Privatizations in Georgia

Privatizations in Georgia

The availability of information on issues related to privatization is crucial for investors in Georgia, as investing in Georgia often involves the acquisition of State property.

Meaning Of Privatization

According to the Georgian legislation, privatization means the acquisition of State/Municipal property by individuals and legal entities (including foreign individuals and foreign companies) in accordance with the rules stipulated by the legislation.

This chapter addresses the property which is subjected to privatization.

Property which is subject to privatization

Property in Georgia may be in State, Municipal or Private Ownership.

State property may include State-owned movable and immovable property.

Municipal property includes Municipality-owned movable and immovable property.

Generally, Georgian legislation allows privatization of any State or Municipal property not subject to express restrictions and prohibitions under the law.

Accordingly, Georgian legislation includes an exhaustive list of the property that may not be privatized due to its utmost State or economic importance, Specifically, the following State property may not be subject to privatization:

 

  • Minerals and subsoil.
  • Water resources.
  • Territorial waters.
  • Continental shelf.
  • State forest fund except the woods of former collective and Soviet farms situated within the borders of settlements.
  • Air space.
  • State reserved territory;
  • National parks.
  • Monuments of nature.
  • Protected territory.
    Recreational territories or/and special construction zones determined by the President of Georgia.
  • Objects of historic, cultural and artistic value approved according to the established rule, buildings and facilities of cultural and artistic purpose, also plots of land where the above mentioned objects are located, without adequate conditions and agreement with the Georgian Ministry of Culture and Protection of Monuments.
  • Religious buildings (active and inactive), their remnants, also plots of     land where they are situated.
  • State archives of special historic and cultural importance.
  • State fund of cinema, photo and audio documents of exceptional importance
  • Special archives and funds of the ministries (entities) and scientific and research institutions of
  • Museum collections and funds of special importance.
  • House-museums of special importance.
  • Property used for performing dispatching activity in the energy sector.
  • Property utilized by legal entities of public law where public schools and high educational and scientific institutions are operating.
  • Berths, hydro technical buildings, lighthouses, light signals and waters of seaports of special importance.
  • Motorways (in case of absence of a road of alternative importance);
  • Means of operation and control of air navigation;
  • Runways of special importance.
  • Frequency spectrum.
  • Georgia’s position in the geostational orbit;
  • State pantheons.

Property designated for deploying the Prosecutor’s Office of Georgia, the Ministry of Defense and Ministry of Internal Affairs of Georgia and Special State Protection Service of Georgia in accordance with the rules provided by the Georgian legislation.

 

Where to find information about the objects of privatization

As a rule, the State and Municipal Government publish information on the sale of a particular property in advance.

You can check the following links for more info:

www.eauction.ge

http://privatization.ge

 

Forms of Privatization

 

The privatization of State-owned property is carried out by the property manager. Privatization of Municipal property is carried out by the executive body of the respective municipality (municipal government).

The privatization of State/Municipality owned immovable property is carried out in several forms:

a) Auction (public/electronic);

  • Direct selling;
  1. Direct selling on the basis of competitive selection.

Detailed information about each of these forms is provided below.

Public Auction

The public auction is one of the most widespread forms of privatization. It aims to sell a property at the highest price, and consequently, the participant who offers the highest bid wins the auction. The auction may also be announced under certain conditions. In this case, along with the price, the compliance with these conditions is also assessed.

Electronic auction

Privatization can be carried out by electronic auction. The electronic auction is announced and conducted on a web page designed especially for electronic auctions (www.eauction.ge) or/and on a web-page of the body conduction the privatization, transfer to use or manage the State property. Such an announcement of information about the auction amounts to the official announcement.

 

Right and conditions of participation in the auction

Any person, including foreign citizens and foreign companies, is entitled to participate in the auction and purchase property, wherein the share of the State or municipality is less than 25%. In order to participate in the auction, the interested person must submit an application to the organizer of the auction.

 

Direct selling and direct selling based on competitive selection

Direct selling and direct selling on the basis of competitive selection are separate forms of privatization.
a) In case of direct selling, the criterion for selection is the complete fulfillment of the conditions specified for the purchase of the property.

  1. b) Direct selling can be conducted on the basis of competitive selection. This form is used when there exist several investment related preconditions or alternative proposals by the interested parties.

Privatization of agricultural land

For the purposes of the privatization of State owned agricultural land two cases are identified:

a) Privatization of rented agricultural land and

  1. b) Privatization of non-rented agricultural land.

The privatization of rented agricultural land is carried out via direct selling and the buyer may only be the tenant of the land.

The Law on State Property mentioned the timeframe (the period before 1st May 2011) during which the tenant was entitled to require privatization of rented agricultural land. If the tenant would not request privatization of the land before the expiration of this period, privatization would take place in accordance with the rules applicable to un-rented land.

Privatization of agricultural land which is not rented may be accomplished in the following forms:

  • Auction
  • Direct Selling;
  • Direct selling on the basis of a decision of the President of Georgia;
  • Direct selling on the basis of competitive selection by decision of the President of Georgia;

 

Privatization of stocks and shares

Apart from tangible property, Georgian legislation provides for the privatization of State or Municipality owned intangible property (stocks and shares). The State/Municipality may be the founder of a Joint Stock Company or Limited Liability Company and/or non-entrepreneurial (noncommercial) legal entities and/or the owner of the shares.

The privatization of shares and stocks can be conducted via auction or direct selling (including direct selling on the basis of competitive selection), as well as privatization of shares or stocks or certified stocks directly or by the agent, in forms of public or private offer, also in the forms in accordance with the established practice at the recognized foreign stock markets or at international capital markets for that time.

The privatization of stocks and shares is carried out based on the decision of the President of Georgia with the initiative of the property manager or, in special cases, of the Government of Georgia. The rules for privatization and transfer to the use of the State property are defined by the Minister of Economy and Sustainable Development of Georgia.

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