4 June 2019
Over the past few years, after the turbulent 90s, corporate raids in Ukraine have again become a popular way of “redistribution of business assets”. Over 2017 more than 700 hostile takeovers of businesses happened, and this statistics concern only the agricultural sector. Prior to this, in 2016, the media reported thousands of high-profile corporate raids of enterprises. According to the “Judicial and Legal Newspaper”, since 2012 the number of searches and seizures has increased 45 times – up to 118 884 searches and seizures in 2017. It is 2019 on the calendar, but it is not safer. The number of conflicts-takeovers and cases of pressure on business does not decrease.
Raiders are not necessarily special forces soldiers on your threshold or “titushky” armed with scraps and armature. Usually invaders act “formally lawfully”. The main maneuvers for a takeover are forgery of documents, falsification of decisions of supervisory boards, falsification of land lease agreements, etc. All these things mean competent applications of the possibilities provided by the Criminal Procedure Code of Ukraine. There is even a special terminology: white or gray corporate raids, that is, absolutely or almost legitimate. People are losing business when they are working or sleeping peacefully. And, waking up in the morning, they suddenly find out that they are not owners anymore.
A consistent and almost infallible scenario of blocking the operation of an enterprise can be considered on the example of an attack on PJSC “Ilyichevsk Oil and Fat Industrial Complex” (Chornomorsk, Odesa region). The scheme is as follows: an interested person appeals to the law enforcement agencies with a statement about committing a crime under one or several popular business articles – legalization (laundering) of proceeds, taxes and fees evasion, false entrepreneurship, embezzlement, taking possession of property. Such a statement is registered in the Unified Register of Pre-Trial Investigations. After that the investigation and the prosecutor’s office take the statement “in hand” and start looking for a crime in the economic activity of the victim company. As a result, on May 13, 2016, the prosecutor of the Prosecutor’s General’s Office of Ukraine, accompanied by the authorised operatives, arrived at the territory of the enterprise and announced the decision on the transfer of the property complex of PJSC “IOFIC” for safe custody with the State Enterprise “Oblshovk”.
And the machine-building enterprise “Motor Sich” (Zaporizhzhia) was attacked not so long ago, in April 2018. 56% of the shares of the “Motor Sich” turned out to be owned by Chinese investors – someone sold the shares of the company to authorized persons of the owner of the Chinese company Beijing Skyrizon Aviation Industry Investment Co., Ltd.
In a nutshell, there is no general pattern according to which a takeover of companies happens. Each time this is a unique, highly professional event – it is like Grandmaster’s game. Takeovers of companies are planned by experts of a very high level. In almost every case the success of raiders is the result of the availability of a strategy, tactical techniques and resources, as well as the complete or partial lack of such a strategy in the target company. Therefore, in order to protect your business, you do not need to know in advance how the invaders will act. Far more important is to keep abreast of the smallest steps on the opposite side.
“Modern business along with the implementation of the imperfect system of state registration faced the invasion of corporate raids in Ukraine. Every day dozens of businesses and hundreds of citizens become victims of raiders who successfully manipulate state registers. At present legal awareness of entrepreneurs and citizens moves to the forefront in the fight against corporate raids, because the best defense against the attack is preventive measures,” Ruslan Kvitin, a human rights activist, said.
It is important to realize that the system of corporate raids remains in force due to all “links in the chain”: from direct customers and state officials of various scales to... the owners of the companies themselves, who, without knowing it, contribute and “expose themselves” to an attack. They have to pay for their own carelessness, though it is unintentional.
As a rule the lack of proper protection of a company is a kind of provocation for it to be hit in all its pressure points. The efficiency of the struggle depends directly on the tools of protection. Timely and thought-out preventive measures are the only way not to become a raider’s victim. And the main tool of self-defense is information.
That is, the main preventive measure is to receive information about the raiders’ actions in time, to immediately notice that the data on your enterprise in the registers have changed without your participation. This may be information about a tax debt, the appearance of a lawsuit, a change of the company’s statute or even directly – the change of the owner. These “bells” can be seen in the relevant registers (the Unified State Register of Enterprises and Organizations of Ukraine, the Unified State Register of Court Decisions, etc.). They are open to everyone and information is available. The only drawback is the difficulty and duration of checking. For full protection it is necessary to regularly (if not daily, at least once a week) check the data on your company in several registers. You can do this more easily – through automatic monitoring in the YouControl system. Only in this case it is necessary to monitor not others but your own company.
Monitoring is a special tool of YouControl, created for the so called “most burning issues of the day” and “in response to public demand”. You can use it to prevent raider attacks.
“To protect corporate rights from raiders’ attacks I can advise the following tools:
• protection of property assets with controlled pledges, because the precise aim of a raider attack is to take possession of them;
• control over accounts receivable and payable, prevention of the consolidation of a large amount of debt to an uncontrolled (unpredictable) counterparty;
• division of areas of economic activity and their allocation to individual entities (for example, financial transactions in one entity, production – in the other, sales – in the third one);
• daily monitoring of the Unified State Register;
• constant updating of constituent documents in accordance with the requirements of the legislation,” Ruslan Kvitin advises.
According to statistics, agricultural enterprises are at the highest risk of raider attacks. Trading, industrial and construction companies are also attractive to invaders. Of course, in the risk zone there are companies that own a large volume of real estate and land – they are tidbits, as well as companies with a large tax credit – they are easier to be let down.
But, in general, it is impossible to name an enterprise that is 100% insured against raiders. That is why monitoring from YouControl is a convenient tool for:
• busy people who used to delegate powers with confidence that the task will be performed in a high-quality manner;
• entrepreneurs who do not have time to surf on the Internet and review registers;
• directors, owners, shareholders, investors, board members – all those who are interested in the welfare of their company.
Moreover, it is possible to monitor not only one company. You can protect several companies (your main company, companies from your group and/or branch offices, your relatives’ companies). In addition, monitoring the companies whose assets and shares you own and the startups that have received your investments will also be useful. Totally up to 10 enterprises can be included in the monitoring.
According to Ruslan Kvitin, “as a rule raiders do not attack those whom they cannot overcome, or there is a risk of serious resistance”.
The realia are such, that, unfortunately, within 25 years a fully functional culture of respect for property rights did not develop in Ukraine. By 2016 criminal liability for corporate raids had not even existed. In 2016 outright criminal liability for the illegal seizure of others’ property was introduced (Law № 1666-VIII). But a large list of problems still remains. And if a helping hand can be found only at the end of your own arm, then monitoring your company is one of the most reliable ways to have your finger on the pulse. Be attentive to considerable details and YouControl will help you with this.