KSC, TITLE 7.  AGENCIES & GOV'T FINANCED ENTERPRISES
 
Part II.  Government
Financed Enterprises

Part II Background
State Law 7-8 divided Title 7 into two parts, "Agencies" and "Government Financed Enterprises," and added Chapter 14 under Part II, Government Financed Enterprises.

As originally enacted by State Law 7-8, Part II started immediately after Chapter 13 of Title 7.  State Law 7-28 moved the new Part II so that it followed Chapter 12 of Title 13, repealed the former Chapter 13 establishing the "Micronesian Petroleum Corporation" and enacted a new Chapter 13, "Micronesia Petroleum Corporation," within Part II.

Chapter 13.  Micronesia
Petroleum Corporation

Former Chapter 13 Background
Former Chapter 13, establishing the Board of Education, was repealed by State Law 6-1.  The subsequent Chapter 13, establishing the Micronesia Petroleum Corporation, was added by State Law 6-98 and repealed and replaced by State Law 7-28.  See Part II, Government Financed Enterprises.


      Section 7.1301.  Corporation established.
       There is a corporation known as the Micronesia Petroleum Corporation, formerly establish[ed] by the Code, referred to in this Chapter as the "Corporation".

Background
Added by State Law 7-28.

      Section 7.1302.  Responsibilities, duties and powers of the Corporation.
       The Corporation is vested with the following powers, duties and responsibilities:

     (1)  To operate and manage the State's fuel storage facility.

     (2)  To expand and improve the State owned fuel storage facility to meet the foreseeable demand for reliable and economical fuel for the public and private sectors of the State.

     (3)  To engage in the business of buying and selling petroleum products.

     (4)  Incidental to its petroleum business, to transport goods to and from Kosrae and other locations in the Pacific region.  The Corporation may not market goods that it transports under this Subsection except that the Company may sell water from Kosrae to other areas in the Pacific.

     (5)  To acquire and maintain from the revenues and subsidies received by the Corporation, a prudent contingency reserve of capital, a program of insurance, including liability coverage, for all personnel, facilities, and equipment controlled by the Corporation.

     (6)  To deposit in the Kosrae State Treasury surplus revenue, consistent with Section 7.1315, after investments in expansion, improvements of the Corporation and the payment of dividends, as approved by the Board of Directors.

     (7)  To issue dividends to shareholders as approved by the Board of Directors.

     (8)  To sue and be sued in its own name.

     (9) To borrow funds for its operation, maintenance, improvement, expansion and development.

     (10)  To sell minority ownership interest or stock in the Corporation, not in excess of forty-nine (49%) percent of the total value of the Corporation.

Background
Added by State Law 7-28 and State Law 7-74.  Subsection (4) amended by State Law 7-149.

      Section 7.1303.  Legal characteristics and capacity of the Corporation.
       In performing the responsibilities and duties authorized by this act or other laws of the State, the Corporation holds the capacity to exercise all powers reasonably necessary to discharge its duties and responsibilities, including, but not limited to the following:

     (1)  To adopt, alter and use an official seal.

     (2)  To adopt and amend bylaws and other rules, regulations and directives governing all aspects and duties granted to or imposed upon it by law.  No bylaws, rules or regulation other than those covering the internal operation of the Corporation shall be adopted without a public shareholder meeting.  Notice of a meeting.  Notice of a meeting within this subsection shall be given to shareholders thirty (30) days prior to the Board of Directors meeting.

     (3)  To set interest charges or other monetary penalties, to require security deposits and create procedures for termination of service, and to establish such other procedures and policies to ensure timely payment of Corporation bills.

     (4)  To sue and be sued as an entity; provided that satisfaction of judgment or the settlement of claims or tort actions against the Corporation may only be paid out of contingency reserves or insurance held by the Corporation and not out of the other assets or operating capital of the Corporation, and for these purposes the doctrine of sovereign immunity is recognized and maintained for this public corporation to the extent not expressly waived by the State law.

     (a)  Notwithstanding subsection (4) above, the Corporation may pledge its assets or operating capital as collateral to secure a loan from the FSM Development Bank.  If the Corporation fails to make any payment due under such a loan in a timely manner, the Corporation shall immediately inform the Governor and the Speaker to enable the State to take action to ensure that payment is made.  The FSM Development Bank may also notify the Governor or the Speaker of any failure by MPC to make a timely loan payment.  No foreclosure or acceleration of the debt is effective unless the Governor and Speaker receive a notice of nonpayment provided under this paragraph.

     (5)  To acquire in any lawful manner, real, personal, or mixed property, either tangible or intangible, to hold, maintain, use, and operate such property; and to sell, lease or otherwise dispose of such property.

