Business met with the State Property Fund on privatization issues

19/ 10/ 2020

On October 16, there was a dialogue between the representatives of the EBA business community and the State Property Fund of Ukraine. During the meeting, Dmytro Sennychenko, Head of the State Property Fund, presented a comprehensive privatization draft law to the business community. The draft law provides amendments to the twenty-seven Laws of Ukraine, Budget, and Tax codes.

It was noted that the new draft law aims to attract investment and simplify privatization procedures for businesses. According to Mr. Sennychenko, the privatization of state property will help fight corruption. With private investment, unproductive government assets, which are often a source of gray cash flows, can be transformed into operative enterprises that pay taxes and create new jobs.

Therefore, the new draft law, which was developed by the State Property Fund, provides for changes in six main areas:

1. Creating clear criteria for the transfer of objects for privatization. Investors are expected to be able to privatize seized and encumbered property.

2. Ensuring transparency of privatization.

Mr. Sennychenko expressed the necessity to enshrine the provisions that large-scale privatization shall be conducted exclusively at electronic auctions. The State Property Fund also understands that businesses need convenient access to relevant information to make important decisions. Therefore, the draft law will regulate the issue of wide disclosure of information about state-owned objects and the creation of a data room on the electronic platform of the fund. It is also possible to conduct an initial public offering for state-owned companies.

3. Protecting the rights and interests of investors.

Many problems arise due to debts borne by the state property. Therefore, it is necessary to minimize the risk of investors by preventing the seizure of property during privatization on a competitive basis. At the same time, it is proposed to extend until January 1, 2024, the possibility of using the rules of English law in contracts of large-scale privatization. The draft law also takes into account the difficulties in transferring a state-owned enterprise to another legal status. Upon liquidation of a state enterprise with a view to creating a new legal entity on its basis, all previous licenses and permits of the SOE are revoked. To reduce the company’s financial and time costs, the draft law proposes to automatically grant the privatized SOE with the status of a limited liability company that enables to preserve the company’s permits for maximizing the auction price.

4. Protecting property interests of the state, particularly, by regulating a number of issues related to the bankruptcy of enterprises that are transferred to privatization.

5. Preventing the resistance of the management of companies subject to the transfer for privatization.

To avoid a situation where privatization processes are blocked due to the resistance of the heads of state-owned enterprises and their refusal to cooperate, it was proposed to automatically terminate the contract with such management and conclude a new employment contract with them, which will specify updated terms and conditions for them staying in the enterprise.

6. Transforming the State Property Fund and protecting its employees. To increase the efficiency of work, it is planned to form a single legal entity of the State Property Fund instead of the current 12 agencies of which it consists.

The business thanks to Mr. Sennychenko and the team of the State Property Fund for reformist approaches to privatization and active involvement in dialogues with the business community. For its part, the European Business Association declares its readiness to support quality initiatives that open new opportunities for business and contribute to the development of the country’s economy.


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