Under Decision 41/2015 issued on 15 September 2015, the Prime Minister introduced a raft of new measures to facilitate the sale of State shares in public unlisted joint stock companies with (Unlisted JSC). The new measures do not apply to State shares in listed JSCs include JSCs registered for trading on Upcom market. In particular,
- For the first time, Decision 41/2015 allows for public bidding by professional or strategic investors for a single large block of shares (block bidding) of the State owner representative in an Unlisted JSC. Under previous regulations, the main method for a State owner representative to sell State shares in an Unlisted JSC is to offer such shares to retail investors via a public bidding, who may purchase only a small part of the shares offered. This method has discouraged many professional or strategic investors from participating the bid as they are not certain that they can acquire a meaningful stake in the Unlisted JSC;
- In a block bidding, the State will tender a single large block of shares (not less than 5% of the charter capital of the Unlisted JSC) and will sell that block to the highest bidder. The tender needs to be conducted by a stock exchange unless a direct sale is permitted by the Prime Minister;
- An investor participating in the block bidding is expressly allowed to conduct due diligence into the Unlisted JSC. This should mitigate the potential insider trading risk;
- An investor participating in the block bidding is also exempted from tender offer requirements which will usually trigger if the investor holds 25% or more of the charter capital of the Unlisted JSC. While this exemption is favourable to the State owner representative, it takes away a chance for other minority shareholders in the Unlisted JSC to cash out; and
- Decision 41/2015 also clarifies whether an Unlisted JSC, which used to be an equitised State-owned enterprise (Original SOE) is required to follow the old equitisation plan of such Original SOE. Under Decision 41/2015, if Unlisted JSC is more than 12 months old then the Unlisted JSC does not need to follow the equitisation plan of the Original SOE and will need to follow the new regulations on management of State capital.