Principle 1 - Basic shareholder rights. The
corporate governance framework should protect shareholders’ rights. Basic
shareholder rights include the right to: (i) secure methods of ownership
registration; (ii) convey or transfer shares; (iii) obtain relevant
information on the corporation on a timely and regular basis; (iv)
participate and vote in general shareholder meetings; (v) elect members of
the (supervisory) board; and (vi) share in the profits of the corporation.
X
Difficult
to access the records of the court enterprise registers and uncertainties in
knowing if shareholders are sharing in company’s profits
Principle
2 - Fundamental corporate changes. Shareholders have the right to
participate in, and to be sufficiently informed on, decisions concerning
fundamental corporate changes, such as: (i) amendments to the governing
documents of the company; (ii) the authorization of additional shares; and
(iii) extraordinary transactions that in effect result in the sale of the
company.
X
Principle
3 - Shareholder meetings. Shareholders should have the opportunity to participate
effectively and vote in general shareholder meetings and should be informed
of the rules, including voting procedures that govern shareholder meetings.
X
Not
uncommon practice of failing to hold the required shareholders’ meetings
Principle
4 - Proportionate control. Capital structures and arrangements that enable certain
shareholders to obtain a degree of control disproportionate to their equity
ownership should be disclosed.
X
Principle
5 - Markets for corporate control. Markets for corporate control should be
allowed to function in an efficient and transparent manner. The rules and
procedures governing the acquisition of corporate control in the capital
markets, and extraordinary transactions such as mergers and sales of
substantial portions of corporate assets, should be clearly articulated and
disclosed so that investors understand their rights and recourse.
Transactions should occur at transparent prices and under fair conditions
that protect the rights of all shareholders according to their class.
Anti-takeover devices should not be used to shield management from
accountability.
X
Limited
by low liquidity in stock market
Principle
6 - Equal treatment of shareholders. The corporate governance framework
should ensure the equitable treatment of all shareholders, including minority
and foreign shareholders. All shareholders should have the opportunity to
obtain effective redress for violation of their rights.
All
shareholders of the same class should be treated equally. Within any class,
all shareholders should have the same voting rights. All investors should be
able to obtain information about the voting rights attached to all classes of
shares before they purchase. Any changes in voting rights should be subject
to shareholder vote.
X
Effective
redress requires review under a court system that is heavily overburdened and
has not yet made any decisions on similar cases
Principle
7 - Procedures for shareholder meetings. Processes and procedures for general
shareholder meetings should allow for equitable treatment of all
shareholders. Company procedures should not make it unduly difficult or
expensive to cast votes.
X
Principle
8 - Insider trading. Insider trading and abusive self-dealing should be prohibited.
X
Effectiveness
of legal restrictions limited by low liquidity of the stock exchange and
small size of the business community
Principle
9 - Insider disclosure. Members of the (supervisory) board and management board should
be required to disclose any material interests they have in transactions or
matters affecting the corporation.
X
Minor
role played by supervisory boards in the strategic guidance of companies
Principle
10 - Rights of stakeholders. The corporate governance framework should recognize the
rights of the stakeholders as established by law and encourage active
cooperation between corporations and stakeholders in creating wealth, jobs,
and the sustainability of financially sound enterprises.
X
Principle
11 - Corporate disclosure. The corporate governance framework should ensure that timely and
accurate disclosure is made on all material matters regarding the corporation,
including the financial situation, performance, ownership and governance of
the company. Channels for disseminating information should provide for fair,
timely and cost-efficient access to relevant information by users.
Disclosure
should include, but not be limited to, material information on: (i) the
financial and operating results of the company; (ii) major share ownership
and voting rights; (iii) members of the board and key executives, and their
remuneration; (iv) material foreseeable risk factors; (v) material issues
regarding employees and other stakeholders; (vi) governance structures and
policies.
X
Less
than complete disclosure by most reporting companies, particularly of
financial and operating results
Principle
12 - Accounting and auditing. Information should be prepared, audited and disclosed in
accordance with high quality standards of accounting, financial and
non-financial disclosure, and audit. An annual audit should be conducted by
an independent auditor in order to provide an external and objective
assurance on the way in which financial statements have been prepared and
presented.
