ALERT: Is Raiding in Ukraine Going to Come to an End?
Raiding, or the illicit acquisition of property, has become one of the most critical bottlenecks of the Ukrainian economy and a major deterrent for investment. According to the statistics of the General Prosecutor Office of Ukraine, over the last seven years there were more than 3 200 raider attack incidents in Ukraine and, on average, about 400 raider attacks per year.
In January 2016, a special Anti-Raiding Commission was set up under the Ministry of Justice of Ukraine in order to prevent raiding and invalidate unlawful registration decisions. According to the Decree of the Ministry of Justice of Ukraine dated 12 January 2016 No. 37/5, if a person became aware of a violation of one’s rights caused by unlawful registration action(s), such a person has 60 days to file a complaint which must be considered within 30 days (this could be extended up to 45 days).
As Vladislav Vlasiuk, the newly appointed Head of the Anti-Raiding Commission under the Ministry of Justice of Ukraine (the “Commission”), stated in his interview, more than 2600 complaints have been registered since the beginning of 2019 and more than 1180 complaints since the beginning of June 2019.
In practice, however, almost every third complaint lodged with the Commission was rejected on formal grounds. For example, a complaint did not contain all mandatory requisites such as the Complainant’s full name (only initials are not enough), the documents copies were unduly certified or if a judicial proceeding with the same subject has been commenced.
During August-October 2019 a number of significant anti-raiding improvements were made in the spheres of corporate and property rights registration. In particular, the following achievements should be highlighted:
- The state-run registry of legal entities will be updated on a daily basis.
Previously victims of raiding could became aware of unexpected changes made to their companies weeks after they took place. However, now company owners are able to track any corporate changes and become notified of them within less than a day (in particular, by using such services as OpenDataBot, YouControl, Liga and Vkursi). For example, OpenDataBot can send an SMS to everyone for whom changes have occurred. As regards to property rights protection, Liga’s SMS-Mayak project allows businesses to turn on SMS and e-mail notifications, which will pop up instantly if a registration action concerning their property has been or is being performed.
- Complaints on raiding attacks can be submitted online and now their layout and formalities compliance must be verified within 5 days after their receipt.
According to the Resolution of the Cabinet of Ministers of Ukraine “On amending the Procedure for consideration of complaints in the field of state registration” dated 04 September 2019 No. 831 (the “Resolution”) the administrative appeal procedure was simplified through its automation (the appeal form on the iGov public services website is partially completed). Moreover, from now on the Commission’s officials should not tacitly reject unduly performed complaints, but instead, if a formal deficiency is identified within 5 days from the receipt of a complaint, the respective official should contact the complainant and give him or her a chance to amend the any deficiencies.
- New Anti-Raiding Law has been adopted.
On 03 October 2019 the Law of Ukraine “On Amending Certain Legislative Acts of Ukraine on Property Rights Protection” No. 1056-1 dated 06 September 2019 (the “Law No. 1056-1”) was adopted by the Verkhovna Rada of Ukraine in its second reading. According to Law No. 1056-1, which will come into force on the 10th day after its official publication, the following legislative changes are introduced:
- Accreditation of all utility companies’ state registrars has been terminated (according to the statistics prepared by Nobel project about 80% of all raiding incidents were caused by illicit actions of state registrars of utility companies);
- All share purchase agreements will have to be duly notarized;
- Notary actions must be done simultaneously with the respective state registration actions;
- State registrars (in particular, notaries) will be obliged to verify not only the validity of power of attorneys, but also their content;
- State registrars will be obliged to improve their qualification;
- It will possible to electronically submit registration documents through the respective public services website (in case if an applicant is identified using a qualified electronic signature);
- Automatic monitoring of risky operations;
- In order to avoid the use of forged court decisions, court decisions will be automatically sent to state registers of legal entities and property rights for immovable property;
- State registrars responsibility increases.
The new government stepped up the fight against raiding in Ukraine and decided to move in two directions: improve the administrative appeal procedure and adopt anti-raiding legal acts (in particular, the Law No. 1056-1) providing for additional protective measures for national businesses and foreign investments. In particular, the operating online services allow everyone to be instantly notified of any changes made to their property or corporate rights. Furthermore, if a raiding attack took place, the aggrieved party may lodge a respective complaint to the Anti-Raiding Commission online in a simplified and less bureaucratic procedure.
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