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New rules control dilution of State investments
State-owned single member limited liability companies are asked to invest at least 70 percent of their capital into core trade or industry and limit investment in by-products to an amount less than their chartered capital.
Circular 117/2010 prepared by the Ministry of Finance made it clear that these companies are not allowed to contribute more than 20 percent of their partners’ chartered capital in any joint ventures in banking, insurance and securities. The combined investment by holding and subsidiary companies in a State-owned economic group is not allowed to surpass 30 percent of their partners’ chartered capital in the above-mentioned joint ventures.
In cases where the companies want to invest more than the set level, they will have to submit proposals to the Prime Minister for consideration.
Those SoEs which have appeared to run counter to the new regulation are asked to adjust their investments before July 1, 2012.
The freshly promulgated circular aims to limit negative impacts on some State-owned economic groups and SoEs by their multi-industrial investments.
Diluting core investments sometimes reduces the competitive edge of SoEs and can drive them to the verge of bankruptcy, stipulated the regulation.
The Ministry of Finance reported that there are some 300 one-member limited liability companies run by the State operational across the country, in addition to some 3,800 joint-stock companies that were formerly SoEs.
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