Bucharest Stock Exchange (BVB) has a new Corporate Governance Code (CGC) applicable to listed companies, which should bring higher standards of governance and transparency in the local capital market.

The new code, which was launched on September 22, will enter into force on January 4, 2016.

“The new code of Corporate Governance is a modernized set of ‎rules and practices, which will increase the attractiveness and valuation of Romanian companies, for the greatest benefit of investors. We are introducing this code, with a new system of compliance and enforcement, because Romania did not want to remain anymore in that matter, as a frontier market on the map of European markets,” said Ludwik Sobolewski, Bucharest Stock Exchange CEO.

The European Bank for Reconstruction and Development (EBRD) helped the BVB in developing the new set of corporate governance rules. The EBRD also financed 90% of the project’s total cost, which was EUR 300,000, with the remaining 10% being covered by BVB.

“The new code is much more focused and precise in what is required from listed companies,” said Gian Piero Cigna, Senior Counsel at the EBRD. “For instance, it provides a clear list of functions that are expected from the audit committee, therefore complementing the law. I particularly welcome the emphasis on the value of establishing a continuous relation with investors and the quality of disclosure. The new code is yet another step towards transforming Romanian capital market into an attractive investment destination,” he added.

Access to information for investors and protection of shareholders’ rights are the leading principles of the new code. The rulebook has 4 sections: Responsibilities, Risk management and internal control system, Fair rewards and motivation, and Building value through investors’ relations. Each section has an outline of “general principles”, followed by “provisions to comply with”.

The enforcement of the new rules will be based on the “comply or explain” principle which is expected to give the market clear, accurate and actual information about listed companies’ compliance with corporate governance rules, according to BVB representatives. Companies shall include a corporate governance statement in their annual report, as a specific section of the annual report, which shall contain a self-assessment of how the “provisions to comply with” are observed and shall include the measures taken in order to comply with provisions that are not fully met.

Although the BVB can’t actually sanction the companies that don’t comply with the corporate governance principles, the investors will have the necessary information to sanction these companies by selling their shares or by questioning the directors during general shareholders meetings.

In addition to the Corporate Governance Code, the Bucharest Stock Exchange also launched a Compendium of Corporate Governance Practices, and a Manual for reporting Corporate Governance.

Nestor Advisors, law firm Nestor Nestor Kingston Diculescu Petersen and an economic and business consultancy Concept SRL, represented by represented by Aurelian Dochia, were the advisors on this project.

The BVB will start training the listed companies on adopting the Corporate Governance Code in the following period. It will also develop and launch a Corporate Governance Index, to highlight those companies which prove high corporate governance standards.

Bucharest Stock Exchange makes new corporate governance code

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editor@romania-insider.com