30 April 2021

ZTMC minority shareholder protected in court the preemptive right to purchase 51% of the plant during privatization

Kyiv Commercial Court revoked the order of the State Property Fund No. 1971 on the privatization of ZTMC

On 28 April 2021, Kyiv Commercial Court deemed null and void the State Property Fund of Ukraine Order No.1971 of 7 December 2020 on privatization of Zaporozhye Titanium & Magnesium Combine. The Court adjudicated a claim filed by Tolexis Trading Limited, a member of Group DF and ZTMC minority shareholder.


The court found that the State Property Fund of Ukraine order on ZTMC privatization violated the investor’s preemptive right to acquire a stake in the authorized capital of the enterprise. This right was established in ZTMC Charter, as well as in Article 20 of the Law of Ukraine “On Limited and Additional Liability Companies”, which explicitly states that “a company shareholder has the pre-emptive right to acquire a share (participating interest) of another company participant, which is being sold to a third party.”


The Court also recognized that the SPFU Order No. 1971 contravenes Article 16 of the Law of Ukraine “On the Privatization of the State and Communal Property”, which established that “only if the members of the company did not use their preemptive right to buy out shares within the specified period of time, the privatization authorities may carry out the sale.”


The Court established the pre-emptive right of Tolexis Trading Limited, a ZTMC minority shareholder, which owns 49% in the authorized capital of the plant, to acquire a stake in ZTMC in the course of privatization.


Tolexis Trading Limited challenged in court not the privatization itself, but the method of privatization chosen by the State Property Fund of Ukraine. Having ignored the preemptive right to buy out the shares of the second participant of the company, the SPFU once again grossly violated the legal rights of ZTMC minority owner,” – noted Roman Chishinsky, lawyer of Tolexis Trading Limited. “We have repeatedly proved in the courts our position in legal disputes with the SPFU. Any further attempts by the SPFU to violate the law regarding the property of ZTMC will be appealed in the courts of Ukrainian and international jurisdiction,“ – said Chishinsky.