The Law of Ukraine “On Managing Objects That Are in State Ownership”

The Law of Ukraine “On Managing Objects That Are in State Ownership”

Date of entry into force: October 18, 2006

According to Article 1 of the present Law, managing objects that are in state ownership shall mean the exercise of powers by the Cabinet of Ministers of Ukraine and bodies authorized thereby, as well as other entities specified by the present Law, related to the implementation of the rights of the state as the owner of such objects connected with owning, using and disposing of such objects within the limits identified by the legislation of Ukraine for the purpose of meeting public and social needs.

Article 3 of the present Law shall envisage that the objects of managing state property shall be:

• property that was transferred to state enterprises into operational management; • property that was transferred to state-owned commercial enterprises (hereinafter referred to as state-owned enterprises), institutions and organizations; • property that was transferred to state-owned business associations; • corporate rights that belong to the state in statutory funds of business associations (hereinafter referred to as corporate rights of the state); • state-owned property that provides for the activities of the President of Ukraine, the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine and that is managed according to the procedure identified by specific laws; • state-owned property that was transferred into lease, leasing or concession; • state-owned property that is on the balancesheet of business organizations and that was not included into their statutory funds or was left after the liquidation of enterprises and organizations; • state-owned property that was transferred into permanent free-of-charge use to the National Academy of Sciences of Ukraine or to sectoral academies of sciences; • derelict and confiscated property that shall be transferred into state ownership on the basis of a court decision. It shall be stipulated that the scope of the present Law shall not extend to managing objects that are in the ownership of the Ukrainian People specified in part 1 of Article 13 of the Constitution of Ukraine, as well as to exercising intellectual property rights.

According to Article 4 of the present Law, subjects of managing objects that are in state ownership shall be:

• the Cabinet of Ministers of Ukraine; • the State Property Fund of Ukraine; • ministries and other bodies of executive power (hereinafter referred to as authorized management bodies); • bodies that are engaged in management of state property according to powers identified by specific laws; • state-owned business associations, state-owned holding companies and other state-owned business organizations (hereinafter referred to as business structures); • legal entities and private individuals that fulfill functions related to managing corporate rights of the state (hereinafter referred to as authorized entities and individuals); • the National Academy of Sciences of Ukraine and sectoral academies of sciences.

Articles 5-9 of the present Law shall identify powers of subjects of managing objects that are in state ownership.

According to Article 10 of the present Law, authorized entities and individuals shall fulfill functions related to managing corporate rights of the state according to a commission contract that shall be signed between authorized management bodies or the State Property Fund of Ukraine and the relevant authorized entity or individual. It shall be envisaged that an authorized entity or individual shall fulfill functions related to managing corporate rights of the state by way of exercising rights of a shareholder of (participant in) a business association within the limits of powers that are granted by the above-mentioned corporate rights of the state, which were transferred to the relevant authorized entity or individual into management on the basis of a commission contract. Such authorized entities and individuals shall be determined on a competitive basis.

Article 11 of the present Law shall establish that corporate rights of the state cannot be transferred to business associations for the purpose of forming their statutory funds, except for the transfer to statutory funds of state-owned joint stock companies and stateowned holding companies. It shall be envisaged that corporate rights of the state that were transferred into management to an authorized entity or individual cannot be alienated by the relevant authorized entity or individual from state ownership without a permit of the Cabinet of Ministers of Ukraine, cannot be subjected to the collection of a penalty under obligations of an authorized entity or individual, cannot be subject to actions committed by the relevant authorized entity or individual that may result into alienation of such corporate rights from state ownership. Alienation of corporate rights of the state shall be carried out according to the legislation on privatization issues. Functions to manage corporate rights of the state shall be fulfilled directly, without the calling of a meeting of shareholders, by the Cabinet of Ministers of Ukraine, the State Property Fund of Ukraine and authorized management bodies in the instance, when corporate rights of the state constitute 100 percent in the statutory fund of the relevant business organization. In addition, a business organization whose statutory fund contains corporate rights of the state shall, based on the results of a calendar year, channel a part of net profits into the payment of dividends.

