Decisions of the Commission Resisting Hostile Takeovers

One of the options to protect one’s business and title to real pro­perty against hostile takeover is to challenge unlawful registration with the Commission for Considera­tion of Complaints in Respect of State Registration at the Ministry of Justice of Ukraine; the Commission’s unofficial name is the Commission on Resisting Hostile Takeovers.

Consideration of such a complaint results in the Commission issuing a conclusion on the basis of which the Ministry of Justice of Ukraine or the relevant territorial body of the Ministry of Justice either grants or dismisses the complaints of an applicant.

However, in most cases: it is common practice for decisions taken by the Mi­nistry of Justice to be challenged in court with reference to a lack of evidence and non-compliance with the requirements of law.

Legislative Framework

Separate commissions are established within the Commission on Resisting Hostile Takeovers in order to consider complaints against unlawful registration actions related real property in accordance with the Law of Ukraine On State Registration of Proprietary Rights to Real Property and Their Encumbrances, as well as to consider complaints against unlawful entering into the state register of changes to information about legal entities in accordance with the Law of Ukraine On State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations.

However, both cases tackle uniform rules of consideration of complaints by the Commission in accordance with the Procedure for Consideration of Complaints Related to State Registration approved by Resolution No. 1128 of the Cabinet of Mi­nisters of Ukraine of 25 December 2015.

Key Provisions

Which Court Should one Apply to?

There are currently a number of avai­lable legal positions expressed by higher courts regarding determining a competent court to consider a complaint against an order of the Ministry of Justice issued on the basis of conside­ration of a complaint by the Commission.

The key point in terms of determining the court jurisdiction shall be the grounds for challenging a respective order.

In particular, if an order is challenged with reference to violation of the procedural requirements of the law, the Procedure for Consideration of Complaints and if a preceding complaint filed with the Commission did not result from a dispute related to corporate or proprietary rights, such a case must be considered by an administrative court.

What violations of the Procedure for Consideration of Complaints Related to State Registration shall be deemed sufficient for cancellation of an order?

Failure to comply with the procedure for notification of the date and time for consideration of a complaint on merits is probably the “most common” grounds for challenging decisions of the Ministry of Justice of Ukraine made on the basis of the Commission’s recommendations.

As stipulated by the Procedure for Consideration of Complaints, an applicant and/or representative thereof, a respondent other parties concerned (based on a complaint or established in accordance with the information provided in registries) shall be invited two days prior to the hearings being held by the Commission.

The materials of a complaint shall be served to the above persons two days ­prior to consideration of a complaint.

However, failure to notify the parties of the date and time of a hearing by the Commission Resisting Hostile Takeovers may, in certain cases, not be grounds for cancellation of an order by a court.

For example, in case No. 815/3357/17, the court ­concluded that failure to observe the procedure for notification of persons of the time and date of a hearing under a complaint shall be construed as grounds for cancellation of an order provided such failure to notify resulted in violation of the right to submit written explanations on the merits of a complaint, which are obligatory for consideration.

Despite this position, the Supreme Court drew a different legal conclusion in case No. 826/3442/17, of 6 July 2018; pursuant to the findings of the Supreme Court in this case, failure to notify the applicant and/or representative thereof, respondent and other parties concerned, as provided by the complaint, could not be deemed a formal violation.

However, in the context of other circumstances of case No. 815/3357/17, failure to notify the applicant and other persons of the time and date of the hearing resulted in violation of other procedural rights of the persons envisaged by the respective procedure.

That is, there is no well-established case law as to whether failure to give notification of the time and date of a hearing by the Commission shall be considered as grounds for inevitable cancellation of an order; thus this situation should be monitored regularly to track the “novelties” and use them effectively for the elaboration of a successful legal position.

Among other things, we should note the position of the court (for instance, position of the Court of Appeals in case No. 804/2296/17), whereby the court held that there were no grounds to cancel an order, since the person in question was pre­sent at the Commission’s hearing despite the fact he/she had not been duly notified of the time and date of the hearing. The court justifies its position by the fact that the presence of the persons at the Commission’s hearing gives a proper possibility to provide explanations on the merits of a complaint, hence such situation shall not be construed as a violation of rights.

