ROMANIA'S FOREIGN INVESTORS COUNCIL WELCOME THE GOVERNMENT DECISION ON THE SECURITIES LAW BUT REMAIN "ATTENTIVE" TO A TRANSPARENT AND BALANCED TREATMENT BETWEEN MAJORITY AND MINORITY SHAREHOLDERS

The Foreign Investors Council (FIC) and its member companies welcome the postponement of the deadline for the application of the Art.138 of the capital markets law (Emergency Ordinance 28/2002 approved by the Law 525/2002 regarding Securities, Financial Investment and Regulated Markets).

This highly controversial article stipulated that investors having more than 90% of the share capital of the companies in which they invested must initiate a Public Tender Offer for the remaining shares by October 9, 2002. The deadline was impractical and impossible to meet since the CNVM Instructions were published on a date that left the majority shareholders with only 14 days for completing the whole public tender process.
The Government reacted positively and issued the Emergency Ordinance 122/2002 stipulating the postponement of the deadline for the application of Article 138 until December 1, 2002 and allowing a longer period of time for the preparation and finalization of the Public Tender Offer.

It has to be highlighted that the FIC has broader concerns regarding the law on capital markets, and seeks a fair balance between the interests of majority and minority shareholders, with a clear goal to continue to attract strategic investors.

Last year, the FIC commissioned an international firm of lawyers to draw up proposals based on the legislation applicable in other European countries and we presented this report to the relevant Romanian authorities including the CNVM. In spite of our efforts neither the Law 525/2002 nor its instructions reflected properly the international best practice in this area. The FIC's main concern is related to the pricing method to be used for the evaluation of the shares since the current methods proposed by the CNVM seem not to meet the three basic criteria which are accepted internationally: objectivity, transparency and equity.

Therefore, the FIC has contacted the CNVM and requested the suspension of the Instructions issued for the application of Article 138. In addition, the FIC has advised that it is committed to work together with the CNVM to provide specific recommendations for the improvement of certain articles of Law 525/2002 and applicable instructions, which have major consequences for the investment climate.

The FIC considers that it is extremely important to address quickly this situation and to rectify the various inconsistencies and irregularities of the capital market law. The FIC is concerned that this law in its current form could deter future foreign direct investment and create uncertainty for foreign investors already present in Romania.

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