LAW DIGEST:
Troubled banks
Resolution No.752 of the Board of the National Bank of Ukraine On Changes to Some Legal Regulations of the NBU of 27 November 2014, introduces the following changes to Section VI of the Regulation On NBU’s Regulation of Liquidity of Ukraine’s Banks, approved by the Regulation of the NBU’s Board of 30 April 2009, No.259, Clause 1.4 shall read as follows: 1.4. Starting from the date of the bank’s outstanding debt, the National Bank shall have the right to write off funds from the correspondent account of the Bank and its subsidiaries that operate in EFTS under separate correspondent accounts. If there are no (sufficient) funds on the correspondent accounts of the bank, the National Bank shall take measures to satisfy in full its claims under the liquidity regulation transactions pursuant to concluded agreements and the legislation of Ukraine, including by selling the collateral (transactions) and/or transferring it into its ownership at the account’s fair value.
Taking such measures does not exclude the possibility of undisputed withdrawal of the funds from the bank accounts till full repayment of the total debt to the bank is made. Clause 9.25, Chapter 9, Section ²² of the Regulation On NBU’s Measures for Violation of the Legislation on Banking, approved by the Resolution of the NBU’s Board of 17 August 2012, No.346, shall be supplemented with the following Paragraph after sub-clause “d”: the NBU shall not apply to the problem banks its measures of influence in the form of a penalty for violation of economic regulations and/or limits of the general (long, short) currency position and/or the procedure of forming and maintaining mandatory reserves.
Increasing the banking system’s level of capitalization
Taking into account the urgent need to improve the capitalization of the banking system and to ensure banks comply with capital requirements, the Resolution of the National Bank of Ukraine On Changes to the Resolution of the Board of the National Bank of Ukraine No.758, of 15 January 2015 No.22 allowed banks to repay foreign currency loans from non-residents early, starting from 18 January 2015, if the proceeds from such repayments by non-residents are used to increase share capital.
Corporate rights of the state
TheAct of Ukraine On Changes to Article 41 of the On Joint Stock Companies (on the quorum at the general meeting of shareholders where the state holds majority rights) Act of 13 January 2014 supplements Article 41 of theJoint Stock Companies Act with part 3, defining the quorum at the general meeting of shareholders where the state holds corporate rights and is the owner of 50% and more of ordinary shares, provided that shareholders who jointly own more than 50% of voting shares, have registered to participate in the meeting.
Comments
Oles Kvyat,counsel, Asters
The issue of reducing the quorum requirement or complete waiver of quorum in respect of business companies has long been a subject of intense debate among legal experts. The main reasons for this are frequent disruptions of general meetings by shareholders (participants) holding a blocking equity (40% + 1 share). This is also due to the fact that the quorum requirement, as a tool used to secure the passing of a resolution by a majority vote of those present at the meeting (relative majority), is justified only for companies with a large number of shareholders and dispersed ownership structure, especially in case of joint-stock companies. As for companies with a small number of owners, such as LLC where none of the participants exercises control over the company, the quorum requirement often becomes a tool of manipulation that provides decision-making powers to the person who controls over a half of the votes cast by the quorum but at the same time has the absolute minority of votes in the company.
The legislative initiative to reduce the quorum requirement for a general meeting should in fact be welcomed. Although, it shall not affect LLCs (primarily due to the political background of this novelty), we are hopeful that legislators will soon consider the reduction or waiver of quorum for this legal form of business as well. With regard to JSC, it is clear that reducing the quorum will not be a panacea for all corporate woes, but it will still partially solve the issue of dragging out the adoption of important decisions by shareholders, will in some way balance the rights and interests of majority and minority shareholders, will reduce the risk of illegal takeovers (corporate raiding) and to encourage shareholders to take a more active stand in the decision-making process. It should be noted that on 26 January 2015, the Cabinet of Ministers of Ukraine submitted to Parliament a new Draft, No.1839, that suggests, inter alia, extending the quorum reduction to each and every JSC starting from the date of the new law coming into force, if adopted.
