About the statement of the Second State Program of privatization of the state property in the Azerbaijan Republic

 

About the statement of the Second State Program of privatization of the state property in the Azerbaijan Republic


    With the purpose of maintenance by execution of the Law of Azerbaijan Republic About Privatization of the State Property, acceleration of processes by carrying out of structural changes, development of business and formation of environment for conducting a healthy competition in economy, increases of its efficiency by attraction of investments, I order:
    1. To approve the Second State Program of privatization of the state property in the Azerbaijan Republic (addition).
    2. In view of insufficient use of privatization share (checks) at the time of privatization with the purpose of attraction by population to this process to prolong for citizens of Azerbaijan Republic, the term of a privatization share (checks) till 1 January, 2002.
    3. The Cabinet of Azerbaijan republic:
    According to the legislation within 2 months to lead necessary actions for revealing infringements of the law during realization of the State Program by privatization of the state property to 1995-1998 in the Azerbaijan Republic and also for attraction of originators to the responsibility and to give by President of the Azerbaijan Republic the detailed information on it.
    -Within one month to present offers about privatization within the limits of the Second State Program of establishments and the objects prepared for privatization per 1995-1998 but process of privatization is completed according to the State Program by privatization of the state property;
    -Within two months to present by President of the Azerbaijan Republic the offers concerning the coordination of normative-legal acts of the Cabinet and corresponding bodies of the central executive authority with requirements of the Second State Program; v
    - To solve other questions which are starting from the given Decree
    4. The Ministry of the state Property of Azerbaijan Republic:
    - Within the limits of legislation to create necessary conditions for using of the state privatization share (checks) and the state privatization option;
    -Within the limits of the powers to lead other actions providing realization, the Second State Program of privatization in the Azerbaijan Republic.

President of Azerbaijan Republic Ilham Aliyev

Baku city, August 10, 2002.

№ 382.

   

II State Program on

State Property Privatization

In the Azerbaijan Republic

II State Program on State Property Privatization (hereinafter – II State Program) was developed  in accordance with the Law of the Azerbaijan Republic “On State Property Privatization” and other legislative act, as well as subject to privatization practice in the recent years in the Republic.

The primary aim of the II State Program is to:

privatize state property;

increase the rationality of the national economy by improving economic set-up and forming a competitive environment;

extend the strata of private owners as the economical basis of market relations;

achieve the development of economy by attracting  investments, as well as foreign investment into economy;

attract maximum wide sections of the population to the process of privatization by selling state property to state privatization cheques;

complete privatization of enterprises and objects subject to privatization in the frames of the I State Program conforming with the requirements of the Law of the Azerbaijan Republic “On State Property Privatization”

The II State Property (determines) classification  of enterprises and object from the point  of view of privatization, the order of choosing the ways of state property privatization, the order of using the privatization shares (cheques) and state privatization options, making of concession for employees of the privatized enterprises, selling of privatized enterprises and objects,  ground areas of the objects, established on the account of  natural persons and non-governmental legal entities, the order of participation  of local and foreign investors (buyers) in the process of privatization, restrictions of privatization process, order of payment for the privatized state property, pre-privatization restructuring, improvement of enterprises and maintenance of privatized enterprises, information and method support for the privatization process, and other issues connected with the state property privatization.

1. General provisions

 1.1. State Property Committee of the Azerbaijan Republic (hereinafter State Property Committee) is the Chief executor and the body coordinating the activity of state bodies related to implementation of the II State Program.  

1.2. The state control over the state property privatization  process is exercised by the State Commission on the Control over Privatization (hereinafter – State Commission).   

The State Commission controls the process of privatization and makes decisions within the limits established by legislation.

State Commission Staff, its duties and authorities are determined by the Statute of  State Commission approved by the President of the Azerbaijan Republic.

1.3. The appraisal of state enterprises and objects, ground areas under them, as well as ground areas of the objects, established on the account of  natural persons and non-governmental legal entities is carried out in conformity with statutory legal acts of the Azerbaijan Republic.

1.4. Transformation of state enterprises into stock-companies and rights of their employees working at the  enterprises, as well as social security of population is provided in conformity with the II State Program and other legislative acts of the Azerbaijan Republic.

1.5. According to legislative acts of state property privatization in the Azerbaijan Republic, state privatization shares (cheques), distributed among the population of the country are in circulation till January 1, 2008. 

1.6. From the moment of taking the privatization cheques out of the circulation, specialized cheque auctions and shares or stocks meant to be sold to state enterprise employees at discount but not sold, will be sold at specialized money auction.

1.7. Changing of the structure and staff schedule, as well as worker displacement is prohibited from the adoption of the privatization plan till the beginning of selling the enterprise to employees on preferential terms 

 2. Classification of the state property from the point of view of privatization

In conformity with the Law of the Azerbaijan Republic “On State Property Privatization” a state-owned property from the privatization point of view should be classified as follows:

property, privatization of which is prohibited;

property, remaining as a state-owned property until the adoption of decision on the privatization;

the property privatized by the decision of the President of the Azerbaijan Republic;     

the property privatized by the decision of the State Committee on the State Property Management

     2.1. Property, privatization of which is prohibited;

Property, privatization of which is prohibited is determined according to the Law of the Azerbaijan Republic “On State Property Privatization”.

