REPORT OF THE DIRECTOR GENERAL
ON COMPLIANCE WITH THE CODE OF CORPORATE GOVERNANCE
BY JOINT STOCK COMPANY "INTERREGIONAL DISTRIBUTION GRID COMPANY OF CENTRE"
IN THE FIRST HALF OF 2009
CORPORATE GOVERNANCE PRINCIPLES
Corporate governance is based on the respect for rights and legitimate interests of its members; it makes the Company’s operations more efficient, including by increasing the Company’s shareholder value, providing new jobs and supporting financial stability and profitability of the Company.
The basic principals of the Company’s corporate governance are the following:
Justice
Openness
Accountability of the Company administration to shareholders
Manageability of business activities
Observance of third parties rights / Yes / The Company defends the rights and legitimate interests of its shareholders by:
- providing a reliable method for recording of the title to the Company's shares and the possibility of free and fast transfer of their shares (the Company's Registrar, by resolution of the Board of Directors (Minutes No. 009/05 of December 5, 2005), is Central Moscow Registrar OJSC (MCD OJSC) under agreement for maintaining and keeping a register of holders of nominal securities of April 3, 2006.MCD OJSC has all the necessary technical means and an unblemished reputation; it has licence No. 10-000-1-00255 issued by the Federal Commission for the Securities Market of Russia on September 13, 2002 for an indefinite period and a Certificate of Compliance with PARTAD Standards of Registrar Activity of June 16, 2005.
( providing to shareholders the possibility to exercise their rights by making resolutions on the main issues related to the Company's activity at the General Meeting of Shareholders (in accordance with Article 6 of the Company’s Articles of Association (approved by Resolution of the Extraordinary Meeting of Shareholders – Management Board of RAO UES of Russia, Minutes No. 1829/pr1 of February 28, 2008) and the Regulation on the Convocation and Holding Procedure of the general meeting of shareholders of IDGC of Centre (approved by Resolution of the Extraordinary Meeting of Shareholder – the Management Board of RAO UES of Russia, Minutes No. 1829/pr1 of February 28, 2008)providing the possibility to participate in the Company’s profit.(Article 7 of the Company's Articles of Association establishes that the dividends for ordinary shares are paid within the term established by a resolution of the General Meeting of Shareholders, but not later than 60 days from the approval of the resolution on their payment; this complies with guidelines of advanced corporate governance practice).
In addition to information to be disclosed in accordance with the laws of the Russian Federation regulating information disclosure by an issuer, the Company discloses additional information in compliance with its Regulation on Information Policy (approved by Resolution of the Board of Directors of the Company, Minutes No. 009/06 of October 18, 2006). In the reporting period information on all material facts was disclosed; the issuer’s quarterly reports were prepared.All the information disclosed by the Company is available on its site ( interested persons have free access to such information.
Information is also published in the Interfax newsfeed ( including:
Press releases on resolutions adopted by the governing bodies of the issuer.
Announcement of an adopted resolution on placement of securities.
Announcement of an approved resolution on an issue (additional issue) of securities.
Informationof the state registration of an issue (additional issue) of securities and procedure for accessing information contained in the prospectus.
Information of the commencement date of placement of securities.
Information a of out the placement price.
Announcement of suspension of placement.
Announcement of resumption of placement.
Announcement of registration of the prospectus.
Information of the procedure for accessing information contained in the quarterly report.
Information about disclosure of the list of affiliated persons by the joint stock company at its website.
Reports on material facts:
a) information about reorganisation of the issuer, its subsidiaries and dependent companies;
b) information about facts that resulted in a one-off increase or decrease of the value of the issuer's assets by more than 10 per cent;
c) information about facts that resulted in a one-off increase (decrease) of net profit or net losses of the issuer by more than 10 per cent;
d) information about one-off transactions of the issuer where the value or the value of the property in such transactions exceeds 10 per cent of the issuer's assets as of the date of such a transaction;
e) information about stages of the procedure of the issue;
f) information about suspension or resumption of the issue;
g) announcement declaring the issue (additional issue) cancelled or invalid;
h) information about entering of a shareholder owning not less that 5 per cent of ordinary shares of the issuer into the shareholder register, as well as about any amendment due to which the number of shares owned by such shareholder has become less or more than 5, 10, 15, 20, 25, 30, 50 or 75 per cent of all the ordinary shares placed;
i) information about the closing date of the issuer's shareholder register;
j) information about terms of performance of the obligations to the owners of securities by the issuer;
k) information about resolutions approved by general meetings;
m) information about accrued and/or paid profit on the issuer's securities;
n) information about a voluntary or mandatory offer (including a competitive offer) made to the issuer, being an open joint stock company, in accordance with Chapter XI.1 of the Federal Law "On Joint-Stock Companies";
o) information about receipt by the issuer, being an open joint stock company, of notices on the right of redemption or demand of redemption of securities sent by a person that purchased more than 95% of the total number of ordinary shares and preferred shares of the open joint stock company, enabling their owner to vote in accordance with Clause 5 of Article 32 of the Federal Law "On Joint-Stock Companies", taking into consideration shares owned by such person and its affiliated persons.
