RECOMMENDATIONS OF PRESIDIUM OF THE SUPREME ECONOMIC COURT OF UKRAINE

of December 28, 2007 No. 04-5/14

About practice of application of the legislation in hearing of cases which arise on the corporate relations

For the purpose of identical and correct application of regulations of substantive and procedural law in hearing of cases which arise on the corporate relations the presidium of the Highest economic to court of Ukraine considers necessary to make such recommendations.

1. Jurisdiction and cognizance of cases

In the solution of question of whether the dispute is such which arose on corporate legal relationship and whether it is subject to the decision economic court, it is necessary to proceed from requirements of item 4 of part one of Article 12 of the Economic Procedure Code of Ukraine (further - HPK).

1.1. The item 4 of part one of article 12 HPK provides such structure of the parties of corporate dispute: 1) the member (the shareholder, the founder) of economic society, including such which was disposed, and society or 2) members (shareholders, founders) of economic society in the dispute between them connected with creation, activities, management and the termination of this society.

The cases on disputes between members (shareholders, founders) of economic society and economic society connected with realization and protection of corporate laws are within the exclusive competence of economic courts.

In the solution of question of dispute belonging to corporate economic courts shall consider that the part two of Article 194 of the Civil code of Ukraine (further - the Civil Code of Ukraine) determines it: pass to individuality who was found by the property right to security in total all rights which it make sure. Modification of the register of owners of personalized securities is determined in paragraph three of part one of article 5 of the Law of Ukraine "About National depositary system and features of electronic security circulation in Ukraine" determined as sales term of the rights certified by shares, but not as the moment of finding of corporate laws. Therefore, person is considered the shareholder and respectively the subject of corporate laws from the moment of finding of the property right to shares.

1.2. Also disputes over claims of participants (shareholders) of economic societies on recognition invalid the documents of title concluded by society belong to corporate disputes if the claimant proves claims by violation of its corporate laws or interests.

1.3. As 12 GPK are provided by part one item 4 of Article that the party of corporate dispute can be also the participant who was disposed from society, disputes on recognition invalid decisions on exception of the participant of society, and also the disputes connected with determination and collection of cost of the part of property of society ought to payment to the participant who left (was disposed) from society, treat corporate and are subject to consideration by exclusively economic courts.

1.4. As follows from content of Item of 1 part four of article 12 HPK, disputes between members (shareholders) of economic society concerning creation, the termination of society and management of its activities belong to corporate disputes. As constituent documents of economic society affirm during creation of society, go for state registration of society and further govern the relations concerning management of economic society, disputes over claims of members of society on recognition invalid constituent documents of society or their part, changes to them belong to corporate and decide economic courts on the location of the relevant economic societies.

Disputes on liquidation or cancellation of state registration of economic societies over claims of shareholders or participants to societies are corporate disputes as such which arise between members of economic society and economic society concerning the termination of the last.

1.5. Disputes over claims of persons who are not members (shareholders) of economic society to economic society on the subject structure do not belong to corporate. In particular, it concerns disputes:

about recognition invalid decisions of governing bodies of economic societies in claims of the creditors, pawnbrokers, property tenants or other persons who are not members (shareholders) of the relevant societies;

about recognition invalid constituent documents of subjects of housekeeping, their part or changes to them in claims of bodies of the state registrars of the State Tax Service, or other bodies which control activities of society;

Cases on the corresponding disputes depending on structure of the parties are considered by economic or general courts.

1.6. In determination of jurisdiction of disputes which arise concerning creation of the termination, managements of activities of investment funds, economic courts need to consider type of investment fund and its form of business. According to the Law of Ukraine "About institutes of general investment (share and corporate investment funds)" corporate investment funds are created in form of business of joint-stock company. Therefore disputes which arise on the corporate relations in corporate investment funds are corporate in understanding of item 4 of part one of article 12 HPK and irrespective of structure of the parties of dispute are subject to the decision economic court on the location of corporate investment fund.

As the activities connected with asset management of corporate investment funds are performed by the companies on asset management based on the agreement signed with corporate fund, disputes which arise in case of such activities are contractual and do not belong to corporate. The parties of such agreement are legal entities: therefore, proceeding from instructions of Article 1 and Item of 1 part one of Article 12 GPK, disputes between them connected with the conclusion, change, termination, accomplishment or recognition invalid agreements on asset management of corporate investment fund are subject to the decision in economic courts. Cognizance of such disputes is determined by rules of article 15 HPK.

1.7. In the solution of question of jurisdiction of disputes on introduction or recognition invalid changes to registers of owners of personalized securities, the conclusions, changes, termination or recognition invalid contracts for maintaining registers of owners of personalized securities in claims of shareholders economic courts need to consider that the relations on accounting of the property rights to securities are such which are connected with realization of corporate laws. According to the paragraph third parts one of article 5 of the Law of Ukraine "About National depositary system and features of electronic security circulation in Ukraine" the participation rights in management, income acquisition and so forth which follow on personalized securities (i.e. make sure securities) can be realized from the moment of modification of the register of owners of personalized securities. Obligation provide proper accounting of owners of personalized securities it is assigned to the issuer. In part one of article 9 of the Law of Ukraine "About National depositary system and features of electronic security circulation in Ukraine" it is determined that the issuer by the conclusion of the relevant agreement shall charge to the registrar maintaining the register of owners of personalized securities if the number of owners of personalized securities of the issuer exceeds the quantity determined by State commission by securities and the stock market as maximum for the organization of independent maintaining the register by the issuer. Thus, by the conclusion of the contract for maintaining the register of owners of personalized securities the issuer charges to the registrar to fulfill its duties before owners of securities. The legislation confers responsibility for the proper organization of accounting of owners of personalized securities on the issuer: according to the paragraph the second parts one of article 9 of the Law of Ukraine "About National depositary system and features of electronic security circulation in Ukraine" the order the issuer to the registrar to keep the register of owners of personalized securities does not relieve from the issuer responsibility for accomplishment of obligations which follow from agreements concerning securities.

Thus, courts should recognize that the disputes over claims of shareholders to registrars connected with modification of registers of owners of personalized securities, the conclusion, change, termination, recognition invalid contracts for maintaining the register of owners of personalized securities directly concern the rights and obligations of joint-stock company. Therefore the joint-stock company is participant of the called disputes. Considering brought, as well as the fact that the bases of such claims are connected with realization by shareholders of their corporate laws and interests, the specified disputes are corporate and considerations in economic courts are subject.

Courts need to resolve in all cases issue of involvement of joint-stock company to participation in the corresponding cases as defendant or the third party depending on content of claims.

1.8. The disputes between joint-stock company and the registrar connected with the conclusion, change, termination, accomplishment or recognition invalid contracts for maintaining the register of owners of personalized securities, and also disputes between joint-stock company and depositary, connected with the conclusion, change, termination, accomplishment or recognition invalid service agreements of issue of securities do not belong to corporate disputes.

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