X
Weak
auditing practices and an audit law that allows liability to be capped in the
contract between the company and the auditor
Principle
13 - (Supervisory) Board responsibilities. The corporate governance framework
should ensure the strategic guidance of the company, the effective monitoring
of management by the (supervisory) board, and the (supervisory) board’s
accountability to the company and the shareholders.
(Supervisory)
Board members should act on a fully informed basis, in good faith, with due
diligence and care, and in the best interests of the company and the
shareholders.
X
Absence
of detailed guidelines for supervisory boards
The Securities Market Law (SML)
regulates the Joint Stock Companies whose shares are traded at Georgian Stock
Exchange.
The main principles of the Securities
Market Law (SML) are the following:
The purpose of the Law is to develop
securities market in Georgia, to protect the investors' interests on securities
market, as well as to establish fair and transparent public trading in
securities and free competition;
The Georgian Securities Market is
regulated by the National Securities Commission of Georgia (NSCG);
The public offering of securities is
an offer to sell securities directly or indirectly on behalf of the issuer to
at least 100 persons or to unspecified numbers of persons;
A company, which has a class of
Publicly Held Securities, shall be deemed to be a reporting company;
All reporting companies shall prepare
and submit to the National Securities Commission of Georgia (NSCG) and publish
or distribute to registered owners:
I.
Annual reports;
(b) Semi-annual reports; and
(c) Current reports.
II.
Every person who is a member of a managing body
of a reporting company shall file with the National Securities Commission of
Georgia (NSCG) a report regarding the percentage of this company's securities
of which he is the beneficial owner;
III.
A person, acting independently or together with
other persons (a "group"), shall inform the National Securities
Commission of Georgia (NSCG) about the substantial acquisition of securities;
IV.
Substantial acquisition of securities means
beneficial ownership of securities, which provide 5% or more of the voting
rights in a reporting company and also when level of beneficial ownership
changes by more than 5% from that originally reported;
V.
Members of the managing body of a reporting
company shall exercise their rights and perform their duties: a) in good faith,
b) with the care that an ordinary prudent person in a similar position would
exercise under similar circumstances, and c) in a manner that they believe to
be in the best interest of the company and its security holders;
VI.
A Stock Exchange shall be the exclusive organizer
of secondary public trading in securities;
VII.
All purchases and sales of Publicly Held
Securities shall be concluded through a licensed Brokerage Company;
A licensed Central Depository shall
perform the following functions:
a) open, operate and close securities accounts of participants in accordance
with its rules;
b) facilitate the settlement of securities transactions without physical
delivery of securities certificates and, in furtherance thereof, provide
facilities for comparison of data respecting the terms of settlement of
securities transactions.
Licensed Stock Exchanges and a
Licensed Central Depository shall be designated Self‑Regulatory
Organizations (SROs) under this law;
The main objective of such an
organization, as an SRO, shall be to:
a)
Pprepare rules for its
members and supervise compliance with such rules;
Apply sanctions provided for in its inner regulations and rules or charter
against members for non-compliance with its rules.
Insider means any person who, by
virtue of his membership in the managing body of a reporting company, his
holdings in the capital of such company, or based upon his access to such
information by virtue of the exercise of his employment, profession or duties,
possesses inside information. Other persons obtaining inside information that
evidently originated with an insider shall be likewise considered insiders.
It shall be unlawful for any insider,
and any person who knowingly receives inside information from an insider, to:
a) Acquire or dispose of, for his own account, or the account of a
third party, either directly or indirectly, Publicly Held Securities of the
reporting company or companies to which that inside information relates;
b) Disclose inside information to any third party unless such
disclosure is made in the normal course of the exercise of his employment,
profession or duties;
c) Recommend to or procure a third party, on the basis of inside
information, to acquire or dispose of Publicly Held Securities.
Analysis - The Securities Market
Law (SML). The SML is
drawn on German model and mostly reflects the international best practice in
the field described in "The Objectives and Principles of Securities
Regulation" adopted by the International Organization of Securities
Commissions (IOSCO), but it has the following weaknesses: (i) It does not cover
collective investment schemes (CIS), such as investment funds, and therefore
there is currently no legal basis for the operation of CISs in Georgia[13]. Meanwhile, the experience obtained from the Central and Eastern
Europe indicates on crucial importance of CIS, such as investment funds, in
increasing the corporate governance standards and facilitating the trust
amongst investors towards stock markets; and (ii) The NSCG does not have an
authority to supervise private placements.