Information which can materially influence the cost of securities, including:
a) information on resolutions approved by the Board of Directors (supervisory board) of the joint stock company;
on convening of an annual or extraordinary general meeting of shareholders, including approval of the agenda of the general meeting of shareholders;
on formation of a sole executive body and/or a collegial executive body;
on early termination of the authorities of a sole executive body and/or a collegial executive body;
on suspension of the authorities of the sole executive body, including the managing company or the manager;
Paragraph excluded.- Order No. 07-44/pz-n of the Federal Financial Markets Service of the Russian Federation of April 12, 2007.
on recommendations on the amount of a dividend to be paid out on shares and procedure for its payment;
on recommendations relating to a voluntary offer received by the open joint stock company and provided for in Article 84.1 of the Federal Law "On Joint-Stock Companies" (including a competitive offer provided for in Article 84.5 of the Federal Law "On Joint-Stock Companies") and a mandatory offer provided for in Clause 84.2 of the Federal Law "On Joint-Stock Companies", including assessment of the price offered for securities to be bought and possible changes in their market price after purchase, assessment of the plans of a person that have sent a voluntary or mandatory offer with regard to the joint stock company, including its plans with regard to the employees;
on submitting an issue of reorganisation of the joint stock company and terms of such reorganisation to the general meeting of shareholders for its consideration;
on approval of a major transaction of the joint stock company;
on approval of the registrar maintaining the register of owners of registered securities of the joint stock company and the terms of the contract with such register;
on termination of the contract of the registrar maintaining the register of owners of registered securities of the joint stock company;
on purchase of its placed shares, binds and other securities by the joint stock company;
on establishing (winding-up) of branches and/or opening (closing) of representative offices of the joint-stock company;
on approval of the investment declaration of the joint stock investment fund and any changes and amendments in it;
on making or termination of contracts with the managing company, specialised depository, registrar, appraiser and auditor of the joint stock investment fund;
b) on expiry of the term of the authorities of a sole executive body and/or members of a collegial executive body of the joint stock company;
c) on changing of amounts of interests of persons, being members of the Board of Directors (supervision board), members of a collegial executive body of the joint stock company, as well as a person acting as a sole executive body of the joint stock company, including that of the managing company or the manager, in the authorised capital of the joint stock company, as well as in authorised capitals of its subsidiaries or dependent companies;
d) on carrying out by the joint stock company of a transaction with a related party that is subject to approval by the authorised governing body of the joint stock company in accordance with the laws of the Russian Federation, if the value of such transaction is 5 or more percent of the book value of the assets of the joint stock company determine on the basis of the data in its accounting reports as of the latest reporting date prior to the approval of such transaction by an authorised governing body of the joint stock company;
e) on initiating bankruptcy proceedings by an arbitration court with regard to the joint-stock company and/or its subsidiaries and dependent companies;
f) on making a contract between the joint stock company and a stock exchange under which securities of the joint stock company are listed (contract with a market maker on entering securities of the joint stock company into the list of securities accepted for trading by such market maker).
g) on entering securities of the joint stock company into the list of securities accepted for trading by a market maker and excluding securities of the joint stock company from the said list;
h) on obtaining an approval for placement and/and organisation of circulation of securities of the joint stock company outside of the Russian Federation from a federal executive body by the joint stock company;
i) on material errors found in financial (accounting) reports of the joint stock company that was published and/or otherwise disclosed earlier;
j) on disclosure of interim (quarterly) and annual financial (accounting) reports, and/or interim (quarterly) and annual consolidated financial (accounting) reports prepared in accordance with the International Financial Reporting Standards or Generally Accepted Accounting Principles of the USA (US GAAP) by the joint stock company.
k) on submitting an application on making an entry on reorganisation and/or termination of activities (dissolution) of the joint stock company into the Uniform State Register of Corporate Persons by the joint stock company;
l) on dissolution of a business entity which is a subsidiary and/or dependent company in relation to the joint stock company;
m) on receipt, suspension, revocation (annulment), replacement, renewal or expiry of the term of a permit (license) obtained by the joint stock company;
to use objects with restricted circulation capacity;
to perform banking activities;
to perform insurance activities;
to act as a professional participant of the securities market;
to performance activities of an investment fund;
to perform other activities which are material to the issuer.
n) on a claim filed against the joint stock company, its subsidiaries and dependent companies that, if satisfied, may have a material effect on the financial standing and business activities of the joint stock company, its subsidiaries and dependent companies;
o) on changing of the web address of the Internet site at which the joint stock company discloses its information.
p) on purchase of an interest in the authorised (share) capital (mutual fund) of another corporate entity, being not less than 5 per cent, or ordinary shares of another joint stock company which number is not less than 5 per cent of their total number, as well as any changes in their number if it becomes more or less than 5, 10, 15, 20, 25, 30, 50 or 75 per cent of the total number;
r) on declaring the general meeting of shareholders incompetent.
