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Part 4
Legal Status of the Privatized Enterprises

The majority of the privatization transactions concluded up to now involve the sale of separate parts or entire enterprises (according to Chapter VI of the Privatization Law). The number of enterprises privatized through sale of interests and shares is smaller. To a great extent this is determined by the legal status of the privatized enterprises. In most cases the privatized fixed assets, separate parts or entire enterprises under Chapter VI of the Privatization Law become part of the assets of the buyer company. As a result, the corporate body of the privatized state-owned enterprise is either subject to termination or has to indicate the changes in capital with the sale of the respective separate part or fixed asset.

Typically, when incorporated in the newly formed or already operating private company the state-owned enterprises privatized in this manner constitute the principal part of its assets. This is particularly true in cases when the buyers are smaller or newly formed companies, which seems to speak of the critical role that privatization is to play for the future development of this type of economic agents. In this sense it is closely related to the process of formation of new firms or to the development and expansion of the activity of already existing private enterprises.

When the buyers under the provisions of Chapter VI of the Privatization Law (privatization of entire enterprises or separate parts thereof) are larger private companies, there are cases when the acquired enterprise becomes a subsidiary company or branch.

Even if more limited in the practice to date, privatization through sale of interests and shares of commercialized state-owned enterprises will predominate in the future owing to the nature of the changes in the existing regulations and legislation. The post-privatization outline of the legal state of the enterprises in this type of transaction is the following:

- preservation of the corporate body of the enterprise with a registration of the changes in ownership;
- acquisition on preferential terms of part of the interest or share by the staff (there are nearly no instances of failure to use this preference);
- when the buyer of the majority share is not the staff or part of the staff, in a number of cases those who have acquired a share on preferential terms wish to sell it at the higher price to the major shareholder. Even if economically and socially justified, this possibility has been abolished with the changes in the Privatization Law.


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