More specifically, the World Bank (WB)
and the International Monetary Fund (IMF), also conducted the Assessment of the
Implementation of the Objectives and Principles of Securities Regulation of The
International Organization of Securities Commissions (IOSCO) in Georgia. The
assessment identified quite a lot of problems in the operation of the
securities regulator, the functions of which is assumed by the National
Securities Commission of Georgia (NSCG). Namely, the report lists the following
problems: (i) NSCG has a seriously insufficient budget; (ii) Code of ethics for
NSCG staff is awaited; (iii) No specific oversight program to supervise
self-regulatory organizations (SROs) has been established; (iv) Inspection and
investigation powers of the NSCG over Reporting Companies and their major
shareholders are not adequate; (v) Enforcement power of the NSCG on the basis
of criminal legislation is limited; (vi) International Accounting Standards
(IAS) are recognized but are not fully adopted in practice; (vii) There in no
legislation on Collective Investment Schemes (CIS) in Georgia; (viii) There is
no market surveillance and stock watch system to detect abnormal movements and
unfair trading practices.
More detailed results of the assessment are summarised in
Table 1.2.2.1 below:
Table 1.2.2.1 Georgia:
Assessment of the Implementation of the IOSCO Principles
Principle 1 - Clear responsibilities. The
responsibilities of the regulator should be clearly and objectively stated.
X
Principle
2 - Independence and accountability. The regulator should be operationally
independent and accountable in the exercise of its functions and powers.
· Lack of legal immunity for NSCG staff
acting in good faith.
Principle
3 - Adequate power, resources and capacity. The regulator should have adequate
powers, proper resources and the capacity to perform its functions and to
exercise its powers.
X
Seriously insufficient
budget. As the market develops, more revenue from fees can be expected.
Principle
4 - Clear and consistent regulatory process. The regulator should adopt clear and
consistent regulatory processes.
X
Principle
5 - Professional standards. The staff of the regulator should observe the highest
professional standards, including appropriate standards of confidentiality.
X
Code of ethics
awaited, and introduction of a system of independent assessment may be
considered.
Principle
6 - Use of Self‑Regulatory Organizations (SROs). The regulatory regime should
make appropriate use of SROs that exercise some direct oversight
responsibility for their respective areas of competence, to the extent
appropriate to the size and complexity of the markets.
X
Principle
7 - Supervision of Self‑Regulatory Organizations (SROs). SROs should be subject to the
oversight of the regulator and should observe standards of fairness and
confidentiality when exercising powers and delegated responsibilities.
X
No specific
oversight program to supervise SROs has been established.
Principle
8 - Adequate inspection, investigation and surveillance powers. The regulator should have comprehensive
inspection, investigation and surveillance powers.
X
· Inspection power over Reporting Companies
and their major shareholders is not adequate.
· Investigation power not adequate.
Principle
9 - Adequate
enforcement power. The regulator should have comprehensive
enforcement powers.
X
Enforcement
power on the basis of criminal legislation limited.
Principle
10 - Effective use of
the powers. The regulatory system should ensure an effective and
credible use of inspection, investigation, surveillance and enforcement
powers and the implementation of an effective compliance program.
X
Limited power was well used. Faced
with a severe resource constraint.
Principle
11 - Authority to
share information. The regulator should have the authority
to share both public and non‑public information with domestic and
foreign counterparts.
X
Principle
12 - Information
sharing mechanisms. Regulators should establish information
sharing mechanisms that set out when and how they will share both public and
non-public information with their domestic and foreign counterparts.
No specific MOU or other agreement
/ procedure has been established.
Principle
13 - Assistance to
foreign regulators. The regulatory system should allow for
assistance to be provided to foreign regulators who need to make inquiries in
the discharge of their functions and the exercise of their powers.
X
Lack of legal immunity of NSCG
staff in handling sensitive information in good faith.
Principle
14 - Full, timely and
accurate disclosure. There should be full, timely and accurate
disclosure of financial results and other information that is material to
investors’ decisions.
X
Sound rule but compliance needed
(due to the lack of enforcement power of NSCG over Reporting Companies?)
Principle
15 - Fair and
equitable treatment of securities holders. Holders of securities in a company should
be treated in a fair and equitable manner.
X
Compliance needed. (Private rights
of action including class action are not established while the NSCG’s
enforcement power over Reporting Companies is limited.)
