|
Based on Article 24. Paragraph 5. of the Law on Privatization ("Official
Gazette of the Republic of Serbia" no. 38/2001), the Government of the
Republic of Serbia introduces:
I INTRODUCTORY
PROVISION
Article 1
This
decree regulates the methodology for determination of value of capital
and/or of property in enterprises and other legal entities with socially
or state-owned capital.
The entity being privatized produces its accounting statements on the
day of capital valuation.
top of
page
II VALUATION OF
CAPITAL AND PROPERTY FOR THE PREPARATION OF PRIVATIZATION PROGRAM
Article 2
Enterprises and other legal entities (hereinafter: entities being
privatized), which prepare the privatization program shall conduct the
valuation of capital and/or property.
Entities to be privatized shall determine the basic value of the total
capital and/or property, as well as the lower and upper value of a range
of estimated value of total capital and/or property.
1.
Procedure of capital valuation
Article
3
The value
of capital of entities being privatized is estimated by application of
following methods:
1) discounting cash flows (hereinafter: DCF method),
2) liquidation value method (hereinafter: LV method).
1.1 DCF
method
Article
4
The basic
DCF value, and the lower and upper range DCF value shall be determined
by the estimate of value of total capital conducted by means of DCF
method.
Article 5
Within the
production of a value estimate of total capital of the entity being
privatized by means of DCF method, realistic cash flow after servicing
debts is projected, and the value of cash flow in the residual period is
estimated.
Cash flow referred to by paragraph 1. of this article is projected for
the period in which its stabilization is expected, which cannot be
shorter than five years.
The value of the cash flow in the residual period referred to by
paragraph 1. of this article shall be determined by multiplying the
stabilized net cash flow from the last year of the projection by the
index of expected growth of the net cash flow in the residual period and
dividing it by the difference between the discount rate and the expected
rate of growth of the net cash flow in the residual period.
The present value of the net cash flows from the periods for which the
projection is undertaken, as well as the present value of the net cash
flow in the residual period referred to in paragraph 1. of this article,
are determined by the application of the chosen discounting rate.
Article 6
The
discount rate represents the cost of the entity's own capital.
The discount rate referred to by paragraph 1. of this article is
calculated as the sum of the following three components:
1) realistic rate of return on investment without risk,
2) premium for the risk of investing in the entity being privatized,
3) premium for the risk of investing in the Federal Republic of
Yugoslavia, that is in the Republic of Serbia.
The Agency shall announce the rate of return referred to by paragraph 2,
point 1. and the premium referred to by paragraph 2, point 3. of this
article every six months.
Article 7
The total
rate of risk of investing in the entity being privatized shall be
determined as the sum of individual rates of risk which are estimated
for the following factors:
1) size of the entity,
2) quality of its organization, management and its employees,
3) financial standing,
4) production and sales potential,
5) possibility for reliable business forecasting.
Individual factors referred to by paragraph 1. of this article can
generate the the rate of risk of 5 % at most, whereas the total rate of
risk of investing into the entity being privatized cannot be less than 5
%.
Article 8
The basic
DCF value referred to by article 4. of this decree equals the sum of
pesent values of net cash flows from the periods for which the
projection has been undertaken, increased by the amount of the present
value of the net cash flow in the residual period. Lower DCF range value
of the total capital referred to by article 4. of this decree is
determined by the increase of the discount rate by five percentage
points.
Upper DCF range value of the total capital referred to by article 4. of
this decree is determined by the decrease of the discount rate by five
percentage points.
1.2 LV
method
Article
9
Within the
production of value estimate of total capital by means of LV method, the
basic liquidation value of total capital is determined.
The value estimation referred to by paragraph 1. of this article is
conducted with the presumption of regular liquidation of the entity
being privatized.
Article 10
Regular
liquidation referred to by article 9, paragraph 2 of this decree shall
mean the cessation of the entity's activities and the sale of its
property at prices which are formed in accordance with market
conditions.
