Law on Privatization Program 1997-1998
(extended up to December 31, 2002)
Parliament adopts the present Law
Law on Privatization Program 1997-1998 establishes the procedure, objectives, restrictions and methods of privatization of companies and of other priority objects of public property, determines the objects and subjects of privatization, methods and specific aspects of privatization in different industries, methods of financial support of the privatized companies and the development of real estate markets; it provides the legislative, informational and institutional basis of the privatization process.
The present Law stipulates the diversification of privatization methods, synchronizing this process with process of the capital markets development and the restructuring of companies in order to attract the investments in the economy.
With the implementation of this Law the privatization of public property and reforms of agricultural sector shall be in general completed.
CHAPTER I
General Provisions
Article1. Law on Privatization Program for 1997-1998 (hereinafter, Privatization Program) is worked out on the basis of Law on Privatization N 627-XII from July 4,1991, Law on Property 459-XII from January 22,1991, the Law on Privatization of the Dwelling Fund 1324-XII from March 10,1993 and other regulatory acts, taking into consideration the social and economic situation in the country and the results achieved from privatization of public property and restructuring of the national economy.
Article 2. The main objectives of the Privatization Program are completing privatization of public property, restructuring of privatized enterprises, revitalizing the economy and improving the living condition of population, modifying the Government role to fit the market requirements, cutting down the Government expenditures on managing the economy and termination of subsidies to the loss-making companies.
Article3. The main objectives of Privatization Program are:
a) privatization of certain new objects of public property: state-owned shares (quotas) in companies with mixed capital, other companies of industry, agriculture, transport, utilities and other sectors, the Fund of uninhabitable buildings, including buildings which are leased out; plots of rural and urban land;
b) opening the infrastructure sectors to the market competition with the private sector participation; setting up the legal and institutional framework for the Government to perform the regulatory role in these sectors;
c) attracting and encouraging strategic investors to participate in privatization and restructuring of companies;
d) encouraging citizens of Moldova to participate in privatization of public property by selling shares through the public offering, the Stock Exchange, involving regional entities of broker/dealer companies;
e) employing privatization marketing methods based on competition, transparency, dissemination of information among the investors and the public about the objects and results of privatization;
f) implementation of the mechanisms of privatization, restructuring and financial support to the privatized companies in order to revitalize them;
g) developing capital markets by selling the state-owned shares at the Stock Exchange, involving all its infrastructure entities;
h) developing the real estate market by privatizing buildings, constructions and land plots, and introducing modern information systems for tracking supply and demand for the real estate;
i) developing the legal and institutional framework to protect the rights and legal interests of new owners, including a registration system of ownership rights on real estate and transactions with it;
j) improving the system of State Property Administration;
k) completion of sale of the state-owned shares of companies subject for partial or integral privatization for the patrimonial bonds and unsold.
Article4. The specific aspects of privatization of the public property are:
a) shifting from the mass privatization based on patrimonial bonds to cash privatization and other privatization methods and mechanisms;
b) application of new specific methods and mechanisms of privatization, including public offering, sales of state-owned shares at the Stock Exchange, direct sales, investment and commercial tenders, collateral auctions, sales of the public property objects for settlement of the State debts;
c) using the experienced local and foreign companies in the complex privatization projects and restructuring of companies capable to attract strategic investors;
d) evaluation of financial and environmental condition of companies, inventory and evaluation of their property in order to fix the initial selling price.
e) evaluation of the environmental influence of the companies activities.
Article5. The Ministry of Privatization and State Property Administration shall be the only body which conducts the Government policy in privatization sphere and coordinates along with the central specialized State authorities and local public administration the privatization activities.
Chapter II
Objects and Subjects of Privatization
Article6. Privatization shall be extended over the objects of public property from all sectors and branches of economy, except for the objects which are not subject for privatization in compliance with the Law.
Article7. Subject for privatization: property of enterprises, institutions, entities, state associations, their structural subdivisions complex production units, leased out public property, objects from the Fund of uninhabitable buildings, unfinished constructions, dwellings, state-owned shares in companies to be privatized, plots of land from inhabited localities, as well as adjacent land of privatized and to be privatized companies, land plots of the garden cooperatives.
Article8. (1) An integral part of the Privatization Program is as follows:
a)List of companies to be privatized (Appendix N1)
b)List of unfinished constructions to be privatized (Appendix N2).
(2) The information on the objects to be privatized reflects the situation as of the date of lists’ development and will be subsequently specified as of the date of their privatization.
Article9. Companies and organizations not included in Appendixes N1, N2 and N3 of this Law, including the objects intended for keeping the State reserves values, mobilization reserves, wine factory deposits, which form the national patrimony, including the objects of creed are not subject to privatization.
Article10. (1)State companies on the privatization list in the Appendixes or their divisions may not be leased out, their fixed assets unused in production may be leased out only with the consent of the Department of Privatization. The lease term in this case may not exceed one year.
