INTOSAI Working Group on the Audit of Privatisation

The Polish SCC experience in auditing performance of duties by the State Treasury representatives in commercial law companies

PAPER FOR THE SIXTH MEETING
WARSAW, 5 and 6 OCTOBER 1999

Scale on which the State Treasury is represented in companies

At the end of 1997, the State Treasury was the sole partner/ shareholder(1) in 377 commercial law companies. The value of shares/stocks amounted to 86b zlotys, i.e. $25b. In 1150 other companies, the State Treasury held partial shares. The value of those shares was around 9b zlotys, i.e. $2.8b.

One-man companies of the State Treasury were established following:

Partial participation of the State Treasury followed:

Legal status

1. Since 1st October 1996, the Minister of the State Treasury has become responsible for tasks and competent in the scope of exercising rights in shares and stocks belonging to State Treasury(6), previously exercised by ministers of liquidated offices: Ministers of Industry and Commerce, Privatisation, Economic Cooperation with Abroad, Land Management and Construction, Internal Affairs, the Head of Central Planning Office, the Head of Council of Ministers Office. From 1st October 1997 the Minister of the State Treasury was also to overtake exercise of such rights from other central bodies of government and state organisations without legal personality(7). The bodies were obliged to pass shares/stocks of the State Treasury and documentation of the companies with State Treasury shares to the Minister of the State Treasury by specified dates(8) (from 30th March 1997 to 30 September 1997).
2. As for a limited liability company, basic rights of shareholders(9) may be divided into corporate type rights (e.g. right of participation and vote at the meeting of shareholders, right to appeal against resolutions, right of control), proprietary rights (e.g. right to participate in balance profit - article 191 of the Commercial Code, right to participate in division of liquidated property of the Company - article 275 sections 2 and 3 of the Commercial Code) and individual, collective, and minority rights. Basic rights of joint-stock companies include right to participate in the general meeting and right to vote, right to participate in the annual profit, right to draw new issue shares, right to participate in the liquidation amount.
3. Representatives of the State Treasury in commercial law companies are persons who exercise proprietary rights of the State Treasury, in particular rights in shares and stocks which belong to the State Treasury.

This will be the Minister of the State Treasury(10) who exercises those rights at the meetings of shareholders or general meetings of shareholders and persons appointed by him. Those representatives may also be, in an indirect way, persons appointed by the Minister of the State Treasury (in one-man companies of the State Treasury) and appointed to Supervisory Boards of joint-stock companies(11), as well as, in companies with partial shareholding of the State Treasury, persons appointed to Supervisory Boards upon motion of the Minister of the State Treasury. The supervision performed by Supervisory Boards of joint-stock companies is not kept on behalf of the stock owner as it is the body of the company the competencies of which are regulated by the Commercial Code and company statute(12).

As for limited liability companies, the right of supervision over the company's activities is granted to every shareholder (Article 205 of the Commercial Code) regardless of the Supervisory Board or inspection commission (or both bodies jointly). Under the law, every shareholder may review the company books and documents, draw up balance sheet on his own account and demand explanations from the management. The right may be restricted or excluded when the shareholders decide so by establishing supervisory bodies in the founding act(13).
4. § 6 of the Resolution of the Council of Ministers of 9th September 1997 on training and examination for candidates to Supervisory Boards of companies in which the State Treasury is the sole stockholder and on remuneration of members of Supervisory Boards(14) provides that remuneration of Supervisory Boards members of one-man companies of the State Treasury is the multiplier of the average monthly salary in the enterprise sector for the last month of the previous quarter as published by the President of the Chief Statistical Office.

