Finally, raiding is prohibited

Finally, raiding is prohibited 150 150 Esquires

Decree of the President of Ukraine “On measures to counter raiding” No. 5442/2019 as of 07/22/2019 – another declarative gesture or a program of real change?!

Which changes propose the President? What are they dictated by? Will the novelties have a practical use – commented partner of ESQUIRES, head of business protection practice Opanas Karlin for Family Office.

The article is available in Ukrainian.

The Decree of the President of Ukraine “On Strengthening the Counteraction to Raiding” dated on March 19, 2014 No. 313/2014 (one of the first to be signed by Acting President of Ukraine A. Turchinov) was indeed more declarative in nature, but for the first time recognized the problem of using judjeg for raiding at the regulatory level. admission of a problem is the first step to resolve it.

Obviously, the representatives of the previous cadence did not go beyond the first step.

The other day, on the official website of the President of Ukraine (, the Decree of the President of Ukraine “On measures to counteract raiding” No. 5442/2019 of 07/22/19 was published. This document is more programmatic and obliges the Government to develop a draft law, which will normative consolidate a number of changes that will help to protect the rights to real estate and protect the rights of founders of legal entities.

Remember the beginning of the reforms in 2014. Then the Ministry of Justice advocated the transfer of state registration functions from state registrars to utility companies accredited by the Ministry of Justice (accredited entities). That had to contribute to the fight against raiding and corruption. However, these accredited entities  have shown the most frequent and provocative violations of the law in the field of state registration, in every way contributing to the rooting of raiding and corruption. Recently, the same Ministry of Justice has been actively proposing to withdraw such powers from utilities. Perhaps this was an unsuccessful social experiment. The Decree No. 5442/2019 requires to deprive accredited entities at the legislative level of authority in the field of state registration. It is clear that this is a forced step, however, returning to starting positions, the main thing is not to fall into the trap of old problems.

One of the “tools” that raiders often use is registration actions based on court decisions. The problems lie in the inconsistency of the registries, the limited information of the registry of court decisions, and especially in the possibilities to conduct registration acts on the basis of a court decision not entered into the registry of court decisions. This “loophole” appealed to raiders most of all. Most of the felicitated court decisions got into the registers of the Ministry of Justice under this scheme. Decree No. 5442/2019 proposes to introduce a mechanism by which a registration action on the basis of a court decision that has not been submitted to the Registry of court decisions will only be possible after certifying a court decision by a qualified electronic signature (QES).

Also, Decree No. 5442/2019 requires to fix legislatively the changes in the structures of the two main registers (real estate and legal entities, individual entrepreneur), so that owners of real estate and / or founders of a legal entity are informed about the beginning, contents and consequences of registration actions (now there is a paid SMS- Mayak service). The President also orders to provide the possibility of electronic registration in the registry of court decisions (so far it is possible only for registration of individual entrepreneur), as well as the possibility of individual registration actions in the automatic mode without the participation of the state registrar. The Justice Ministry has to determine the criteria for risky registration actions and to monitor automatically.

Among the vital novelties should be named the introduction of a unified electronic register of notarial acts, as well as the mandatory notarization of agreements on the alienation of corporate rights. The Decree suggests to allow the conduction of separate registration actions only by notaries who have conducted the relevant notarial action (immediately after its conduction).

The issues of the necessity to introduce blockchain technologies to strengthen the protection of state registry information have been discussed for the long time. The Decree proposes to introduce additional confirmation of the registration action conduction by using a mobile electronic signature (ID) and other electronic identification Mobile schemes.

Separate attention is focused on the need to improve the basis for appealing decisions, actions or inaction in the field of state registration. The practice of the Commission for the consideration of complaints in the field of state registration is extremely heterogeneous in terms of the timing of the consideration of complaints and in terms of notifying participants about the consideration, and in terms of resolving similar cases.

Also, Decree No. 5442/2019 proposes to strengthen the responsibility for violation of the law in the field of state registration. It is important to note here that the current problem is rather not in the insufficient severity of the punishment, but in the absence of effective mechanisms to bring to responsibility. The ensuring of the principle of the inevitability of punishment is much more important than the severity of the punishment itself.

Many of the issues raised in Decree No. 5442/2019 have already been elaborated in the draft law on amendments to the Land Code of Ukraine and some other legislative acts to counteract raiding No. 8121 as of 03/14/18, which was not adopted in the second reading. Therefore, it is obvious that when preparing a package of legislative changes, it makes sense to focus on the valuable developments of the “predecessors”.

In conclusion, it should be noted that the success of many of the proposed changes directly depends on the possibility of their implementation not so much at the legislative level as at the technical (physical) level. The influence of the human factor should be minimized, the registrar should not technically be able to take an unlawful action, since, as practice shows, legislative prohibitions and fear of responsibility are not sufficient barriers.


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