CHAPTER TWO:

Reorganization of the State-Owned Enterprises

ARTICLE 4- In order to reorganize and to restructure the state-owned enterprises and effectively utilize their resources and potentials, to enhance productivity and efficiency of those enterprises that deem necessary to remain in the public sector, and to facilitate transferring to the non-public sector those enterprises whose continued operation in the public sector is deemed unnecessary, government is authorized to take appropriate measures toward divestiture, dissolving, merging and reorganizing the state-owned enterprises; reforming and sanctioning their articles of association, and their transactional and financial by-laws, taking into consideration the current laws and regulations governing re-deployment and transfer of functions and manpower, assets and stocks of the state-owned enterprises and their subsidiary companies under the following frame of reference:

A- The state-owned enterprises shall be organized as specialized holding companies and shall be managed under the auspices of the related ministry and within the framework of their own articles of association.

B- Governance of the state-owned enterprises shall be autonomous and independent of the policy-making function of the concerned ministry, while the authoritative functions will be removed from the state-owned enterprises and devolved to the concerned ministry.

Note 1- State-owned enterprises may be formed and incorporated solely upon approval of the Islamic Consultative Assembly.

Note 2- Any joint-venture between the state-owned enterprises, except banks, insurance companies and credit institutions, within the context of this Article will require authorization of the Cabinet.

Note 3- Government is required to dissolve all representative and branch offices of the state-owned enterprises abroad. Otherwise, the matter shall be proposed jointly by the Ministry of Economic Affairs and Finance, the Plan and Budget Organization, and the State Administrative and Employment Affairs Organization, and shall receive approval of the Administrative High Council.

Note 4- In order for any state-owned enterprise to remain in the public sector and to justify its utilization of public capital, it must be engaged in one of the two activity areas listed below:

1- Activities that are monopolies by their nature.

2- Activities in which the non-governmental sector has no incentive and interest to invest.

C- The state-owned enterprises approved by the Cabinet for divestiture through tender or the stock exchange market shall be managed thereafter according to the commercial law, and no longer will they be subject to the general regulations governing the state-owned enterprises.

D- Assignment of employees of the state-owned enterprises and other companies stipulated in Item (C) above to ministries and public agencies is possible within the framework of a by-law that will be approved by the Cabinet.

E- Any transfer of share in relation with implementation of this Article (as the result of merger, dissolution, or reorganization) shall be exempted from tax .

F- State-owned enterprises are prohibited from conducting any business transaction other than those stipulated in their articles of association.

G- Government is required to review the labor regulations and take appropriate measure within a maximum period of six months.

H- The by-law for implementation of this Article shall be proposed jointly by the Plan and Budget Organization, the State Administrative and Employment Affairs Organization and the Ministry of Economic Affairs and Finance, and to be approved by the Cabinet.

ARTICLE 5- Annual increase of prices of goods and services by public agencies and the state-owned enterprises beyond ten percent (10%) shall not be permissible. Pricing of goods and services, except for items that are subject to special regulations in this Law or in the annual budget law, shall be set within the framework of the criteria to be adopted by the Cabinet, taking into account the goal of raising productivity and lowering production costs. Should the government deem necessary for any reason to fix the price of goods and services of any state-owned enterprise at a level below the above rate, the difference between the calculated price and the imposed price shall be paid to the interested company through government general budget.

ARTICLE 6- In all cases where the authority for approval of the articles of association rests with government, any reform and revision of such articles shall jointly be proposed by the related agency and the State Administrative and Employment Affairs Organization and shall be approved by the Cabinet. Public agencies and corporations content of this Article include the state-owned enterprises and their affiliate entities, any entity whose subjection to this law necessitates mention of their name, and non-public agencies or entities.

ARTICLE 7- Government share holding representation at the general share holders meetings of the state-owned enterprises, assuring oddity of the number of members representing the share holders shall be entrusted to the minister-in-charge, Minister of Economic Affairs and Finance, Head of the Plan and Budget Organization, and two or more ministers selected by the Cabinet, or their representatives.

ARTICLE 8- All other regulations (by-laws and directives) which are inconsistent with the decisions of the Cabinet within the framework of authorities stipulated in this Chapter will be annulled.