DECISION OF THE CONSTITUTIONAL COURT OF UKRAINE

of May 11, 2005 No. 4-rp/2005

On case on the constitutional appeal of Obolon private company and the citizen Vinnik Victor Vladimirovich on official interpretation of provisions of part two of article 28 of the Law of Ukraine "About economic societies", Item 1, paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" (case on shareholder rights of closed joint stock company)

Case No. 1-11/2005

NAME OF UKRAINE

Constitutional court of Ukraine as a part of judges of the Constitutional Court of Ukraine:

Selivon Nikolay Fedosovich - the chairman,

Voznyuk Vladimir Denisovich,

Ivashchenko Vladimir Ivanovich,

Kostitsky Mikhail Vasilyevich - the judge-speaker,

Mironenko Alexander Nikolaevich,

Nimchenko Vasily Ivanovich,

Wheaten Valery Grigoryevich,

Savenko Nikolay Dmitriyevich,

Victor Egorovich's buffoons,

Tkachuk Pavel Nikolaevich,

Chubar Lyudmila Panteleevna,

Shapoval Vladimir Nikolaevich,

with the assistance of representatives of persons of law on the constitutional address Vitchenko Andrey Nikolaevich, Kolesnik Vladimir Viktorovich, representatives: The Verkhovna Rada of Ukraine - the Permanent representative of the Verkhovna Rada of Ukraine in the Constitutional Court of Ukraine Selivanov Anatoly Aleksandrovich, the President of Ukraine - the deputy minister of justice of Ukraine Efimenko Leonid Vasilyevich, the Cabinet of Ministers of Ukraine - the member of State commission on securities and the stock market Burmaki Nikolay Alekseevich, the Supreme Court of Ukrainynachalnik of management of ensuring activities of Trial chamber on economic to cases of the Supreme Court of Ukraine of Serdyuk Valentin Vasilyevich; the specialists recruited in consideration of the case: Gridchina Marina Vladimirovna - the assistant manager department of finance and statistics of Institute of the international economy and finance of Interregional academy of personnel management, Candidate of Economic Sciences, associate professor, Lutsya Vladimir Vasilyevich - the head of the department of civil disciplines of Academy of municipal authority, the doctor of jurisprudence, professor, the academician of Academy of legal sciences of Ukraine, Fursa Svetlana Yaroslavovna - professor of department of international law of Institute of the international relations of the Kiev national university of Taras Shevchenko, the doctor of jurisprudence, Swabia Konstantin Ivanovich - the head of department of enhancement of tax policy of Research center of problems of the taxation of National academy of the State Tax Service of Ukraine, Candidate of Economic Sciences,

considered at plenary meeting case on the constitutional appeal of Obolon private company and the citizen Vinnik Victor Vladimirovich on official interpretation of provisions of part two of article 28 of the Law of Ukraine "About economic societies" (Sheets of the Verkhovna Rada of Ukraine, 1991, N 49, Art. 682; 1998, N 18, the Art. 89), Item 1, paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" (Sheets of the Verkhovna Rada of Ukraine, 1991, N 20, the Art. 249).

Reason for consideration of the case according to Articles 42, 43 Laws of Ukraine "About the Constitutional Court of Ukraine" became the constitutional appeal of Obolon private company and the citizen Vinnik Victor Vladimirovich.

The basis for consideration of the case according to article 94 of the Law of Ukraine "About the Constitutional Court of Ukraine" is availability of ambiguous application of provisions of the specified laws of Ukraine courts of Ukraine.

Having heard Kostitsky M. V. judge-speaker, Vitchenko A. M. explanations., Kolesnika V. V., Selivanova A.O., Efimenko L. V., to Burmaki M. O., Serdyuk V. V., Gridchina M. V., V.V., Fursa S. Ya. Lutsya., Swabia K.I. and having researched case papers, the Constitutional Court of Ukraine established:

1. Persons of law on the constitutional address - Obolon private company and the citizen Vinnik V. V. - appealed to the Constitutional Court of Ukraine with the petition to give official interpretation of provisions of part two of article 28 of the Law of Ukraine "About economic societies", Item 1, of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" as consider that courts of Ukraine ambiguously apply these provisions in case of settlement of identical legal relationship, in particular relatively about alienation of shares of private company (further - closed joint stock company), and confirm it with the corresponding judgments.

Authors of the petition raise such questions:

- whether article 28 of the Law of Ukraine "About economic societies" regulates process of acquisition or alienation of shares; whether is on the content of provision of part two of this Article such that after modification by the Law of Ukraine of December 23, 1997 prohibits fixing in constituent documents of closed joint stock company of certain procedure for alienation of shares;

- whether the provision of Item 1 of article 4 of the Law of Ukraine "About property" is the basis for ignoring of closed joint stock companies of contractual commitments fixed by constituent documents concerning observance of procedure for alienation of shares by its shareholders, in particular implementation of the privilege of other shareholders of society to share acquisition which is alienated; whether such fixing with restriction of the right of the owner to own, use and dispose of the property is considered;

- whether the provision of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" is such which obliges the shareholder of closed joint stock company not to violate the rights of other shareholders of closed joint stock company to preferential share acquisition of such society which are alienated.