The Resolution specifies the amount of monthly remuneration for:

1. Chairman of the Supervisory Board at 1.4 times the average remuneration,
2. Vice-Chairman and Secretary of the Supervisory Board at 1.2 times the average remuneration,
3. other members of the Supervisory Board at 1.1 times the average remuneration.
5. Pursuant to Article 13 section 1 of the Act on Commercialisation and Privatisation of State Enterprises as long as the State Treasury is the sole stockholder of a company, members of the Supervisory Board of the company cannot:
a) work under contract of employment for the company nor provide work or services to the company under other legal titles,
b) own shares or stocks in economic entities established by the company except for stocks allowed for public trading under separate rules,
c) work under contract of employment for the aforementioned economic entities nor provide work or services to the economic entities under other legal titles (does not apply to membership in Supervisory Boards except Supervisory Boards of competitive economic entities),
d) pursue activities which would remain in contradiction to their duties or might arise suspicions to their partiality or interest.

Scope and methodology of audit

1. The audit of performance of duties by the State Treasury representatives in commercial law companies is conducted by examination of operations of statutory bodies of the companies, i.e. meetings of shareholders and general meetings at which the representatives of the State Treasury exercise their rights in shares and stocks which belong to the State Treasury. In companies, where the State Treasury is the sole shareholder/ stockholder, the audit consists in examination of legality, purposefulness, management, and diligence(15) and in companies with partial share of the State Treasury - examination of legality and economy. The same criteria apply to audits of Supervisory Boards of companies as bodies where persons appointed or designated by the Minister of the State Treasury perform their functions.

Audit of the Minister of the State Treasury and his administrative body (Ministry staff) in preparation and execution of rights in stocks and shares and other issues takes into account all of the aforementioned criteria.

In 1998, the Supreme Chamber of Control performed an audit of performance of duties by representatives of the State Treasury in commercial law companies. The audit covered the Minister of the State Treasury, his administrative body, and 34 one-man companies of the State Treasury and 3 companies partly owned by the State Treasury. The issues addressed during the audit related to audits performed in 1996-1998 on:

  • Privatisation processes of foreign trade entities,
  • Protection of the State Treasury and state organisational body interest in cooperation with private companies,
  • Functioning of shipyard companies in market economy conditions
  • Proprietary transformations in 1996,
  • Proprietary transformations in entities reporting to the Minister of Culture and Arts,
  • Enforcement of the Act on Regulation of the Sugar Market,
  • Activities of the state bodies and Gdafisk Shipyard authorities from 1998 until bankruptcy of the Company.

During the audits, activities of general meeting and Supervisory Board were examined in more than 200 companies with shares owned by the State Treasury and the Minister of the State Treasury.

Essential findings and conclusions

1. The Supreme Chamber of Control positively assessed the following preparations by the Minister of the State Treasury to perform ownership functions in the companies:
  • development of acknowledgement procedures for duties performed by the authorities of one-man companies of the State Treasury
  • definition of rules for selecting candidates for members of the Supervisory Boards, qualification examinations for those candidates, and setting up a database of those candidates,
  • establishment of Consulting and Program Board at the Minister to pass opinions on training programmes for candidates for members of Supervisory Boards, assessment of correctness of examination, and passing opinions on the list of examiners,
  • obligating Supervisory Boards of one-man companies of the State Treasury to provide quarterly company information to the Ministry of the State Treasury.
2. However, there were some errors in performance of the tasks listed above:
  • quarterly company information was provided to the Ministry of the State Treasury, in various periods, by 30 to 80% of Supervisory Boards of one-man companies of the State Treasury. Additionally, there were no legal grounds to enforce this obligation imposed by an internal instruction of the Ministry.
  • Ministry database on candidates for members of Supervisory Boards was incomplete and outdated. It failed to provide vital information on the number of staff of the Ministry of the State Treasury performing functions in Supervisory Boards, or how often members of Supervisory Boards were recalled by the Minister of the State Treasury before expiration of their term of off-ice.
3. The Ministry of the State Treasury did not have complete data on stocks and shares of the State Treasury under which proprietary rights had been previously exercised by voivodes as the process of taking over shares and stocks of the State Treasury from voivodes was continued in 1998. In addition, the Minister of the State Treasury did not have systematic data on collected economic results of one-man companies of the State Treasury in which he exercised rights in stocks/shares which proved lack of appreciation for this information for proper assessment of activities of the companies.
4. Rights in shares and stocks owned by the State Treasury were exercised by the Minister of the State Treasury or usually his appointed representatives at the meetings of shareholders and general meetings. Irregularities in exercise of those rights consisted in:

