Managerial staffs of China's major state-owned enterprises (SOEs) are permitted to hold shares of their own firms during assets or shares increase of the SOEs, according to the country's state-owned assets administer.

Total shares held by the managerial staff should be less than the volume that could absolutely or relatively control the SOEs, according to a document issued by the State-owned Assets Supervision and Administration Commission (SASAC) and approved by the State Council.

In order to contain insiders-control and state-owned assets losses, SASAC and the Ministry of Finance jointly issued a document in April 2005, forbidding management buyout (MBO) in large-scale SOEs.

"The inspiring and inhibiting role of MBO has been approved in some large corporations overseas, and the practice of some of our major SOEs also prove the measure to be effective," a SASAC official noted.

Generally, managerial staff holding a small amount of their companies' share will not lead to insiders-control or state-owned assets losses, so long as the MBOs are "rigidly controlled and canonically operated", said the official.

According to the official, the newly-issued document sets several conditions to "strictly control" the MBOs. Only those who won their positions through competition instead of appointment, or who have made major contributions to the companies, could hold the shares of the SOEs.

The MBOs must be approved by the supervisory departments of state-owned assets, and the total shares held by the entire managerial staff should be less than the volume that could control the SOEs.

The managerial staff is banned from being involved in major proceedings like drafting reform plans and fixing prices of state-owned assets; and should provide certificates that can prove the validity of their capital sources.

Those managerial members bearing direct accountability for the decline of their companies' performance could not hold shares of the companies.

According to the document, the MBOs does not include the shares and futures awarded to the managerial staff.

Source: Xinhua