     (6)  To acquire in any lawful manner and with consent of the entity, the business, property, assets, and liabilities of any public entity of the State to the extent it provides fuel.

     (7)  To borrow or raise any sums of money or such security and upon such terms as may from time to time be deemed necessary for the expansion and improvement of the Corporation's business.

     (8)  To retain and terminate the services of employees, agents, attorneys, auditors, and independent contractors upon such terms and conditions as the Corporation deems appropriate.

Background
Added by State Law 7-28.  Amended by State Law 7-106 to add Subsection (4)(a).

      Section 7.1304.  Debts and obligations of the Corporation.
       Unless otherwise provided by law, the debts and obligations of the Corporation are not the debts and obligations of the Kosrae State Government, and the Kosrae State Government is not responsible for any such debts or obligations.

Background
Added by State Law 7-28.

      Section 7.1305.  Composition of the Board, terms.
       The Corporation is governed by the Board of Directors.  There shall be five (5) directors on the Board appointed by the State of Kosrae.  In addition to the five (5) appointed directors, each shareholder possessing a twenty (20%) percent or more ownership of outstanding stock, or his designee, shall serve as director.  The five appointed board members are nominated by the Governor, with the advice and consent of the Legislature.  An appointed Director serves for a term of four years, subject to reappointment, and until his successor has been appointed and qualifies. A vacancy of an appointed Director is filled for the remainder of the terms for that vacated position.

Background
Added by State Law 7-28.

      Section 7.1306.  Meeting of the Board.
       The Board meets and holds at least one annual shareholders' meeting.  The Board may call other meetings as it deems necessary for the transaction of its general business.

Background
Added by State Law 7-28.

      Section 7.1307.  Organization of the board; quorum; compensation and expenses.
       Pursuant to its bylaws, the Board organizes by electing one of its members as Chairman and another as Vice-Chairman.  The Board also designates from among its members a Secretary to keep the minutes and records of the Board.  A majority of the Board constitutes a quorum, and a concurrence of a majority of its members is necessary for any official action to be taken by the Board.  No vacancy in the membership of the Board impairs the right of a quorum to exercise all of the rights and perform all of the duties of the Board.  Directors are compensated at prescribed rates, which may not exceed $50 per meeting, when they physically attend meetings of the Board.  All Directors, appointed by the State of Kosrae, receive travel expenses and per diem at Kosrae State Government rate when these amounts would be payable to Kosrae State government employees in the same circumstances.  Non-appointed Directors shall not receive travel expenses or per diem from the Corporation.

Background
Added by State Law 7-28.  Amended by State Law 7-60.

      Section 7.1308.  Appointment of General Manager, removal.
       By a majority vote, the Board appoints a General Manager and fixes his compensation.  The General Manager has full charge and control of the operation and management of the Corporation and other real and personal property controlled by the Corporation, and of construction and maintenance of any facility and necessary work on vehicles, vessels and equipment controlled by or required to be built or repaired by the Corporation.  The Board may remove the General Manager for good cause upon a majority vote.  During any period when the position of General Manager is vacant, the position is temporarily filled from within the organization following its rules and regulations.

Background
Added by State Law 7-28.

      Section 7.1309.  Duties of the General Manager.
       The General Manager of the Corporation has the following duties:

     (1)  To ensure that all fees and bills imposed by the Corporation are charged and collected.

     (2)  To attend all meetings of the Board and submit a general report on the affairs of the Corporation.

     (3)  To keep the Board advised on the needs of the Corporation.

     (4)  To approve demands for payment of obligations for the purposes and within amounts authorized by the Board.

     (5)  To prepare or have prepared all plans and specifications for the construction and repair of facilities, vehicles, vessels and equipment operated by the Corporation.

     (6)  To manage the day to day business of the Corporation; to select  and appoint the employees of the Corporation except as otherwise provided in this act; to contract with independent contractors, and to plan, organize coordinate and control the services of such employees and contractors in the exercise of the powers of the Corporation under the general direction of the Board.

     (7)  To publish within 90 days after the end of each fiscal year, in the manner required by the Board, a complete financial and operations statement showing the result of operations for the preceding fiscal year and the financial status of the Corporation on the last day thereof.

     (8)  To perform such other additional duties as the Board may require.

Background
Added by State Law 7-28.

      Section 7.1310.  Appointment of Comptroller and general counsel; duties of each.
       The General Manager appoints a comptroller and a general counsel, both of whom report to the General Manager.  The General Manager may terminate the comptroller and the general counsel for good cause.  The comptroller and the general counsel are compensated at rates determined by the Board.  Such officers may be full-time employees of the Corporation, shared with the Kosrae State Government, or be placed on retainer from the private sector.  The General Manager may appoint one or more assistants to any such office.