  • failure to meet the statutory obligation(16) of holding meetings of shareholders/ general meetings in one-man companies of the State Treasury within 6 months of the end of a financial year. One third of all companies failed to meet that date in 1998. The primary reason for that was failure to provide required materials by the companies or incompleteness of those materials and lack of legal grounds for enforcing that from company authorities.

  • in 24 cases, powers of attorney to participate in meetings of shareholders/ general meetings along with voting instructions were passed by the Minister of the State Treasury to Ministry staff on the day before or on the very day of such meetings. This made it very hard for State Treasury representatives to prepare for the meetings.
5. Improper performance of State Treasury duties related to meetings of shareholders/ general meetings was revealed. It related to:
  • failure to perform required statute amendments related to introduction of new legal regulations (this applied to other than existing rights of company staff as to their representation in Supervisory Boards and gratuitous purchase of stocks/shares). This situation took place in every fifth company.
  • improper appointment of State Treasury representatives to Supervisory Boards, in every fifth company. Appointed persons were not included in the Ministry database or they were involved in competitive activities,
  • granting acknowledgement to the company authorities in the situation of a clear deterioration of economic results or performance of activities detrimental to the company. This situation occurred in some 6% of audited entities.
6. Members of Supervisory Boards in most of audited one-man companies of the State Treasury received proper remuneration for performance of their function in boards. In 10% of the companies defaults in this field were revealed e.g. in the form of undue remuneration or unfounded reimbursement for use of own means of transport and telephone calls.
7. Over 1/3 of Supervisory Boards of audited companies in which persons appointed by the Minister of the State Treasury performed their functions fulfilled their obligations in an improper way:
  • in 9% of audited companies statutory dates for meetings were not kept and the activities were not properly documented;
  • as a result of neglected supervision over company activities (11%) management passed adverse economic decisions (resulting in unnecessary costs and losses), was slow, neglected its duties, and failed to enforce resolutions of Supervisory Boards and general meetings.
8. Audit findings allowed to formulate the following conclusions to the Minister of the State Treasury relating to:
  • improvement of cooperation of State Treasury representatives in particular those who perform functions in Supervisory Boards of companies as regards passing information (reports) on company operations required for definition of strategy on exercising rights in shares and stocks by the State Treasury,
  • need to establish a system of monitoring economic and financial results of companies allowing to identify threats and taking preventive measures,
  • improvement and completion of the process of taking over shares and stocks of the State Treasury from voivodes and setting up a collective register of those assets.

Notes on audit results

Undoubtedly, the primary result of the audit was identification of areas where the activities of State Treasury representatives in commercial law companies have to be improved, as well as presentation and elimination of errors and negligence.

The financial result of the audit was revealing losses in income of audited companies and state budget at 1,733,000 zlotys, i.e. $0.5b for bearing unjustified costs, results of making wrong economic decisions, or delays in passing dividends.

COMPREHENSIVE
information on results of 1994-1998 major audits of privatisation
processes

I.1. Privatised enterprise

Suwalskie Zak3ady Drobiarskie w Suwa3kach (Poultry Plant in Suwa3ki)

2. Financial size of transaction

- book asset value - 8.4m zlotys
- asset value as valued - 7.6 - 8.3m zlotys
- Company sale value - 100 zlotys + take-over of Company liabilities at 12.1 m zlotys

3. Key findings

4. Key conclusions

A number of defaults revealed during audit of SZD privatisation could not be eliminated as they were irreversible. The audit report presented to the voivode recommended:

II.1. Privatised enterprise

Fabryka Samochodów Ma3olitrażowych S.A. w Bielsku-Bia3ej (Low-Power Engine Motorcar Factory in Bielsko-Bia3a)