Basic value of total capital referred to by article 9, paragraph 1. of
this decree is equal to the difference between the liquidation value of
the entity's property and the value of its liabilities increased by the
costs of regular liquidation procedure.
The liquidation value of property referred to by paragraph 2. of this
article shall mean the money amount which could be acquired by
individual sale of parts of property in the regular liquidation
procedure.
2.
Conclusion about the value of total capital
Article
11
The
conclusion about the value of total capital of the entity being
privatized represents the range between the lower and upper limit of the
value of total capital.
Article 12
The lower
limit of the range of values of total capital of the entity being
privatized represents the lower DCF value in case this is higher or
equal to the basic liquidation value of total capital.
The lower limit of the range of values of total capital of the entity
being privatized represents the basic liquidation value of total capital
in case this is higher than the lower DCF range value and lower than the
upper DCF range value.
The lower limit of the range of values of total capital of the entity
being privatized represents 80 % of basic liquidation value of total
capital in case this is higher or equal to the upper DCF range value.
Article 13
The upper
limit of the range of values of total capital of the entity being
privatized is represented by the upper DCF range value in case this is
higher than the basic liquidation value of total capital.
The upper limit of the range of values of total capital of the entity
being privatized represents 120 % of the basic liquidation value of
total capital in case this is higher or equal to the upper DCF range
value.
3.
Harmonization of previously conducted valuations
Article
14
Entity to
be privatized that has conducted the capital valuation based on the Law
on Ownership Transformation ("Official Gazette of the Republic of
Serbia" no 32/97 and 10/01) is not obliged to conduct a new valuation of
capital.
Entity being privatized referred to in paragraph 1. of this article is
obliged to conduct the harmonization of the valuation for the
requirements of the production of privatization program, by:
1) Correcting the value of capital for profits and/or losses,
2) Determining the lower and upper limit of the range of capital's
value.
Article 15
The
correction of value of capital referred to by article 14, paragraph 2,
point 1. of this decree shall be conducted in the following way:
1) Entities to be privatized which have entered into accounts the value
of capital, in accordance with the decision made by the competent body
for the control and verification of capital valuation, shall determine
the value of capital as of the date of production of privatization
program by deducting from the total assets the amount of losses and the
amount of total liabilities (liabilities, long term provisions, accrued
cost and deferred revenues);
2) Entities to be privatized which have not entered into accounts the
value of capital, in accordance with the decision made by the competent
body for the control and verification of capital evaluation, shall be
obliged to enter into accounts the value of capital expressed in the
aforesaid decision and determine the value of capital as of the date of
production of privatization program by deducting from the total assets
the amount of losses and the amount of total liabilities (liabilities,
long term provisions, accrued cost and deferred revenues);
3) Entities to be privatized, which have submitted the valuation of
capital to the Directorate for Capital Valuation for the purpose of
control and verification before the date of coming into force of the Law
on Privatization ("Official Gazette of the Republic of Serbia" no
38/01), shall be obliged to follow the stipulations referred to by
paragraph 1, point 2. of this article, upon the decision being made by
the Directorate.
Article 16
The
entities to be privatized referred to by article 14. of this decree
shall determine the lower range value of capital by multiplying the
value determined by the method stipulated in article 14. by the factor
of 0.8.
The entities to be privatized referred to by article 14. of this decree
shall determine the upper range value of capital by multiplying the
value determined by the method stipulated in article 15. of this decree
by the factor of 1.2.
If the Agency for Privatization (hereinafter: the Agency) evaluates that
the value of capital of the entity being privatized referred to by
article 14, paragraph 1. of this decree significantly deviates from the
value of capital that could be achieved by its sale in the market, the
Agency can effect a correction in the estimate of capital's value.
4.
Procedure of property valuation
Article
17
Entity to
be privatized which envisages the sale of its property in the
privatization program shall be obliged to conduct the valuation of
property.
