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Management buyout permitted in major SOEs
www.chinanews.cn 2006-01-22 15:35:25
(Source: Xinhua)
BEIJING, Jan. 22 - Managerial staffs of China's major state-owned
enterprises (SOEs) are permitted to hold shares of their own firms during
assets or shares increase of the SOEs, according to the country's
state-owned assets administer.
Total shares held by the managerial staff should be less than the volume
that could absolutely or relatively control the SOEs, according to a
document issued by the State-owned Assets Supervision and Administration
Commission (SASAC) and approved by the State Council.
In order to contain insiders-control and state-owned assets losses, SASAC
and the Ministry of Finance jointly issued a document in April 2005,
forbidding management buyout (MBO) in large-scale SOEs.
"The inspiring and inhibiting role of MBO has been approved in some large
corporations overseas, and the practice of some of our major SOEs also
prove the measure to be effective," a SASAC official noted.
Generally, managerial staff holding a small amount of their companies'
share will not lead to insiders-control or state-owned assets losses, so
long as the MBOs are "rigidly controlled and canonically operated", said
the official.
According to the official, the newly-issued document sets several
conditions to "strictly control" the MBOs. Only those who won their
positions through competition instead of appointment, or who have made
major contributions to the companies, could hold the shares of the SOEs.
The MBOs must be approved by the supervisory departments of state-owned
assets, and the total shares held by the entire managerial staff should
be less than the volume that could control the SOEs.
The managerial staff is banned from being involved in major proceedings
like drafting reform plans and fixing prices of state-owned assets; and
should provide certificates that can prove the validity of their capital
sources.
Those managerial members bearing direct accountability for the decline of
their companies' performance could not hold shares of the companies.
According to the document, the MBOs does not include the shares and
futures awarded to the managerial staff.
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