2. Financial size of transaction

- book asset value - 2.9b zlotys
- asset value as valued no valuation was made
- value of contribution in kind to joint-venture company (86% of fixed assets) - 1.7b zlotys

3. Key findings

  • irregularities in negotiations, no opinions from governmental bodies were obtained,
  • obligations of the State Treasury were contracted in agreements without the consent of bodies which were to perform such obligations.
  • interest of the State Treasury was not secured during whole privatisation process. In concluded agreement, the State Treasury did not secure control of realisation of obligations undertaken by Fiat. The value of contribution in kind was valued at 1.7b zlotys and then was decreased by 1.1 b zlotys of debt taken over by the company and the so-called "restructurisation reserve" at 0.6b zlotys just to make the value of contributed enterprise symbolic. Therefore, the State Treasury to achieve 10% share as provided by the agreement had to contribute additional cash at 35.6m zlotys.
  • Polish party negotiators while contracting obligations on behalf of the State Treasury exceeded their statutory competencies, violated the rules of the Polish law and association laws with international organisations.
  • 14% of fixed assets encumbered with debts and unable to generate profit was left out of Fiat transaction.
  • before conclusion of the agreement with Fiat no statement of economic effectiveness for the transaction had been made. The simplified statement of major liabilities of the State Treasury drawn up for audit purposes showed that the Polish party lost over 2b zlotys as a consequence of the concluded Agreement.
  • Company staff lodged claims related to continuation of employment for over 1,500 staff and provision of stocks to over 25,000 staff.
  • the State Treasury did not fulfil some of liabilities towards the Company which resulted in Fiat's claims towards the State Treasury for the amount of over 140m zlotys.

4. Key conclusions

The Supreme Chamber of Control conclusions addressed to government bodies stressed the need for undertaking certain actions to eliminate revealed defaults and settlement of mutual claims so that coordination and control of Fiat agreement performance could be achieved. In particular this related to:

  • specifying actual liabilities of the State Treasury towards FSM, their creditors, and Fiat and companies established with Fiat, and final satisfaction of those liabilities,
  • satisfying staff claims,
  • development and implementation of privatisation program for the remaining part of the former FSM, operating under name of FSM WWR S.A.
  • implementation of a monitoring system for the performance of Definitive Agreement so that it can be supervised.

Ill.1. Privatised enterprise

Huta Warszawa in Warsaw (Warszawa Steelworks)

2. Financial size of transaction

- book asset value - 161.8m zlotys
- asset value as valued no valuation was made
- value of contribution in kind to Huta Lucchini Sp. z o.o. (limited liability company) - 41.1m zlotys

3. Key findings

  • contribution in kind was not valued before it was contributed to Huta Lucchini Sp. z o.o.
  • value of the contribution in kind made to Huta L.W. Sp. z o.o. was decreased by 120.7m zlotys in comparison to book value so the Company was forced to book the amount as an extraordinary loss,
  • the contribution in kind included real estates not related to production activities of the Steelworks,
  • transaction conditions had been agreed before negotiation team was set up,
  • no actions which would secure interest of the State Treasury were carried out in relation to potential loss of budget income, complaints and appeals against the decision on confirmation of Steelworks right to perpetual usufruct of the lands. Lack of any actions in this field causing delays in legal definition of the owner of that right resulted in loss of State Treasury income of over 6.4m zlotys.
  • no actual concept for participation of staff in the privatisation of Huta Warszawa was developed

4. Key conclusions

General conclusions related to: the method used for the valuation of assets and company value; inclusion of the right of ownership or right of perpetual usufruct of lands in book value; and establishing bodies stimulating activities of supervised governmental bodies in the field of regulation of ownership rights.

Detailed comments were sent to the Ministers of Privatisation, Finance, and Industry and Commerce to:

  • develop a concept for participation of staff in the privatisation of Huta Warszawa,
  • make decisions on further privatisation processes of Agencja Kapita3owo-Rozliczeniowa S.A. (Capital and Settlement Agency)
  • consider issues related to claiming compensation claims from gmina for losing budget income from perpetual usufruct fees.

