In September, mass privatization is to be resumed — approximately 150 public and municipal property objects will be put up for auction in the Prozorro.Sale system. Let us remind you that when the full-scale invasion of Ukraine by Russia began, privatization was basically suspended.
Resuming it became possible because the Verkhovna Rada made amendments to the specialized law, which simplified the privatization procedure for the period of martial law. However, in order to unblock the sale of public and municipal property, amendments to by-laws were also necessary. To do this, on August 23, the government brought the rules for conducting electronic auctions into line with the new version of the law.
The sale of objects of small-scale privatization during the war will be carried out in several stages.
Selecting the Object of Privatization
The prospective buyer will be able to choose the property required for purchase in several ways.
The first one is to find it among the objects for which privatization auctions are already taking place, or for which the sale conditions are approved. In addition to Prozorro.Sale, the list of such property can be found on the official website of the SPFU and on the specialized page on privatization. The list of municipal property for sale is also published on the websites of local self-government bodies.
If a potential buyer is interested in a specific property, but it is not available on the specified resources, it is worth looking in the list of objects subject to privatization. If it is not there, you can initiate an auction yourself. To do this, a letter of arbitrary form should be sent to the privatization body about the intention to privatize such an object. As far as the privatization of public property is concerned, it is necessary to apply to the SPFU or its regional offices, as far as municipal property is concerned — to the bodies of privatization of territorial communities.
Approval and Publication of Sale Conditions
If you initiated privatization on your own, you will have to wait until the auction commission develops the conditions for the sale of property, and the privatization body approves them.
For the period of martial law, the legislator significantly narrowed the list of such conditions. The winner of the auction can be obliged to:
- preserve the activity profileof privatized objects of social and cultural purpose (objects of education, health care, culture, physical culture and sports, tourism, art, etc.);
- repay salary and budget debts;
- provide social guarantees for employees.
Together with other sale conditions, the auction commission determines the starting price of the privatization object. It is equal to its book value. If the book value of individual components of the object is zero, the starting price is set at the level of the book value of the remaining components. If the book value of the object is absent, and at the same time there is no conclusion about the value based on the results of the valuation, the starting price is set at 1 hryvnia.
Within three working days after the approval of the sale conditions, the privatization body publishes an information notice on the privatization of the object in the Prozorro.Sale system and on the website of the SPFU or the relevant territorial community.
The information notice shall indicate the data on the object, the starting price, the amount of the guarantee and registration fees, the sale conditions, the date and time of the auction, the deadline for submitting the application for participation and other information.
Application for Participation in the Auction
To participate in the auction, the potential buyer needs to register at one of the authorized platforms.
To participate, potential buyers — legal entities, submit:
– application for participation containing an identification code in accordance with the USREOU;
– a statement that the potential buyer is not subject to the restrictions provided for in Article 8 of the Law of Ukraine “On Privatization of State and Municipal Property.”
For example, buyers cannot be employees of state privatization bodies, citizens and residents of the aggressor state, sanctioned persons, as well as buyers with whom a privatization contract was earlier terminated due to non-compliance with its requirements;
– application for getting acquainted with the object of privatization;
– documents containing information on:
– registration of a non-resident in the country of location;
– ultimate beneficial owner or their absence;
– payment of registration and guarantee fees;
and written agreement to the conditions of sale.
To participate, potential buyers — individuals and foreigners, submit:
– application for participation;
– a statement that the potential buyer is not subject to the restrictions provided for in Article 8 of the Law;
– application for getting acquainted with the object of privatization;
– passport of a citizen of Ukraine or identity document (for foreigners);
– documents confirming payment of registration and guarantee fees;
– written agreement to the conditions of sale.
For the period of martial law, these applications and documents can be submitted electronically and signed by the QES.
The application for participation in the electronic auction should contain a closed price offer — the amount for which the potential buyer is ready to purchase the property before the beginning of the bidding. It cannot be lower than the starting price of the privatization object.
We advise you not to postpone the submission of the proposal until the last day. In addition, before the deadline for accepting applications for participation, participants have the right to cancel or amend their price offers.
