General questions

What is privatization? What is the difference between small and large privatization?

Privatization is a sale of state-owned property to private individuals or legal entities.All privatization objects are divided into small-scale and large-scale privatization objects. Objects of small-scale privatization include not only state-owned enterprises and stakes but also objects of unfinished construction and socio-cultural purposes, separate movable and immovable property, the value of which does not exceed UAH 250 million. Such objects can be sold exclusively through government’s electronic trading system ProZorro.Sale, which is built on the principles of full transparency – the entire sale process takes place publicly and openly to avoid corruption.

If the cost of the object is higher than UAH 250 million – these are large-scale privatization objects. The sale process of such enterprises involves investment advisers, who gather all the necessary information, prepare the object for privatization and look for potential investors. Usually, large consulting, audit and investment companies become advisors for these objects.

What will not be privatized

  • Enterprises that ensure the security of the state.
  • Enterprises that are natural monopolies.
  • Enterprises that are important to society or whose services/goods cannot be performed by private businesses.

How to participate in a small privatization auction?

All small-scale privatization objects are sold exclusively through ProZorro.Sale auctions. 7 simple steps to participate in an auction and become an owner of a small-scale privatization object:

  1. See the list of all objects on the page “Small-scale privatization” of this website, on ProZorro.Sale website or on website of any electronic marketplace that works with ProZorro.Sale and is authorized to participate in sale of small-scale privatization objects.
  2. Choose an object, study information, and the terms of its sale.
  3. Register on any of dozens authorized marketplaces connected to the system – bidding information is identical on all marketplaces.
  4. Apply for participation in an auction through a personal account on marketplace site.
  5. Take part in an auction and win.
  6. Pass the qualification.
  7. Sign a purchase agreement, pay the value of an object.

Who can be a buyer?

Anyone can be an investor – both individuals and legal entities, both residents and non-residents. The ban is for persons associated with the aggressor state or subject to sanctions. There is also a ban on offshore investments without a transparent ownership structure.

More details see Art. 8 of the Law of Ukraine “On privatization of state and municipal property”.

How to get more information about an object?

Information on privatization objects is posted on www.privatization.gov.ua, on the official website of the Fund, on ProZorro.Sale and on authorized websites.

For more information about the object there are virtual data rooms (VDRs). These are repositories of all documents available for the object – from technical passports to documents for ownership and photographs. Their main goal is to simplify access to information, remove corruption when it is received, and increase the transparency of the privatization process.

If after that there are still questions – each object has a contact person responsible for preparing for privatization, as well as a person responsible for physical access to the object. Information about these persons is indicated on the object page.

What is Virtual Data Rooms (VDRs)?

These are repositories of all documents available for each object – from technical passports to documents on ownership, from photographs to financial statements.

Opening of access to information in VDR is carried out for all persons at the same time – after the announcement of the auction. It may take 20-35 days from that date to the date of the auction.

How to get access to the virtual data room (VDR)?

All available documents on objects are placed in virtual data rooms:

  • On separate property: http://vdr.spfu.gov.ua/. Access to data on separate property involves simple registration via e-mail.
  • On enterprises: https://investroom.spfu.gov.ua/. Access involves the one-time signing of a non-disclosure agreement for access to data on all privatization objects. This requires:

1) Download on the website and fill in the Application and the Agreement (3 copies).

2) Attach copies of documents to the Application – see description on the website, in the section “How to buy”

3)  Send the Application and the Agreement by mail or bring it in person to the Central Office of SPFU or to any regional branch.

4) After concluding the Agreement, an invitation to the VDR will be sent by e-mail.

5) One copy of the contract will be sent to the postal address of the potential buyer.

It is also possible to obtain such access, after signing the contract, directly in the premises of the privatization authorities.

Responsible department: Information Disclosure Department: +38 (044) 200-33-09, 200-30-27.

How is the starting price of the object determined?

The starting price is formed at the book value level (for joint stock companies – at the level of the par value of shares). But with the correct work on the disclosure of information and preparation for privatization, the competition at the auction always forms the market price of the object.

What happens to land plots after sale?

Privatization objects are sold without land. According to the legislation, the owners of the objects on this site have the primary right to register the plot.

About auctions

Where can I find out more information about participation in an auction?

You can contact any of authorized Prozorro Sales marketplaces for information and advice. They provide participation in auctions. Important information on small-scale privatization is published on the Fund’s official website and Facebook page, as well as on privatization.gov.ua and ProZorro.Sale websites.

How to choose a marketplace for participation in the auction?

Information about an announced auction is identical at all marketplaces. Choose a marketplace for your ease of use and quality of service.