Introducing of restrictions on the privatization area, except for the cases provided by the legislation on privatization is not allowed.

 2.2. Enterprises and objects privatized by the decision of the President of the Azerbaijan Republic;  

2.2.1. Objects owned by the Azerbaijan Republic beyond the boundaries of the Azerbaijan Republic.

2.2.2. Enterprises and objects serving for the civil defence and mobilization objects

2.2.3. State-owned social and cultural enterprises and objects

2.2.4. Enterprises of national art works, enterprises and objects of production association “Azerkinovideo”

 2.2.5. Enterprises and objects functioning on the basis of commercial principles (self financing) of the Azerbaijan Academy of Sciences

2.2.6. State-owned educational institutions (except for state compulsory secondary education institutions)

2.2.7. State medical enterprises and objects (except for the enterprises and objects, privatization of which is prohibited and enterprises and objects provided by the i. 2.3.19 of the II State Program)

2.2.8. Enterprises and objects of medical industry (including enterprises and objects of pharmaceutical and medical and biological medicines industry)  (except for the medical enterprises and objects, privatization of which is prohibited and enterprises)

2.2.9. Engineering and infrastructural objects of cities and regions (including electric, heating, gas supply, water and sewerage economy, city lighting), as well as enterprises operating, maintaining and preserving  the indicated objects.

2.2.10. Water economy and reclamation constructions (except for nationally-significant reclamation and irrigation constructions), and the enterprises and objects operating such constructions.

2.2.11. Ports, port installations and objects.

2.2.12. Specialized refrigerators, objects of storing economy providing permanent placement of government reserves and storing of mobilization  reserves.

2.2.13. Enterprises and associations of fuel-energy complex, power industry enterprises, and enterprises producing and processing oil and natural gas, as well as trading depots of oil and oil products.

2.2.14. Gas economy enterprises and objects of national significance, as well as the organizations maintaining them.

2.2.15. Chemical, petrochemical, and biochemical enterprises.

2.2.16. Communication enterprises, state information and  telegraph agencies

2.2.17. Television and transmitter centers.

2.2.18. Air, sea and river transport enterprises.

2.2.19. Enterprises and objects of ferrous and non-ferrous metallurgy, engineering and metal working industry, as well as of metal reworking.

2.2.20. Printeries and publishing houses.

2.2.21. Fish, pedigree and seed breeding industries.

2.2.22. Enterprises and objects of nationally significant construction and construction materials.

2.2.23. All monopolist enterprises and objects in the goods, labor and  services market, enterprises and objects, privatization of which is allowed by the legislation of the Azerbaijan Republic, as well as enterprises and objects not indicated in the 2.3. item of the II State Program.

2.2.24. Slef-sustained research and development, design, design and survey organizations and enterprises.

2.2.25. State commercial banks and insurance organizations. The Decision on privatization of the enterprises and objects indicated in the item is adopted by the President of the Republic of Azerbaijan after its presentation by the Cabinet of Ministers of the Republic of Azerbaijan (hereinafter – Cabinet of Ministers).

2.3. Enterprises and objects privatized by the decision of the State Committee on State Property Management.

2.3.1. Wholesale and retail commercial enterprises and objects (including enterprises and objects selling production and technical products).

2.3.2. Enterprises and objects of public catering and personal services (including retail trade objects, public catering and services objects with open timeboard).

2.3.3. Foreign  trade associations and enterprises of wholesale state supply.

2.3.4. Enterprises and objects of construction and construction and repair services, construction materials industry (except for nationally significant enterprises and objects of construction and construction materials industry), local industrial plants.

 2.3.5. The objects construction of which is frozen, the objects with expired standard term or the construction of which is not completed.

2.3.6. Food industry enterprises.

2.3.7. Winery, champagne and cognac production plants, ginnery, tobacco fermenting factories and tobacco factory, tea and tea weighting factories.

2.3.8. Enterprises producing bread, baked goods, mixed forage and food concentrates.

2.3.9. Enterprises serving for and providing farming industry with technical products.

2.3.10. Light industry enterprises

2.3.11.Woodworking and wood-pulp industry enterprises and objects, including packaging enterprises.  

2.3.12. Wool processing enterprises  

2.3.13. Motor transport enterprises.

2.3.14. Enterprises  repairing and maintaining public roads.

2.3.15. Bath houses and laundries.

2.3.16. Enterprises and objects organizing events.

2.3.17. Pawnshops.

2.3.18. Travel agencies.

2.3.19. Pharmacies and drugstore depots, medical installations warehouse

2.3.20. Litter processing plants and stations

2.3.21. Leased state property (except for the property of the enterprises the privatization of which is prohibited, as well as the property separate privatization of which is impossible from territorial and technological point of view).

2.3.22. Non-residential areas at the disposal of local executive authorities, as well as non-residential areas located in the buildings constructed for the account of state.

2.3.23. Enterprises and objects of sanatorium and hotel industry, lodging houses regardless of administrative subordination.

2.3.24. Retail enterprises and objects selling oil and oil products.

2.3.25. Property and state enterprises and organizations destroyed without determination of a  rightful heir.

 3. Grouping of the state enterprises according to size.

3.1. State enterprises are privatized by grouping into small, medium and big enterprises according to the employment size.

