SMART HOLDING (CYPRUS) LTD filed claims with the Commercial Court of Kharkiv region demanding to invalidate the decisions made at the Supervisory Board meetings of Kharkivoblenergo JSC and Kharkivenergozbut PJSC on 23 March 2021, in particular, the decisions on holding general shareholder meetings of these companies on 28 April 2021.
SMART HOLDING (CYPRUS) LTD (hereinafter referred to as the Shareholder or the Claimant) owns 76,436,210 ordinary registered shares or 29.795% of the authorized capital in each of the above companies.
The Claimant has the relevant evidence of the violated procedure for convening and holding the Supervisory Board meetings of Kharkivoblenergo JSC and Kharkivenergozbut PJSC on 23 March 20211. The Shareholder also provided the court with justifications that after 6 January 2019 the composition of the Supervisory Boards of Kharkivoblenergo JSC and Kharkivenergozbut PJSC became incapacitated since it was not brought to compliance with the provisions of the effective legislation2.
SMART HOLDING (CYPRUS) LTD believes that all decisions by the aforementioned companies’ Supervisory Boards, except for the decisions on the preparation, convocation and holding of a general meeting in order to elect the authorized or capacitated composition of the companies’ Supervisory Boards, are invalid.
The Shareholder also asks the court to rule invalid the decisions of the general shareholder meetings of Kharkivoblenergo JSC and Kharkivenergozbut PJSC dated 28 April 20213. In particular, the meeting approved the annual reports of the companies for 2019 and 2020, took into consideration the reports of the Supervisory Boards for 2019 and 2020, approved the distribution of the companies' profits and losses based on the 2020 performance results, approved the amounts of the annual dividends, and considered other agenda items.
The Claimant believes that the decisions of the general shareholder meetings of Kharkivoblenergo JSC and Kharkivenergozbut PJSC dated 28 April 2021 are invalid and illegal, violating the legal rights and interests of SMART HOLDING (CYPRUS) LTD as a shareholder of these energy companies.
Ivan Gerasimovich, Risk Management and Security Director of Smart Holding, a candidate to members of the Supervisory Board of Kharkivoblenergo JSC and Kharkivenergozbut PJSC, said:
'What do we have now? Incapacitated Supervisory Boards, the management that in fact is not controlled by anyone, and a bunch of criminal proceedings regarding the corrupt actions by some of the energy companies’ officials. In addition, by their latest decisions the Supervisory Boards provided the Management Board, which compromised itself for a while now, with some additional powers. This certainly does not contribute to the transparency of the business and the security of decision making at the level of the companies’ senior management, but rather creates a situation when companies, strategic for the country, are simply plundered and are actually led to bankruptcy. This clearly jeopardizes the plans of the so-called "Big Privatization" in Ukraine. We have filed the court claims aimed at overturning the decisions of unauthorized, incapacitated Supervisory Boards and shareholder meetings.
We want to restore the legitimacy and create conditions for efficient operation of the companies and not for the legalization of corruption schemes. We sincerely want the corporate principles to start working for the benefit of both the companies, the shareholders and the State.
We publicly appeal to the State Property Fund urging them to finally hold the long-awaited competitions in order to introduce, in accordance with the requirements of the Ukrainian legislation, independent members to the Supervisory Boards who will act in the interests of the energy companies, and not in the interests of certain political figures. This will make it possible to finally dismiss the corrupt management and prepare Kharkivoblenergo and Kharkivenergozbut for the privatization planned to be held this year.’
It is a reminder that on 28 April 2021, an online general shareholder meeting of the two large companies, Kharkivoblenergo JSC and Kharkivenergozbut PJSC, having strategic importance for the economy and security of Ukraine, was held. Following the consideration of the general shareholder meeting’s agenda, the representative of SMART HOLDING (Cyprus) voted, in particular, against the approval of the companies’ annual reports for 2019-2020, and also voted for the decision to recognize unsatisfactory the performance of both companies’ executive bodies in the same period. The main negative point of the annual shareholder meeting was the fact that the Supervisory Boards in either of the two companies were not established. This led to the situation that the collegial body stipulated by the Charter and the laws of Ukraine, which protects the rights of shareholders, including the State, and also controls and regulates the activities of the companies’ Directorates (Management Boards), in fact has ceased to function both in Kharkivoblenergo and Kharkivenergozbut.
