SPF Continues to Ignore the Requirements of the Law on the Formation of Independent Supervisory Boards of State-Owned Companies


The State Property Fund of Ukraine (SPF) did not take part in the extraordinary meetings of KHARKIVOBLENERGO JSC and KHARKIVENERGOZBUT PJSC, which were initiated by the shareholder of the companies SMART HOLDING (CYPRUS) LTD. The agenda of the meetings included the questions on the election of new members of the energy companies’ supervisory boards, including independent board members, as well as on conducting a special audit of the companies’ financial and economic activities for 2019–2020.

Representatives of the SPF did not register for the meetings held online on 3 September 2021. For lack of a quorum, the general meetings of shareholders were recognized invalid.

Ivan Gerasimovich, Risk Management and Security Director of Smart Holding, a candidate for a member of the Supervisory Board of KHARKIVOBLENERGO and KHARKIVENERGOZBUT, noted:

‘By its inaction, the SPF brought the corporate governance system in KHARKIVOBLENERGO and KHARKIVENERGOZBUT to a standstill. The companies still have not formed their legally competent supervisory boards with independent members. Defying the requirements of the law, the Fund gave the energy companies’ current management another carte blanche to keep their corruption schemes. The National Police, the SBI and NABU are now investigating dozens of criminal cases involving senior executives of these joint-stock companies. The damage caused to the state is measured in tens of millions of dollars. We hope that placing of the energy companies in the management of the Ministry of Energy in accordance with the NSDC decision will change the situation, and independent management bodies of the companies will be established. All the shareholders will benefit from this, and the State above all.’

The formation of independent Supervisory Boards in companies where 50%+ shares (stakes) in the authorized capital belong to the State is mandatory according to Law of Ukraine No. 1405-VII "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, as a responsible shareholder guided by the principles of the OECD on corporate governance of state-owned companies and the National Code of Corporate Governance, initiated an independent competition to select candidates for independent members of the Supervisory Boards of KHARKIVOBLENERGO JSC and KHARKIVENERGOZBUT PJSC. According to its results, the international executive recruitment company Boyden Ukraine selected 16 potential candidates for the position of independent board members.

It is a reminder that on 28 April 2021, online general shareholder meetings of KHARKIVOBLENERGO JSC and KHARKIVENERGOZBUT PJSC were held where the Supervisory Boards of the joint-stock companies were not established.

In May, SMART HOLDING (CYPRUS) appealed in court the decisions made at the Supervisory Board meetings of KHARKIVOBLENERGO JSC and KHARKIVENERGOZBUT PJSC on 23 March 2021, in particular, the decisions on holding a general meeting of these companies on 28 April 2021. The Company is convinced that after 6 January 2019, the composition of the Supervisory Boards of KHARKIVOBLENERGO JSC and KHARKIVENERGOZBUT PJSC became legally incompetent since it was not brought into compliance with provisions of the current legislation.