Law of the Azerbaijan Republic

About Privatisation of State Property in Azerbaijan Republic

The present Law determines principles and organisation-legal basis of privatisation of state property in Azerbaijan Republic.

Clause 1. General Under privatisation of state property we shall mean transfer of state property into private property according to provisions of the present Law. Clause 2. Legislation concerning privatisation of state property 1. Legislation concerning privatisation of state property consists of the Law of Azerbaijan Republic «About property», the present Law, other legislative acts of Azerbaijan Republic issued based on the present Law.

2. Privatisation of land and housing fund is controlled by other legislative acts of Azerbaijan Republic.

Clause 3. Procedure of privatisation of state property Privatisation of state property in Azerbaijan Republic will be accomplished by the body subordinate to the President of Azerbaijan Republic that exercises control over state property. Clause 4. Objects of privatisation All enterprises and property constituting state property of Azerbaijan Republic are considered objects of privatisation, except enterprises and objects that cannot be privatised. Clause 5. Subjects of privatisation Subjects of privatisation (buyers) might be: Clause 6. General principles of privatisation of state property General principles of privatisation of state property are: Clause 7. Procedure of privatisation 1. Privatisation of state property in the Republic is accomplished on the basis of national currency - Azerbaijan manat.

2. Privatisation of state property is accomplished after preparation of necessary documents (forms) according to order determined by the body exercising control over state property.

3. Participation of foreign legal entities and physical persons in privatisation is controlled by regulations envisaged by Clause 8 of the present Law.

4. Housing and social-cultural objects, auxiliary economy objects being on balance of enterprises under privatisation might be privatised both together with their total property and separately. If it is impossible to accomplish privatisation of these objects they are transferred under control of the body governing state property.

5. Privatisation of state property is accomplished by means of auctions (sales), competitions, various investment funds, securities and stock exchanges.

6. Each member of working collective of the enterprise, being privatised by means of auction (sale) and competition, who had not received right for property will be given compensation at the expense of the new owner at the moment of his dismissal.

Amount and procedure of compensation payment are determined by provisions on organisation and realisation of auctions and competitions.

7. On transformation of state enterprises into stock companies various privileges are granted to members of working collective, particularly the right to purchase part of shares at their nominal value or with partial payment.

Clause 8. Participation of foreign legal entities and physical persons in privatisation 1. Participation of foreign legal entities and physical persons in privatisation is allowed according to legislation of Azerbaijan Republic, in an order determined by state program of privatisation.

2. Whenever foreign legal entities and physical persons participate in privatisation of state property jointly with local capital the former shall have priority over the latter.

3. Enterprises with foreign investments, wherein share of local participant is compensated by private (individual) capital might take part in privatisation based on reinvestment (repeated investment) of profit obtained at the territory of Azerbaijan Republic.

Reference about sources of profits shall be submitted to the body that exercises control over state property before beginning of the auction (sale) and competition.

Clause 9. State control over privatisation 1. State control over privatisation is exercised by the body having control over state property within the limits of authority determined by the present Law and other legislative acts of Azerbaijan Republic issued on the basis of the present Law.

2. The body exercising control over state property:

3. Ways, forms and options of privatisation, procedure of their accomplishment, specificity’s in various branches of economy, various enterprises and objects, estimation of their cost, normative, methodical and also other necessary documents concerning distribution and use of money obtained as a result of privatisation are developed by the body exercising control over state property and approved by the President of Azerbaijan Republic. Clause 10. State program of privatisation 1. State program of privatisation determines: 2. Every year, not later than on the 1st of November, state program of privatisation is submitted for approval by Supreme Council of Azerbaijan Republic by the President of Azerbaijan Republic.

Supreme Council of Azerbaijan Republic approves state program of privatisation not later than on the 20th of December.

Amendments to the state program of privatisation might be introduced after approval of Supreme Council of Azerbaijan Republic.

Clause 11. Restrictions on privatisation of state property List of enterprises, objects (property) that are not subject to privatisation is approved by the Supreme Council of Azerbaijan Republic on presentation of the President of Azerbaijan Republic. Clause 12. Classification of enterprises and objects under privatisation In the course of privatisation of state property the following classification of enterprises and objects is proposed: Clause 13. Ways of privatisation 1. Sale of privatised property with full compensation of the cost.

2. Sale of privatised property with individual (privilege) compensation of cost.

Clause 14. Forms of privatisation 1. Sale of property that has been taken on lease before to leaseholder on agreement of the body controlling state property.

2. Redemption of the property by the enterprise' collective.

3. Organisation of auctions (sales) and competitions.

4. Establishment of Limited liability company and close stock companies.

5. Establishment of open stock companies.

Clause 15. Options of transformation (establishment) of state enterprises into stock companies 1. Establishment of stock companies when the state possesses the control package of shares.

