A significant legislative development has been enacted in Uzbekistan with the approval of Law LRU-907, “On Privatization of State Property.” Signed by the President on February 14, 2024, this law came into force on May 16, 2024. The full text of the law is available in Uzbek [here]

Aligning with Strategic Goals
This legislation is part of the broader “Uzbekistan – 2030” strategy and the 2021-2025 Strategy for the Management and Reform of State-Owned Enterprises. The primary aim is to reduce state involvement in the economy and enhance the investment climate significantly.
Key Developments

• Relevance to Businesses

If your company is interested in acquiring state-owned property complexes, buildings, structures, or unfinished construction projects in Uzbekistan, this law is highly relevant.

• Regulatory Oversight

The State Assets Management Agency of the Republic of Uzbekistan (the Agency) is the authorized body overseeing the privatization process. The Agency’s responsibilities include:

• Implementing state policy on property privatization
• Acting as the seller of state properties and signing Sale and Purchase Agreements (SPAs)
• Determining privatization methods and setting starting prices
• Creating and executing privatization programs
• Monitoring the privatization processes

Special authorized bodies designated by the president will handle the privatization of large state-owned enterprises.

• New Privatization Procedure

The privatization process involves several stages:
1. Program Formation

• The Agency drafts and approves the privatization program.
• Goals, objectives, and a list of properties for privatization are set.
• Approval is obtained from various government bodies depending on the property’s ownership.

2. Property Preparation

• A privatization roadmap is drafted.
• Valuation and inventory are conducted to enhance investment appeal.

3. Property Valuation and Pricing

• Valuation organizations are involved to issue valuation reports.
• The Agency sets the starting price based on these reports.
• Methods of Privatization

The law provides for eight methods to privatize state properties, including electronic auctions, competitive bidding, public negotiations, and leasing with subsequent sale.

• Responsibilities of Purchasers

Purchasers must comply with environmental and maintenance standards and consider the limited use of land by others. The Agency monitors compliance with SPAs, ensuring obligations are met and payments made.

Special Provisions for Large state-owned Enterprises
A Presidential Decree issued on April 19, 2024, outlines measures for transforming and accelerating the privatization of large state-owned enterprises. Key initiatives include:

• Establishing corporate secretariats for governance improvement;
• Implementing updated corporate governance rules and ethics codes;
• Conducting board meetings electronically.

This Presidential Decree has also set out significant measures for the privatization of large state-owned enterprises in Uzbekistan. This decree approves:

• A list of stock packages to be offered in public auctions on the international market, with the involvement of professional consultants.
• A list of large enterprises with state participation, whose shares will be offered through initial public offerings (IPO) and/or secondary public offerings (SPO) on the international stock market.
• Professional consultants are being engaged to prepare for privatization and achieve high international ratings for these enterprises.

Looking Forward
Starting July 1, 2024, large enterprises will implement these changes, enhancing transparency and efficiency in governance. Details about specific assets, programs, bidding processes, and results will be available on the Agency’s official website. For more information and to stay updated on the latest developments, visit the Agency’s official website.
This comprehensive overview provides valuable insights into the new privatization law and its implications for businesses and investors. Our firm remains committed to supporting our clients through these significant changes, offering expert guidance and legal services.

DISCLAIMER:
The content of this article is provided for informational purposes only and should not be construed as legal advice. It is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional counsel and should not rely on it as a substitute for obtaining legal advice from a qualified attorney licensed in their jurisdiction.
 
Gulnoza Abdurakhmonova