3.2. Two basic forms of simultaneously carried out privatization are determined:

privatization of small enterprises;

privatization of medium and big enterprises.

3.3. State enterprises subject to privatization are divided into groups according to their reference to small, medium and big enterprises:

No. 

 Sphere 

Grouping according to employment size (men) 

Small

Medium

Big

   Industry  Up to 50  50—150  More than 150
   Construction  Up to 50  50—100  More than 100
   Transport and communication  Up to 50  50—100  More than  100
   Scientific and technological  Up to 30  30—75  More than  75
   Trading, services  Up to 25  25—50  More than  50

  

4. Privatization methods of state property

 4.1. State property privatization is carried out by the following methods:

privatization of state enterprises by private projects;

 discount sale privatized state enterprise property to the member of labor collective and equal persons (hereinafter workers);

selling of state property at specialized cheque and money auctions;

selling of state property through auctions;

selling of state property through investment competitions;

selling of leased state property;

selling of state enterprises by declaring them bankrupt;

 4.2. Privatization methods of the state property are determined by the President of the Azerbaijan Republic or State Committee on the State Property Management adopting the decision on privatization of state property in conformity with the II State Program.

4.3. When privatizing state enterprises the rights and social security should be provided in conformity with the legislation of the Azerbaijan Republic.

4.4. The employees of the privatized  state property have a right to buy 15% of the property or shares of the enterprise at discount.

Granting of discounts and participation of enterprise employees at privatization is regulated in accordance with the orders provided by the II State Program.

4.1. State property privatization according to private projects.

 4.1.1. State enterprises and objects significant for state economy are privatized according to private projects, and in order to attract a strategic investor to the enterprise 51% or more of its shares are drawn.

 4.1.2. Privatization order of state properties according to private projects, the list of the enterprises and sale ratio of the shares are determined by the President of the Azerbaijan Republic.

4.1.3. State Committee on the State Property Management can attract a financial adviser to the process of privatization in conformity with the private projects.

4.2. Discount sale of the property of privatized state enterprises

4.2.1. In conformity with the Law of the Azerbaijan  Republic “On the state property privatization”, in the privatization process the following persons may be referred to the members of labor collective of a state property or equal persons:

the employees whose main workplace is considered to be the enterprise;

persons, eligible to return to the previous workplace at the enterprise in conformity with the Law of the Azerbaijan Republic.

persons that worked at a privatized enterprise more than 7 (seven) years or retired from the enterprise;

persons that have been discharged from employment and given unemployed status as a result of employment size or staff reduction since January 1, 1995.

 4.2.2. 15% of shares of stock-companies established in the result of the transformation of state enterprises or 15% of starting prices of enterprises and objects privatized as small enterprises regardless of selling method of shares and stocks are sold at discount to employees.

4.2.3. Discount sale of a state property (shares or stocks) makes provision for the exchange of the property for privatization cheques.

4.2.4. Discount sale of the shares of stock companies established in the result of transformation of state enterprises is carried out in the following order:

the complete list of persons eligible to buy shares is made by Privatization Commission of the enterprise;

the number of privatization cheques to be presented to the privatization commission by every employee is determined. To this end, the cost of one privatization cheque is determined by dividing the value of the state property sold at the last 2 cheque auctions by the number of privatization cheques presented to the auctions. The number of cheques to be presented by every employee in equal number is determined by dividing the total principal value of shares exhibited for discount sale by the cost of one cheque. During the calculations the roundings are made by general rules;

discount sale is made within 25 days from the official declaration of privatization by the State Committee of the State Property Management and the number  of the sold shares is determined according to the results of discount sale  based on the documents presented by the privatization commission.

part of the shares exhibited for discount sale proportional to the number of labor collective members not participated or partially participated at the discount sale is privatized by other sale method conforming with the privatization plan by the decision of the State Committee of State Property Management;

in order to confirm the results of the discount sale of the enterprise on the basis of documents presented by the privatization commission, the general meeting of the sale participators is held  and the appropriate resulting documents are tendered to the State Committee for the State Property Management.

        4.2.5. When privatizing small enterprises and objects, discount sale for employees is held in the following way:

full list of persons entitled to participate at discount sale by an authorized person is drawn up;

 every worker presents one privatization share to the authorized person;

discount sale is made within 25 days from the official declaration of privatization by the State Committee of the State Property Management and the divided part is determined according to the results of discount sale  based on the documents presented by the authorized person;

part of the shares exhibited for discount sale proportional to the number of labor collective members not participated at the discount sale (generally, in case of refusal by members of labor collective and persons equal to them to participate at discount sale all the shares are) is privatized by other sale methods conforming with the privatization plan by the decision of the State Committee of State Property Management;

in order to confirm the results of the discount sale of the enterprise on the basis of documents presented by the privatization commission, the general meeting of the sale participators is held  and the appropriate resulting documents are tendered to the State Committee for the State Property Management.

4.2.6. After the receipt of the document by the State Committee on the State Property Management the presented privatization cheques are deleted in the presence of the presiding commissioner (authorized person) of the privatization commission. The deletion of the privatization cheques is carried out through cutting the sub (perforated parts) on the right of cheques.

