Privatization in the 3^rd & 4^th Economic, Social

and Cultural Development Plan of the Islamic Republic of Iran

A: The Privatization Organization:

Formation & Establishment 

The Privatization Organization has been incorporated based on Article 15 of Islamic Republic of Iran 3^rd Economic, Social and Cultural Development Plan ratified in 2000, by changing the articles of association of the former Financial Organization for Promotion of ownership of Production Units.

 Its articles of association was approved by the cabinet on April.18, 2001 and upon verification by Guardian Council, it was notified on May.6, 2001. 

This organization has practically commenced its activities with the new objectives and tasks since June.2001. The Privatization Organization is a governmental company affiliated to the Ministry of Economic Affairs and Finance, having legal entity and financial independence and the director of executive board and its managing director is the Deputy Minister of Economic Affairs and Finance. 

By issuance of the Decree of Cabinet in 2001, the Privatization Organization, while performing its entrusted tasks and duties, was appointed as a specialized holding company in order to take action for offering and sales of its own shares in sub-companies, according to the rules and regulations. 

Since 2000 by now, the secretariat of the High Commission of Divestiture is located in Privatization Organization and based on the ministerial order of the Minister of Economic Affairs and Finance, the director managing of organization is considered as the secretary of the High Commission of Divestiture.

Objective

 The objective for execution of  privatization plan in Iran  according to provisions of article  9 3^rd & 4^th  Development , Economic  , Social and Cultural Plan of Islamic Republic of Iran, inter alias are  economic growth , promotion of economic efficiency and productivity of materials and human resources , increment of compatibility and partnership of private sector in economic activities and rationalization of size of the government and reduction of financial and management burden in handling the economic activities .So this organization is active for materialization of the said objectives aiming on goals stipulated in its legal articles of association based upon execution of government privatization policies through divesting and sales of governmental companies shares to the private and cooperatives sectors .

 Fundamental Tasks and Duties

-               To issue the suitable approaches for prompt and facile  access to development of general partnership for materialization of efficiency promotion and increment of material and human resources efficiency and development of capabilities of private and cooperative sectors and its submission to High Commission of Divestiture and other concerned authorities.

-      -  Procurement by proxy in divesting the shares of  state companies which their duties have been determined based on related rules and regulations

 -  Price fixation and offering and assignment of the shares of qualified companies  for divesting according to the approved time scheduled plan

 -  Execution of the determined policies by High Commission of Divestiture

 - To perform any suitable operations and services for execution of plan for divesting the shares and management of governmental companies , and privatization in     context of rules and regulations

 - Supervision on exact execution of the provisions of the contracts concerning divesting, management and lease and to perform the affairs entrusted to the            organization according to the contracts.

 - To perform any other tasks and duties for divesting the shares and privatization that is borne to the organization in context of 5-year Development Plans.

Former Financial Organization for Promotion of Ownership of Production Unit

          The Financial Organization for Promotion of ownership of Production Units, which has been determined as Privatization Organization in Islamic Republic of Iran 3^rd Development , Economic  , Social and Cultural 5 Years Plan , was established in 1975 as a governmental company affiliated to the Ministry of Economic Affairs and Finance based on note 4 Singled Article Act for expansion ownership of entities. It has commenced its activities notably aimed on sharing the workers in factories ownership by granting the credit and facilities and to perform any measures led to development of the manufacturing units ownership all over Iran.

Main Important objectives and legal Duties as of 1975 up to 2000 

1. Sharing the workers and farmers in ownership of entities/enterprises based on Act concerning development of entities/enterprises ownership ratified in 1975
2. To perform the executive measures and divesting the shares to the workers and employees of companies in execution of the note 3, approval No.H109/T/5283 dated June.19, 1991 by the cabinet.
3. To perform the executive measures and divesting the shares to the workers and employees of the state units in execution of the note 3, clause 6, Act concerning divesting the governmental shares and government owned shares to the war veterans and Workers ratified on Aug.3, 1994 by Islamic Consultative Assembly.In execution of para.C, note 35 of State Budget Act of 1999, the responsibility and administering the commission secretariat note 35 as of 1999 to 2001 shall be borne by the Financial Organization for Promotion of ownership of Production Units.
4. Based on clause 15 of 3^rd Development, Economic, Social and Cultural 5 Years plan, by changing the articles of association of Financial Organization for Promotion of ownership of Production Units, the title of the organization has been converted to the Privatization Organization and its objectives and tasks have been determined based on requirements and mechanism of Privatization 5 year plan with the concept of divesting the shares of SOES.

 B: The Executive Mechanism for Shares Divesting:

Functions of the Privatization Organization

In stages of divesting the governmental companies shares, based on the rules and regulations of Islamic Republic of Iran 3^rd & 4^th Economic, Social and Cultural Development Plan, the Privatization Organization has two fundamental functions:

 Firstly: This organization has been defined in context of one specialized holding company as a public entity and the function of such company is in accordance with the 3^rd Development Plan Code.

