Cyprus' UKRN I New Capital Growth said it would file an appeal to the Supreme Economic Court later this month, seeking to overturn a Dnipropetrovsk court decision that favored the DniproAzot chemical plant and its registrar, Privatbank, in a dispute over minority shareholder rights.
On June 13, UKRN, an authorized company of the international Ukrainian Growth Fund, took DniproAzot to court over a shareholders’ meeting held in April. UKRN said that DniproAzot’s registrar and largest shareholder, Privatbank, had failed to permit a UKRN representative to attend the meeting.
DniproAzot’s registrar alleged that the UKRN representative was denied access to the meeting because he did not have a valid power of attorney.
Diana Smakhtina, director of SigmaBleyzer, which manages UKRN’s assets in Ukraine, denied that charge, saying that the UKRN representative held a valid power of attorney.
UKRN asked the court to declare the shareholders meeting invalid. However, it ruled in favor of the chemical plant last September, a ruling the Dnipropetrovsk Court of Appeals declined to review a month later.
UKRN said that the court’s ruling sends the message to companies doing business in Ukraine that it is acceptable to violate minority shareholders’ rights.
Privatbank maintains that it acted within its rights as registrar in its dealings with UKRN.
Smakhtina said that the registrar claimed that the UKRN representative’s power of attorney was refused because it lacked a registration number, was not notarized and had expired. The law, however, did not require the power to bear a registration number, she said, adding that the State Commission on Securities requires only documents issued outside of Ukraine to be notarized, but the UKRN representative’s power of attorney was issued in Ukraine, and therefore conformed to Ukrainian law.
Smakhtina did not deny that the expiration date on the certificate had passed, although she said that it was simply a typographical error, and not a valid reason to refuse the representative entry to the meeting.
“We believe that DniproAzot violated UKRN’s rights as a shareholder to govern the plant, and believe that the decision of the Dnipropetrovsk Economic Court violates Ukrainian law and must be overturned,” SigmaBleyzer’s Smakhtina said.
UKRN holds a 1.6 percent share in the DniproAzot chemical plant, one of the nation’s five largest chemical plants. It specializes in the production of ammonia, caustic soda and chlorine for use in agricultural fertilizers. The plant’s major shareholders are companies registered in Cyprus and affiliated with Privatbank.
Privatbank officials refused to comment on the matter when contacted by the Post in mid-October.
Although the court ruled against UKRN in this case, the issues surrounding minority shareholders’ rights have existed in Ukraine for years. Experts say that the country’s corporate governance legislation is weak.
Viktor Horbatenko, legal advisor to the International Financial Corporation’s Corporate Development Project in Ukraine, said that minority shareholders’ rights are sometimes violated because the country’s laws do not include provisions to defend the rights of minor shareholders.
