Corporate raids are on the rise in Ukraine. What are the causes and how to combat these uninvited guests?
In 2015, the long-forgotten phrase "corporate raider takeover" returned to the media. Over the past year alone, there have been at least a dozen high-profile scandals in the public sphere: the Chumaki company, the Amstor chain, the distillery owned by Marie Brizard Wine & Spirits, the Pobuzhsky Ferronickel Plant, and others.
LIGA.net investigated the reasons behind the surge in violent property redistribution and how businesses can be protected from hostile takeovers.
On Friday, October 16, Alexander Leshchinsky, a major bakery producer, announced the seizure of its office space in the capital. "At 08:30 a.m., approximately 40 armed individuals in camouflage uniforms, posing as employees of a security firm but without identifying the company or presenting any identification, attempted to break into the premises and occupy it," the company reported. Also in Lauffer Group Several hours after the attack, representatives of Avant Bank reportedly showed up and claimed the premises. According to company employees, the office at 5 Orositelnaya Street contains a safe containing the company's statutory documents, which is precisely what the unexpected visitors were looking for.
According to company employees, the office at 5 Orositelnaya Street contains a safe containing the company's statutory documents, which are what the unexpected guests were interested in.
Moreover, not only commercial but also government entities are being targeted. On Tuesday, October 13, the Ministry of Agrarian Policy's press service released information that the Novoaidar elevator, owned by the state-owned company Khlib Ukrainy, is the target of a corporate raid. In September, the newly appointed director of the Novoaidar elevator, Valeriy Kravtsov, was barred from entering the facility. According to Khlib Ukrainy's director, Igor Kobeli, corporate raiders have been operating the elevator for several years. "In 2011, the elevator's management signed an investment agreement with the private company Agro, which belongs to the Agroton business group, controlled by former Party of Regions member Oleksandr Yefremov. However, instead of developing an investment project and an implementation plan, the so-called investor effectively seized the state-owned enterprise," he asserts.
It's not all bad news. Some victims are achieving justice. For example, on October 1, after a year-long investigation, the high-profile case of the corporate raid on the Chumaki farm in Dnipropetrovsk Oblast concluded. The company was returned to its rightful owners, Unison Group, by court order. The Supreme Administrative Court of Ukraine ruled that the actions of Dnipropetrovsk Oblast state registrar Tatyana Abramova regarding the Chumaki farm were illegal.
What is the reason for the escalation of corporate raiding? A purge of "predecessors"
Lawyers interviewed by LIGA.net cite the changing political climate in the country as the main reason for the surge in corporate raiding. "The 1990s are long gone; in recent years, relationships between businesses and the government have matured, establishing a certain status quo. Business owners were 'friends' with officials who could ensure their safety. That's why, even during Yanukovych's presidency, we mostly heard about his son's corporate raiding exploits," explains Igor Chudovsky, managing partner of Chudovsky & Partners. "After the Revolution of Dignity, business owners found themselves in an unfamiliar situation: the old officials and security officials who protected them had left, and they hadn't yet found new ones," he says.
After the Revolution of Dignity, business owners found themselves in an unfamiliar situation: the old officials and security officials who protected them had left, and they hadn't yet found new ones.
"In Ukraine, a redistribution of spheres of influence and a reorganization of businesses are underway. This isn't the 1990s. This is the new 2010s, which means that the raiding schemes being used are more sophisticated and complex," explains Viktor Moroz, managing partner of the law firm Suprema Lex. According to him, from a legal perspective, many takeover schemes are ideal, almost flawless. "Raiders find loopholes in a business's corporate structure, corporate conflicts, or legal problems, particularly with tax payments, settlements with counterparties, etc., and they obtain a court decision based on this, which they enforce," the lawyer explains. Additionally, criminal proceedings are initiated against shareholders or business executives, allowing raiders to paralyze the business and forcing owners to cede control, says Moroz.
Andrey Porayko, managing partner of the law firm Everlegal, adds that another reason for corporate raiding is the lack of independence of the courts, which often facilitate the legalization of the transfer of control of a company to raiders. Porayko also logically notes that the increase in corporate disputes in which the parties accuse each other of being raiders is due to the fact that business owners who lost their companies before the revolution are trying to take revenge and reclaim their businesses after the change of power.
Where to run, who to fear?
Most often, corporate raiding involves physically removing the management and owner of a company from control and seizing the company's assets, says Vitaly Datsyuk, partner at the law firm Datsyuk, Pepa & Partners. "But this is just the tip of the iceberg, and hoping that after contacting law enforcement, the management and property will be returned to the management and owner without any effort is unrealistic," he explains. Datsyuk also notes that a corporate raid only occurs when the raiders have at least some documentation of the change in management, allowing them to escalate any disputes to the courts.
The country has acquired a sufficient number of weapons and armed groups (if not “private armies”) that are not averse to making money by providing the forceful side of a hostile takeover.
"The situation has been further exacerbated by the fact that the country has acquired a sufficient number of weapons and armed groups (not to say "private armies") that are not averse to profiting by providing the forceful side of a hostile takeover," says Chudovsky.
The lawyers interviewed recommend that owners of businesses at risk of corporate raiding take a number of mandatory actions.
At firstConduct an assessment of the company's management. A clear system for decision-making, the use of official signatures, and the control of seals must be established.
Secondly, attract public attention during hostile takeover attempts. This will significantly reduce the risk of corruption on the part of ill-wishers.
ThirdlyIf there is even the slightest reason to suspect a corporate raid, contact law enforcement agencies with information about an attempted crime under Articles 205-1 and 206-2 of the Criminal Code of Ukraine, which introduce criminal liability for the forgery of documents and their use in a corporate raid.
Among the unpopular measures is the advice to company management to communicate more frequently with the state registration service, so that the appearance of new people there with documents about the change of management and ownership will at least raise doubts in the state registrar about the authenticity of these changes and a desire to verify them.
Subscribe to our channels in Telegram, Facebook, Twitter, VC — Only new faces from the section CRYPT!