY OF ECONOMY, ENERGY AND TOURISM

GENERAL REVIEW In the ranking list of the Top 100 most profitable companies for 2010 – among others 14 are state companies. The group consists of mainly energy and transport companies.

GENERAL REVIEW State companies report significantly more successful financial results for Transport companies narrowed their losses, energy companies greatly increased their profits from a year earlier. At the same time both show an increase in revenue, which continued throughout the first half of The strong financial result of the largest state companies means a significantly higher dividend for the state.

DEVELOPMENT ROLE OF PSEs The total amount of privatized fixed assets amounts to 65.49% - compared to the amount of all state assets at book value at and 99.18% of the fixed assets defined for privatization. The state has withdrawn from participation in economic life by state companies except in the sectors of energy and transport. In this sectors PSEs operate along with private companies. Strategic goals are approved by the Council of Ministers and adopted by the National Assembly of Bulgaria.

COMPARISON OF DEVELOPMENT ROLES Public Sector  production of electricity (nuclear power)  gas supply  railway transport  ports (river and sea)  airports Private Sector  distribution of electricity  power generation from renewable energy resources  air transport  road transport

ORGANIZATION OF THE STATE OWNERSHIP Joint-stock company (JSC) a company whose capital stock is divided into shares. The company (not the shareholders) shall be liable before its creditors with its assets. All shares can be possessed by a single person – in our case – the state. Limited liability company (LLC) may be formed by one or more persons who shall be liable for the company's obligations with their contributions to the company's registered capital. It blends elements of partnership and corporate structures.

JOINT-STOCK COMPANY Corporate structure means:  Legal personality  Centralized management under a board structure  Its existence does not depend on membership  Limited liability  Transferable shares

JOINT-STOCK COMPANY  They may be “public” or closely (privately) held  The single owner is registered in Commerce Register. Several shareholders are not registered  Organs of JSC are the general meeting of shareholders/single owner the board of directors (one-tier system), or the supervisory board and the managing board (two-tier system)

JOINT-STOCK COMPANY GENERAL MEETING/ SINGLE OWNER  amends the Articles of Association;  resolves on increase or reduction of the capital stock;  resolves on transformation and dissolution of the company;  elects and recalls the members of the board of directors, or of the supervisory board as the case may be;  determines the remuneration of the members of the supervisory board, or of the board of directors  appoints and dismisses registered auditors;

JOINT-STOCK COMPANY  approves the annual financial statement as audited by the appointed registered auditor, resolve on profit distribution and payment of dividend  resolves on issuing of debentures  appoints liquidators upon dissolution of the company, except in the event of bankruptcy  relieves of responsibility the members of the supervisory board and managing board, or of the board of directors  resolves on other matters which by virtue of the law or the Articles of Association are in its competence

LIMITED LIABILITY COMPANIY SIMILARITIES:  both types of companies are separated legal entities which have their own privileges and liabilities distinct from those of their members  creditors are granted (as opposed to shareholders) priority over the company assets upon liquidation or insolvency  corporate assets cannot be withdrawn by its shareholders/partners, nor can the assets of the company be taken by personal creditors of its shareholders/partners

LIMITED LIABILITY COMPANIY MAIN DIFFERENCES :  minimal amount of capital required by low;  all partners (one or several) are registered;  each partner is entitled to take part in the management of the company  manager/managers instead of board structure  general meeting of partners is entitled to:  to resolve on additional monetary contributions  admit and expel partners, give consent on the transfer of an interest to a new partner  resolve on setting up or closing down branches and participation in other companies  resolve on the acquisition or alienation of real property

The Council of Ministers or the Ministers (according to their branch competence) are entitled to exercise the rights of the owner of shares. In a single person joint-stock company and a single person limited liability company, the single owner of the stock shall decide on issues within the competence of the general meeting. ORGANIZATION OF STATE OWNERSHIP FUNCTIONS

THE MINSTER GIVES PERMISSION FOR:  the disposal of the fixed assets  rental of properties  acquisition or disposal of shares  mortgage and pledge of fixed assets  for the conclusion of agreements, which recognize obligations or release debt ORGANIZATION OF STATE OWNERSHIP FUNCTIONS

 Election and nomination of management  Incentives and remuneration  Evaluation systems MANAGEMENT AND PERFORMANCE EVALUATION SISTEMS

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