What is the cost of marketplace services?

The same tariffs for participation in an auction are established for all marketplaces. It depends on a cost of an object and ranges from 1% to 3% for small-scale privatization.

Can a newly created company participate in an auction?

One of the mandatory documents for a winner’s qualification is the availability of financial statements for a last quarter or an year. As the practice shows, newly established companies may not always have the appropriate documents (Article 14 of the Law “On privatization of state and communal property”).

What financial statements should be submitted by a company to participate in an auction?

The application for participation should be accompanied by an annual or quarterly financial statements. Forms of such statements must be registered by the relevant authority and indicated in the receipt of acceptance. Lack of financial statements with the relevant receipt of its acceptance is the basis for the privatization body not to approve an auction protocol or not to sign a purchase agreement.

Are the guarantee and registration fees refundable?

A guarantee fee will be refunded if you lose in an auction, and if you win it will be taken into account as part of a payment. A registration fee is non-refundable.

How is a winner determined?

In all types of auction (both English and Dutch), a winner is the bidder who made the highest bid during the bidding.

What is an English auction?

An English auction is a typical auction for price increase. English auction consists of 3 rounds, where each participant has an opportunity to increase previous bid, and 3 minutes is given for the decision-making to each participant. The peculiarity of this auction is that the participant who set the highest price goes last and sees all competitors’ bids.

What is a Dutch auction?

A Dutch auction is an auction where a starting price of an asset at first declines (usually this type of an auction is determined for assets which price is difficult to estimate) until one of the bidders is willing to buy an asset at that price. Then the price at which the decline was stopped is considered the starting price, and all participants have an opportunity to compete for the asset in 1 round.

How long does 1 round of an auction last?

Each bidder has 3 minutes to bid, so the duration of 1 round of an auction will depend on the number of participants.

What happens if an auction does not take place?

The law provides a model of three consecutive auctions only if the previous one did not take place – there was not even 1 application for participation. The time between auctions is 20-35 days.

  1. English auction to raise prices. (Unconditional auction or conditional auction). The starting price is 100%. (initial price).
  2. English auction to raise prices (Auction with a reduction of the starting price). Starting price – 50% (from the initial).
  3. Dutch auction to reduce the price (Auction by the method of step-by-step reduction of the starting price and subsequent submission of price proposals). Starting price – 50% (from the initial).

Is an auction took place if there was 1 application for participation?

Yes. In this case, 1 participant who submitted this application receives the right to buy out the privatization object.

Why do you need an auction protocol?

An auction protocol records all important details of an auction, in particular, lists all participants, names the organizer, includes payment details. The protocol also indicates the final value of the asset and prescribes all additional payments with certain amounts for the winner .

Can a bidder refuse to buy an asset after winning an auction?

Yes, but his guarantee fee will not be refunded. Such participant and its final beneficiary are deprived of the right to participate in further auctions for the sale of this object.

How much time does a winner have to sign a protocol after the end of the bidding?

A winner of the bidding has 4 working days from the date of an auction to sign a protocol (Paragraph 49 of the Resolution of the Cabinet of Ministers #432). The privatization body approves and publishes the protocol within 10 working days from the day following the day of its formation in the trading system.

How much time does a winner have to sign a purchase agreement?

The winner has 30 days to sign a purchase agreement with a privatization institution.

How much time is there to pay for the privatization object?

30 days from the date of signing the contract. For non-payment of funds within 30 days from the date of the conclusion of the contract, a penalty is charged. Failure to pay funds within 60 days from the date of the conclusion of the contract is the basis for its termination.

Is there a penalty for late payment under the sales contract?

If the winner does not pay for the object within 30 days, he will be charged a penalty in accordance with the terms of the contract, in which case the winner can pay the asset together with the penalty and become its new owner. Failure to pay funds within 60 days from the date of the conclusion of the contract is the basis for its termination.

Can the borrowed (credit) funds be used to finance the purchase?

The object can be purchased using borrowed (credit) funds. The winner of the auction submits information about the lender, as well as documentary evidence that the lender agrees to provide the appropriate amount of financing (consent in the form of a letter) at the stage of preparing the draft of contract of sale.

In which cases a privatization institution does not approve an auction protocol or does not sign the purchase agreement?

If a potential buyer does not meet the requirements of Article 8 “On privatization of state and communal property”, did not submit necessary documents or information, the mandatory submission of which is stated in part seven of Article 14 of the Law, or provided false information.

In which cases it is necessary to obtain a permission of the Antimonopoly Committee of Ukraine?

