Auction Regulations
Prior to any discussion, it should be noted that, similar to tender laws, auctions are governed by specific rules and conditions. To understand these regulations, familiarity with certain terms is essential. According to Article 1 of the Auction Law, the following terms are defined:
Auctioneer:
The Privatization Organization, auctioneer, and participating natural or legal persons.
Transaction Subject:
Shares, partnership interests, pre-emptive rights derived from shares and partnership interests, ownership rights, enterprises, and rights of exploitation and management owned by the government in state-owned companies.
Law:
The Law for Implementing the General Policies of Article 44 of the Constitution.
Enterprise:
An economic unit (natural or legal) engaged in the production of goods or services.
Technical Working Group:
A group formed in two-stage auctions to evaluate the qualifications of bidders, based on the “Executive Directive for Selecting Strategic Customers and Verifying Managerial Competence” and the “Executive Bylaw on Divestment Methods,” and tasked with determining and identifying the Divestment Board.
Executive Board:
The executive board of the Privatization Organization.
Divestment Board:
The board stipulated in Article 39 of the Law for Implementing the General Policies of Article 44 of the Constitution.
Organization:
The Privatization Organization.
Accounting Services Scope:
According to Article 2 of the Auction Law, matters related to sales include the following items:
Cash portion
Installment portion (equal or stepped installments)
Maximum installment period
Number of installments
Time intervals between installments
Grace period for the first installment (excluding profit from installment sales)
Members and Duties of the Auction Commission:
According to Article 3 of the Auction Law, the auction commission comprises the following members:
Two members of the executive board of the Organization, with voting rights
Deputy for Divestment and Share Affairs (representative of the Organization’s head and chair of the commission), with voting rights
Accountant and Director-General of Financial Affairs, with voting rights
Director of Security, without voting rights
Director-General of Marketing and Enterprise Divestment, without voting rights (serving as secretary of the commission)
Note: The commission is officially convened with a majority of members present, including at least three voting members. Decisions are valid with the majority vote of voting members.
Duties of the Commission:
According to Article 4 of the Auction Law, the commission’s duties include:
Convening auction commission meetings on the date specified in the auction announcement
Reviewing bidders’ proposals for completeness of documents, signatures, legibility, and unconditional nature of price proposals (formal evaluation)
Evaluating proposals and determining acceptable proposals based on auction conditions and documents
Referring technical evaluation of proposals to the technical working group (in two-stage auctions)
Determining first and second winners of the auction; referring to third and subsequent proposals if they meet or exceed the base price
Preparing auction minutes
Deciding on auction renewal or cancellation
Complaint Review Board:
According to Article 5 of the Auction Law, reviewing, opining, and deciding on complaints and disputes between bidders and auctioneers falls under the jurisdiction of the arbitration board, as per Article 30 of the Law for Implementing the General Policies of Article 44 of the Constitution.
Classification of Auction Types:
According to Article 6 of the Auction Law, auctions are classified into two types:
Single-Stage Auction: An auction where no evaluation of bidders’ qualifications or proposals is required.
Two-Stage Auction: An auction where evaluation of bidders’ qualifications or proposals is conducted based on conditions set by the Divestment Board, involving a technical working group to assess qualifications or proposals. The results are reported to the auction commission.
Determining the Divestment Method:
According to Article 7 of the law, divestment of enterprises may be conducted in cash or cash-and-installment terms, as proposed by the Organization and approved by the Divestment Board.
Pricing:
According to Article 8, the base price of shares, partnership interests, rights, and other assets of enterprises subject to divestment is determined within the framework of “Resolution No. 63/2/196514/210678 dated December 20, 2008, by the Supreme Council for Implementing the General Policies of Article 44 of the Constitution,” as per the “Executive Bylaw on Pricing Methods for Enterprises and the Application of These Methods.” The base price is proposed by the Organization and approved by the Divestment Board.
