How to protect agribusiness from a raider attack?
According to ESQUIRES junior associate Vadym Dziuba, the owner of an agricultural enterprise should constantly and systematically take measures to prevent raider seizure in order to protect effectively his business.
In addition, we should not forget about preventive measures against raiding, pay attention to frequent inspections of regulatory authorities, requests from other companies, shareholders, participants, monitor assets, ensure proper protection of real estate and carry out effective corporate managment. And in the event of a direct attack on the enterprise – to take a strong and active position to prevent illegal actions.
Read more in the article of Vadym Dziuba for LigaZakon. The article is available in Ukrainian.
Agribusiness is one of the most profitable sectors of the Ukrainian economy, but, unfortunately, one of the most vulnerable to attacks from outside, that attracts raiders. Today, the problem of raiding is increasingly associated with the issue of domestic security of the state. According to the latest statistics released by the Prosecutor General of Ukraine, the number of raider attacks is growing every year. Modern raiders have changed their approaches and ways to achieve their goal. They are less likely to use physical force, and their actions have concentrated on the use of “legitimate methods.” Such methods usually include the decision of judges, the purchase of a controlling stake in the company, the creation of problems by the regulatory authorities, the initiation of bankruptcy, the opening of criminal proceedings against the heads of enterprises,etc. How to protect agribusiness from raider attacks and which actions should be taken right now to preserve your own business – read on in the article.
Ukrainian legislation in the field of resistance to raiding is rather poorly developed. Any gap or conflict is quite skillfully used by raiders in their favor to obtain a “legal basis” for the seizure of part or all of the enterprise’s property. Every year, raiders use new grounds to achieve their main goal. Among the traditional are: falsified agreements on the alienation of corporate rights, “paid” court decisions on enforced collection of real estate, fake documents for property managment (for example, a joint venture agreement), initiating bankruptcy, canceling registration actions, release from attachment or seizure of property things, ect. An important role in obtaining a “legal basis” for seizure is played by registration actions. The raiders often use registrars as a tool to achieve their criminal goals by providing them with a fake decision of the general meeting of companies’ participants, as well as a falsified court decision, passing property or corporate rights on themselves. Partially, the legislator took measures to minimize the abuses during the registration actions by adopting the so-called “Anti-Raider” law dated on 02.11.2016, which introduced mandatory notarization of the charter and the signatures of the Director, secretary and participants on the minutes of the general meeting when amending the constituent documents of the companies.
The agricultural business has certain operating features, in particular, its activities are highly dependent on the “land bank”, which requires increased attention to the proper conclusion, execution and extension of land lease agreements, registration of rights. You can easily get rid of a substantial land mass or get stuck in protracted litigations due to simple mistakes: the landlords’s right to terminate the contract ahead of schedule, or incorrectly written conditions that make it possible to appeal the contract.
To protect their own business, the owner of the agricultural enterprise should constantly and systematically take measures to prevent raider seizure. To achieve this goal, you must adhere to these advises:
1. Take care of the positive business reputation of your agricultural enterprise. It will help you in the case of the enterprise seizure, since there will be great chances that residents of the village, journalists will be on your side. Thus, you will protect yourself from the spread of false and negative information that will be spread by raiders in order to legitimize their actions.
2. Pay special attention on the completion of the constituent documents of the enterprise. Try to detail all the problematic issues that may become the basis for manipulation by business partners. It will be effective in such case to attract highly qualified lawyers to participate in the development of constituent documents.
3. Try to control the number of shareholders. If the legal form of your enterprise is LLC, of course, with the adoption of the Law of Ukraine “On Limited and Additional Liability Companies”, this has become more difficult to do it, since now the consent of other participants to the joint of a new shareholder is not required. However, if someone from the shareholders who owns an insignificant share does not take part in the management of the enterprise, offer them to buy out their shares until the raiders have done so.
4. Check through various state registers of your counterparts. Remember, even counterparts and partners that have been “tested” with years of cooperation at any time can appear harmful.
5. Review all land lease agreements and compare the information in the state register with those indicated in the agreements. This check is aimed at identifying situations when two or more lease agreements are concluded on one land plot.
6. Be responsible for issuing various types of power of attorney. Do not give to representatives whose reliability you doubt powers of attorney. The power of attorney should be issued only for the performance of certain actions – conduct registration actions, represent interests in court within a certain case, etc.