4.2.7. The State Committeee on the State Property Management gives employees a notification confirming the right of property for the appropriate number of shares (in case of small enterprises and objects for the appropriate parts) on the basis of resulting documents.

4.2.8. If the labor collective is the winner of auction sale of small enterprises and objects, the right of property of the employees in accordance with the results of the auction is indicated in certificate of property on the basis of the discount sale results.

4.3. Selling of a state property at specialized cheque and money auctions

4.3.1. Selling of a state property at specialized cheque and money auctions is a selling of shares or shareholdings of stock-companies established in the result privatization by order.

4.3.2. The orders at specialized cheque and money auctions are given in the 1st and 2nd order forms.

In case of no minimum limit by the customer on the share of privatization cheque at the specialized auction the order is referred to the 1st form, in case of such limits the order is referred to the 2nd form.

1st type customer do not impose low limits for the amount of shares for the paid sum, the 2nd tupe customer indicates the minimum limit for the shares, he want to buy.

4.3.3. The order of specialized cheque and money auction is determined by the President of the Azerbaijan Republic.

4.4. Selling of the state property through auctions

Selling of the state property through auctions is a transfer of the privatized property into the ownership of natural and legal person known as a buyer at privatization in return for the money and without requirements to the buyer under the legislation .

The right of property is given to the buyer that offered the maximum amount in the course of the auction.

4.4.2. In case of no orders at the first two auction sales of a state property (of if the property was not sold) at the third auction the starting price  of the property is reduced by 10%, at fourth auction by 25%, and at the fifth auction by 50%.

The state enterprises not sold in such order are abolished in the established order and their property (building, equipment, installation etc) is sold through auctions in the above mentioned order.

4.4.3. The orders of sale of the state property through auctions is established by the President of the Azerbaijan Republic.

4.5. Selling of state property through investment competitions

4.5.1. When privatizing the state property through investment competition it is required to carry out the investment program on  state property. Economic, social and ecological terms  of the investment program are determined by the President  of the Azerbaijan Republic or the State Committee for the State Property Management.

A winner of the investment competition  is considered to be a person tendering an investment program reflecting maximum amount and rational investment within  the terms of the investment program.

4.5.2. The right of property is transferred to the winner of the competition (buyer) only after fulfilling of the competition requirements. Non fulfillment  of competition requirements by the buyer serves as a basis for termination of the contract on the sale of the property to the buyer through competition under the legislation.

The winner of the competition may not transfer or make other arrangements for the privatized property until he acquires the right of property.

The ownership, right of use, and other relations regarding the state property privatized through competition are regulated by sale and purchase agreement concluded between State Committee on the State Property Management until the right of property is transferred to the buyer.

4.5.3. Participation of foreign investors at the competition is determined by the competition conditions.

4.5.4. 51% or more part of shareholding is exhibited at the investment competition. The sale ratio (division) of the remaining part of enterprise shares is indicated in the decision on the privatization of the enterprise adopted by the President of the Azerbaijan Republic or the State Committee for the State Property Management.

 4.6. Sale of the leased state property

4.6.1. Privatization  orders of the state property leased by purchase option in conformity with the lease agreement before the approval of the II State Program are determined by the II State Program and other statutory and acts. The sale of the leased state property is made by various methods subject to the terms of contracts concluded between the parties (purchase option, term of lease etc.)

4.6.2. The enterprises functioning on the basis of a lease agreement concluded before the adoption of the II State Program and registered at the State Committee on the State Property Management are privatized in the following way:

a) 15% of the shares of medium and big enterprises are designed for discount sale to the labor collective;

30% are first of  all offered to the lessee at par value;

55% are sold at a specialized cheque auction.

b) 15% of the value of small enterprises (of the starting price of the object) are designed for discount sale to the labor collective;

85% are first of  all offered to the lessee at starting price

4.6.3. If the lessees refuse to get the part of the share holding  or charter capital offered them, then the enterprises  are privatized according to the rules indicated in the 5.8th and 6.1st item of the II State Program.

4.6.4. The decision on separate privatization of the structural department of the leased enterprise is adopted by the State Committee on the state Property Management subject to the separate functioning of the department, its dependence on the enterprise from the technological point of view, the possibility of its separation from the territorial point of view and other factors. In case of the adoption of the decision the leased  property is offered to the lessee at 100% price. In case of refusal by the lessees to buy the leased property, the property is leased in the order established by the II State Program.

4.6.5. State property (building, equipment, installation etc) leased under lease contracts, except for the property, privatization of which is prohibited, is privatized by the State Committee on the State Property Management in the following order subject to its dependence on lessor enterprise or organization, the possibility of its separation from the territorial point of view and other factors:

a leased property is offered to a lessee at 100% price. If a lessee agrees to buy the leased property, a sale and purchase agreement is concluded and he should pay for the property within 30 days. 

If a lessee refuses to buy the leased property or fails to pay for the property within 30 days from the receipt of a proposal, the property is exhibited at the auction in conformity with the section 4.4 of the II State Program or privatized together with the enterprise.

