Donations to the public budget made by state-controlled companies violate the rights of minority shareholders, says CFA Romania

Newsroom 10/01/2011 | 15:45

Donations to the public budget made by companies where the government is the main shareholder, generate a negative impact on the attractiveness of the Romanian capital market, and are an abuse against minor shareholders, says CFA Romania. The association criticizes these practices, nominating the case of Romgaz, Electrica and Loteria Romana.

In addition to the alteration of attractiveness of the local capital market, such donations also cause the discrimination and alteration of property rights for the private minority shareholders, the alteration of profitability, the investing capacity of the companies, affecting their attractiveness in an eventual listing on a stock exchange, and discouraging investments to Romania.

“We consider that this decision violates the rights of investors on the Romanian capital market, and in the same time, it creates a precedent. Besides the direct loss for investors generated by arbitrary distribution of a company’s profit to a single shareholder, this practice will discourage investments in Romania. This decision will negatively affect the confidence of both local and foreign investors regarding Romania,” say CFA Romania representatives.

According to the same source, the violation of the minority shareholders’ rights by the government implies a nationalization of the profits of the affected companies. “If this practice is repeated every year, the shares owned by minority shareholders are, de facto, nationalized by the state”, argue representatives of the NGO.

CFA Romania is a member of the CFA Institute (The Global Association of Investment Professionals) and has 130 members.