On 15 April the Verkhovna Rada of Ukraine adopted Draft Law No. 3774 to fight raiding. What are the provisions of the Draft?
The said Draft Law was approved in the first reading, with MPs voting in favor of a simplified procedure for preparing it for the second reading stage.
The Draft amends certain laws of Ukraine regarding improvement of the anti-raiding mechanism.
As envisioned by its authors, the law is intended to eliminate several legislative gaps and omissions that prevent proper protection of ownership and corporate rights. In particular, the following gaps should be addressed:
The authors of the Draft Law propose to give the Ministry of Justice of Ukraine the right to prohibit registration actions during the period of consideration of a complaint against registration actions (decisions); such prohibition would enable any hostile takeover to be quickly stopped.
In addition, the Draft contains provisions aimed at removing artificial barriers preventing the Ministry of Justice of Ukraine from considering on merit any complaints against registration actions (decisions), as well as to streamline the procedure by which the Ministry of Justice of Ukraine handles complaints. At the same time, the Draft requires publication of decisions adopted by the Ministry of Justice of Ukraine on its official website.
It is important to note that one of the proposed changes addresses an extension of the period for appealing against registration actions from 60 calendar days to 3 months. Furthermore, it is proposed to improve the rules for signing of decisions at a legal entity’s general meeting by establishing that in case of a change of the legal entity’s CEO at a general meeting the minutes of such meeting must be signed by participants who voted for the decision and the number of votes must be sufficient for the approval of such a decision. Particular attention is paid to deeds on termination of land lease agreements for which a prior decision of the general meeting on approval of such deed is required.
In our opinion, the initiators of the Draft Law focused on some problems and gaps that are often used during (and after) hostile takeovers.
However, it is first necessary to wait until the final text of the law is approved by MPs. Secondly, in our opinion, issues of counteracting hostile takeovers should cover not only the procedural aspects of making and appealing against relevant decisions but also the proper (primarily criminal) liability for such actions. It is no secret that now, in the majority of cases, the perpetrators of illegal takeovers manage to avoid any liability. That is why it is critical to amend laws so that they establish an effective mechanism for prosecuting the perpetrators and for ensuring the procedural possibility of recovering the damages caused to the victim by illegal actions.