III.1. Privatised enterprise

Bank OEl1ski S.A. in Katowice

2. Financial size of transaction

- book asset value - 141.1m zlotys
- asset value as valued - 89.3 to 237.9m zlotys
- value of sale of 66% of stocks (to a strategic investor in public offering and to Bank staff) - 285.0m zlotys

3. Key findings

BSK privatisation was started two years after set date,

privatisation was carried out in such a way that management could benefit most,

BSK stocks were listed on WSE (Warsaw Stock Exchange) where 96% of investors were unable to participate in stock exchange trading as they purchased stocks in public offering and wanted to discount them on secondary market,

sale price for BSK stocks for public offering and strategic investor transaction was underrated,

there were discrepancies between economic information relating to the Bank and verified actual state for year 1991-1993. The discrepancies were caused by incomplete and inconsistent application of the accruals method of presenting economic operations by the Bank,

underrating the profit value for nine months of 1993 by the Bank Management (period prior to privatisation),

some Bank staff were assigned larger pool of stocks than provided by the governing rules,

fee for the privatisation advisor was overrated by around $ 1.1 m and for BSK Brokerage House by 40,700 zlotys.

4. Key conclusions

Audit conclusions were sent to BSK Management; they were related to final settlement of stocks assigned to staff and settlement of the fee for BSK Brokerage House for the sale of stocks.

General conclusions were related to:

  • detailed legal rules regulating bank privatisation,
  • no state interference in stock exchange market operations
  • verification of the role of the Securities Commission.

Ill.1. Privatised enterprise

Fabryka Lin i Drutów Drumet S.A. in W3oc3awek (Drumet Cable and Wire Factory in W3oc3awek)

2. Financial size of transaction

- book asset value - 52.0m zlotys
- asset value as valued - 19.0 to 20.0m zlotys
- value of purchasing 51% of stocks by the investor - 12.9m zlotys

3. Key finding

  • company value was underrated. The strategic investor purchased 51% stocks of Drumet one-man company of the State Treasury for an extremely low price of 12.89m zlotys, i.e. 48.6% of the stock book value.
  • invitation to negotiations on Drumet stock purchase did not state offer submission deadline,
  • no new invitation to negotiations was announced (when foreign industry investors backed out) and no newly submitted offers were reviewed,
  • the Minister failed to verify the company viability and examine the source of cash used for paying for Drumet stocks. During the offer submission period, the investor declared 3.0m zlotys of stock capital gathered and then the capital to the amount of price paid for purchased value. Actually, the capital of the investor was only 100,000 zlotys and the register copy attached to the Drumet stock purchase agreement contained incorrect description of company capital (10m stocks at 10 zlotys each, i.e. 100m zlotys).

4. Key conclusions

Following findings of the SCC audit, the Chairman of the Sejm Privatisation Commission applied to the Attorney General for institution of proceedings in connection with purchase of stocks of Drumet S.A. in W3oc3awek.

III.1. Privatised enterprise

Cementownia Ożarów S.A. in Ożarów (Ożarów Cement Plant)

2. Financial size of transaction

- book asset value - 129.2m zlotys
- asset value as valued - 145.5 to 398.0m zlotys
- value of selling 75% of stocks - 140.6m zlotys

