The implementation of privatization

2/12/96

Framkvæmdanefnd um einkavæðingu

Also see:

• Iceland's privatisation programme 1991-2000

Announcement from the Prime Minister's Office

For the purpose of coordinating procedures and in order to ensure professional preparation for the sale of state-owned enterprises, the following was agreed upon at a Government Meeting on 9 February 1996:

Rules procedures regarding the
implementation of privatization

is in the hands of the Government and a Ministerial Committee under its auspices, consisting of four members. The members of the Committee are the Prime Minister, the Minister for Foreign Affairs, the Minister of Finance and the Minister of Industries and Commerce. An Executive Committee operates under the auspices of the Ministerial Committee (Executive Committee on Privatization) which is in charge of preparations and coordination of projects in the field of privatization. The Committee is in charge of converting state-owned enterprises into limited liability companies, sale of state-owned enterprises, sale of state properties, sale of state shares in other enterprises as well as putting up for tender projects and services under the auspices of the state and state institutions. The Executive Committee consists of representatives appointed by the abovementioned ministers. When specific privatization projects are dealt with, a representative of the ministry concerned joins the Committee. The Executive Committee is assisted by 2 -- 3 employees of the Ministry of Finance.

2. Coordination. Coordination both upon privatization, for instance when state-owned enterprises are converted into limited liability companies, in matters concerning the employees' rights, and upon sale is ensured by the Executive Committee.

3. Review. Before the ministry concerned decides to change the legal form of an enterprise or to sell an enterprise, a detailed review is conducted on the activities of the enterprise and its operating environment and how privatization will influence these factors. Such a review shall be made by the Committee on Privatization. The review shall involve an assessment of the enterprise's market value. In assessing the market value, the future flow of revenue shall be estimated, computed to the present value. Other methods shall also be applied for reasons of comparability. The purpose of the review is to ensure adequate information on the financial status of the enterprise before a decision is made to sell.

4. Announcements. The intended sale of enterprises is, in all instances, to be publicly announced in order to ensure that all interested parties have equal opportunity to make offers.

5. Selling procedure. The ministry concerned decides, upon receiving proposals thereof from the Executive Committee on Privatization, which selling procedure is to be applied each time, i.e. whether an enterprise is to be sold according to a public stock offering or whether invitations to buy the enterprise are to be offered.

6. Sale. In selling an enterprise according to an offer, the offer is to be assessed for cash price, taking into account the required investment return in the last offering of government bonds. Furthermore, the collateral put up for payment by the party that makes the offer shall be assessed separately. The offer that secures the best payments and the highest cash price shall be accepted, without prejudice to point 8. All offers considered unsatisfactory shall be turned down. In the process of selling enterprises according to a public stock offering, the value of each share shall be fixed. If demand turns out to be greater than supply, stocks shall be sold in chronological order based on the time when confirmed requests for buying were registered, without prejudice to point 8.

7. Securities brokerages. The review of companies, cf. point 3, the consultations and supervision of sales, cf. points 5 and 6, shall be conducted by certified securities brokerages and by the consultants that they call on for advice. Securities brokerages shall be selected by the ministry concerned, on receipt of recommendations made by the Executive Committee on Privatization, preceded by a tender under the auspices of the Committee where services and prices are defined.

8. Restrictions on sale to individuals. Restrictions on party's, or financially linked parties', purchase of stocks may be imposed in order to distribute ownership of enterprises sold according to a public stock offering. It is permitted to reject an offer from parties if selling to them is liable to reduce active competition on the market where the enterprise is operating and if such sale does not comply with the prescribed objectives, thus possibly causing injury to that industry. Foreign parties have the right to purchase enterprises within the framework of law on investment of foreign parties in Iceland.

9. Special rights of state-owned enterprises. Preceding the sale of a state-owned enterprise, all special rights according to law shall be abolished. No agreements providing for special rights of the enterprise to provide services to state institutions shall be included in the sale. In the same manner, any obligation of an enterprise to provide services at a reduced price or free of charge shall be abolished. The Competition Council and the Competition and Fair Trade Authority shall monitor privatized enterprises in accordance with the Law on Competition.

10. Deviations. The ministry concerned may, in special circumstances after having obtained a proposal from the Executive Committee on Privatization, grant exceptions from the abovementioned Rules. All such deviations shall be reported to the Government before they take effect as well as publicly upon conclusion of discussions within the Government.

11. Information. The ministry concerned shall as soon as possible provide information to the media and other parties on the state of privatization projects in their field. The Executive Committee on Privatization shall be responsible for public promotion of the Government's privatization policy. The Executive Committee shall publish an annual report on privatization where the enterprises sold by the Treasury are specified as well as the process of their sale. The report shall also specify schemes on converting state-owned enterprises to limited liability companies, cf. point 2 and 3.

12. Scope. These Rules replace Rules by the same name from 12 October 1993 and apply to all enterprises sold or intended to be sold by the Treasury, entirely or partly. The Rules also apply to shares in enterprises sold, or intended to be sold, by the Treasury. The ministry concerned and the Executive Committee on Privatization are responsible for the implementation of these operating procedures. This is hereby publicly announced.