Principle
16 - Accounting
standards. Accounting and auditing standards should be of a
high and internationally acceptable quality.
X
IAS recognized but not fully
adopted in practice.
Principle
17 - Eligibility
standards. The regulatory system should set standards for the
eligibility and the regulation of those who wish to market or operate a
collective investment scheme.
X
No law, no CISs.
Principle
18 - Legal form and
structure. The regulatory system should provide for rules
governing the legal form and structure of collective investment schemes and
the segregation and protection of client assets.
X
No law, no CISs.
Principle
19 - Disclosure for
suitability and valuation. The regulations should require
disclosure, as set forth under the principles for issuers, which is necessary
to evaluate the suitability of a collective investment scheme for a
particular investor and the value of the investor’s interest in the scheme.
X
No law, no CISs.
Principle
20 - Basis for
valuation and pricing for redemption. The regulations should ensure that there
is a proper and disclosed basis for asset valuation and the pricing and the
redemption of units in a collective investment scheme.
X
No law, no CISs.
Principle
21 - Entry standards. The regulations should provide for minimum entry standards for market
intermediaries.
X
Principle
22 - Initial and
on-going prudential requirements. There should be initial and ongoing
capital and other prudential requirements for market intermediariesthat
reflect the risks that the intermediaries undertake.
X
Monthly capital.
adequacy report not audited. NSCG does not have power to reject an auditor.
Principle
23 - Internal
organization and operational conduct and risk management. Market intermediaries should be required to comply with standards for
internal organization and operational conduct that aim to protect the
interests of clients, ensure proper management of risk, and under which
management of the intermediary accepts primary responsibility for these
matters.
X
No specific
requirement of compliance officer / dept. with specific responsibilities.
Principle
24 - Procedures for
failure. There should be procedures for dealing with the
failure of a market intermediary in order to minimize damage and loss to
investors and to contain systemic risk.
X
No procedures to
manage winding down of a failed broker although other investor protection
legislation, and regulations have been prepared.
Principle
25 - Authorization
and oversight of exchanges. The establishment of trading systems
including securities exchanges should be subject to regulatory authorization
and oversight.
X
Principle
26 - On-going
supervision of exchanges and trading systems. There should be ongoing regulatory
supervision of exchanges and trading systems which should aim to ensure that
the integrity of trading is maintained through fair and equitable rules that
strike an appropriate balance between the demands of different market
participants.
X
· NSCG has no real time access to trading
information, no real time oversight.
· SML does not expressly require fair
trading rules for different members.
Principle
27 - Trading
transparency. The regulations should promote transparency of
trading.
X
SML does not
expressly require real time transparency of pre-trade information for direct
market participants.
Principle
28 - Detection and
deterrence of unfair trading practices. The regulations should be designed to
detect and deter manipulation and other unfair trading practices.
X
No requirement
of market surveillance / stock watch system to detect abnormal movements.
Principle
29 - Management of
exposures, default risk and market disruption. The regulations should aim to ensure the
proper management of large exposures, default risk and market disruption.
X
Principle30
- Oversight of
clearance and settlement systems and management of systemic risks. Systems for clearing and settlement of securities transactions should
be subject to regulatory oversight, and designed to ensure that they are
fair, effective and efficient and that they reduce systemic risk.
X
· The GCSD needs to comply with the requirement
of ownership structure.
·
The legal requirement
for efficiency in settlement arrangements could be stated more explicitly.
Labor Code. The Labor Code of Georgia regulates labor relations between workers
and employees living in Georgia and enterprise, institution and organization
(regardless their ownership and organizational legal form), supports to
realization of human rights and freedoms through labor fair reimbursement
(legal payment), creation of safe and healthy working conditions for all
employees and workers including the working conditions for minors and women. On
the basis of international agreements regulating labor relationships, the state
protects the labor rights of Georgian citizens abroad. Foreign citizens and
stateless persons living in Georgia have the rights and obligations equal to
the rights and obligations of citizens of Georgia with some exceptions
envisaged by the Constitution and law.
Nondiscrimination. Under the constitution labor is free. Each person has right to
choose its field of activity and profession. Discrimination in obtaining a job,
or in the workplace, based on race, skin color, language, sex, religion,
political and other beliefs, national, ethnic and social origin, property and
title of nobility or place of residence is prohibited.
Minimum and Maximum Age of Employment.