4.7. Selling of state enterprises by declaring them bankrupt

4.7.1. If a state enterprise remains unsold after 5 auctions or if it is insolvent at the pre-privatization stage of state enterprises and (objects), the enterprises and objects privatization of which is provided for by i.2.2 of the II State Program may be declared bankrupt and abolished under the legislation  by the decision of the President of the Azerbaijan Republic, and the enterprises and objects privatization of which is provided for by i.2.3 of the II State Program may be declared bankrupt and abolished under the legislation  by the decision of the State Commission. In this case, the property of the enterprise is sold through auction.

4.7.2. A part of funds obtained from the sale  of a property is designed for the clearance of debts, in conformity with the priority principle established by the legislation. 

4.7.3. The orders of selling state enterprises by declaring them bankrupt ore determined by the legislation of the Azerbaijan Republic.

5. Transformation of medium and big state enterprises into stock companies and privatization

5.1. All the privatized medium and big state enterprises (or their structural departments) are first of all transformed into stock companies and the privatized. In this case the transformation of state enterprises into stock companies is carried out subject to the factor of their technological dependence.

5.2. Transformation of state enterprises into stock companies is regulated by the Statute approved by the appropriate law of the Azerbaijan Republic.

5.3. Transformation of state enterprises into stock companies is carried out according to the plan drawn by the privatization commission and approved by the State Committee for the State Property Management.

5.4. A privatization commission is established in every enterprise within 10 days after the adoption of the appropriate decision on the transformation of state enterprises into stock companies, for the purposes of pre-privatization preparation.  The commission works out the following documents and presents them to the State Committee on State Property Management for the adoption:

privatization plan (emission prospectus);

Act of inventory and appraisal of enterprise property;

Certificate of the content and value of the participation share (stocks and parts) of the privatized enterprise in the charter capital of commercial banks, joint and other enterprises and offer to privatize the share. 

 annual report balance for the last 3 (three) years, as well as the balance of the last reporting period;

charter of the stock-company (is drawn in conformity with charters of  ctock-companies established in the result of the transformation of state enterprises). 

A manager and a chief accountant  of an enterprise are personally responsible for the accuracy of the act of inventory and appraisal of an enterprise, as well as of other documents presented to the State Committee on the State Property privatization.

The above mentioned documents are drawn by the single method prepared by the State Committee for the State Property Management.

Constituent instruments of the enterprises transforming into stock-companies are considered at the State Committee for the State Property Management. If the documents do not meet the requirements of the current legislation, they should be returned for renewal.

5.5. If the documents indicated in the i.5.4. of the section are presented within 3 (three) months from the adoption of the decision on the transformation of the state property into stock-company a commission is established by the decision of the State Committee of the State Property Management.  The Commission prepares appropriate documents according to the initial documents and enterprise balance. In case of need, the commission can attract independent auditors and experts to its work.

5.6. The establishment of privatization commission and its functioning is governed by the appropriate legislative acts of the Azerbaijan Republic.

5.7. The shares of the privatized enterprise nor designed to remain in the property of the state are exhibited for sale from the moment of state registration of the stock company.

 5.8. A part of medium and big state enterprises transformed into stock companies are privatized in accordance with sections 4.1. and 4.5. of the II State Program on the basis of private projects and through investment competitions. Shares of all the big and medium enterprises, except for the enterprises privatized by the indicated methods, are as a rule sold in the following proportion:

a) 15% are designed for discount sale to the labor collective;

b)30% are directed to money auctions;

c)55% are directed to specialized cheque auctions.

5.9. The sale of the enterprise shares is made in the succession indicated in the i.5.8. If the  share exhibited in the money auction is not sold, stocks can be exhibited at money and specialized cheque auctions in small equal amounts providing for the succession indicted above.

5.10. Subject to technological features and value, medium enterprises can be privatized in the order established for small enterprises.

5.11. Share issue, registration and turnover orders of the stock companies established in the result of the transformation of state enterprises are determined by the State Committee for Securities under the auspices President of the Azerbaijan Republic under the legislation.

5.12. After the approval of resulting information about the sale of shares of stock companies during the privatization of the State Property the information is presented to the National Deposit Center by the State Committee for the State Property Management.

5.13. In the process of privatization the rights of shareholders are protected under the current legislation of Azerbaijan Republic.

 6. The privatization of small enterprises

 6.1. The privatizations of the small enterprises (objects) is  realized according to the following rules:

The charter capital of the small enterprise (the start price) is defined in accordance with established procedure of the legislation of Azerbaijan Republic;
     According to the rules of 4.2nd item of  the 2nd State Program the 15 percent of charter capital ( the start price of object) of the small enterprise is directed to the preferential sale to the members of  the labor collective and to the persons who are in equal level with them;

The 85 percent of charter capital (the selling price of the object) of the small enterprise is sold according to the  selling mode of the 4.4th item of the II State Program.

6.2. In the process of the privatization of the small enterprises the labor collective of the institution is due to select an authorized person (juridical or physical person) who will protect their rights.

In the privatization the authorized person   — is a juridical and physical person who is empowered legally by the members of the labor collective of the institution and more than 50 percent of the other persons who have preference rights in the privatization (the letter of attorney is made notarially official in appropriate form).

In the privatization the authorized person:

represents the labor collective in the organs that carry out the privatization and takes into control conforming to the rules;

in the process of the privatization carries out necessary work ( makes official the application for the privatization of the institution, takes part in the process of the privatization, concludes the necessary agreements and signs the commitments, according to the letter of attorney he assumes the responsibility for the uprightness of the given information).

