In response to the sluggishness of the Czech capital markets, the government has launched a series of legislative initiatives with the aim of creating a more stable and transparent environment for investors. Accordingly, the Czech capital markets have been undergoing major changes. However, whether the hoped-for results will materialize remains to be seen.
Since mid-1996 the revised Commercial Code has stipulated that majority shareholders must offer to buy minority shareholders' shares by means of a public offering. Under the amended Securities Act, the shareholders of Czech companies must report any passing of the 10% threshold for ownership of shares in any one company. Information on shareholders of publicly-traded registered shares in booked form is now published by the Securities Centre. The prices of all securities not traded on the Prague Stock Exchange are also to be made public.
The administrative burden on the Securities Centre, which collects and stores all securities accounts of both individual and corporate investors, has been eased with the waiving of the obligation to deliver to all shareholders — numerous in the Czech Republic because of the popularity of voucher privatizations — annual statements of their securities accounts. Abolishing the fee for maintaining the accounts has also made individual investments more convenient.
Another amended Act on Investment Companies and Investment Funds introduced the possibility of the conversion of investment trust unit funds into regular stockholdings in business corporations. The applications of major investment trust unit funds for such a conversion are being reviewed by the Czech government.
One part of the legislative package was the amendment of the Stock Exchange Act to allow derivatives onto the Prague Stock Exchange and thus create the possibility of trading futures and options.
Recently, the government decided to establish an independent commission on securities, which would fulfil a function similar to that of the US Securities and Exchange Commission. In the meantime, the former Ministry of Finance Department of Capital Market Supervision has been transformed into the Securities Bureau. The Bureau will be supported by a body of 11 Czech consultants. However, the view is that after its formation the independent commission will be headed by a foreign capital markets expert.
More privatization ahead
In the 1996 elections the conservative-liberal government failed to win a parliamentary majority and has had to rely on the support of a part of the social democrats. Nevertheless, in January 1997 the government decided to privatize the remaining major corporations in which it has a majority stake through the National Property Fund. The Czech economy has already to a large extent been privatized and private businesses account for some 70% to 80% of GNP.
Some 13.5% of the former state-owned sector remains to be privatized. The Czech state still maintains its stake in the Czech postal service and Czech Railways as well as in the four most important banks. The privatization of Investicni a Postovni Banka (IPB) will be the first of a bank in which the government stake will be offered to a private investor. Compared with the other banks in which Czech government holds an interest, the stake in IPB is a relatively small 29.66%. However, the state retains a 'golden share', which gives it certain exclusive rights until 1999. IPB should be a model privatization, and the sale of the government's stakes in the Komercni Banka (KB), Ceskoslovenska obchodni banka (CSOB) and Ceska Sporitelna (SB) should follow.