This was the result of some intended and deliberate actions of the State Property Fund, which, as a subject of state property management, ignoring the requirements of the current legislation, simply failed to submit candidates to be elected to the Supervisory Boards of these joint-stock companies, which are of special importance for the Ukrainian economy.
As it is known, the formation of independent Supervisory Boards in companies, in the authorized capital of which 50% + of shares (stakes) belong to the State, is mandatory, according to the Law of Ukraine No. 1405 "On amendments to certain legal acts of Ukraine regarding the management of public and municipal property", which was adopted by the Verkhovna Rada on 2 June 2016.
SMART HOLDING is one of the largest industrial and investment groups in Ukraine. The interests of the Group focus on the industries that are the key ones for the economy of the country. The companies of Smart Holding invest in metals and mining, oil and gas segment, banking sector, agriculture, energy sector, shipbuilding and real estate. The SMART HOLDING’s strategy is aimed at efficient management of a diversified investment portfolio in order to increase its value in the long term.
SMART HOLDING (CYPRUS) LTD is the top holding company of the Group that was established and operates under the laws of the Republic of Cyprus. Its beneficiary is Vadym Novynskyi.
1 According to the information received in response to lawyer’s requests dated 18 May 2021 from one of the members of the Supervisory Boards of Kharkivoblenergo JSC and Kharkivenergozbut PJSC, he was not notified of the companies’ Supervisory Board meetings scheduled for 23 March 2021, both within the established time limits (three days before the date of meeting) and on the day of these meetings. In addition, neither before the date of the Supervisory Boards’ meetings, nor on the day of the meetings, he was provided with the relevant required documents and information related to the agenda items of the companies’ Supervisory Board meetings. This deprived the members of the companies’ Supervisory Boards of the opportunity to fulfil their duties and enjoy the corresponding rights of a member of the Supervisory Board (to participate in decision-making, to propose to add additional agenda items, to object on the agenda items, etc.). Thus, failure to comply with the imperative requirements to duly notify of the Supervisory Board meetings, requirements to provide documents and information related to the agenda items of the companies’ Supervisory Board meetings, has become a gross non-compliance with a number of provisions of the Companies’ Charters, and indicates a significant violation of the procedure for convening and holding the Supervisory Board meetings of Kharkivoblenergo JSC and Kharkivenergozbut PJSC dated 23 March 2021.
2 In particular, the Law of Ukraine "On Joint Stock Companies" and the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine Concerning the Simplification of Doing Business and Attraction of Investments by Securities Issuers" No. 2210-VIII dated 16 November 2017. As for the latter, subparagraph 29 of paragraph 10, section 10 of this Law amended part 4 of Article 53 of the Law of Ukraine "On Joint Stock Companies". According to those amendments, the Supervisory Board of a public joint stock company and of a joint stock company, in the authorized capital of which more than 50 percent of shares (shares, stakes) belong to the State, must at least by one third consist of independent directors, while the number of independent directors cannot be less than two persons. By 6 January 2019, these joint stock companies had to bring the composition of their Supervisory Boards to compliance with the requirements of Law No. 2210.
3 As noted above1, the decision of the Supervisory Boards of Kharkivoblenergo JSC and Kharkivenergozbut PJSC dated 23 March 2021, executed by the relevant protocols (minutes of meetings), are invalid. In connection with the above, there were no legal grounds for holding the companies’ general meetings on 28 April 2021, which automatically indicates the invalidity of decisions taken at these general meetings. The grounds for cancelling the decision of the general meetings in particular include a violation of the requirements under the procedure of convening and notifying of the general shareholder meeting, violations in the formation/drafting of the agenda of such a meeting.