2. The president of Ukraine in the letter in the Constitutional Court of Ukraine noted that the legislation of Ukraine does not contain prohibition to citizens on bases of the agreement to acquire certain rights and to undertake the corresponding obligations, including relatively about alienation property (in particular corporate) the rights and obligations and to enshrine it in the relevant documents, for example in charter of joint-stock company. At the same time from relevant provisions of the Constitution of Ukraine (Articles 13, of 41) and general bases of the civil legislation of Ukraine follows that the procedure determined by constituent documents shall not break or limit the rights of the shareholder of certain economic society - to deprive of it possibility of exit from society, alienation of shares at market prices, and also sales of shares to the third parties if closed joint stock company and its shareholders refuse to redeem them.

The Cabinet of Ministers of Ukraine stated the legal line item of the question which is rather raised by persons of law on the constitutional address generally on the basis of the of provisions of the acting Civil code of Ukraine and the Economic code of Ukraine, i.e. without situation which took place for consideration of the corresponding cases by courts of Ukraine. Now, as approves the Cabinet of Ministers of Ukraine, article 81 of the Economic code of Ukraine provides that shareholders of private company have the privilege to share acquisition which are on sale other shareholders of society, but the legislation does not provide the accurate mechanism of realization by the shareholder of closed joint stock company of the privilege to share acquisition in case of their alienation by other shareholders of this society.

The committee of the Verkhovna Rada of Ukraine concerning economic policy, management of the national economy, property and investments notices that refining of edition of parts two, third article 28 of the Law of Ukraine "About economic societies" helped their coordination with part five of article 4 of this Law concerning compliance of the charter of society to the current legislation.

The shareholder, according to Committee, cannot ignore the provisions provided by constituent documents of joint-stock company, Article part five 4, parts two, third article 28 of the Law of Ukraine "About economic societies" concerning the circulation of shares as the founder of closed joint stock company, receiving shares of society in case of distribution, shall know about legislative restriction of their address. It is not considered restriction of the rights of the owner, and is observance by the owner of provisions of Items 5, of the 6th article 4 of the Law of Ukraine "About property".

The Ministry of Justice of Ukraine considers that the shareholder preemptive right on share acquisition which are alienated, and also certain procedure for realization of this right by them which, in turn, shall meet the requirements of the legislation establishing rules of security circulation can be provided in the charter of closed joint stock company.

The Supreme Court of Ukraine claims that article 28 of the Law of Ukraine "About economic societies" regulates procedure for share acquisition. It is type of their alienation and consists in share transfer to other persons for remuneration with transition of the property rights to them. Based on provision of part five of article 4 of this Law by constituent documents of closed joint stock company the procedure for alienation of shares, in particular shareholder preemptive right of society on share acquisition in case of their alienation can be established.

The Ukrainian Union of Industrialists and Entrepreneurs emphasizes that when the charter of closed joint stock company determines shareholder preemptive right on share acquisition which are on sale other shareholders, its violation is the basis for recognition of purchase and sale agreements of shares invalid.

Consultants of Lawyers' union of Ukraine came to conclusion that they with withdrawal by the Law of Ukraine "About introduction of amendments to the Law of Ukraine "About economic societies" of December 23, 1997 from part two of Article 28 of the phrase "if another is not provided by the charter of society" of closed joint stock company lost the right to provide in the constituent documents provisions concerning shareholder preemptive right of society on share acquisition which are alienated by other its shareholders. They consider that availability of such provisions in constituent documents of closed joint stock company during the period since January 22, 1998 (entry into force by the Law of Ukraine "About introduction of amendments to the Law of Ukraine "About economic societies" till January 1, 2004 (entry into force by the Economic code of Ukraine contradicted the legislation of Ukraine existing for that time.

Line items of specialists of higher educational institutions and research establishments of Ukraine which provided the conclusions on the judge-speaker's request as for the questions raised in the constitutional address in particular of the Kiev national economic university, Institute of the international relations of the Kiev national university of Taras Shevchenko, Institute of economical and legal researches NAS of Ukraine, Research institution of private law and entrepreneurship of Academy of legal sciences of Ukraine, practically match.

In their opinion, "About economic societies" did not prohibit provision of part two of article 28 of the Law of Ukraine and does not prohibit after entering of changes of fixing into it with constituent documents of closed joint stock company of certain procedure for alienation of shares as it regulates the share acquisition bases, though does not establish the exhaustive list of such bases. By this provision shareholders are also not exempted from obligations of accomplishment of conditions of the charter of closed joint stock company as other regulations of the legislation of Ukraine oblige them to it. It is, in particular, about article 11 of this Law.