In the production of value estimate of property referred to by paragraph
1. of this article, basic value and lower and upper range value of
property are determined.
Article 18
Basic
value of property referred to by article 17, paragraph 2. of this decree
is estimated by comparison with current market prices of the same, or of
similar property.
The lower range value of property of an entity being privatized referred
to by article 17, paragraph 2. represents 80 % of base value. The upper
range value of property of an entity being privatized referred to by
article 17, paragraph 2. represents 120 % of base value.
5. Determination of starting price of capital and property for public
invitation to an auction
Article
19
Starting
prices of capital which is offered for sale in the procedure of auction
shall be determined by multiplying the border range values of total
capital referred to by article 2, paragraph 2. of this decree by the
percentage of capital being offered for sale.
Starting prices of property which is offered for sale in the procedure
of auction represent border range values of property referred to by
article 18, paragraphs 2. and 3.
Article 20
If the
public invitation to an auction is announced in a period longer than 30
days from the date of the valuation of capital and/or property, the
Agency shall conduct the revaluation of capital valuation and/or that of
property, estimated in accordance with this decree.
Revaluation referred to by article 1. of this article is conducted from
the date of capital valuation and/or that of property until the date of
announcement of public invitation to an auction.
Revaluation referred to by paragraph 1. of this article is conducted by
application of monthly indices of retail prices in the Republic of
Serbia, where the retail prices index for the previous month is used in
calculating for the current month.
top of
page
III VALUATION OF
CAPITAL AND PROPERTY IN STATUS CHANGES
1.Procedure of
capital and property valuation
Article
21
The
methodology for capital and property valuation proscribed by this decree
is applied in the procedure of determination of capital value for cases
of status changes of legal entities with socially or state owned
capital.
Methodology referred to by paragraph 1. of this article may be applied
in the procedure of determining the capital and property value for
founding of legal entities, change of starting capital (reduction and
growth).
In the case stated in paragraph 1. and paragraph 2. of this article the
determination of the lower and upper range value of capital and equity
is not necessary.
Article 22
The
estimate of value of capital in cases referred to by article 21,
paragraphs 1. and 2. of this decree, are conducted by using the methods
referred to by article 3. of this decree.
Article 23
The total
capital value represents the basic DCF value referred to by article 8,
paragraph 1.. if it is higher or equal to the basic liquidation value
referred to by article 10, paragraph 2.
The total capital value represents the basic liquidation value referred
to by article 10, paragraph 2. if it is higher than the basic DCF value
referred to by article 8, paragraph 1.
Article 24
The legal
entities that are conducting status changes beside the estimate of total
capital value are also obliged to describe their ownership structure.
The ownership structure of capital is determined on the basis of:
1) The entry into the court register,
2) Data from the Central Register,
3) book-keeping status,
4) other relevant documentation.
Article 25
The
estimate of property value for cases referred to by article 21,
paragraphs 1. and 2. of this decree, is conducted by application of
method referred to by article 18, paragraph 1.
2.
Production of balance sheets after changes in status
Article 26
Upon the effected change in status, balance sheet of the
participants in the change of status shall be produced, in accordance
with regulation governing the composing of accounting statements.
Article 27
The
minister in charge of privatization affairs shall introduce the
instruction on the application of methods, determined by this decree,
and methods of expressing the estimated value of capital.
top of
page
IV TRANSITIONAL
AND FINAL PROVISIONS
Article 28
The entity to be privatized which has completed the capital
valuation up to the date of coming into force of this decree, in
accordance with the Law on Ownership Transformation, may conduct a new
capital valuation in accordance with this decree.
Article 29
The
minister in charge of privatization affairs shall introduce the
instruction referred to by article 27. of this decree within 30 days
from coming into force of this decree.
Article 30
This
decree comes into force on the eight day following the date of its
publication in the "Official Gazette of the Republic of Serbia".
|
