A change in policy now requires State Owned Enterprises (SOEs) to seek approval from the Ministry of Finance before taking any loans.
A change in policy now requires State Owned Enterprises (SOEs) to seek approval from the Ministry of Finance before taking any loans.
A circular sent by the Privatization and Corporatization Board to SOEs stated that the change had been approved by the board in a meeting held on December 25.
The Guidelines on SOEs taking loans was compiled, where SOEs need to fulfil the requirements stated in it and apply for Finance Ministry approval if they wish to take a loan, the circular said.
The guideline states that SOEs, when proposing budget, must include details of resources needed, or loans needed for broadening their business, with an assessment.
The company board must also submit to management a technical assessment of reasons why the loan is needed, financing options, research on more than one source from which the loan can be obtained.
Companies must also state whether the new loan may affect repayment of previously taken loans or financing of any such loans.
In taking loans, priority must be given to government shareholding entities which can provide the loan. Details must also be submitted on the levels to which the company will rely on the State Budget if the loan is taken.
The assessment needs to be approved by the company board before it is submitted for Finance Ministry approval.
PCB's changes to policies also state that Finance Ministry approval must be sought to bring changes to salary or administrative structures, as well as in making investments.
PCB said that these measures are being taken to further strengthen corporate governance amongst SOEs. Previously, these permits were issued by the PCB.