6.3. If the labor collective doesn’t carry out the preference sale in 5 days till the auction after the State Committee on Property Management declares officially on the privatization, it denies its preference rights in this section.

6.4. If labor collective becomes the auction winner of the part of the small enterprise (85 percent of charter capital of the institution and start price of the object) which is put up to auction, this part is considered 100 percent:

after the sales agreement is concluded in appropriate form the 30 percent of the auction price is paid by the authorized person during the 5 (five) bank days;

the auction price is taken 30 percent off for the purchasers who pay 30 percent of auction price  (distributing this part equally among the members of labor collective, it is given without bias);

the authorized person pays the 40 percent during the time indicated in the  sales agreement, but not later than 2 years.

Due to purchaser’s commitment the some part of his property is considered to be left as deposit.

6.5. If the auction winner is outsider or the labor collective that deny its preference rights according to the 6.3rd item, the total auction price of the property is paid by cash during the 5 bank days since the sales agreement is signed.

6.6. The model plan of the privatization, the letter of attorney and the patterns of the other documents of the privatization are prepared and ratified by State Committee on Property Management.

6.7. If the auction winner is labor collective, the distribution of the property among the members of the labor collective and its application are realized according to the legislation of the Azerbaijan Republic.

6.8. After the possibility of the separation is defined technically and territorially according to the appeal of the labor collective a part of the institution (building, installation, equipment and so on.) can be sold by auction. In this case if the auction winner is (are) the member (members) of the labor collective the concessions in this section are concerned him (them).

6.9. Due to the decision of State Committee on Property Management small enterprises can be privatized in accordance with established procedure for medium and large enterprises depending on technical peculiarities and values Due to the decision of the State Committee  on Property Management the small enterprises can be privatized in accordance with established procedure for the medium and large enterprises depending on the technical peculiarities and values.

6.10. The manager of the institution and chief accountant take on responsibility on the correctness of the inventoried and estimated statement and of the other documents of the property presented to the State Committee on Property Management.
Above mentioned documents are made up according to single method prepared by the State Committee on Property Management.

 7. The restrictions that are put during the privatization and the privatization of the government’s share in charter capital of the joint institutions.

 7.1. In order to ensure the state security, the welfare of the population, the protection of their morality, their juridical and legal interests the President of the Azerbaijan Republic and the State Committee on Property Management can put restrictions on the privatization of the state property. If such limits are put the control envelope (51%) and the limited part (25,5%) of the common shares (who have the right to vote) are remained in state property.

7.1.1. If the control share envelop (51%) of the privatized institution or the limited part of the shares (25.5%) are remained in the state property, the rest of the shares (nominal value is considered 100%) is sold according the 5.8th item of the II State Program.

7.2. After some time according the 2.2nd and 2.3rd items of the II State Program due to the decision of the President of the Azerbaijan Republic or State Committee on Property Management the share holding  remained in the state property can be privatized. In this case the rest part of the shares is considered 100% on nominal value and sold according to 5.8th item of the II State Program (if the state privatized cheques are withdrew from circulation the shares indicated in «c» sub-item of the 5.8th item of the II State Program are sold in specialized money auction).

7.3. If the certain share (control share holding  or limited share holding ) is decided to be remained in the state property, the appointment of the state representative to the administrative bodies of the same institution, the rules of the management of the share remained in the state property are defined by the Cabinet Minister of the Azerbaijan Republic.

7.4. According to the classifications indicated in 2.2nd and 2.3rd items of the II State Program due to the decisions of the President of the Azerbaijan Republic or the State Committee on Property Management the government’s share in charter capital of the joint institutions established with the participation of the state institutions is privatized in following way:

7.4.1. By making the government’s share an inventory it is estimated again and first of all it is offered to other founder (founders) of the joint institution with  defined start price. If the other founder (founders) consents to buy government’s share in this case the sale agreement is signed with him and he pays the price of the share during the time indicated in the agreement;

7.4.2. If the other founder (founders) of the joint institution refuses to take the government’s share, according to the 4.4th item of the II State Program this share is privatized by means of the auction. If the 50 percent or more part of the property of the joint institution belongs to the government, this share of the government can be privatized by means of the competitive investment.

8.  About the social-cultural and communal and life objects which is in the balance of the privatized state institutions (unities) and abolished state companies and concerns

8.1. On the basis of the presentation of State Committee of Property Management or on the presentation of the abolished commission established in appropriate form due to the decisions of the Cabinet Minister of the Azerbaijan Republic the social-cultural and communal and life objects ( hostels, houses, cultural buildings, kindergartens, sports equipments, atelier, boiling-rooms and so on.) which is in the balance of the privatized state institutions (unities)  and abolished state companies and concerns can be given to the balance of the local executive  (or municipal) bodies or accordingly to the balance of certain organizations.

8.2. According to the suggestion of the privatization commission if the social-cultural and communal and life (dwelling houses, kindergartens and children’s houses are excluded) objects are not considered advisable to be given to the balance of the appropriate organizations or to the balance of the organs of the local executive (municipal) powers and these objects are privatized together with the privatized institutions or separately.

