Changes Made to Law on Privatization

In June changes in the Federal Law No 178-FZ “On privatization of the state and municipal property” are coming into effect, which will may make the privatization relationships more transparent and open.  


Changes envisage 17 novels to this law, the most important of which are the following: 


  1. Possibility of forecast privatization plan adoption for the period of up to 3 years was introduced. At present such a plan should be approved annually.
  2.  Market mechanism for the definition of the privatized property price is established on the basis of the report on the property estimation, concluded in concordance with the legislation on valuation activities. The notion of “normative price” is excluded from the law, since there is no necessity in it in practice, there being initial price and stop-out price. The abolition of the statements on normative price will allow eliminating privatization processes inefficiency, which was connected with the fact that the normative price did not often reflect the real cost of the privatized property.
  3. Unjustified limitations for federal property privatization by its contribution to the statutory capital of an open joint-stock company were abolished. This, for instance, will allow fast solution of questions on creation of vertically integrated structure under the control of the government.
  4. New procedure for sale of state or municipal property in the form of public offering was established. Privatization will be carried out with the use of an open form of offering for property purchase submission within one procedure of such sale conduction while at present the customers can apply in a closed form within certain periods of time of initial price decrease. The open form of offering on property purchase submission within one procedure of trading will secure more transparent and fast property sale.
  5. Legal conditions for the use of electronic bidding when privatizing state and municipal property are created. This form of privatization will allow increasing the efficiency when selling the state and municipal property and diminishing corruption component of privatization. 


Simultaneous fulfillment of these suggestions should increase the economic efficiency of state and municipal property privatization by expanding transparency, decreasing corruption and creating competing environment when carrying out privatization procedures. Besides, these novels will allow execution of measures established by the National plan for corruption counteraction, which envisages the use of innovative technologies of the state management and administration and secures the transparency of management processes. 

It is obvious that the novels on their own cannot exclude the abuses in the field of privatization. The exception should also be taken into account: the changes are not applied to the relationships that arise when privatizing the federal property in concordance with the decision of the RF Government, adopted in order to attract the investments, stimulate stock market development, conduct modernization and technological development of the economy. However on the whole the novels introducing elements of market mechanisms in privatization relationships leave far less space for abuse as compared with the previous version of the law.  

D.A. Kazantsev, Senior Legal Expert, Department of the Appraisal and Development of Normative-legal Acts