The idea of hastily “squeezing out” two large private companies at once is quickly losing supporters
The arrest of a share of the corporate rights of two members of the Top-100 largest private companies of Ukraine at once became a moment of truth for the authorities and the mass media. The first managed to make anecdotal mistakes in their senselessness. Others were unable to either notice or disclose these mistakes.
On October 6, the Security Service of Ukraine and the Office of the General Prosecutor (OGP), referring to the court decision passed two days earlier, announced the seizure of “all corporate rights in Ukraine” belonging to sanctioned Russian businessmen Mykhailo Fridman, Petro Aven and Andrii Kosogov. Since this decision of the court was not made public (and still is not made public, by the way), a number of Ukrainian mass media reported some details with reference to their own sources. In particular, it was said about the seizure of 100% of the shares of PJSC “Kyivstar” and LLC “Lifecell”, which are allegedly controlled by sanctioned persons through the Dutch company VEON Ltd.
In just ten days, the scandalous decision underwent a significant correction. Referring to the request of the OGP, the court corrected what is officially interpreted as a “description”. Now we are talking about the seizure of significantly smaller shares of corporate rights, namely 47.85% of Kyivstar PJSC and 19.8% of Lifecell LLC.
Unfortunately, even this surprisingly loud bell was not enough for Ukrainian mass media, including business ones. Ignoring the well-known basic concepts of corporate law, journalists continue uncritically to reproduce a false narrative. “Only 47.85% of Kyivstar’s authorized capital, i.e., the share belonging to the structures connected with LetterOne, was seized ,” are typical comments regarding the latest court decision.
The unprofessionalism of civil servants is harmoniously combined with the unprofessionalism of journalists.
Let’s recall the well-known facts reflected in open sources. The company “Kyivstar” exists as a private joint-stock company . All 99.998% of its shares belong to the multinational company VEON Holdings BV. This company is registered in the Netherlands and its shares are traded on Nasdaq (New York, USA) and Euronext (Amsterdam, Netherlands). VEON shares are divided between the company L1T VIP Holdings S.à rl, better known as LetterOne, and free float, that is, shares that circulate on the free market. To be precise, LetterOne owns 47.85% of the voting shares, which is less than half. The majority of LetterOne shares are owned by three authorized persons.
So, the first question that arises for a non-engaged and educated observer is, in what way is it possible to separate the share belonging to the sanctioned persons in a situation of joint ownership ? Joint ownership is called joint because any of its shares, even 100%, even half, even a single share, belong simultaneously to all shareholders of Kyivstar PJSC and Lifecell LLC without exception. In our case, this means that any package of shares of PJSC “Kyivstar”, on which the Ukrainian state imposes its sanctions, belongs to LetterOne only by 47.85%. In the case of “Lifecell” LLC — by 19.8%.
In any case, the seizure of any part of the shares of the specified companies automatically affects the interests of all Veon shareholders at once. The Ukrainian state can impose sanctions either on everyone or on no one.
The second question follows from the first. In what sense does “imposing a seizure on the corporate rights of Ukrainian companies not affect the protection of the interests of foreign investors and owners of shares of corporate rights, does it not hinder their economic activity and the possibility of receiving dividends” ? This is how the state authorities explain the purpose of the arrest. But in the same official reports it is directly stated that “seizure of this property will not allow the Russian owners to “rewrite” it to false persons in order to avoid further transfer of assets to the income of Ukraine . ” What dividends of foreign investors can we talk about in the case of “transfer of assets to the income of Ukraine” ? About what interests?
Finally, it would be interesting and useful to know the reasons why the very first court decision in case No. 761/35853/23, according to which 100% of corporate rights were seized, has not yet entered the Unified State Register of Court Decisions ? The second, regarding the “description”, is in the register.
All these are extremely trivial questions, which are asked both publicly and privately by the shareholders of these companies. And these, by the way, are such powerful investment funds as Shah Capital, Lingotto Investment Management, Helicon Investments, City Group, BNP Parisbas Assets and others. Caan Terzioglu, Chief Executive Officer of Veon Group, and Ogi Fabela, co-founder and honorary chairman of Veon’s Board of Directors, spent almost a week in Ukraine. In addition to a large program of public activity, they actively met behind closed doors. The key question that representatives of the authorities hear time and time again is why investors of leading Western countries should bear collective responsibility for actions they have nothing to do with?
The chances of getting an answer seem slim. Judging by the sudden realization by the investigative bodies of the existence of the “description”, the idea of quickly “squeezing out” two large private companies at once is quickly losing supporters.
What is happening around PJSC “Kyivstar” and LLC “Lifecell”, even in the best case, is not some kind of “description”, but an extremely unfortunate mistake. Ukraine will not invent anything from an attempt to confiscate these assets, instead it is guaranteed to receive a high-profile scandal. Given the rapid growth of problems with the support of Ukraine in the US Congress, a wave of letters from outraged Veon shareholders will be received by congressmen in an extremely undesirable scenario.