Law of Ukraine
“On Privatization Specifics of Coal Mining Companies”
Date of entry into force:
May 6, 2012
The Law determines the specifics for legal, economic and organizational regulation of privatization of state property of coal mining industries, and specifics of the work in the post-privatization period.
Article 1 of the Law provides definitions of terms used in it. For example, a coal mining company is a mining company with the main type of business activity being deep or open coal mining, which can include mines, mining departments, quarries and other separate divisions carrying out auxiliary functions.
According to Article 2 of the Law, privatization specifics for coal mining companies are:
- sale of all shares owned by the state (without retaining blocks of shares in state ownership) in statute capitals of joint stock companies created in the process of privatization or corporatization of state-owned coal mining companies;
- a moratorium on enforced sale of property of privatized objects, by termination of the execution procedure, and a moratorium on initiating cases on bankruptcy of coal mining companies, only in respect of debts existing as of the time of privatization completion – for a term of up to 3 years after completion of privatization. The moratorium does not apply to decisions related to payment of wages, severance payment, other payments (compensations) to employees in relation to labor relation, compensation of material (property) damages caused by injury, other deterioration of health or death, collection of alimonies, decisions to collect overdue contributions to the funds for mandatory state social insurance and the single contribution for mandatory state insurance to the bodies of the Pension Fund of Ukraine, or decisions to collect overdue payments for power, power transmission and distribution;
- transfer of the valid special permits for mining of natural resources to the buyer (investor) of the privatization object, without an auction.
Article 4 of the Law classifies the following as privatization objects:
- coal mining companies as integral property complexes;
- mines (mining departments) as integral property complexes;
- quarries as integral property complexes;
- shares owned by the state in statute capitals of joint stock companies created in the process of privatization or corporatization of state coal mining companies.
According to Article 5 of the Law, entities involved in privatization are:
- state privatization bodies;
- buyers (investors) and their representatives;
- the central executive authority that provides for creation and implementation of state policy in the coal sector (hereinafter referred to as “the body authorized to manage state property”).
Privatization preparation measures are determined in Article 6 of the Law.
Article 7 of the Law envisages that privatization of the above objects is carried out by:
- sale through an auction;
- sale through an investment competition;
- other methods provided for by the legislation in the issues of privatization.
The method for privatization of a privatization object included in the list of privatization object is selected by state privatization bodies jointly with the body authorized to manage state property, according to the criteria approved by the Cabinet of Ministers of Ukraine.
Social guarantees for employees of privatized companies and companies being privatized are established by Article 10 of the Law.
Each of the employees of a company being privatized is granted the right of priority purchase of shares with the nominal value of 45 personal exemptions. The right of privileged purchase of shares also applies to former employees of the company that retired, were dismissed due to changes in the production and labor organization, including liquidation, reorganization, bankruptcy, change of the company profile, or downsizing, and have not been working in other companies since their dismissal; persons that, according to the legislation, have the right to return to their previous workplace in the company; disabled persons dismissed due to injury or occupational disease; employees dismissed for health reasons; and heirs apparent of employees that died at work. The price of one share for privileged sale is set at half the nominal value. Additional terms for privileged sale of privatization objects may be established by other laws (Article 11 of the Law).
According to Article 13 of the Law, in order to avoid bankruptcy of coal mining companies and preserve the raw material base of the metallurgy and energy sectors, after a decision to privatize a company has been made and until privatization is complete, a moratorium is imposed on enforced sale of property of the privatization object, by terminating execution proceedings, as well as a moratorium on initiating bankruptcy cases against coal mining companies. A moratorium on enforced sale of property of privatized objects, by termination of the execution procedure, as well as a moratorium on initiating bankruptcy cases against coal mining companies, only in respect of debts existing as of the time of privatization completion, are imposed for a term of up to 3 years after completion of privatization.
The terms of sale and purchase agreements are determined by Article 14 of the Law.
According to Article 15 of the Law, control of adherence to the terms of sale and purchase agreements, and monitoring of the economic efficiency of the privatized object are carried out according to the procedure established by the Cabinet of Ministers of Ukraine. Control of adherence to the terms of the sale and purchase agreement, except for monitoring implementation of mobilization and environmental tasks, should not be carried out for more than 5 years. The above procedure shall provide for, among others:
- dividing spheres of responsibility between authorities that control adherence to the terms of sale and purchase agreements;
- measures to organize monitoring of the agreement terms fulfillment;
- procedure for carrying out such measures and recording the results;
- establishing the norms for economic efficiency of the object.
Change of company profile, conservation or work termination of coal mining companies during the effective term of the sale and purchase agreement can be carried out exclusively after approval with state privatization bodies and the body authorized to manage state property, according to the procedure approved by the Cabinet of Ministers of Ukraine.
The Law also introduces appropriate amendments to the Code of Ukraine on Bowels, the Laws of Ukraine “On Concessions”, “On Restoring the Solvency of a Debtor or Declaring Them Bankrupt” and “On Execution Procedure”, and the Mining Law of Ukraine.