December the 29th, 2024 – The days of the infamous Croatian uhljeb might be well and truly numbered as the country pursues its OECD ambitions.
As Marija Brnic/Poslovni Dnevnik writes, who will manage state-owned enterprises going forward? How will the personnel will be selected? Which of those state enterprises will eventually end up being scrapped? All of the above have been the main focus of the current model of portfolio management in Croatia. This is also how the recent presentation of upcoming reforms, designed by Finance Minister Marko Primorac, went.
The public information about the operations of these companies has remained more difficult to come by. Owing to that, and the apparent “unmasking” of the legend of the Croatian uhljeb, Primorac’s proposals are interesting. His proposals regard a law on legal entities owned by the state, which was put up for public debate on Christmas Eve.
This law is very specific in itself. That’s because for the first time in three long decades, the state is defining only the management of enterprises in which it is the owner from its total assets. One of the most important steps in improving corporate practices of this kind is to prescribe the publication of a series of information and documents about its operations.
more reporting, and throwing the spotlight on the legendary croatian uhljeb
The government will first determine the ownership policy for each company and announce it on its website, as well as on the Ministry of Finance’s site. The new law will require companies to regularly update their websites and publish timely information about their business plans with details and deadlines for their implementation, as well as data on their financial and non-financial goals, as well as related achievements.
Unlike previous practices, state-owned companies will need to publish not only their annual financial reports, but also their semi-annual and quarterly ones, alongside any accompanying notes. This publicly published information should remain available on their websites for at least five years.
One of the major pieces of news in this regard is the strict regulation of separate accounting in the business books for companies that simultaneously perform public services and market activities. In addition to the accounts, the separation of these activities will have to be implemented in terms of organisation and personnel. If they fail to do so, companies will have to publicly announce the reasons why they’re exempt from this obligation. This alone should reveal the sheer power still held by the Croatian uhljeb, and seek to minimise it once and for all.
Companies which perform both public interest and market activities will in future have to additionally explain their sources of income in their financial reports. That mean’s that they’ll need to explain how much they collect from fees or from the state budget if they secure income for performing such activities in this way. They must also reveal how much they manage to collect on the market. The law will also strictly prohibit them from using the income collected from fees to finance their market activities.
the clock is ticking…
The remuneration of members of supervisory boards, management boards, and boards of directors and executive directors will also need to be publicly announced once a year.
The remuneration policy will otherwise be determined by the government. That will be the case every four years for large and medium-sized companies. The permanent engagement of the same audit firms will likely also be limited. That will mean that one auditor will be able to perform the tasks of assessing annual financial reports in state-owned companies for a maximum of four years only.
For violating the law and failing to publish required information, plans and reports, companies will be subject to fines of 5,000 10,000 euros, and from 500 to 1500 euros for responsible persons.
Primorac’s bill will remain in public debate until January the 20th, and will then go into regular parliamentary procedure. It is expected to be adopted at the end of the first quarter of 2025. It will enter into force eight days after its publication in the Official Gazette (Narodne Novine), followed by the adoption of a whole series of by-laws.
However, unexpectedly long deadlines have been set in the past. For example, the registration of state-owned companies will need to be carried out within a period of year, and a deadline of three years is left for the separation of market operations from the provision of public services and the maintenance of separate accounts. The most urgent task will be to determine new remuneration policies, which are expected to be introduced at the first assemblies to be held after the law enters into force.
Are the days of the pesky Croatian uhljeb finally drawing to a close? It’s yet to be seen.