(2) the Department of Privatization verifies the validity of the lease contracts and if the infringements of Law are revealed, takes measures for their elimination.
Article10/1. Transmission into trust management of objects with prevailing state capital included into the Appendixes lists is not admitted.
Article11. The seller of public property subject to privatization, except for the adjacent land of companies privatized or to be privatized, whose value is not included in their statutory capital, except for the adjacent land of private companies is the Department.
Article12. Under the Law the following persons and entities may participate in the privatization process:
a) citizens of the Republic of Moldova and their associations;
b) legal entities of the Republic of Moldova, except the state-owned companies;
c) foreign individuals and legal entities, those without citizenship.
Article13. Property of companies, included in the Appendixes lists, subsequently declared bankrupt is to be sold in order established by the legislation.
Article14. Privatized company shall be a successor of the property rights and obligations of the state company, including those of the adjacent land, on which it is located.
CHAPTER III
Privatization Methods. Preparation of Objects for Privatization.
Article15. (1) State companies may be privatized through their sale as complex production units or as reorganized open end joint stock companies with the subsequent sale of their shares.
(2) For the privatization of public property leased to the company employees, the leased company is liquidated, but the public property may not be used for compensation of this company debts. An open end joint stock company may be organized on the basis of public property and lessees quotas.
(3) From the date of state registration of the joint stock company the state company shall be deemed reorganized and its property shall be transferred to the balance of joint stock company.
Article16. (1) Privatization of public property is carried out through:
a) open outcry auctions with lowering or raising the initial price;
b) commercial or investment tenders;
c) direct negotiations;
d) sale of shares at the auction as a single packet or separate packets through the domestic or international public offer;
e) compensation to the persons indicated in Article 12 of the unconditional state debts with the property (shares) of companies to be privatized.
f) according to the individual projects approved by the Government.
g) transferring into the private property of apartments in the unfinished dwelling houses according to the Law on privatization of dwellings
(2) Privatization methods according to the provisions of the part (1) shall be established by the Government.
Article17. (1) Value of the object to be privatized, regardless of privatization methods, is to be paid by individuals and legal entities of the Republic of Moldova by a lump sum or by installments in term of up to ten years for plots of land and up to 5 years for other objects to be privatized.
(2) By installments may be paid: unfinished constructions, objects from the Fund of uninhabitable building (including those leased out, inclusively to non-commercial organizations), adjacent land of companies privatized or to be privatized, adjacent land of private companies, objects purchased at the investment or commercial tenders.
(3) With the payment by installment the initial amount paid at the moment of concluding the contract shall be not less than 25% of the value of object. Payments shall be effected quarterly in equal amounts or ahead of time with their indexation depending on the inflation rate for the date of payment.
(4) The sale of privatized object or its usage as a collateral may be effected only after the full payment has been made. In case of delay with payments in term set up by the contract the buyer shall pay a penalty of 0.1% of the amount due for every day of delay.
(5) Foreign individuals and legal entities, as well as those without citizenship shall pay for the object with a lump sum.
Article18. (1) For privatization of companies and objects through the commercial tenders the buyers shall have to meet certain requirements of the sellers.
(2) The Government may set certain requirements for the tender participants related to the specific character of certain companies subject to privatization.
Article 19. (1) Privatization of objects from the Fund of uninhabitable building (buildings, constructions, premises, including uninhabitable appendixes to apartments) leased and not included in the appendixes lists shall be effected upon the lessee application.
In case the lessee didn’t submit an application for the purchase of object in term of 45 days from the date of written proposal of the Department of Privatization or didn’t pay the price of the object in term set by the Law, this object shall be sold through the auction on general terms. Methods of valuation and sale of the object shall be established by the Government.
(2) Not subject for privatization are: premises of the Fund of uninhabitable buildings located in the buildings of public authorities (except the ground floors of these buildings, in case these floors are intended in the projects as social objects), in building of state companies, organizations and institutions which are not included in the lists envisaged in appendixes , as well objects, whose value and area had been included in the value and area of other objects and privatized dwellings.
(3) For privatization of garages leased by war veterans and persons equated to them, labor veterans with seniority of at least 30 years in the Republic of Moldova, as well as disabled people of I and II category, the payment shall be effected in the amount of 50% of their price.
Article20. (1) The Dwelling Fund shall be privatized for cash or free of charge in procedure established by the Law.
(2) Unfinished apartment buildings, where construction is effected at the state account, may not be sold or their beneficiary changed without the consent of the Department of Privatization.
Article21. The Department of Privatization along with the branch ministries and specialized departments provides for preparation of the companies and objects for reorganization and privatization. This process may include:
a) formation of the privatization commissions;
b) reorganization of companies through their division, separation or transformation;
c) inventory and valuation of the public property;
d) liquidation of insolvent state companies and sale of their assets.