In cases provided for by the legislation on protection of economic competition, the buyer is obliged to obtain approval from the Antimonopoly Committee of Ukraine to directly or indirectly acquire shares in the amount that ensures the achievement or excess of 25 or 50 percent of votes in the supreme governing institution of the relevant entity, as well as assets in the form of a single property complex or structural unit of a business entity. Concentration may be carried out only with the prior approval of the AMCU or the administrative board of the AMCU in cases of exceeding the thresholds set out in Article 24 of the Law on Concentration.

Privatization of the alcohol industry

How many distilleries will be listed for sale?

The state will put up for sale 41 places of activity (distilleries) that are part of the SOE “Ukrspirt” and another 37 plants that are part of the “Ukrspirt” concern.

In what format are distilleries being privatized, what is Operating Locations (OPs, МПД)

Operating Locations (OPs, МПД) are places of production activities and storage of alcohol of SOE “UKRSPYRT” is provided. Because each such object (plant) is not a legal entity per se, an OP is, in fact, a group of separate property, including buildings, equipment, movable property, etc., that is capable of providing a full production cycle.

What are the privatization conditions?

Basic conditions, according to the government program, include:

  • preservation of the type of activity until 07/01/2021\
  • preservation of at least 70% of production personnel until 07/01/2021
  • preservation and / or access to civil protection facilities (in the presence of)

What can be produced in a distilling plant?

The plant can simultaneously produce one of the following types of alcohol:

  • Non-denatured ethyl alcohol (simultaneously, a plant can produce any ethyl alcohol without the content of denaturing additives: rectified (food) alcohol, technical alcohol, raw alcohol) and products that contain it: alcohol spirit and liquor beverages, alcohol vinegar).
  • Denatured ethyl alcohol and products based on it: detergents, dissolvents, antiseptics, perfumes and cosmetics products, etc.
  • Bioethanol and its raw material (raw materials for bioethanol), biofuels.

By-products of alcohol production are biogas, protein forage products and carbon dioxide.

How to get a license for the production of alcohol and alcohol beverages?

  • Licenses for the production of alcohol beverages (spirits and liquors) can be obtained by enterprises of any form of ownership.
  • Obtaining a license for the right to alcohol wholesale costs UAH 500,000 annually, and is issued within 10 days.
  • Obtaining a license for the production of alcohol takes no more than 30 days from the application date and requires an annual fee of UAH 780.More details: on “How to get a license” webpage.

Question about foreign investors

Can a non-resident submit documents for participation in the auction in Ukrainian with the applicant's signature and seal?

Yes, it can.

Can the buyer be a non-resident legal entity registered in a state classified as offshore zones, but having a transparent ownership structure?

It is possible, however, the submitted documents on the ownership structure of the potential buyer must contain all the comprehensive information available about the persons of the ultimate beneficial owners of the potential buyer of the privatization object and data that disclose them 100% and allow them to be identified.

Can a non-resident pay the value of the object in foreign currency?

Yes, it can. In accordance with parts two and three of Art. 23 of the Law of Ukraine, non-residents may pay the value of the object in national currency or in freely convertible currency. You can pay from the buyer’s account in a Ukrainian or foreign bank.

In the case of freely convertible currency – the amount is determined at the official exchange rate of hryvnia to such currency, set by the NBU on the day of the contract.

How to pay the guarantee and registration fee to a non-resident?

Contributions must be paid from the potential buyer’s account with a Ukrainian or foreign bank.

Is there an established form of certificate with information on the ultimate beneficial owner?

The law does not define the requirements, templates, forms of registration of the document on the ownership structure of potential buyers. However, taking into account the requirements of paragraph 5 of part 2 of Article 8 of the Law, the submitted documents on the ownership structure of a potential buyer must contain all the comprehensive available information about the persons of the ultimate beneficial owners of a potential buyer of the privatization object. The submitted documents and information about the ultimate beneficial owner must contain information and data that discloses it 100% and allows identification.

How is the translation of documents certified?

Documents issued in accordance with the legislation of a foreign state must be legalized (consular legalization or apostille) in the prescribed manner, unless otherwise provided by international treaties.

Is it possible to provide in the agreement that all disputes related to the execution of the agreement are resolved in arbitration of the country of the non-resident participant or in another international instance or in court?

According to part of the twelfth art. 26 of the Law, by agreement of the parties, the contract may provide the possibility of resolving disputes in connection with the sales contract or on the basis of it, in the international commercial arbitration court. At the same time, if the parties have not reached an agreement on the choice of such a court, any dispute, disagreement or claim is subject to final resolution by arbitration in accordance with the Arbitration Rules of the Arbitration Institute of the Stockholm Chamber of Commerce.

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