2. Establishment of stock companies when the state doesn't possess the control package of shares.

Clause 16. Estimation of cost of state property being privatised 1. Estimation of cost of state property is accomplished either by the enterprise itself or on agreement with specialised enterprises, with subsequent expertise and approval of its results by the body exercising control over state property, according to instructions and methodical recommendations, developed by abovementioned body.

2. Questions on sale or long-term leasing of land site together with privatised state enterprise and object located thereon shall be solved individually, according to existing legislation and order, by the body exercising control over state property in pursue to agreed mutual decision of respective bodies depending on location of said land site, its cost, communication network under this land site, electrical lines, cables, on type of activity and aim of the enterprise' activity, on the subject accomplishing privatisation and other factors.

Clause 17. Sources of money for redemption of state enterprise by working collective 1. Working collectives might redeem state enterprise at the expense of money taken from the following sources: Clause 18. Privatisation share 1. Privatisation share is share of privatised state property given to all citizen of Azerbaijan Republic free of charge.

2. Privatisation share is given to citizens of Republic for establishment of equal starting conditions for participation in privatisation process.

3. Amount of privatisation share is established based on cost of state enterprises and objects chosen for privatisation.

4. Privatisation share is being kept at specially opened accounts in respective bank on the names of all citizen of Republic.

5. Privatisation shares might be used by citizens of Republic only for the purposes of privatisation.

6. Privatisation shares having special purpose are not handed out, cannot be used for payment in the sphere of money circulation, and might be only transferred from one account to the other.

7. Whenever privatisation share is transferred as legacy it should be also used only with the same specific purpose.

8. Procedure of giving out and use of privatisation shares is controlled by the President of Azerbaijan Republic.

Clause 19. Investment funds 1. With the objective of efficient use of part of privatisation shares belonging to the citizens of Republic that were not used due to some reason the state establishes specialised investment fund. With the same objective private (individual) investment funds might be also established in the Republic.

2. Regulations concerning specialised, private (individual) investment funds and other normative documents controlling their activity are approved by the President of Azerbaijan Republic.

3. Investment funds exercise their activity on the basis of licenses given by National bank and under control of this bank; they are subordinate to National bank.

Investment funds are included into Common State register.

Clause 20. Use of money obtained as a result of privatisation of state property Money obtained as a result of privatisation of state property constitute national property and are used for social-economic development of Azerbaijan Republic. Clause 21. Applications in connection with privatisation of state property 1. Applications for privatisation of state property are submitted after publishing the program of state privatisation in mass media.

2. List of documents and data that should be enclosed with applications submitted in connection with privatisation is determined by state program.

3. When submitting application for privatisation respective state duty is paid; amount of said duty is equal to initial cost of property declared at the auction.

Clause 22. Organisation of auctions 1. Auctions on privatisation of state property are organised by the body exercising control over state property.

2. Procedure of sale of the objects at the auction is governed by respective Provisions approved by the body exercising control over state property.

Clause 23. Organisation of competitions 1. To carry out privatisation of state property in the form of competition participant of the competition should establish specific conditions in connection with this property.

2. Competitions are being held according to Provisions approved by the Body controlling state property.

Clause 24. Establishment of stock companies 1. With the purpose of privatisation enterprises are transformed into open or closed stock companies.

2. Transformation of state enterprises into stock companies is governed by respective legislation.

Clause 25. Procedure of legalisation of deals 1. The Body exercising control over state property shall grant documents confirming right for property to the buyer of the object to be privatised.

2. Whenever working collective is buying the enterprise on credit terms it acquires proprietary right after payment of first instalment and presentation of guarantees of subsequent payments secured by the part of property already paid off.

3. Until cost of the enterprise is completely redeemed by working collective its right for charge of free transfer or sale of the enterprise' property to the other party is limited.

Clause 26. Social protection of people during privatisation 1. People who lost their job because of privatisation of state enterprises shall enjoy rights and privileges established according to respective legislation for the people dismissed on reorganisation and liquidation of enterprises.

2. When paying compensations and granting other privileges at the enterprises transformed into stock companies with the objective of privatisation pensionaries having worked at the enterprise at least seven years and also persons having right to return to their former posts according to existing legislation are also accounted for.

Clause 27. Information about results of privatisation 1. Privatisation processes in Azerbaijan Republic are accomplished in conditions of wide publicity and under public control.

2. State program of privatisation is published in mass media, and people should be provided with necessary information concerning auctions, competitions, transformation of state enterprises into stock companies at least one month before.

President of Azerbaijan Republic

A. Elchibey

Baku, January 7, 1993

No 445

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