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Books by Grigory Yavlinsky
Economics and Politics in Russia
The Center for Economic and Political Research (EPIcenter)
Nizhni Novgorod-Moscow, 1992

4.1 Entrepreneurship and Property

4.1.4 New Approaches to Small Business Privatisation



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(1) Sample regulations for open non-commercial tenders for the sale of state and municipal property

I. General regulations

1. A decision on the tender sale of an object of state property shall be taken by the oblast, municipal, or regional state property management committee, with the consent of the work collective of the enterprise to be privatized, the local

council of peop le's deputies, and the state agencies for anti-monopoly policy and support to new economic structures (if applicable).

2. Enterprises (associations), organisations, departments, other subdivisions of enterprises and organiszations, and single property production complexes shall be deemed objects of state property which may be sold by tender.

3. Tender sales shall apply as a rule for small municipally owned assets, as well as in the case of a monopoly or special social significance, for given objects within the economy of a corresponding region.

4. Citizens and non-state legal entities may participate as bidders at tenders for objects of state property, held in accordance with these Regulations.

5. Priority shall be given to individual citizens and work collectives in the tender sale of objects of state property.

6. People's deputies at all levels, and employees of the state property management committees property funds (personally or via other individuals) and their close relatives, shall be prohibited from participating as bidders in tenders for state and munici pal property. This regulation shall also apply to these individuals for one year after they leave those positions.

II. Preparation for tenders

7. A tendering shall be carried out on behalf of the property fund by a tender commission, formed from representatives of the corresponding property fund and/or committee, the local Council of People's Deputies, the state agency for anti-monopoly policy and support for new economic structures, and specialists invited for the purpose.

8. The tender commission shall in general comprise 5 to 9 members.

9. The chairman of the tender commission shall be elected by the members of the commission and approved by the corresponding property fund.

10. The tender commission shall determine the terms, procedure, and timeframe for holding tenders.

11. The tender commission shall compile reports on objects of state property to be tendered, and shall arrange for the publication of the reports in the local press and special information bulletins no later than 30 calendar days before the announced date of the tenders.

12. The reports must include the following information on the entities of state property to be offered for tender:

- the tender terms;

- the name and address of the object and the organisation which has the right of economic management;

- the volume and basic list of products (or services), and the numbers and composition of staff of the state property;

- a list of the assets and liabilities of the enterprise;

- the date, time, and place of holding of the tenders;

- the method of payment, and terms for granting the right to pay by instalments, if such is stipulated;

- information on the premises occupied and/or the plot of land, and the terms of use and disposal of such by the property owner;

- the amount of the deposit and the required information about the account to which it must be transferred;

- the address and deadline for acceptance of applications for participation in the tenders;

- the date, time, and procedure for obtaining information about the entity;

- the telephone number for clarification or receipt of additional information; as well as other information at the discretion of the tender committee.

13. The following may be included in the tender terms:

- the obligation to produce or perform certain types of products or services, principally consumer goods and services;

- restriction of retail prices and service fees;

- protection of the ecological environment;

- retention or creation of jobs;

- the bid for the entity;

- restrictions on the resale of the entity to other legal entities and private individuals for the duration of a certain period of time; and other terms at the discretion of the tender commission.

14. If the conditions set forth in points 11-13 of these Regulations are not met, the tender sale of the object of state property shall be prohibited by a higher authority of the property fund, subsequent to the filing of a claim by any of the participants, the local council of people's deputies, or the work collective of the enterprise. Failure to observe the conditions could serve as grounds to render the tender null and void.

III. Tender terms for participants

15. To participate in a tender, a potential bidder must submit to the tender commission an application, and a certificate of transfer of the amount of the deposit to the settlement account indicated in the report.

16. The deposit shall be made by way of a non-cash transfer of funds to the account of the appropriate committee. The amount of the transfer shall be equivalent to 10% of the starting price of the object of state property.

17. The tender application shall include proposals in accordance with the terms set forth by the tender commission.

18. The deadline for accepting tender applications shall be three working days prior to the first meeting of the tender commission.

19. A bidder shall be granted the status of participant in the tender at the time of receipt of written notice of such from the tender commission.

IV. Procedure for holding the tenders

20. Information on individuals who have submitted tender applications, and the content of their proposals, shall be deemed confidential from the start of the first sitting of the tender commission.

21. The meetings of the tender commission shall be held behind closed doors.

22. The sale price shall be determined during the examination of the tenders. It may not be less than 30% below the starting price.

23. The decision on the choice of winner of the tenders shall be taken by the tender commission by majority vote, based on the consideration of all proposals of the participants, according to the tender terms.

24. After the meeting of the tender commission, when the winner is chosen, a report shall be compiled, indicating:

- the composition of the tender commission;

- the tender terms;

- the proposals of the tender participants;

- the rationale for the choice of the tender winner; and

- information on the tender participants.



25. The report shall be signed by all members of the tenders commission and sent to the organisations forming the tenders commission and all tender participants. The tender results may be appealed within 30 calendar days of the date of receipt of the rep ort.

26. The decision of the final meeting of the tender commission when the winner of the tenders was declared shall be approved by the appropriate property fund.

27. In the case of flagrant violations of the tender procedure, the property fund may, within two months from the time that the tenders commission chooses the winner, revoke that decision.

28. In the case of rejection of the tender results, a lack of tenders for the proposed object, or the tender committee's decision not to declare a winner, the property committee may adopt one of the following decisions:

- to declare new tenders, recommending that the appropriate tender commission change the tender terms; or

- to sell the object of state or municipal property at an auction or via transformation into a joint stock company.

V. Settlements Procedure

29. Within 30 calendar days of the date of receipt by the tender winner of a report on the tender results, the buyer shall transfer to the settlement account the monetary sum indicated in the report. The deadline for payment shall be extended for another

30 calendar days if the buyer makes a payment of no less than 50% of the cost of the object. If the buyer fails to transfer the established sum before the indicated deadline, he or she shall be deprived of the right of ownership of the acquired object; th e deposit shall not be refunded.

30. The sum of the deposit shall be returned to all tender participants within 10 calendar days.

VI. The buyer's assumption of the rights of ownership

31. The individual who acquires the object of state or municipal property by tender shall assume the rights of ownership, as of the signing by the members of the tender commission, of the report on the tender results. A copy shall be deemed a provisional certificate of the buyer's rights of ownership.

After payment by the buyer of the full cost of the acquired object, he or she shall sign with the seller a contract of sale of the state property, determining the obligations of the parties in strict accordance with the tender results.

33. In the case of a substantial discrepancy between the actual state of the object of state property at the time of the buyer's assumption of the rights of ownership, and the information submitted to the tender commission, the property fund shall bear pr operty liability according to the decision of a court of law or arbitration tribunal.

34. If an individual acquires the object of state property by tender and does not pay for it by the established deadline and damage is caused to the entity by his or her actions, the sum of such damage shall be exacted from that person according to the de cision of a court of law or arbitration tribunal.

35. Information on the tender results shall be published within 15 calendar days in the local press, and shall contain the following:

- information on the person acquiring the ownership of the object of state or municipal property;

- the terms, approved by the tender commission, of the sale of the object of state or municipal property;

- the final purchase price;

and other information at the discretion of the tender commission or property fund.


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