A senior state assets official announced Friday that important state companies, including those directly owned by the central government, will be required to set up legal departments within three years.

Huang Shuhe, vice minister in charge of the State Council's State-owned Assets Supervision and Administration Commission (SASAC), said that the 53 largest of the 178 companies directly owned by the central government must designate chief counsels within three years.

"Chief counsels and legal advisory organs must be authorized to overhaul contract management and other important decisions made by management bodies," Huang said at an international forum of legal risk management of key state-owned enterprises.

"It's critical to build up the contract management system centralized on advance recognition, intermediate control and post remedy," Huang said.

From March 2003 when SASAC was founded to the end of 2004, 131 centrally administered companies reported 146 legal disputes to SASAC, involving a total direct value of 19.9 billion yuan (2.4 billion US dollars) and indirect value of 45 billion yuan.

In an administrative order issued last May, SASAC specified that all important state companies must create internal legal departments, with the most important employing chief counsels.

By the end of last year, 105 out of the total 178 state companies had legal departments. Twenty-three of the 53 biggest state companies had chief counsels.

"Most state companies have a shortage of legal professionals and a few have none at all," Huang said.

He warned that business risks could lead to disastrous results for state companies. "Preemptive measures, particularly legal check on management, are vitally important."

SASAC upervises 178 state companies.

State-owned and state-held companies tallied sales worth 7.15 trillion yuan in 2004, with a year-by-year growth rate of 26 percent, and 531.1 billion yuan in profits, an increase of 42.5 percent.

With total assets worth 9.19 trillion yuan, the companies wholly owned by the central government earned 5.5 trillion yuan in sales and 478.5 billion yuan in profits, increasing by 25.8 percent and 57.6 percent respectively.

Source: Xinhua