On 7 October 2021, an extraordinary general shareholder meeting of KHARKIVENERGOZBUT PJSC was held online. At the meeting a new legally qualified composition of the company’s Supervisory Board was elected. Officials of KHARKIVENERGOZBUT PJSC falsified the minutes of the meeting stating in them that a decision on this agenda item was not made.
Risk Management and Security Director of Smart Holding Ivan Gerasimovich noted:
‘This is where KHARKIVENERGOZBUT’s management deliberately obstructs the establishment of a legally competent Supervisory Board, which would establish proper control over the management’s activities and would be the key to the effective operation of the company. The interests of the state, which holds a 65% share in the authorized capital of KHARKIVENERGOZBUT PJSC, are put in jeopardy in the first place. The State and the representative of its interests, the State Property Fund, should be particularly interested in increasing the transparency of this company’s operation and improvement of its investment attractiveness in the run-up to the privatization.’
The company’s Supervisory Board consists of three persons. Its previous composition was elected on 30 May 2018 for a term of three years. Therefore, its powers were expired on 30 May 2021[i] accordingly. On 7 October, five candidates were offered to be considered by the participants of the meeting, as submitted by shareholders, and a decision on their election to the Supervisory Board was proposed. According to the cumulative voting results[ii], a representative from SMART HOLDING (CYPRUS) and two representatives from another shareholder, Stock Company Avanpost Closed Non-Diversified Venture Corporate Investment Fund, were elected. These candidates received the largest number of votes compared to others.
Thus, the Supervisory Board of the company is formed, and the powers of its new members are valid from the moment of their election by the general meeting. However, contrary to provisions of the law, the counting committee of KHARKIVENERGOZBUT PJSC noted that the decision on this agenda item, which was the second on the agenda, was not made. This is recorded in the minutes of the meeting published on the issuer’s website.
Authorized persons of the State Property Fund of Ukraine (hereinafter referred to as the SPFU) did not take part in the voting on the second agenda item, but according to the effective legislation, this decision is considered adopted.
Shareholders holding 97.86% of the voting shares, including the SPFU representatives, registered to participate in the extraordinary general meeting. Therefore, the quorum stipulated by the legislation was ensured.
Three items were included in the agenda of the meeting. In particular, those on termination of powers of the Chair and members of the Supervisory Board, on election of new members of the management body, as well as on approval of the form of civil law contracts to be concluded with members of the Supervisory Board.
During the voting, representatives of the SPFU voted against the termination of powers of the members of the Supervisory Board, which can be concluded from the minutes of the meeting published on the official website of KHARKIVENERGOZBUT PJSC. This agenda item is essentially purely technical, as the term of office of the company’s current Supervisory Board expired on 30 May 2021.SMART HOLDING (CYPRUS) considers the actions of the counting committee, which is under the control of the energy company’s management, as a deliberate falsification of the voting results and will challenge them at the level of the National Securities and Stock Market Commission. The relevant complaint will also be sent to the address of the issuer. The shareholder also reserves the right to turn to the courts.
[i]According to para. 17.5. of the Articles of Association of Kharkivenergozbut PJSC, the Supervisory Board of the company consists of 3 (three) persons, including the Chair of the Supervisory Board. According to para. 17.6. of the Articles of Association of Kharkivenergozbut PJSC, the Supervisory Board members are elected by the shareholders during the general meeting through cumulative voting for a term of three years.
In case of failure to elect new Supervisory Board members after three years, the powers of the Supervisory Board members are terminated, except for the powers to prepare, convene and hold the general meeting, which is supposed to elect new Supervisory Board members, among other things.
The previous composition of the Supervisory Board was elected on 30 May 2018. Therefore, its powers were terminated on 30 May 2021.
[ii]According to sub-para. 9 of para. 1, Article 2 of the Law of Ukraine “On Joint Stock Companies”, cumulative voting is the voting during the election of members to the company’s bodies, when the total number of the shareholder’s votes is multiplied by the number of members in the company’s body to be elected, and the shareholder has the right to cast all votes so counted for one candidate or distribute them among several candidates.
In accordance with para. 4 of Article 42 of the Law of Ukraine “On Joint Stock Companies”, when electing members of a joint stock company’s body through cumulative voting, the voting is made on all candidates simultaneously.
Those candidates who received the highest number of shareholders’ votes in comparison with other candidates are deemed elected. In accordance with para. 7 of Article 53 of the Law of Ukraine “On Joint Stock Companies”, the powers of a Supervisory Board’s member are valid from the moment of his/her election by the general meeting.