Offer Announcement:
According to Article 10, the following must be included in the offer announcement published on the internet portal, with a summary containing items (1), (3), (4), (7), (9), and (17) published in two widely circulated newspapers and, if necessary, other media:
Name of the enterprise whose shares are being divested
Business activities of the enterprise
Number of shares to be divested and their percentage of total shares
Divestment method
Disclosure of major shareholders’ composition
Location for obtaining forms and information
Announcement of the base price of shares to be divested
Readiness for site visits by prospective buyers
Amount of upfront cash payment, installment schedule, and conditions
Necessary guarantees for receivable claims in cases of cash-and-installment divestment
Financial and non-financial incentives for buyers and how commitments are obtained and discounts granted
Number and conditions for preferential share allocation to managers and employees of the enterprise and other experienced specialists
Statement that share transfer is contract-bound and participation implies full acceptance of terms
Deadline and method for proposal submission
Amount of bid deposit
Requirement for clear and specific proposals submitted in sealed envelopes by the deadline
Date for opening proposal envelopes (auction date)
Freedom for bidders to attend the opening session
Priority for cooperative sectors under equal conditions
Enterprise size based on Article 3 of the “Directive on Obtaining Commitments, Including Terms, and Granting Discounts to Buyers of Controlling Shares in State-Owned Companies”
Restriction of participants to persons under Article 44 of the Law for Implementing the General Policies of Article 44 of the Constitution
Buyer’s commitment to comply with Article 6 of the Law for Implementing the General Policies of Article 44 of the Constitution and its amendments
Ownership limits for state bank shares: 10% for public joint-stock companies, cooperative joint-stock companies, or non-governmental public institutions, and 5% for natural persons and other legal entities
Exclusion of persons banned from transactions by the Land Registry Organization
Exclusion of persons with overdue installments to the Organization for block purchases of other enterprises
Compliance with the directive for protection and maintenance of divested properties approved by the National Security Council (for block divestments)
Compliance with guidelines from the Passive Defense Organization for sensitive and security-related activities
Compliance with Articles 44, 45, and 46 of the Law for Implementing the General Policies of Article 44 of the Constitution; otherwise, violations will be reported to the Competition Council
Other conditions as approved by the Divestment Board
Announcement Interval:
According to Article 11, the interval between the announcement and the auction must be at least 20 days.
Note: The Divestment Board may decide to reduce this interval based on circumstances.
Bid Deposit:
According to Article 12, the bid deposit is calculated as 3% of the base price.
Proposal Submission:
According to Article 13, participants must submit their proposals as follows after receiving documents:
Obtain the auction participation form and other financial/technical information from the auctioneer and complete it
Submit proposals by the deadline specified in the auction announcement
Obtain a receipt for proposal submission
Bidders must submit documents and proposals in separate sealed envelopes:
Guarantee (bank receipt for deposit payment) (Envelope A)
Technical and commercial proposal (Envelope B)
Price proposal (Envelope C)
All envelopes must be placed in a suitable outer envelope, sealed and stamped. The deadline for submission is the day before the auction.
Article 14: Auctions may be held with a single bidder.
Article 15: No bidder may submit more than one proposal for a single offered subject.
Note: If multiple subjects are offered, bidders must submit separate proposals for each subject in compliance with Article 13.
Article 16: The auctioneer must register and safeguard all received proposals until the opening session.
Article 17: The deadline for submission, modification, replacement, or withdrawal of proposals is the end of the envelope submission period.
Opening of Envelopes:
According to Article 18, bidders’ envelopes are opened at the designated time and place.
According to Article 19, the opening process is as follows:
A. Single-Stage Auctions:
Prepare and announce a list of bidders for each enterprise to commission members and attendees
Open guarantee envelopes (Envelope A) and verify payment by the accountant
Open price proposals (Envelope C) and check for completeness of documents and signatures; set aside unacceptable proposals
Prepare, draft, and sign minutes of proposal opening by the auction commission
Return price and guarantee envelopes of rejected proposals to the beneficiaries
B. Two-Stage Auctions:Prepare and announce a list of bidders for each enterprise to commission members and attendees
Open guarantee envelopes (Envelope A) and verify payment by the accountant
Open envelopes containing technical and commercial proposals
Deliver technical and commercial envelopes to the technical working group
Open price proposals (Envelope C) and check for completeness of documents and signatures; set aside unacceptable proposals
Prepare, draft, and sign minutes of proposal opening by the auction commission
Return price and guarantee envelopes of rejected proposals to the beneficiaries
Article 20: In two-stage auctions, the time and place for opening price envelopes (Envelope C) will be announced during the opening session (Envelopes A and B).
Article 21: The Organization has no obligation toward proposals lacking signatures, ambiguous, conditional, tampered, without deposit, or submitted after the deadline.
Verification of Technical and Financial Qualifications of Bidders (Specific Conditions):
Article 22: In two-stage auctions, after the technical working group approves bidders or proposals, the price envelopes of qualified bidders are opened in the second-stage auction session.
