Tolexis Trading Limited appealed SPFU order on ZTMC privatization

Tolexis Trading Limited (Cyprus), a member of Group DF, will appeal in court the State Property Fund of Ukraine Order No. 1971 on the privatization of the Zaporozhye Titanium and Magnesium Combine. The company’s lawyers filed a lawsuit demanding to recognize their preemptive right to acquire a share in the authorized capital of the company and to declare the SPFU order null and void.

 

The first court hearing in the lawsuit on the claim of ZTMC’s private investor, which owns 49% in ZTMC authorized capital, will be held on 1 February at Commercial Court of Kyiv City.

In the lawsuit, Tolexis Trading Limited stated that the order of the State Property Fund of Ukraine on the privatization of the state shareholding in the authorized capital of ZTMC LLC contained a number of violations of Ukrainian laws. In particular, according to the plaintiff, the SPFU Order directly violates Article 20 of the Law of Ukraine “On Companies with Limited and Additional Liability”, which states that “a company participant has the preferential right to acquire a share (part of a share) of another company participant, which is being sold to a third person”, as well as Article 16 of the Law of Ukraine “On Privatization of State and Communal Property”, which provides that “only if the participant of the company did not exercise within the specified period of time its preferential right to buy out a share, the privatization authorities shall sell privatization objects at an auction”.

“We believe that the State Property Fund of Ukraine has grossly violated a number of requirements of the laws and are ready to defend our legal position in Ukrainian and international courts,” said Roman Chishinsky, lawyer of Tolexis Trading Limited.

According to him, the violation of the preferential right was not the only violation of the law that the SPFU committed by its decision to privatize ZTMC.

In the lawsuit, Tolexis Trading Limited also stated that the SPFU violated the effective direct legislative ban on holding auctions to sell large-scale privatization objects for the period of quarantine on the territory of Ukraine (see clause 7-2 of Section V “Final and Transitional Provisions” of the Law of Ukraine “On Privatization of State and Communal Property”). According to the plaintiff, the SPFU also ignored conclusions of the Ministry of Justice of Ukraine, which directly referred to legislative restrictions on the sale of large privatized objects during the quarantine period.

According to Chishinskiy, the SPFU while recognizing the weakness of its legal position in this case, is lobbying for amendments in the laws on privatization, namely, Article 16 on the Law of Ukraine “On Privatization”. This way, SPFU is trying to deprive the minority owner of the preferential right to buy out the state shareholding in the course of privatization.

 

“According to our information, lobbyists have already kicked in, who want to “nicely pack” 51% of the company for its illegal sale. They do it real quick in order to somehow cover up their violations. These attempts to change the privatization rules are null and void from the legal point of view. And absolutely pointless. Any lawyer understands that the Law has no retroactive effect,” emphasized Roman Chishinsky.

Follow this link to read more about SPFU Order that is appealed in court.