3. Key findings

  • while commissioning privatisation issues to IFC (collection and selection of offers and negotiations), the Ministry lost the key privileges for the benefit of IFC. As a result, the advisor's decision was not verified and an incorrect valuation was approved which might have impacted.the final value of concluded contract.
  • while selling stocks to HCP company, the Minister met the condition contained in the negotiation invitation that the sale of the Cement Plant stocks could only be effected to a Polish company. The Minister of Privatisation failed to explain the role of HCP shareholder, CRH, an Irish company in the transaction. CRH owned 40% of HCP stocks and was to grant a loan for purchase of Ożarów Cement Plant stocks.
  • At the time the decision on sale of Ożarów Cement Plant stocks was made, the legal status of over 5/6 of lands occupied by the Cement Plant was not regulated which must have affected the stock sale price.
  • Holding Cement Polski S.A. in Warsaw (HCP) and Centrala Importowo-Eksportowa Chemikaliami Ciech Sp. z o.o. in Warsaw (Chemicals Import Export Company) were selected for negotiations to choose the purchaser despite the fact that neither of the company met the conditions state in the negotiation invitation. In December 1994, the Ministry of Privatisation chose the HCP offer as more favourable and awarded HCP exclusive right to negotiations.
  • the amount of success fee was not justified with advisor's results and results achieved in the privatisation of the Ożarów Cement Plant. However, the agreement did not condition the success fee upon advisor's work quality.
  • the value of Ożarów Cement Plant stocks fell within discounted cash flows valuation method i.e. from $49m to $134m, where this valuation was carried out in an unreliable way. The privatisation advisor overrated the investment risk factor and assumed a slower GDP growth pace and a slower pace for cement sale growth, which consequently decreased the Company value by some 44m zlotys, according to the SCC estimate.

4. Key conclusions

Defaults revealed in the course of audit could not be eliminated because the privatisation process of Ożarów Cement Plant had been completed. Conclusions related to sale of stocks of the Cement Plant should be used for other privatisation processes.

Ill.1. Privatised enterprise

Fabryka Samochodów Osobowych FSO Warszawa (FSO Warszawa Motorcar Factory)

2. Financial size of transaction

- book asset value - 841m zlotys
- asset value as valued - 428.6m zlotys
- value of contribution in kind to the Company - 458.8m zlotys + overtaken liabilities - 366.0m zlotys

3. Key findings

  • FSO privatisation process, started over 5 years after commencement of preparatory works, was made through liquidation of the factory, and then a new company was set up using the liquidated assets, Daewoo-FSA Motor Sp. z o.o. The privatisation secured interest of the State Treasury, established company, and staff.
  • with overall positive assessment of the transaction, the cooperation between the Minister of the State Treasury and the Minister of Economy was insufficient in enforcement of the state policy on motorcar industry, and the Minister of the State Treasury with Daewoo investors. The Minister of Economy responsible for the policy of duty free import, which at the first stage was the most important element for the commencement of the process with Daewoo, was not informed on Company's activities and investment directions. No decisions on industrial policy developed by the Company where the State Treasury voted were consulted with the Ministry of Economy.

4. Key conclusions

The Chamber sent the Minister of the State Treasury audit conclusions on the need of undertaking actions to increase the supervision of the State Treasury over fulfilment of all contracts concluded with Daewoo, and in particular:

  • establishment of rules for cooperation between the Minister of the State Treasury and the Minister of Economy on performance of the Joint Venture Agreement and other agreements concluded with Daewoo, where such rules would relate to:

    • any amendments to the Agreement connected to industrial policy of the state,

    • performance of assessment of fulfilment of obligations by the investors,

    • motorcar policy.

  • development of the method of settling investment expenses made in Daewoo-FSO Motor Sp. z o.o.

  • arrangement with tax authorities the method of assessing fulfilment of obligations constituting the basis for depreciation of the income tax of the Company.

III.1. Privatised enterprise

Domy Towarowe Centrum S.A. in Warsaw (Centrum Department Stores)

2. Financial size of transaction

- book asset value - 54m zlotys
- asset value as valued - 156.4 to 161.3m zlotys
- value of selling 75% of stocks - 106m zlotys