9. Plot of lands of the objects constructed on the account of the privatized state institutions and objects and also on the account of the physical and non-governmental juridical persons’ means

9.1. Due to the legislation the plot of lands of the objects which was constructed on the account of the privatized state institutions and objects and also on the account of physical and non-governmental juridical persons’ means  are sold to the owners of this institutions and objects by State Committee on Property Management. If there are limitations in this field the delivering of the plot of land is realized under the legislation.

9.2. Due to the appeal of non-governmental juridical persons State Committee on Property Management can realize the sale of the lands belonging to them. In this case the certificate which affirms the ownership on the gained property is given by the State Committee on Property Management.

9.3. In accordance with established procedure of the legislation of the Azerbaijan Republic foreigners and foreign juridical persons, and also the persons who have no citizenship can take the lands only for use or for the lasting lease.

10. The participation of the foreign investors in the privatization

10.1. The persons who are considered foreign investors in the privatization are defined in Law of the Azerbaijan Republic on «The Privatization of the State Property».

10.2. Observing the rules defined under the II State Program and under the other deeds of the legislation of the Azerbaijan Republic foreign investors participate in the auctions and in the investment competitions.

The participation of the foreign investors in the privatization indicated in the

2.2nd item of the II State Program is permitted by the President of Azerbaijan Republic.

10.3. Presenting state privatized options foreign investors participates in the specialized auctions.

10.4. Every privatized option gives the right to get a cheque. If the foreign investors have no the privatized option they are prohibited to use privatized cheques in the privatization.

The state privatized options will be in circulation till January 1st 2008.

10.5. Foreign investors on the account of net profit gained in the territory of the Azerbaijan Republic can participate in the privatization without option.
Until the beginning of the competitions of the auctions and investments they present certificate on the profits gained in the territory of the Azerbaijan Republic and this certification is affirmed by the tax agencies of the State Committee on Property Management.

10.6. Due to the legislation the rules of the issue, turnover and use of the options are defined by State Committee on Securities under the President of the Azerbaijan Republic.

11.  The financing and crediting of the process of the privatization.

11.1. The financial provision of the realization of process of the privatization is paid on account of the state budget.

11.2. According to the current legislation the commercial banks of the Azerbaijan Republic and foreign banks can realize the crediting of the process of the privatization of the juridical and physical persons who perform as purchaser.

 12. The payment of the privatized state property

 The   purchaser can pay for privatized state property once and for all or during some time.

The term of the delay granted for the payment of the state property is defined in the sales agreement and the term can not last more than 2 (two) years.
If purchaser can not pay for the cost of the privatized state property during the term indicated in the sales agreement, in accordance with established procedure of the legislation the problem on the breaking of the sales agreement may be raised.

 13. The money fund gained from the privatization and the make use of the profit
 13.1. The money fund gained from the privatization includes the money gained from the sales of the privatized objects and shares, the money gained from the paid duties in the process of the privatization and other profits.

13.2. The money funds gained from the privatization enters into the state budget of the Azerbaijan Republic.

In the privatization of the state property in order to pay expenses on representation of the Azerbaijan Republic in appropriate organizations and also in the courts of the foreign countries on the involving independent financial counselor, organizing with information on the privatization and normalizing of the institutions before the privatization and financing of the measures on the support of the activity of the institution after the privatization, the protecting and guarding of the state property, the protection of the right of property of the Azerbaijan Republic the State Committee on Property Management is considered to pay 25 percent of these means.

14. To make use of the state privatized shares (cheques) and the state privatized options

14.1. In paying for the privatized property (shares) in a cheque, these cheques and also the options presented by the foreign investors for the participation in the privatization are accepted by the State Committee on Property Management.

14.2. Under the control of the State Commission the accepted privatized shares (cheques) and options are withdrew from the circulation, effaced and abolished by the State Committee on Property Management.

 15. The restructuring and normalizing of the institutions before the privatization and the sponsoring of the privatized institutions

 15.1. The restructuring and normalizing of the institutions before the privatization can take into account the realizing of the following measures:

     the restructuring of the institution (that is its division, consolidation);

     the management of the institution;

     the reconstruction of the institution technically;

    the restructuring of the debts of the institution;

    to assist the institution with financial aid.

15.2. For the purpose of the restructuring and normalizing of the institutions

 15. Due to the decision of the President of the Azerbaijan Republic the measures indicated in the 1st point are defined for the institutions indicated in the 2.2nd item of the II State Program and due to the State Commission these measures are defined for the institutions indicated in the 2.3rd item of the II State Program and are realized by the State committee on Property Management.
15.3. During the privatization of the institution given to the management according to the management agreement the manager who met his commitments has a privilege. During the privatization of this institution first of all the institution is offered to the manager.

15.4. According to the structural policy of the government the measures on the support of the privatized institutions are defined by Ministry of Finance and the State Committee on Property Management for the institutions activated in the leading directions. Preferential credit, tax, insurance and so on can be belonged to the complex of measures.

16. The field characteristics of the privatization of the state property

16.1. The rules of the shares of the commercial banks belonging to the government and the rules of the privatization of the state insurance companies are defined by the President of the Azerbaijan Republic.

16.2. The privatization of the folk art institutions is realized during 3 years of its activation profile, but the objects activated on the education, bringing up of the youth,  forming of the free time, physical and moral development with remaining are realized during 5 years.