According to the legislation of Georgia minimum
working age is 16 years. Maximum working age is not determined, but pension can
be given to a man in the age of 65 years and a woman in the age of 60 years.
Working Hours. According to the Labor Code of Georgia the duration of the
working period is:
- 41 hours per week,
with five working days;
- 36 hours per week
in certain dangerous or unhealthy activities or jobs.
- The duration of a
working day totals 8 hours and 15 minutes.
- Thus, the number of
working days per month equals 21,1 days.
- Minimum leave is
equal to a total of 24 working days.
Wages. Reimbursement of labor is carried out according to labor amount and
quality. According to the legislation, minimum level of salary is determined in
the amount of 20 GEL. The nominal average monthly salary of an employee in 2001
made up 91.4 GEL. Higher labor reimbursement is considered for employees
working in certain dangerous or unhealthy climatic conditions. However, the
wages for each professional category are usually negotiated in labor
agreements.
Social Taxes. The article on Social Taxes of the Tax Code of Georgia stipulates a
new system of social tax payment. According to the tax code of Georgia, social
tax rates are as follows: The amount to be paid into the United State Fund of
Social Security is equal to 28% of the salaries paid, out of which the employer
has to contribute 27% and the employees have to contribute 1%, and the payment
to the United State Fund of Employment is equal to 1% of the salaries paid,
which has to be contributed by the employers.
Medical Insurance Fee. Medical Insurance Fee for legal entities is equal to 3% of the
salaries paid. Medical Insurance Fee for all employed persons is equal to 1% of
their income (exemptions: compensation surplus for annual leave; bonuses;
awards; pensions and allowances).
Social Security System. The social security system of Georgia is based on compulsory
social insurance. According to the Presidential Decree dated by June 29, 2000
(No 278), issues relating to the assignment and distribution of state pensions
and aids, definition of vulnerability and other medical-social expertise are
the responsibility of the Ministry of Health and Social Security. The reform in
social insurance system, which was recently carried out in Georgia, encourages
the improvement of the social security system and the establishment of private
pension funds.
Georgian Trade Unions League. Georgian Trade Unions League is a joint national professional centre
of trade unions in Georgia. The main goal of the league is to protect the labor,
socio-economical, legal rights and interests of its members. The league
includes 33 trade unions and 2 member organizations. Currently, there are 900
000 trade union members in the different organizations of the league. Under the
Constitution of Georgia all employees (workers) have the right to join Trade
Unions. Georgian Trade Unions League, together with the member organizations,
co-operates productively with the General Confederation of Trade Unions,
International Labor Organizations, Trade Unions of United States of America,
Germany, Denmark, France, Turkey, Israel and other countries. At present,
treatment of an issue on accepting the League of Trade Unions of Georgia as a
member of Free Trade Unions International Confederation is in progress.
Freedom of Association and the
Right to Collective Bargaining. The law prohibits discrimination by employers against union
members, and employers may be prosecuted for antiunion discrimination and
forced to reinstate employees and pay back wages; however, there are reports of
managements warning staff not to organize trade unions. Some workers, including
teachers in the Imereti region, employees of various mining, winemaking,
pipeline, and port facilities, and the Tbilisi municipal government reportedly
complain of being intimidated or threatened by employers for union organizing
activity. Observers also claimed that employers failed to transfer compulsory
union dues, deducted from wages, to union bank accounts. The Ministry of Labor
has investigated some complaints, but no action has been taken against any
employers to date. There are no legal prohibitions against affiliation and
participation in international organizations. The Constitution and the law
allow workers to organize and bargain collectively, and some workers exercise
this right; however, the practice of collective bargaining is not widespread.
Forced Labour. The Constitution prohibits forced or
bonded labour, including by children, and provides for sanctions against
violators.
Trafficking in Persons. The law does not prohibit trafficking
in persons specifically, although trafficking could be prosecuted under laws
prohibiting slavery, forced labor, illegal detention, and fraud. Georgia is
both a source and a transit country for trafficked persons. There have been
unconfirmed reports that government customs and border officials were involved
in the trafficking of persons. The Government has prosecuted some traffickers
using fraud statutes, but otherwise has no active programs to address the
problem of trafficking. A government program for combating violence against
women included a proposal for measures to eliminate trafficking in women for
the purpose of sexual exploitation; however, it has not been implemented due to
budgetary constraints. Georgia itself is generally not a destination place for
trafficked persons.
Главная