3. Key findings

  • unreliable valuation of the Company value resulted in fixing an extremely low sale price for 70% of DTC stocks. The Minister of the State Treasury did not know the actual value of the Company assets as the valuation of the assets was approximate based on market value of real estates of 7 out of 55 organisational units. The defaults were not eliminated despite the 2 year period over which the process was carried out. According to the advisor to the Minister of the State Treasury, the Company value fell within the range from 156.4m zlotys to 161.3m zlotys, while the real estate experts assessed the value of real estates of only the so-called Eastern Wall in Warsaw alone at 194.8m zlotys.
  • DTC valuations did not take into account the right related to the decision on fixing location for the Centrum-Bis investment on lands sized 2 ha and located in the centre of Warsaw. According to cautious estimates, the value of the right related to the decision was $15m.
  • the minimum Company value was assessed not only on the basis of income method valuation which was improper for DTC, but in addition that value was underrated by deviating from assumptions made and computations errors. Underrating of DTC value following those errors fell within 56,716,000 to 77,443,000 zlotys, namely 40.9% to 55.8% of the amount computed by the privatisation advisor using that method.
  • DTC stocks were purchased by a company with its seat in Luxembourg with shareholders, except one limited liability company with 0.4% of shares, not being companies constituting the a/m Consortium appointed by the Minister for further negotiations. This means that the Minister of the State Treasury sold DTC stocks illegally, namely contrary to the rules of the governing Act on Commercialisation and Privatisation of State Enterprises of 30th August 1997.

4. Key conclusions

The Chamber requested that the Minister of the State Treasury:

  • resign from services of the advisor who prepared the privatisation and consider taking a civil action for improper performance of commissioned duties.
  • resign from commissioning valuation tasks of privatised enterprises and privatisation advisory services to those companies, and consider implementation of valuation verification practice.

References

1 i.e. the so-called one-man companies of the State Treasury [back]

2 Act of 13th February 1993 on Financial Restructurisation of Enterprises and Banks and Amendment of Certain Acts (Journal of Law, no. 18, item 82 with amendments) [back]

3 Act of 30th April 1993 on National Investment Funds and Their Privatisation (Journal of Law, no. 44 item 202 with amendments) [back]

4 Act of 26th August 1994 on Sugar Market Regulation and Proprietary Transformations in the Sugar Industry (Journal of Law, no. 98 item 478 with amendments) [back]

5 Resolution of the Council of Ministers of 23rd January 1996 on detailed procedure of selling State Treasury stocks of some companies established following state enterprise transformations (Journal of Law, no. 12 item 66). [back]

6 Act of 8th August 1996 on Regulations Introducing Acts on Reform of the Economy and Public Administration (Article 10 section 1 related to Article 31 par 3 subpar a) Journal of Law, no. 106 item 497 [back]

7 Article 10 section 2 of the a/m Act. [back]

8 Resolution of the Council of Ministers of 23rd December 1996 on the procedure and dates of taking over by the Minister of the State Treasury stocks and shares of the State Treasury and scope of information on some stocks and shares taken over (Journal of Law, no. 12 item 45) [back]

9 as regulated by the rules of the Commercial Code and the Statute in the scope allowed by the rules of the Commercial Code [back]

10 Article 2 section 4 of the Act of 8th August 1996 on the Minister of the State Treasury, Journal of Law, no. 106, item 493 with amendments [back]

11 Article 12 section 1 and 2 of the Act of 30th August 1996 on Commercialisation and Privatisation of State Enterprises (Journal of Law, no. 118 item 561 with amendments) [back]

12 the problem of "ownership supervision" in a joint-stock company was addressed in the report entitled "Effectiveness of ownership supervision of the State Treasury in enterprises under proprietary transformations" prepared in December 1996 by R&D Centre for Participative Management Studies and commissioned by the Ministry of Privatisation. [back]

13 Commentary to Article 206 § 3 of the Commercial Code: T. Dziurzyński, Z. Fenichel, M. Honzatko p.360 [back]

14 Journal of Law, no. 110 item 718 [back]

15 Article 2 section 1 of the Act of 23rd December 1994 on The Supreme Chamber of Control (Journal of Law, 1995, no. 13 item 59 with amendments) [back]

16 Article 223 § 1 and Article 390 § 1 of the Commercial Code [back]

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