     (1)  The Comptroller has custody of all monies of the Corporation and pays out such money only in accordance with the direction of the Board and as provided in the annual budget of the Corporation.  The Board appoints an agent as its trustee for payment of bonds issued by it and for such related purposes as the Board may provide.

     (2)  The general counsel advises the Board and the General Manager in all legal matters to which the Corporation is a party or in which the Corporation is legally interested and may represent the Corporation.

Background
Added by State Law 7-28.

      Section 7.1311.  Valuation, Accounting and reporting.
       The Board adopts and maintains a system of accounting that is in accordance with generally accepted accounting principles applicable to public corporations. The system adopted requires:

     (1)  That the Board employs a firm of independent certified public accountants or certified appraisers to determine the total value of the Corporation prior to any issuance of stock or sale of a minority interest.  The Board shall transmit said report of the Corporation's valuation to the Governor and the Speaker prior to any issuance of stock or sale of a minority interest. The Board shall consult with the Governor and Speaker regarding the minority investment plan for the Corporation prior to any issuance of stock or sale of a minority interest.

     (2)  That the Board employs a firm of certified public accountants who annually examine and report to the Board the financial status of the Corporation, and that copies of such reports are furnished to the Governor and Legislature of Kosrae State, made available for distribution in the Corporation's headquarters to shareholders and transmitted to all shareholders owning at least five (5%) percent of the outstanding shares; and

     (3)  That the Board present to the Governor and Legislature of Kosrae State and all shareholders who own five (5%) percent or more of the outstanding shares an annual report on the affairs of the Corporation within 90 days after the end of each fiscal year.  A copy of this annual report shall also be made available to all shareholders for their review at the Corporation's headquarters.  When requested by the Governor or the Legislature, the Corporation shall present special reports within 60 days after the end of each intervening quarter.

Background
Added by State Law 7-28.

      Section 7.1312.  Budget preparation.
       In consultation with the Board, the General Manager prepares in advance of each fiscal year an annual budget for the Corporation, taking into consideration, anticipated capital and operational expenditures and anticipated revenues.  The Corporation uses the same fiscal calendar as the Kosrae State Government.  The budget indicates the operational, capital and maintenance requirements of the Corporation that will be met with, the anticipated revenues of the Corporation and such essential requirements as cannot be met without increase of revenues or outside financial assistance.

Background
Added by State Law 7-28.

      Section 7.1313.  Increase in the rate of services provided.
       The Corporation may increase the cost of diesel or gasoline fuel sold for domestic use in the State of Kosrae, only after exhaustive consultations with the Governor and Legislature, and they have concluded that such increases are not unreasonably high, restrictive or discriminatory due to the abuse of the Corporation's dominant position in the industry.  Domestic use includes Kosraean fuel retailers, majority owned Kosraean businesses and Kosrae State Government.
 
     The Corporation may increase or decrease the price of aviation or jet fuel as it deems appropriate under common business practices and contractual obligations. The Corporation may increase or decrease the price of diesel or gasoline, for non-domestic use, as it deems appropriate under common business practices and contractual obligations.
 
     The Corporation may increase or decrease the price of fuel sold to the Kosrae Utilities Authority as it deems appropriate under common business practices and contractual obligations, subject to a maximum price equal to the actual purchase price for the fuel at the refinery plus $0.40 per gallon.  The Corporation shall provide a written explanation to the Governor and the Speaker of the price to be charged for fuel sold to the Kosrae Utilities Authority, including appropriate documentation of any change in the refinery purchase price for the fuel.

Background
Added by State Law 7-28.  Amended by State Law 7-125.

      Section 7.1314.  Deposit of excess revenue.
       The General Manager in consultation with the Board shall set aside sufficient funds from the revenues of the Corporation to fund the operations, maintenance, expansion, loan retirement and other legitimate financial needs of the Corporation. Any excess revenue over and above the amount necessary to fund the legitimate financial needs of the Corporation may be issued as dividends to the shareholders of the Corporation after the close of each fiscal year as determined by the Board; provided however that the aggregate amount of such excess funds shall not be greater than 80% of the annual net profit of the Corporation.

Background
Added by State Law 7-28.

      Section 7.1315.  Procurement; Manual of Administration.
       The Board adopts procurement regulations and establishes a Manual of Administration for the Corporation including rules and regulations governing the selection, promotion, performance, evaluation, demotion, suspension, dismissal and other disciplinary rules for employees of the Corporation.  Employees of the Corporation are eligible to participate in any health insurance plan, life insurance plan, retirement fund, and workmen's compensation funds available to Kosrae State Government employees.  The Corporation contributes to such programs as determined by the governing authorities thereof.

Background
Added by State Law 7-28.
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