Article22. (1) Preparation of companies for privatization and reorganization into the joint stock companies shall be carried out by the Privatization Commissions set up by the Department of Privatization or its territorial agencies on the procedure established by the Government.
(2) In case of privatization of companies which do not work (state shares in companies which do not work), as well as unfinished constructions, the preparation for privatization shall be carried out by the Department of Privatization.
Article23. For reorganization of a company into a joint stock company (companies) the Commission designs and submits for the approval of the Ministry of Privatization and State Property Administration the following documents:
a) copy of registration certificate of company and copy of its Statutes;
b) property evaluation and inventory documents;
c) draft contract or declaration of incorporation and Statutes of the joint stock company;
d) act on the right of use of land;
e) copies of registration documents for buildings, constructions and other real estate;
f) as the case may be, a notification on the environmental conditions of the company and the restriction set by the environmental institutions, including those related to the use of land.
Article24. For privatization of companies and other objects the Commission in each case prepares and submits to the Ministry of Privatization and State Property Administration or its territorial agency the privatization plan, which determines the methods and terms of privatization, data on the technical and economic conditions of an object and other information.
Article25. Methods of valuation of the company property, unfinished constructions and other objects subject to privatization shall be established by the Government.
Article26. - (1) Sale of adjacent land of the objects privatized or to be privatized and adjacent land of private companies shall be effected for the price calculated on the basis of Law on Normative Land Price and Purchase-Sale Procedures established for of the respective area, considering its location and its engineer arrangement.
(2) Regulations on purchase-sale of adjacent land of the objects privatized or to be privatized and adjacent land of private companies shall be approved by the Government.
Article27. - (1) For sales of shares and other property through the tenders which provide for the investments (investment tenders) the buyer shall provide the guarantees of solvency and a detailed investment plan, and the purchase and sale contract shall contain the following:
(a) main provisions of the tender and mutual obligations of their observance;
(b) amount, type and timing of investments and their use for certain purposes;
(c) mutual responsibility for non-observance of the conditions of tender and contract.
(2) Benefits offered to the buyer by the conditions of tender may not be re-negotiated and changed upon conclusion of the purchase and sale contract. Otherwise the contract shall be deemed null and void. At the same time the results of tender shall be canceled by the body which approved them.
(3) In case of privatization through investment tender at the discretion of the privatization commission the initial selling price could be made public. The selling price is established considering the volume of investments and other commitments taken by the buyer.
Article28. Upon preparation for privatization of the objects previously leased the Ministry of Privatization and State Property Administration shall check the validity of lease contracts and in case of violations revealed shall take measures for their cancellation. Participants of the auction or tender shall be informed on the main terms and conditions of the lease contract.
Article29 -(1). For the sale of companies and other objects the buyer shall be provided with the following information:
a) privatization plan, if needed;
b) main data on the economical condition for last two years, as well as technical and environmental characteristics of an object;
c) documents on financial condition relating to the situation for the date of auction or tender;
d) list of main products (goods, services);
e) number of employees;
f) terms of ownership and use of adjacent land;
g) initial selling price, if needed;
h) other data related to the specific characteristic of an object.
(2) Upon the sale of state shares at the Stock Exchange the buyer shall be provided with the information stipulated by the Law on Securities and the Stock Exchanges.
Article29/1. The sale to investors of insolvent companies (state shares in insolvent companies), as well as unfinished constructions, is admitted through tender procedure for the symbolic price of 1 lei, stipulating social and investment conditions. Such kinds of conditions could be:
a)maintaining the number of employees or creating of new work places;
b)maintaining the main type of activity (production) or respecting of a moratorium on the liquidation of the company for a period of not less than 5 years;
c)implementation of a environmental protection program at the privatized company;
d)paying off the company’s debts;
e)making the investments necessary for ensuring the company’s production activity and for its financial rehabilitation;
f)finishing the unfinished constructions, manufacturing of certain products or practicing certain activities.
(2) Before the fulfilling of the stipulated conditions the buyer has no right to alienate the company (state shares) or to give it up in other ways.
(3) The buyer fulfills its obligations taken according to the provisions of the paragraph 1, (d) at his own expenses according to the provisions of the purchase-sale agreement. The buyer’s breach of the assumed obligations serves as a reason for cancellation of the purchase-sale agreement, without compensation of its expenses.
(4) The list of companies (state shares) to be privatized for the symbolic price is approved by the Government.
Article29/2. The sequestered fixed assets shall be alienated by the Department of Privatization in conformity with the legislation.
Article29/3. (1) In case the buyer of the privatization object does not pay its full price stipulated in the purchase-sale agreement or does not fulfill other contractual conditions within the stipulated terms, the agreement could be canceled by mutual consent of the parties or by court’s decision. The price paid for the object is restituted to the buyer, less the damages caused to the object.