The Company implements the principle of accountability of administration to shareholders as follows:
— The Management Board of the Company, in accordance with subclause 4, clause 22.2, Article 22 of the Company's Articles of Association, controls the activity of the Company's management by examining the reports of deputy Director Generals, heads of separate subdivisions of the Company on the results of implementation of approved plans, programmes, instructions, examining of reports, documents and other information on the activity of the Company and its subsidiaries and dependent companies;
— The Director General and the Management Board of the Company, in compliance with subclause 4, clause 21.2, Article 21 of the Company's Articles of Association, are accountable to the General Meeting of Shareholders and to the Board of Directors of the Company.
The Board of Directors of the Company, in compliance with subclause 36, clause 15.1, Article 15 of the Company's Articles of Association, examines the Director General's reports on the Company's activity (including those on the performance of its duties), on the implementation of resolutions of the General Meeting of Shareholders and of the Board of Directors of the Company and, in its turn, it is accountable to shareholders, who examine the annual report at the Annual General Meeting of Shareholders.
This practice allows the Board of Directors, which is responsible for control over the management's work, to monitor efficiently the work of the Company's executive management and to take the necessary measures according to its results.
Control over financial and business activity in the Company is performed by the Board of Directors, the Internal Audit Commission and the Auditor of the Company.
By resolution of the Board of Directors (Minutes No. 09/08 of April 30, 2008) a committee of the Board of Directors was established to perform direct control of the financial and business activity of the Company: the Audit Committee; its main task is to develop and submit to the Company's Board of Directors recommendations (conclusions) concerning the Company's audit and financial statements.
The Internal Audit Commission regularly performs scheduled audits.An audit of the Company's financial and business operations in, 2008 was performed from February 2, 2009 until February 16, 2009 by resolution of the Internal Audit Commission. (Minutes No. 4 of January 29, 2009).
In compliance with clause 8.6 of the Regulation on the Audit Commission (approved by resolution of the Extraordinary General Meeting of Shareholder represented by the Management Board of RAO UES of Russia, Minutes of the Management Board No1429/pr1 of March 30, 2006), one copy of the report (statement) is kept by the secretary of the Audit Commission, one copy is send to the Chairperson of the Board of Directors of the Company and one copy is send to the Director General of the Company.
In compliance with paragraph 5 of clause 8.6 of the Regulation on the Audit Commission members of the Audit Commission are obliged to submit a report on the results of the annual audit of the Company's activities, including appraisal of the annual report of the Company, to the Board of Directors not later than 45 days before the date of the annual General Meeting of Shareholders of the Company.
On June 11, 2009 the General Meeting of Shareholders elected members of the Audit Commission.Information about members of the Audit Commission can be found at:
At the annual General Meeting held on June 11, 2009 the Auditor of the Company approved HLB Vneshaudit CJSC (license No. Е000548 issued by the Ministry of Finance of the Russian Federation on June 25, 2002), an auditing company having the fifteen-year experience in compulsory annual audit of accounting (financial) statements and complex consultation of the multi-branch electric power companies, and being the founder and member of the Institute of Professional Auditors (IPAR).
In accordance with clause 3 of Article 52 of Federal Law "On Joint-Stock Companies" the information to be submitted to the persons entitled to participate in the General Meeting of Shareholders at preparation to the Company’s General Meeting of Shareholders involves the annual accounting statements, including the auditor’s report, opinion of the Revision Commission (Internal Auditor) of the Company based on the results of annual accounting statements revision.
To perform operative internal audit of the performance of all business operations, the Company created a subdivision in charge for internal audit: the Internal Control and Audit Department.The Internal Control and Audit Department performs a wide range of functions recommended by advanced corporate governance practices, including guaranteeing the completeness and reliability of the Company's financial and management reports.All the employees of the Internal Control and Audit Department have higher economic education, experience in the performance of audit and inspections and periodically attend a special training course in the field of accountancy and audit.
At present the Company's Board of Directors resolved to approve the Regulation on Internal Control Procedures (Minutes No. 1 dated February 10, 2009), which established goals and tasks of internal control, internal control procedures, bodies in charge for internal control and persons in charge for control of compliance with internal control procedures.
Corporate governance includes the establishing of relationships with third parties, including employees, based on respect and consideration of the relevant persons' rights provided for by the applicable laws.
The Company approved documents which regulate issues related to its social responsibility and to the consideration of interests of other parties concerned: the Board of Directors of IDGC of Centre, JSC approved the Collective Agreement for 2009-2011 (Minutes No. 01/09 dated February 10, 2009) regulating social and labour relationships in the Company and determining rights and obligations of the parties forsocial partnership of the Company, specifically employers, employees and their representatives.
The Company also approved the new version of the Regulation on Corporate Assistance and Support of Employees of IDGC of Centre, JSC in Improvement of their Living Conditions (Minutes of the Board of Directors No 13/08 dated August 1, 2008), the Non-State Pension Provision Programme for Employees of IDGC of Centre, JSC for 2009 (Minutes of the Board of Directors No. 02/09 dated February 27, 2009).