The problem of illegal seizure of an enterprise – raiding – has become relevant again. The heyday of raiding in Ukraine was in the early year two thousand and some years after, but the beginning of 2010s was relatively calm. During this period, the only raiders in the country were the “family” of the former Ukrainian president Viktor Yanukovich and his closest collaborators. They were not going to observe any formalities, so the prosecutor’s office, courts, the Security Service and the Ministry of Internal Affairs, which were completely under control of the Donetsk clan, nullified the possibility of owners to defend their business. After the Revolution of Virtue, the situation has somewhat improved, but the problem of forcible seizure of control and illegal transfer of property rights remains relevant. The good news is that now at least we have an opportunity try to defend business interests.

Nataliia Osadcha, co-founder of S&P Investment Risk Management Agency, told RAU how to hedge business and avoid attempts of raider capture and what to do if the attack has already begun

— How often and why do raider seizures take place in Ukraine? What is the reason for this?

— Today, raiding in Ukraine, alas, has become the norm and almost an integral part of doing business. Especially this problem affects the sphere of retail and real estate. Only in last few years dozens seizures of commercial real estate have been committed, you can remember the situation with the Lviv SEC Victoria Gardens and the Kiev SEC SkyMall – ed. Some of them were so serious that they have become some markers of Ukraine as an investment-risky state. Analyzing the current situation in the country, I do not see the preconditions for reducing raider seizures in the near future.

The reasons that contributed to emergence and development of this phenomenon, we can distinguish

  • Unstable political situation in Ukraine, the frequent change of high-ranking officials, leaders of law enforcement agencies and so on;
  • Corruption at all levels, including law enforcement agencies and courts;
  • Raider attacks execution involving state and law enforcement agencies;
  • Absence of a real mechanism and practice of bringing raiders to criminal liability for raiding actions;
  • Lack of a culture to lead honest business. An important factor in this aspect is the unwillingness of businessmen conducting business in Ukraine to play fair.

— What mistakes do Ukrainian companies make more often in such situations?

— Each raider capture is unique. Two equally organized and realized seizures are extremely rare. It’s like a battle, the scenario of which changes depending on the tactics of the enemy. Nevertheless, proceeding from our practice, it is possible to single out general trends and characteristics that can cause a raider capture.

The first thing that is important to remember is that not all enterprises become the object of raider seizure. It can be caused by the following circumstances:

The ownership of a large real estate object and / or objects of intellectual property, as well as business in any form that brings a stable income;

The company’s mistakes / circumstances, which may serve as the reason for the seizure. This is what are the prompts for raiders to attack, identifying the company with an easy prey.

Any raider capture is designed for speed. The attack is interesting to customers only under the condition of the fastest execution, first of all, from the financial point of view. The primary goal of the raiders is to gain complete physical control over the object, the secondary goal is to obtain financial control. In this situation, the raider does not care any more how long the conflict lasts, because he does not use his personal resources, but the means of captured object.

“Victim” of the attack will be “exsanguinated” and it will have to invest in this “war” both personal and borrowed funds. So, the confrontation can last for years, during which the raider will continue to receive income from the captured object. In general, protection from a serious raider attack is a long and financially expensive process. One of our defense case against the seizure of a large property in Kiev lasted five years. The object was returned under our client control, but his financial losses proved to be enormous. Not every company can financially sustain such a battle. However, our case was an exception.

As practice shows, if a raider intrudes into an object and receives control over financial flows, it performs manipulations, because of which it is almost impossible to eliminate it from this object. Do not forget that large raider seizures are carried out with the active participation of law enforcement and / or government agencies, which significantly complicates attempts to return the illegally seized facility.

A vivid example is the sensational case of Arricano. Leading developer of shopping centers; for more than five years he has been trying to regain control of the shopping mall Sky Mall. Despite the fact that Arricano has at its disposal numerous decisions of the London Commercial Arbitration Court, it is practically impossible to execute them at the moment in Ukraine. Particularly difficult for the process is that officials are involved in the conflict at a sufficiently high level.

— How a retailer can protect his business?

— If the business project is executed in partnership, even at the “zero stage” it is worthwhile carefully consider the formation of the correct rules of the game. It is necessary to calculate immediately and c build correctly a system of checks and balances that makes it impossible or unprofitable to betray and / or capture business by one of the partners. According to statistics, one of the most common types of raiding is that one which begins with a corporate conflict.

Therefore, our main advice is this: even at the stage of discussing a business project, approach the issue of investing fundamentally. This will help the investor significantly minimize reputational and financial losses in the future.

— Prevention: what is better to be avoided?

— First: ignoring / not appealing the results of inspections of regulatory bodies that established the fact of illegal actions of the enterprise where the object was registered.

The second. Ignoring the institution of a criminal case against a counterparty who sold the real estate object and / or the official / body that made the decision to sell the property. Issuance of originals of legal documents to the investigation.

Third. Issuance of debt securities with a maturity date “upon presentation” by the enterprise where the property is registered.

Fourth. Primary privatization of the real estate object and / or redemption of the object from state authorities / local authorities without implementing a subsequent scheme to minimize legal risks.

Fifth. Non-renewal of title documents and / or statutory documents: the name of the enterprise has not been changed, a new certificate of ownership has not been received, technical characteristics of the object have not been changed after the reconstruction, etc.

Sixth. Transfer of a part of the corporate rights of the enterprise where the object is registered to third parties: directors, chairman of the board, etc.

Seventh. Distribution of shares between business partners on the basis of “60/40” or “51/49” in the event that the head of the enterprise has moved to the side of the participant owning the 51st% of the statutory fund.

Eighth. Purchase and sale of corporate rights of the enterprise where the real estate object (bought out from the state) was registered, without proper assessment of legal risks. Lack of procedures for minimizing risks.

Ninth. Exclusively legal mistakes / inaccuracies in the conduct of business, especially when concluding a transaction and / or after its conclusion.

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Name: Mykola

Surname: Siutkin


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