Business organizations shall be set up on the basis of objects that are in state ownership on condition that the size of corporate rights of the state exceeds 50 percent of their statutory fund. At the same time, the set-up of business organizations on the basis of objects that are in state ownership and that are of strategic importance for the economy and security of the state shall be carried out on the basis of agreement of the Cabinet of Ministers of Ukraine. It shall be envisaged that ordinary registered shares that belong to the state in the statutory fund of a business organization, provided they work effectively and efficiently, may be converted into privileged shares according to the procedure established by the Cabinet of Ministers of Ukraine. Article 11 of the present Law shall also envisage that in the instance, when corporate rights of the state exceed 50 percent of the statutory fund of a business organization, the composition of an auditing commission shall, in addition to representatives of the relevant authorized management body, include a representative of the Main Control and Revision Department of Ukraine or the State Tax Administration of Ukraine. In the instance, when corporate rights of the state exceed 25 percent of the statutory fund of a business organization, the composition of its supervisory council and an auditing commission shall imperatively include a representative of the relevant authorized management body (authorized entity or individual). A representative of the relevant authorized management body (authorized entity or individual) shall be elected Chairman of the supervisory council of a business organization in whose statutory fund corporate rights of the state exceed 50 percent. In addition, representatives of the local government body and trade unions or some other body authorized by the labor collective that has signed a collective agreement on behalf of the relevant labor collective shall have the right to participate, with the right for an advisory vote, in a meeting of the supervisory council of a business organization whose statutory fund contains corporate rights of the state.

Article 12 of the present Law shall establish that the Unified Register of Objects That Are in State Ownership (hereinafter referred to as the Register) shall be an automated system for collecting, tracking, accounting, accumulating, processing, protecting, and providing information about real estate, including real estate that was transferred into lease (leasing), concession or as a deposit, of state-owned enterprises, institutions and organizations, as well as about corporate rights of the state and state-owned property that was not included into statutory funds of business structures. The Register shall be formed by the State Property Fund of Ukraine on the basis of data of the State Register of Rights for Real Estate and Their Limitations with the participation of central bodies of executive power in the area of land resources, in the area of statistics, the State Tax Administration of Ukraine, the State Commission for Securities and the Stock Market, the Anti-Monopoly Committee of Ukraine, and other authorized management bodies based on unified methodological principles of information systems according to the procedure established by the Cabinet of Ministers of Ukraine. Data in the above-mentioned Register shall be state property.

Article 13 of the present Law shall specify that the value of objects that are in state ownership shall be determined by the State Property Fund of Ukraine according to the legislation. The requirements to organizing and implementing measures for the protection of objects that are in state ownership shall be determined jointly by the State Property Fund of Ukraine, other subjects of management and the Ministry of Internal Affairs of Ukraine.

By a decision of a body authorized to manage objects that are in state ownership, heads of state-owned enterprises may be paid remuneration based on the results of financial and economic activity of these enterprises at the expense of their net profits. The procedure for paying, terms and conditions, as well as specific amounts of such remuneration shall be determined by the Cabinet of Ministers of Ukraine and shall be a component part of a labor contract with the relevant head of a state-owned enterprise.

According to Article 15 of the present Law, remuneration may be paid to an authorized entity or individual in the instance of fulfilling the objectives related to managing corporate rights of the state. The procedure for paying, terms and conditions, as well as specific amounts of such remuneration shall be determined by the Cabinet of Ministers of Ukraine. In addition, it shall be specified that, for responsible representatives of authorized management bodies that fulfill functions of managing objects that are in state ownership, it shall be possible to establish official salaries increased up to 50 percent and quarterly bonuses increased up to 100 percent to official salaries, with due consideration for bonuses for the rank.

The fulfillment of functions to manage objects that are in state ownership shall be overseen by the Cabinet of Ministers of Ukraine, the State Property Fund of Ukraine, authorized management bodies, bodies of the state control and revision service, and other oversight bodies by way of analyzing the legality and evaluating the efficiency and the effectiveness of how subjects of management fulfill their responsibilities identified according to the Ukrainian legislation. In addition, it shall be envisaged that a responsible representative of an authorized management body shall: • oversee the drawing up of financial plans by state-owned enterprises and their approval according to the established procedure; • inform the head of the relevant authorized management body about the results of how heads of state-owned enterprises fulfill terms and conditions of contracts and submit proposals for the termination of such contracts in the instance when their terms and conditions are not being fulfilled.

Article 17 of the present Law shall establish that, for the failure to fulfill the requirements of Ukrainian laws and other regulatory and legal acts on issues related to managing objects that are in state ownership, guilty individuals and entities shall be subjected to measures of administrative, disciplinary, civil and legal, as well as criminal responsibility in accordance with the law.