State representatives on the management and supervisory boards of state and municipal enterprises will be professionals in those fields, with many years of managerial experience and knowledge of the financial and economic system.
Direct state representatives in management structures will be elected by special commissions. At least one third of the members of the management and supervisory boards will be elected through a public competition.
Only those that have a natural monopoly, an established public interest, and operate in an area for which private competition is not sufficiently developed will remain state-owned enterprises; the rest will be privatized.
The state cannot provide assistance to state-owned enterprises that have commercial activities, except through a special institute of state aid once every ten years. The success of state-owned enterprises will be analyzed periodically, with a greater role for the State Audit Institution in their control.
These are the most important innovations from the Draft Law on the Management of State-Owned Companies and the Draft State Ownership Policy, which are under public discussion until October 22. The text of the law was prepared with expert support from the World Bank.
Obligation from the Reform Agenda
The adoption of this law, as stated, is an integral part of the Reform Agenda within the Growth Plan for the Western Balkans.
The aim of the law is to harmonize this policy for state-owned enterprises with European Union norms, and the expected results are their better quality work, greater contribution to the development of the economy and the state budget, better quality services, and to prevent them from being a hindrance and unmarket competition to private companies in commercial activities.
"The adoption of a new law is necessary for the strategic, comprehensive and unified regulation of the area of operations of state-owned companies. The adoption of the new law clearly regulates ownership issues, establishes mechanisms for better corporate governance of these companies through the establishment of clear criteria and procedures for the selection of management, as well as the introduction of a monitoring mechanism and a clear reporting system. In this sense, the new law will contribute to improving efficiency, transparency and accountability in the work of state-owned companies," the explanatory memorandum to the law states.
The goal is better business results.
The new law, as highlighted, aims to professionalize management in accordance with high standards of corporate governance recommended by international practice, and defined in the Guidelines for Corporate Governance in State-Owned Enterprises of the International Organization for Economic Cooperation and Development (OECD).
"In addition to the above, the novelty in implementing the ownership function will be changed from a decentralized model to a coordinated model of ownership management, which represents a transitional phase to the full establishment of a centralized model of state ownership management. By adopting the aforementioned law, Montenegro will make a strong step forward in terms of reform, which will ensure the protection of state property, improve the business results of state-owned companies, reduce costs and fiscal risks, while increasing revenues for the state, which will also ensure greater trust of citizens and the public in the business operations of state-owned companies," the explanatory memorandum to the law states.
All state-owned and municipally-owned companies will have to implement a corporate governance code, for which the Ministry of Finance will issue a bylaw.
Violation of ethics is a reason for dismissal
After the law enters into force, management bodies in state and municipal enterprises will have to adopt a code of ethics that will regulate the principles and rules of business ethics, generally accepted rules of socially responsible behavior, and professional standards that all employees and members of the management bodies are required to adhere to, and its violation will be considered a serious violation of the code of ethics and work obligations, i.e. it will lead to dismissal and termination of the employment contract.
"Every member of the management body and every employee, upon assuming office, is obliged to sign a statement confirming that they are fully familiar with the company's Code of Ethics and that they accept all obligations arising from it, as well as to list and explain in detail any conflict of interest or potential conflict of interest in which they currently find themselves in accordance with the Code of Ethics," the law states.
Minister of Finance responsible for personnel selection
The government will form a commission to select candidates for direct state representatives for the board of directors and supervisory board. The commission will have three members - the finance minister will be the chairman of each, and the remaining two members will be a representative of the relevant ministry and a representative of the prime minister's office.
Independent members, at least one third of the members of the management bodies, are elected through a public competition, and in addition to the general requirements for an independent member, they cannot be a member of a political party, must not be a person connected to the state, or a small shareholder if the company has any.
All members of the management bodies are subject to the following conditions: they must have acquired higher education at least level VI of the national qualifications framework in the amount of 180 CSPK credits; they must have at least five years of work experience in management positions in companies with ten or more employees, or at least ten years of work experience in positions at the qualification level referred to in point 1; they must not have been sentenced by a final judgment to a prison sentence of six or more months; they must not have criminal proceedings pending against them; they must be familiar with the field of corporate governance; they must be familiar with the field of operations of a state-owned company or they must be familiar with financial operations, and they must not be in a conflict of interest, in accordance with the law governing companies or the company's code of ethics.
The candidate will have to undergo training at the Ministry of Finance in the areas of corporate governance, state-owned company operations, and financial operations, where they will also have to take an exam.
Members of the management body may be dismissed if they fail to meet the performance indicators set for two consecutive years, if they violate the code of ethics, if an audit finds them to have violated the company's bylaws or the law, as well as if an indictment is filed for a criminal offense punishable by imprisonment for more than six months.
The Ministry of Finance will issue an act prescribing obligations to disclose data on the business operations, operational and financial results and performance of a state-owned company.
The law is scheduled to enter into force eight days after its publication in the Official Gazette, while bylaws will be adopted within six months.
When can the state exit a company?
The draft state ownership policy foresees the possibility of the state's exit from companies that do not belong to strategic sectors of public interest, as well as their sale and privatization.
“Where state participation is no longer considered necessary, Montenegro will exit non-strategic sectors through disinvestment or privatization. The state periodically reviews its ownership in sectors that are competitive and where private sector players could take over the provision of services or production. In sectors where market competition is strong, the state will consider full or partial privatization. This approach frees up public funds, allowing the state to focus on sectors where its participation is essential. The state may retain regulatory oversight, but will transfer ownership to private entities that are capable of delivering services or goods more efficiently,” the document states.
Decisions on the state's exit from ownership of these companies will be based "on thorough assessments of market conditions, the strategic importance of the sector, and the potential benefits of private sector participation."
"If the private market could efficiently and at competitive prices meet public needs, the state will reduce or completely withdraw its ownership stake," the document states.
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