Over eight months have passed since the President announced the intention to shift from a three year plan-based privatisation campaign to “selective privatisation”. Finally new legislation has been adopted to legalise this new approach.
The main changes in privatisation laws which were actually more or less expected and predicted are the following:
- Three-year privatisation plans with approved lists of enterprises are cancelled.
- The State Property Committee may now decide neither on decrease of the sale price of state-owned shares sold at privatisation auctions nor on additional issue of shares of strategic companies.
- Municipal authorities continue to enjoy pre-emptive rights of acquisition of shares of privatised companies but must adopt an exhaustive list of those companies.
New rules are set forth in Presidential Decree No. 8 of 10 September 2012, Presidential Edict No. 456 of 4 October 2012 and Regulations of the Council of Ministers No. 900 of 1 October 2012 that followed Decree No. 8.
Cancellation of Privatisation Plans
Decree No. 8 directly specifies that further privatisation of state property is performed without formation of three year privatisation plans.
The first three-year privatisation plan was introduced in 2008. The Government announced that the privatisation campaign would cover 519 large state unitary enterprises and 147 state joint stock companies in 2008 – 2010. The three-year planning concept was also included in the new Law on Privatisation adopted in 2010.
Only a handful of small enterprises covered by the 2008 – 2010 plan were sold. The plan for 2011-2013, which included around 370 companies, resulted in sale of over 30 enterprises in 2011 alone, although the targets were also small and the average sale price was about 0,5 million US dollars (0,4 million euro).
However, the approach changed completely in March 2012, when the effectiveness of three-year privatisation plans was questioned and it was decided to centralise the privatisation process, letting the President decide on most sales.
It has been unclear how investors could initiate the privatisation process with regard to certain enterprises. The State Property Committee gave close to no guidance on how to act under the new circumstances. From March until early November 2012, no auctions were announced.
Issue of shares of strategic enterprises
Decree No. 8 also changed the procedure for approval of additional share issued by privatised joint stock companies.
Decree No. 8 mentions that the State Property Committee no longer approves an additional issue of shares of joint stock companies which are included in the list of strategic enterprises. However, any additional issue of shares of so-called agricultural companies (companies that process agricultural products) is still subject to approval of the President.
Price adjustments at privatisation auctions
In 2011 the State Property Committee received powers to decide on sale of shares of companies included in the privatisation plan and to decrease the initial price of shares of privatised joint stock companies. These powers were not broad enough to cover strategic enterprises, but gave certain freedom to the Committee and to a certain extent facilitated the privatisation process.
Starting from autumn 2012 the State Property Committee no longer decides on these issues, which remain fully within the competence of the President.
Pre-emptive rights of municipal authorities
The President issued Edict No. 456 of 4 October 2012 which changes the rules on sale of municipal shares.
Initially the Presidential consent was required only if municipal authorities decided to sell their shares in strategic and agricultural companies. As of December 2012 presidential consent will be required only for disposal of shares in agricultural companies.
Moreover, local municipal authorities will have a pre-emptive right to purchase shares of companies which were initially acquired by citizens at a reduced price during mass privatisation / in exchange for privatisation vouchers, or received after transformation of collective enterprises in the 1990s. Previously, as of January 2011, this pre-emptive right of municipal authorities related only to shares in strategic and agricultural companies.
To make the process more transparent, Edict No. 456 obliges municipal authorities to prepare a full list of companies whose shares fall under the pre-emptive right.