Government policies have been updated such that state-owned companies are now required to obtain permission from the Ministry of Finance and Planning before taking out loans.
The changes were brought under the Guidelines on Borrowing by State-Owned Companies prepared by the Privatisation and Corporatisation Board (PCB).
According to the amendments to the guidelines, government-owned companies seeking to borrow will have to follow the steps outlined in the guideline and send the decision of the company’s board for shareholder approval. Once this step is completed and the approval is received, the PCB must be notified within five days.
Under this rule, once all steps under the guideline are completed, a request has to be made to the Finance Ministry seeking permission for borrowing. The PCB has also recommended other business entities of the state to complete the steps in the guideline and obtain shareholder’s permission before pursuing loans.
The PCB has also made changes to the criteria for classifying newly formed companies. The PCB’s board holds the responsibility of classifying companies based on their purpose and their capital, with recommendations from the Finance Ministry. Based on PCB’s classification, allowances must be paid to the board directors of newly formed companies in accordance with the guidelines.
When a company completes its first full year of operation, government companies will be reclassified after an assessment. With these changes, newly-created government-owned companies will be classified by the PCB board based on the their objectives and capital, with input from the Finance Ministry.