Guarantee and Registration Fees
As before, in order to participate in the auction, the potential buyer pays a guarantee and registration fees to the account of the electronic platform operator, through which they submit an application for participation in privatization. The amount of the latter has not changed and is 0.2 of the minimum wage (UAH 1,300 in 2022). Instead, the guarantee fee is now set at 20% of the starting price of the lot.
If the privatization auction does not take place twice due to the disqualification of the winner, the guarantee fee shall be set at the amount that is higher than:
– 50% of the starting price of the object of small privatization;
– 30 minimum wages as of January 1 of the year in which the information notice is published (in 2022 — UAH 195,000)
Auction and Presentation of Its Results
For the period of martial law, auctions for the sale of small-scale privatization objects will be conducted not earlier than 5 and not later than 20 working days from the date of publication of the information notice. However, before the relevant technical possibility appears in the electronic trading system, this period amounts to 20-25 calendar days. During this period, potential buyers will also be able to inspect the privatization object, get acquainted with its characteristics and decide whether to participate in the auction.
The system activates the auction if two or more participants have applied. It takes place in an electronic trading system in real time. Each participant has the right to increase their price. The minimum step of such an increase is indicated in the announcement of the lot.
The methods of privatization and types of auctions have not changed. As before, privatization begins with an English auction. The property is put up for 100% value, and the participant who submitted the highest price offer for the lot in the course of the auction wins.
If the object could not be sold from the first time, a repeated English auction is announced with a 50% reduction in the starting price.
If the second auction does not take place, a so-called Dutch auction is held. The property is put up, as at the previous auction, with a 50% discount, but the electronic system automatically gradually reduces its cost, until one of the participants stops this reduction. This means that they are ready to buy a lot for this amount. Next, participants can raise the price again.
However, if the Dutch auction is found not to have taken place due to the auction winner’s refusal to sign the auction protocol, the sale and purchase agreement, and to pay the sale price, the potential buyers will have another opportunity to privatize the object. In such a case, a repeated Dutch auction will be held.
The winner, who refused to sign the auction protocol, the sale and purchase agreement, as well as to pay the sale price, is disqualified. Further, they will not be able to participate in auctions for the sale of the same object.
Another innovation is to reduce the period between auctions to not less than 3 and not more than 6 working days from the date of announcement of the relevant auctions.
When the auction is completed, the winner and the operator of the electronic platform sign the protocol on the results of the auction within 4 working days (from the day following the day of its formation). The privatization body checks the application for participation and the documents of the auction winner attached to it, and also approves the protocol on the results of the auction within 7 working days from the date of its formation.
This protocol shall be signed in electronic form by all parties, unless the winner insists on signing in writing.
The redemption option is activated when only one participant has applied for the auction. Then the privatization body may decide to allow them to redeem this object at the price they offered (it should not be lower than the starting price).
This method of privatization can also be used if the buyer at the time of purchase rents the property and repairs it: for example, has made integral improvements in an amount exceeding 25% of its market value.
The winner must pay for the purchased property to the privatization body’s account within 20 working days from the date of the formation of the protocol on the results of the auction. A part of the guarantee fee of the winner remaining after deduction of the auction participation fee is credited when the payment for the object of privatization is made.
Agreement, Transfer of Ownership, and Completion of Privatization
The privatization body and the winner conclude a sale and purchase agreement of the privatization object, after the winner pays for the purchase — within 25 working days from the date of formation of the protocol on the results of the electronic auction. It is published in the Prozorro.Sale system within 10 calendar days from the day following the date of its conclusion.
If it is necessary to produce documents for notarization of the sale and purchase agreement regarding the object by the decision of the state body of privatization, the privatization body and the winner first conclude a preliminary sale and purchase agreement of the object. Then the main sale and purchase agreement must be concluded within 60 working days from the date of conclusion of the preliminary agreement and published within 10 calendar days from the day following the date of its conclusion.
The sale and purchase agreement of the object should include the sale conditions provided for by the information notice on its privatization.
If the sale and purchase agreement does not require notarization, it can be concluded and signed in electronic form.
The ownership of the object of privatization passes to the buyer after the conclusion of the sale and purchase agreement and signing the act of acceptance-transfer of the privatization object.
After the publication of the sale and purchase agreement, the privatization body shall publish an order on the completion of privatization in the electronic trading system within 10 calendar days from the date of its issuance.