Nataliia Osadcha, Co-founder of S&P Agency, Investment Risk Advisor. Published specially for «Novoye Vremya».

Conflicts between owners and business partners for joint assets in the world of entrepreneurship are not rare. However, in the Ukrainian business environment, such cases have always been and continue to be an extremely common practice, as the business partnership is still built on the principles of «everything on trust» and «our people do not betray».

Trust, but…

One example from practice will show on how the business relations exclusively «on trust» cost a foreign business investor in Ukraine. There are thousands of such real stories, and all of them point to the depth of the problem. So, a foreign investor, impressed by the investment attractiveness of our country, the cheapness of assets and labor, decided to move his factory from Poland to Ukraine. He purchased the building, carried out his complete reconstruction, delivered equipment, hired and trained local staff. It is logical that for constant production control he invited his long-time Ukrainian friend as a minority partner. The director of the company was also appointed on the recommendation of the Ukrainian partner. As soon as the business became profitable and all counterparties were exposed, the Ukrainian partner, under the pretext of the annual shareholders’ meeting, received a general power of attorney from the non-resident with unlimited powers to hold a general meeting and make any decisions. The degree of trust between partners was high, because they knew each other for more than 20 years. This was one of the reasons why the majority partner did not ask about the completeness of powers granted in the power of attorney. The result of this «trust» was putting the factory into the liquidation process with the complete removal of assets, movable and immovable property, the creation of a new enterprise, to which, in addition to assets, all contracts with counterparties were also renegotiated. This all took only 3 (!) months.

Enemy within

Very often in a corporate conflict, business owners are convinced that its initiator is outside the company. What is the surprise for our clients when we find traces of business partners or co-owners, although initially everything indicated on the order from competitors? Sometimes it can be seen right away, and sometimes such traces can be found only on the «lower layers». Over the years of practice, we have learned to analyze impartially bulling conflicts and distinguish between real causes and customers, even when they are not entirely obvious to the client.

Of course, it’s hard for clients to believe that the one behind a conflict is a business partner with whom the business was founded. However, «nothing personal». In the realities of the Ukrainian market, it is necessary to calculate the risks and develop a system of checks and balances at the stage of entering into a partnership, or at least mentally accept the fact that dishonesty of a partner can take place. Then follow the main rule of any businessman – soberly evaluate the information and facts.

System of checks and balances

It is very difficult to assess the actions of the parties to any conflict, if you are not inside yourself. In corporate conflicts, as in raider attacks, not everything happens the way participants submit in their stories. Usually each of them accuses the opponent of the attack first, confirming his position with irrefutable evidence. But practice shows – everything is far from obvious, as it seems at first glance.

Both in corporate conflicts and in the development of asset seizure schemes, «black» lawyers take part, who are well aware that illegal actions need to be given the appearance of legitimate ones. In our practice, we were faced with the fact that very experienced lawyers, and even judges, could not always understand the true causes of the conflict, since everything was well «furnished» from a legal point of view.

Only deepening on the «lower layers» of the conflict, one can understand its real causes, even if it is sometimes very difficult to believe in them. If there are several partners in the project it does not matter how the shares and management functions are distributed, the main goal of the partnership is to avoid a corporate conflict and successfully continue the joint business. But if the system of checks and balances has not been calculated and implemented initially, it will be difficult to do. Consciously understanding that people are changing, oral partner arrangements can easily be violated, it is enough simply to turn to the third (unbiased) side for expertise. Or find an experienced advisor in investment risk management and asset protection, which will make for you the analysis of the partnership, the structure of its ownership and management with a focus on weaknesses and risks of possible asset losses in the future. If such weaknesses are identified, it is possible to structure business and assets properly, create a system of checks and balances for effective and conflict-free partnership.

As the ancient Romans correctly said, «If you want peace, prepare for war». To avoid it, we, however, recommend simply consciously calculate your risks.

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Name: Mykola

Surname: Siutkin

Email: siutkin@sp.agency

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