In the present article the main amendments to the Law of the Republic of Kazakhstan On State Property (hereinafter referred to as The Law), which were introduced in accordance with the Law of the Republic of Kazakhstan from 04.12.2015 On introduction of amendments and additions to certain legislative acts of the Republic of Kazakhstan on the public procurement, regarding to procedure of the privatization of state property are concerned.
- Procedure of privatization of state enterprise. Starting with the January 2016 procedure of privatization of state enterprise was changed. Privatization should be done now in the next way:
The object of privatization is put up for the first auction with the method of increasing the price. The starting price of the object of privatization is the same as the initial price of the object of privatization. If the object of privatization is not realized on the first auction, it will be put up for the second, descending-price auction with determination a minimum price in the amount of 50% from the initial price. If even on the second auction the buyer is not decided, the object of privatization will be put up for the third, descending-price auction without the determination a minimum price.
If the state enterprise was not sold after three auctions, this state enterprise must be terminated (Article 97.5 of The Law). Previously the procedure of privatization was slightly different. There was no auction limit. If the state enterprise is not privatized during 2 years after making decision about its privatization, it must be terminated.
- Conditions for bidding. Conditions for bidding have also been changed. A winner of a tender shall be a person, who offers the highest bid (Article 100.1 of The Law). Previously a winner of a tender was a person that proposed the best terms. There is also added a statement that state enterprise should save its business profile in case of selling on a tender. At that, a seller defines a time period, during which the state enterprise should save its business profile.
- Cost of the privatization subject. The Law was added with the article, concerning the cost of the subject of privatization. Previously terms on the cost of the object of privatization were in the Order of the Government of the Republic of Kazakhstan from 09.08.2011 №920 About approval of Rules of sale of objects of privatization. Now this terms are more organized and collected in one Article of The Law.
Objects of privatization are sold on the base of market price of the objects. Market price of the objects is defined as amount of money on which the object of privatization can be sold on the base of deal on the competitive market.
Evaluation of the object of privatization, the balance-sheet value of which is more than 2 500 000 of minimum calculation index (which is established by the law of republic budget and has effect on January, the 1st of the financial year) is made by the external advisor in accordance with the international standards of evaluation (Article 100-1.2 of The Law). At that, external advisors are legal entities including foreign and their associations, participants of the valuation and investment activity and (or) financial consulting, which are engaged by the seller for making evaluation of the privatization object market price and (or) transaction support.
Evaluation of the object of privatization, the balance-sheet value of which is less than 2 500 000 of minimum calculation index (which is established by the law of republic budget and has effect on January, the 1st of the financial year) is made in accordance with the legislation of the Republic of Kazakhstan on evaluation activity (Article 100-1.3 of The Law). It means that evaluation will be made in accordance with the Law of the Republic of Kazakhstan On evaluation activity in the Republic of Kazakhstan. Evaluation will be done by qualified appraiser (private person or legal entity having a license on evaluation activity and is the members of one of the chambers of appraisers). The chamber of appraiser is an independent form of the non-commercial organization established for the protection rights and legal interests of appraisers.
- The order of open bidding. Previously a notification on bidding should be made by a seller not less than fifteen calendar days prior to holding, and sale of state-owned shares of joint stock companies and stakes of participating of the state in chapter capital of limited liability partnerships- not less than thirty calendar days before holding bidding. Now there is no such differentiation. For all objects of privatization a notification on bidding should be made not less than fifteen calendar days prior to holding.
- Guarantee fee. Previously a notification on bidding should be made by a seller not less than fifteen calendar days prior to holding, and sale of state-owned refused from participation in auction not later than three working days before their holding. Now the guarantee fee is also should be returned to persons didn’t take part in auction.
- Competition by way of two-stage procedures. The competition by way of two-stage procedures shall be carried out with participation of the external advisor on the decision of the Government of the Republic of Kazakhstan. Previously the competition was carried out with participation of the financial advisor. In whole the external advisor make the same functions as the financial advisor made.
The competition shall include the following plan of measures according to the Article 103.2 of The Law:
1) the involvement of the external adviser;
2) publication by the seller of the notice on sale of the object of privatization in Kazakh and Russian languages in the periodic printed publications, defined by the seller by holding the competition in accordance with the Law of the Republic of Kazakhstan On state procurement, as well as by the external advisor of the offer about the sale to potential buyers (investors);
3) formation by the external adviser of the list of applications, containing proposals of potential buyers (investors);
4) negotiations by the seller with the participation of an external advisor with potential buyers (investors) on the list of applications to identify at least two potential buyers (investors), submitted in the course of negotiations the best proposals (the first stage of the competition);
5) negotiations by the seller with the participation of an external advisor with the winners of the first stage of competition for the improvement of the previously proposed conditions (the second stage of the competition).
- Direct address sale. Previously only the objects transferred on property tenancy (lease) or entrusted administration with the right to repurchase respectively by the tenant (lessee) or the trusted administrator can be privatized through the direct address sale. Now thought the direct address sale can be sold objects to the strategic investor (Kazakhstan or foreign legal entity) by the decision of the Government of the Republic of Kazakhstan, which fulfils the next criteria:
- have an experience in the sphere that is connected with the business activity of the object of privatization;
- purchase of the major minority shareholding (participation interest in the registered capital) for the participation in the object privatization management and also in its development in the way of technology transfer including receiving unrevealed information (secrets of the production (know-how) and engaging high-qualified specialists.
The object of privatization can be privatized through the direct address sale if the strategic investor determines and undertakes the next obligations:
1) volume, type and term of investments into the object of privatization;
2) guarantee a defined level of the volume of output, product range and services rendered;
3) enforcement of environmental protection measures;
4) save business profile;
5) preservation and creating new vacancies;
6) no less than 2/3 of employees should be citizens of the Republic of Kazakhstan;
7) preservation the circumstance and manner in which the objects of production and social infrastructure may be used;
8) satisfaction of accounts payable within the time limits set;
9) payment of arrears of salary;
10) restriction on consummation of transactions (resale, pawn, transfer of the management and others) and (or) prohibition to make certain actions with the object of privatization during a certain period of time.
By Artyushenko & Partners lawyers 31.01.2016