7. Build an effective security system in the enterprise. Appoint a responsible person to fulfil this function. In order to avoid panic and confusion during the first hours of a raider attack, develop in advance a clear algorithm of the actions of management, security officer and other employees in case of a raider attack. Work with your subordinates, systematically hold a training and psychological training. Control the timely salary payments to employees, because otherwise there are risks that your employees will perceive the raiders as new legal owners and approve of their actions. Do not forget about the material motivation of the staff. Remember that there is no worse enemy than an offended worker. The actions of such an employee are unpredictable; at any moment of a raider seizure he can take the side of the opposite side, help them in every way of establishing control over the enterprise and its property.
In addition, do not forget about the systematic work to identify signs of preparation for the raider seizure of your enterprise, in particular, monitor all available state registries. To do this, remember the following main manifestations of preparation:
1. Unreasonable initiation of criminal proceedings against officials of the agricultural enterprise.
2. The existence of Rulling of the investigating judge on permission on temporary access to things and documents, searches, seizures of property, etc. You can track the availability of such judgments in the register on the portals “Judicial Power of Ukraine” and “Unified State Register of Judicial Decisions”, however, NOT all of these judgments are immediately published on these resources. For example, in order to ensure the secrecy of the preliminary investigation, the decisions of the investigating judge on permission to conduct searches are published a year after the decision is added into the register in accordance with part 4 of Art. 4 of the Law of Ukraine “On access to court decisions”.
3. The sudden receipt of a significant number of notifications from regulatory authorities on conducting of inspection of the agricultural enterprise.
4. Organized payment of company debts by unauthorized persons.
5. The appearance in the public media of information about the said to be illegal activities of your agricultural enterprise.
If, as a result of monitoring, you find several of the above signs, you need to take a set of measures immediately. In particular, you should conclude agreements on the provision of professional legal assistance with a lawyer, strengthen the protection of the most important objects of your agricultural enterprise (administrative premises where documents are stored, premises where equipment is stored, elevators, etc.), if possible, it is necessary to spread the information in the media about a raider seizure, that is being prepared against your enterprise. The final stage of the raider attack is the seizure of administrative buildings and industrial premises and land of the agricultural enterprise. The distinguish feature of raiding in agribusiness is the increased number of seizures in the period from August to October, when agribusiness have to harvest, but raiders, using their own equipment, illegally take the crops out to their storage. If unknown persons appear directly on the territory of your enterprise and in order to protect your business on this stage, you must:
1. Contact the law enforcement authorities and record their illegal actions. Submit a statement of criminal offense. Do not forget about the specifics of the work of our law enforcement bodies, therefore, in case of refusal to add the information about the crime in Unified state register of enterprises and organizations of Ukraine, apply to the investigating judge with a complaint about the inaction of the pre-trial investigation body. Use criminal proceedings to obtain evidence of illegal actions of raiders.
2. Record all actions of unknown persons using a video camera. It is obligatory to record the license plate numbers and identification documents of those who illegally try to seize.
3. Attract regional, and possibly national media. With their help, spread the information that illegal actions are being taken against your company.
4. Report the incident to officials of local governments and local executive authorities.
5. Take measures to appeal and invalidate the document that served as the basis for the raider attack.
6. Monitor changes in the register of rights to real estate. To do this, you can use the SMS-MAYAK service, with which you can receive notifications in the form of an SMS message about a change in the status of real estate and timely apply to the court with a statement of claim for the cancellation of registration actions, as well as law apply to enforcement agencies with a statement about the illegality of registration actions . If you find that there has been an illegal re-registration of the land plots that are owned by your enterprise, then you must file a complaint to the State Registration Complaints Commission, which operates under the Ministry of Justice of Ukraine. Commission can cancel illegal registration actions took against your property.
7. Seize assets within the pre-trial investigation, establish a ban on certain actions.
So, to effectively protect your own agribusiness from raider attacks, you need to use an integrated approach. Do not forget about preventive measures to counteract raiding. Ypo shall pay attention on the frequent inspections of regulatory bodies, requests from other companies, shareholders, participants. Assets should be regularly monitored, the necessary protection for real estate should be provided, and effective corporate managment should be implemented. In the event of a direct attack on the enterprise, take a strong and active position regarding the obstruction of illegal actions.
Article is available in pdf format: LAWYER & LAW – Protecting Your Own Business