16.3. The institutions, objects and equipments of the physical training and sport are privatized by means of investment competitions and in this case the purchaser can put forward the terms of the keeping of the profile of the action of the institutions, objects and equipments.

16.4. The privatization of the self-supporting basis of the scientific research, projecting-investigation institutions with remaining their profile is realized as following.

If these institutions are belonged to the group of the small enterprises they are privatized according to the 6.1st item of the II State Program. If these institutions are belonged to the group of the medium and large enterprises:
     15percent of the shares are sold to the labor collective with abatement;
     30percent is offered firstly to the labor collective with nominal price;
     55percent is directed to the specialized cheque auction.
If the labor collective refuses to get the part of the share holding  or charter capital offered him these institutions are privatized according to the rules indicated in the 5.8th and 6.1st item of the II State Program.

16.5. In the process of the privatization of the state institutions the Cabinet Ministry of the Azerbaijan Republic defines the rules on carrying safely the work in the objects which have radioactive, chemical threat, and also threat of explosion, fire and toxin, and on taking into account ecological factors.

 17. The informational-methodical provision of the process of the privatization

17.1. The informational-methodical provision of the process of the privatization, that is the realizing of the agitation-propaganda works are carried by the State Committee on Property Management and its local bodies, and also by mass media.

In order to provide the population with information these organs are delegated to the following duties:

about the main point of the privatization, its main aims and essential duties, about the use of the state privatized cheques and options;

about the rights of the stockholders (shareholders) and the protection of the right of property;

about the changing of the organizational-juridical form of the institutions and about the form and methods of the privatization;

 about the process of the privatization, auctions and competitions, the place where they are held, the time, about the shares (parts) of the institutions which are put in the auction and so on.

17.2. In the field of the informational-methodical provision of the privatization the mass media, that is television, radio, newspapers, magazines, bulletins, placards and so on. are used for carrying out the duties.

17.3. The state mass media together with the State Committee on Property Management constantly give information on the process of the privatization to the population.

17.4. Since the open sale of the competition, auction and share have been held, the plan-graphic of the auctions and competitions, the information about the specific privatized institutions are published in mass media and in special publications before 30 (thirty) days.

The information on selling of the institutions and objects which can direct foreign investor’s attention can be spread out via «Internet» web-site of the State Committee on Property Management.

17.5. The following information about the privatized enterprises should be published:

The ground area of the privatized enterprise (object) and the description of constructions located on it and assignment of responsibilities on them (if there are such)

The volume of participation share of an enterprise in other enterprises;

Fictitious assets (patent, trade mark etc);

Obligation of an enterprise (contractual, budget, credit obligations);

main nomenclature of products (works, services) produced by an enterprise;

employee size;

par value of issued shares;

ecological condition of an enterprise;

sale method of enterprise shares;

restrictions imposed on the sale of shares (if there are such);

order of getting the information that interest buyers.

17.6. The information about the results of state enterprises (objects) privatization should be published in media within 15 days. The information should reflect the following:

the address of the enterprise (objected) exhibited at auction;

the amount of monetary funds to be paid to the state budget according to the results of  an auction;

the order and term of settling with other participants of the auction;

If the privatized enterprise is transformed into stock-company the following should be indicated:

long and brief title and the legal address of a stock-company;

total number and type of issued shares;

par value and price of the share holding exhibited for sale;

total number and type of sold shares;

The privatization methods provided for in the statutory and legal acts and the provisions arising from the character of such methods can be indicated in the information about the results of state enterprises (objects) privatization results.

 18. The State Committee for the State Property Management and other executive authorities, as well as mutual relations between enterprises and organizations

18.1. Since the II State Program has been adopted, the State Committee on State Property Administration determines mandatory instructions for the national enterprises (facilities) selected for privatization, and for the authoritative executive bodies and organizations during one-month period.
According to these instructions the State Committee on State Property Administration determines the length of privatization of concrete enterprises and facilities, as well as controls principles and forms for their execution and develops a list of enterprises and facilities to be privatized in accordance with the classification defined in the second part of the Program.

18.2. Since the joint-stock company formed during the process of privatization has been registered by Azerbaijan Republic Ministry of Justice and resolution on privatization of small enterprises has been adopted, the respective central and local executive bodies lose their authorities over these enterprises.

18.3. The State Committee on State Property Administration provides the national enterprises, facilities and their structural sectors with licenses certifying the right of property, gives the licenses proving the right of property over non-government sponsored enterprises and facilities and over the land under the privatized enterprises and facilities,as well as the non-government sponsored facilities to private juridical and natural persons.

18.4. In Azerbaijan Republic the Registry of State-Owned Immovable property is conducted by the State Committee on State Property Administration. The executive bodies, public companies, concerns, associations, establishments, organizations and enterprises of Azerbaijan Republic assume the submission of all necessary information on State-Owned Immovable property under their control to the State Committee on State Property Administration in due form.

18.5. The creation, abolition and reorganization of any enterprise irrespective of their organizational and legal forms by the national enterprises and associations and also the central and local executive bodies without the license of the State Committee on State Property Administration is forbidden.

18.6. The enterprises created during privatization or with state property contribution as stock share to the collective investment fund must be founded only in the form of open-type joint-stock companies.