Secondly: pursuant to the Article 15 of 3^rd Development Plan , the specialized holding company shall take action for signing the power of attorney with the Privatization Organization for determining the shares basic price and meeting the stages for sales of shares, upon approval and confirmation of the names of companies which should be sold by High Commission of Divestiture  and the cabinet  it is containing the time scheduled plan and sales method , in the other word Privatization Organization in divesting the public entities  shares , as a concentrated and independent institution , has liability for receiving the required documentation , shares evaluation , obtaining the power of attorney for sales from the specialized holding company , sales public declaration in widely circulated dailies and taking action for divesting the shares of public entities .

 To this effect based on the executive mechanism for divesting the shares of governmental companies, based on provisions of 3^rd & 4^th Development Plan are inter alias as follows

First - Stages: prior to divestiture

1. The public entities are organized in context of specialized holding companies. The specialized holding companies, if requires, correct the structure of the public entities and render the proposal to secretariat of High Commission of Divestiture for determining the status.

2. The High Commission of Divestiture shall consider, confirm and recommend the list of companies which could be sold, dissolution, integration and their time scheduled plan and sales method and shall offer the same to the Cabinet of Ministers.

3. The Cabinet of Ministers   shall study and approve the said list including amount of divestiture, sales method and time scheduled plan.

4. The Specialized Holding Company shall submit the power of attorney to Privatization Organization for meeting the divestiture stages and shall hand over the financial papers and documentation accompanying the required information, accordingly.

5.   The Privatization Organization upon obtaining the required documentation , shall study and consider the ways and means for shares classification  , shares basic price , the ways and means for obtaining the transaction price and also the amount of preferred shares which could be divested to the employees of that company in accordance with the governing rules and regulations and shall take action for obtaining the required permission including the shares basic price from High Commission of Divestiture.

Second – Stages: within Divestiture

1. The approved companies for divestiture are divided into two types in view point of admission or non admission to Exchange Market, may concern. Divestiture of the companies admitted in Exchange Market is fulfilled necessarily by exchange method and divestiture of the other companies is performed through tender bid. Therefore selection of exchange method or tender bid is subject to proportionate of company status in view point of its admission or non-admission in exchange. The Privatization Organization does not absolutely use the negotiation in divestiture.

2. Gradual sales of shares to the public in exchange method are performed at the same price as stipulated on the board. In other word Privatization Organization observes the rules and regulations of Exchange Market and the said shares do not need the separate pricing. Sales of classified (block) shares of the Exchange Companies are performed in accordance with the By-Law approved by the Cabinet of Ministers by taking advantage of the company shares transaction average price at proposal of Privatization Organization and approval by High Commission of Divestiture.

3. Sales of the non-exchange companies shares are done by publishing the notice in widely circulated dailies and through tender bid and by fixing the basic price, in accordance with the by-law approved by Cabinet of Ministers. The official experts to Justice Administration assess the basic price of the shares by taking advantage of the standard and professional method mentioned in the by-law approved by Council of Ministers and based on the same the basic price is offered and approved by Divesting High Council.

4. The Privatization Organization, in any methods of exchange or tender bid, fulfills shares offering through publishing the shares sales notice in widely circulated dailies for public notice and in two instances. In the said sales notice , the basic price of  the shares , amount of preferred shares , terms and conditions for payment of transaction price and other cases stipulated in the Act are stipulated . Therefore offering the shares is done in a fully compatible atmosphere.

Third – Stages: after divesting

1. The Privatization Organization in major divesting, including tender bid and/or exchange, divests the shares in cash and on installments basis based on the published notice and pursuant to the application of the purchaser. In this condition while taking the required bonds, shall hand over the envisaged shares at bond of the organization, so there is possibility for supervision on purchasers after divesting.

2. The Privatization Organization while concluding the divesting contract , shall supervise on provisions and conditions stipulated in the contract and shall take action for obtaining the installments of the purchaser on due time and in case on non payment on time , shall make the required legal actions and measures.

3. The privatization Organization supervises on the ways and means for convention of the company general meetings during re-payment of the installments by the purchaser according to the concluded contract and any sales of company assets and properties shall be possible exclusively by written permission of the organization.

4. The Privatization Organization , shall take action for rendering the facilities including discount in profit of the sales on installments basis and prolongation of the installments re-payment period for maximum two another years , in case of effective and suitable measures by the purchasers including employment increment , production increase , sales and profitability and the new investments as well.

5. The Privatization Organization shall render the required supervision reports to the authorities dealing with and policy makers like Divesting High Council, Council of Ministers, the esteemed president and the esteemed Islamic Consultative Assembly, within the duration for transfer and assignment of shares.