Such conclusions are not always accurate; thus a person could find out about the Commission’s hearing by accident, just hours before. In many cases it is physically impossible to provide proper and accurate explanations, to collect evidence supporting the objections under a complaint not having a clue about the subject of a complaint and within a limited period of time. Moreover, the Procedure provides for the right to submit written rather than oral explanations.

At the same time, having learned about a meeting of the Commission where issues related to business or real property are to be resolved, an owner is obviously unable to ignore a hearing by the Commission Resisting Hostile Takeover, even from the psychological standpoint.

Such a situation may be deemed a violation of the right for self-defense, as well as the right to submit explanations about challenged decisions, actions or omission. Thus, I believe that these shall be sufficient legal grounds for a court to cancel an order of the Ministry of Justice under such circumstances.

Thus, a conclusion of the court that the right of a person was violated following the failure of the Commissions to comply with the procedural rules of consideration of complaints by the Commission (which is required for cancellation of an order), would largely depend on addressing certain circumstances that originally might not be important for a particular case.

In what cases can failure to comply with the term for challenging registration actions to the Commission for Consideration of Complaints Relating to State Registration be considered as grounds for a court to cancel an order?

Legislation provides that a complaint to the Commission for Consideration of Complaints Relating to State Registration can be filed within 60 days following a decision of the state registrar, or follo­wing the day when a person found out or could have found out about a violation of his/her rights.

As a rule, a complaint is filed to the Commission for Consideration of Complaints Relating to State Registration after the expiry of the 60-day period following a decision of the state registrar. Therefore, at this stage it is important to determine what evidence can prove the moment the person learned about violation of his/her right.

Thus, in accordance with conclusions of the Supreme Court of Ukraine set out in the order of 16 November 2016 in case No. 6-2469цс16, the applicant must prove the fact that he could not have found out about the violation of his/her right earlier.

That is, provided a person did not submit sufficient evidence that he/she had became aware of violation of his/her rights at a certain moment after expiry of 60 days following the date of registration actions and, this fact shall be grounds for the court to cancel an order of the Ministry of Justice of Ukraine issued on the basis of a conclusion of the Commission Resisting Hostile Takeovers ta­ken after expiry of the established term.

In addition, it should be noted that Ukrainian civil law establishes that “property entails obligation”. Based on this rule, the arguments of a person who learned about registration actions in respect of his/her property after expiry of a considerable period (half a year or more) cannot be considered as reliable.

Consequently, in any case, a person must prove that he/she learned about registration actions in respect of his/her pro­perty at a particular moment using proper, admissible and sufficient evidence.

The following should also be noted among other things.

Both the Law of Ukraine On State Registration of Proprietary Rights to Real Pro­perty and Their Encumbrances and the Law of Ukraine On State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations envisage that information on judicial proceedings in a dispute between the same parties, on the same subject and grounds may serve as grounds for rejection of a complaint against a decision by the state registrar.

From this perspective, the mere fact of a dispute satisfying the following criteria cumulatively —  same parties, same subject (cancellation of the same registration actions) and on the same grounds (violation of requirements of legislation for state ­registration) — is important.

In this context, the Supreme Court concluded in case No. K/ 9901/44581/18 that non-similarity or lack of at least one of the elements (same parties, same subject and same grounds) shall preclude rejection of a complaint against a decision of the state registrar on such grounds.

That is, in a situation where, for example, a company is related to landlords, such a company (which was an initial party to land lease agreements) may file a complaint against registration of a land lease to the court, while land owners may file a complaint to the Commission Resisting Hostile Takeovers in order to cover possibilities of challenging a decision of the state registrar directly in  court and to the Commission ­Resisting Hostile Takeovers.

Thus, we can end up with a situation resulting in the absence of one of the above ele­ments. That is, similarity of parties, which is a “must have” for the Ministry of Justice to dismiss a complaint on unlawful registration. In turn, the foregoing precludes a possibility of cancellation by the court of an order and a decision by the Commission Resisting Hostile Takeovers on such grounds.

Such aspects should be addressed carefully to ensure recourse to all possible remedies, which can be used to protect your property from hostile takeovers.

I strongly believe that elaboration of a successful defense position in such cases depends on details; addressing and using them properly can help to develop a so­lid position which will leave the court no choice but to agree with it.