A new privatization procedure in Ukraine

The privatization process according to the new law begins from the stage of formation and approval of the lists of the objects that are subjected for the privatization.

The list of the objects of the large privatization shall be approved by the government upon the proposal of the State Property Fund of Ukraine, and the list of small-scale privatization subjects – by the Fund itself. For the objects of the communal property – the list is defined by the local authorities.

The right to initiate privatization is given to the State Property Fund, the bodies of privatization of territorial communities, authorized bodies of managing the objects of state and communal property, namely: ministries, other executive bodies of local authorities and buyers themselves.

During the year, state property management bodies are constantly analyzing the economic activity of the business entities and yearly, by the October, submit their proposals to the State Property Fund about the including of the state property objects to the list of the objects that are subjected for the privatization for the next year, along with their conclusions about the predictable amount of income from privatization and the prediction of its social and economic impact.

To include the state property to the lists of small-scale privatization objects, the authorized management bodies will identify and submit to the State Property Fund offers about the property that is not directly involved in the tasks of such bodies, property that is not used for more than three years in production activities and is not planned to be used. As for the socio-cultural objects, the management bodies shall also propose the duration of such object’s intended purpose retention or the possibility of their re-profiling.

At the same time, initiation of the objects’ inclusion to the appropriate list of the large or small privatization can be made by the buyers. For that, they need to submit the appropriate statement to the State Property Fund or to the local authorities. The procedure of submitting of such statement is established by the State Property Fund and the local authorities.

By the receipt of such a statement, the privatization body shall contact the relevant authorized property management body within three days to obtain agreement consent on the inclusion of the object to the list. The consent or a motivated refusal shall be given within fifteen days from the date of receipt of the request. In case of failure to provide any answer within the mentioned period the principle of tacit consent applies.

In the following, the privatization body, within thirty days considers the statement and makes a decision about the inclusion to the list of small-scale privatization objects and informs the applicant, the asset holder of the object and the relevant authorized governing body within five days. In case of the large privatization objects – within five days after the enactment of the relevant act of the Cabinet of Ministers on approval of the list of the large privatization objects that are subjected for the privatization.

Publication of the lists of the objects that are subjected for the privatization shall be made on the official web-site of the State Property Fund.

A decision on privatization

A decision on privatization of the object shall be made in the form of order of the relevant privatization body no later than thirty days from the moment of its inclusion to the privatization list. After adoption, the respective decision shall be published in official newspaper and on the internet. Within a month from the moment of making the decision on privatization, the authorized governing bodies delegate to the privatization bodies functions of the object management, except for: separate property, objects of incomplete construction, preserved objects and objects of the socio-cultural appointment.

Sale

The new law provides several ways of selling the objects at the auction, including: a conditioned auction, an unconditional auction, a Dutch auction, an auction by a method of gradual lowering of the starting price and subsequent submission of price proposals, auction by the method of studying the price offers and redemption of privatization objects.

At the same time, the process of privatization of the small-scale and the large privatization objects is quite different.

Small-scale privatization objects are subjected to be sold exclusively on the electronic auctions.

The starting price of the small-scale privatization object is defined by the auction commission at the level of the book value of the object or its active assets, the par value of the stock of shares or participatory shares, or according to the Methodology of valuation.

The auction sale of the small-scale privatization objects is conducted not earlier than twenty days, but not later than thirty-five days after the publication of an announcement about their privatization.

As for the sale of the large privatization objects, the procedure and conditions for their sale are approved by the Cabinet of Ministers of Ukraine or by the decision of the relevant local authorities.

The large privatization objects are subjected to be sold at the auction with conditions that are developed by the auction commission. The commission is appointed within ten working days from the date of the decision on privatization.

The auction on the sale of the large privatization objects is conducted not earlier than thirty days, but not later than sixty days after the publication of the notice.

By the result of the auctions, sale and purchase agreement shall be signed with the winner of the auction, and the information about the results shall be published in the newspaper, on the official web-site of the State Property Fund, in the electronic trading system within ten working days.

The privatization is considered to be done (completed) from the moment of sale and transfer of the ownership to the buyer or accomplishment of the issuance of all the shares that are provided before the sale of the issuance plan, and performed by the order of the relevant privatization body.