In understanding of Item 1 of article 4 of the Law of Ukraine "About property" fixing with constituent documents of closed joint stock company of such procedure for alienation of shares which provides implementation of the privilege of other shareholders of society to share acquisition who are alienated is not restriction of the right of the shareholder to own, use and dispose of the property (shares) as the owner when signing constituent documents is free in declaration of will concerning the order the property, disposes of the stocks owned by it at discretion, and its such actions do not contradict the current legislation.

As for provision of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" specialists notice that the shareholder, performing the rights, not violate the rights and interests of other shareholders protected by the law and therefore shall fulfill the undertaken obligations. I.e. in case of establishment by constituent documents of closed joint stock company of obligation of providing shareholder preemptive right for share acquisition which are alienated the owner of such shares shall execute it.

3. At plenary meeting of the Constitutional Court of Ukraine representatives of persons of law on the constitutional address, the Verkhovna Rada of Ukraine, the President of Ukraine, the Cabinet of Ministers of Ukraine, the Supreme Court of Ukraine in the performances supported reasons for the corresponding line items on the questions raised in the constitutional address.

Line items of the specialists recruited in consideration of the case generally are that the provision of part two of article 28 of the Law of Ukraine "About economic societies" in its initial edition and after entering of changes into it establishes the bases of share acquisition and does not concern possibility of establishment by constituent documents of closed joint stock company of the privilege of its shareholders for share acquisition which are alienated by other shareholders of society. The Item provision 1, of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" in sense of the question raised by persons of law on the constitutional address before the Constitutional Court of Ukraine, in their opinion, needs to be understood as debt of shareholders of closed joint stock company in case of alienation of shares to observe the corresponding procedure fixed by constituent documents of society.

4. Solving case on official interpretation of provisions of part two of article 28 of the Law of Ukraine "About economic societies", Item 1, of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" in the context of the constitutional address, the Constitutional Court of Ukraine leaves that the legal order in Ukraine is based on bases according to which nobody can be forced to do what is not stipulated by the legislation (part one of article 19 of the Constitution of Ukraine; everyone has the right to own, use and dispose of the property (part one of article 41 of the Constitution of Ukraine; use of property, in particular, cannot do harm to the rights, freedoms and advantage of citizens, interests of society (part seven of article 41 of the Constitution of Ukraine.

4.1. The part two of article 28 of the Law of Ukraine "About economic societies" in edition of September 19, 1991 established: "If another is not provided by the charter of society, the share can be acquired also based on the contract with its owner or the holder at the price which is determined by the parties, or by the price which developed in the stock market and also according to the procedure of inheritance of citizens or successorship of legal entities. The procedure for implementation of shares is determined according to the legislation of Ukraine".

The share is security without fixed term of the address which certifies equity in authorized capital of joint-stock company, confirms membership in joint-stock company and the participation right in management to them, grants the right to its owner on receipt of part of profit in the form of the dividend, and also on participation in distribution of property in case of liquidation of society (part one of article 4 of the Law of Ukraine "About securities and stock exchange").

Part one of article 25 of the Law of Ukraine "About economic societies", determining types of joint-stock companies and distinction between them, determines that shares of closed joint stock company are distributed between founders and cannot extend by subscription, be bought and on sale at the exchange. The mentioned Law does not establish other prohibition concerning purchase and sale of shares of closed joint stock company, and they can be bought-be on sale according to the procedure, stipulated in Article the 28th this Law, taking into account requirements of its Article 11, which obliges members of society to observe constituent documents of society, to fulfill the obligations to society, to perform other duties if it is provided by this Law, other legislation of Ukraine and constituent documents.

The list of data which shall contain constituent documents of society is established by article 4 of the Law of Ukraine "About economic societies". It is not exhaustive as the part five of this Article provides that constituent documents of society can include other conditions which are not contradicting the legislation of Ukraine.

Among such conditions there can be fixing with constituent documents of closed joint stock company of shareholder preemptive right of society for share acquisition which are alienated by other its shareholders.

On the content article 28 of the Law of Ukraine "About economic societies" establishes the share acquisition bases therefore she cannot prohibit fixing in constituent documents of closed joint stock company of certain procedure for their alienation.

Withdrawal by the Law of Ukraine "About introduction of amendments to the Law of Ukraine "About economic societies" of December 23, 1997 from part two of article 28 of the Law of Ukraine "About economic societies" the phrase "if another is not provided by the charter of society" did not reduce the list of the bases on which shares of closed joint stock company can be acquired, and did not exempt shareholders from obligation to satisfy conditions of constituent documents of closed joint stock company.

If constituent documents of closed joint stock company within the current legislation established shareholder preemptive right on share acquisition which are alienated by other its shareholders, and founders of joint-stock company according to part two of article 26 of the Law of Ukraine "About economic societies" signed among themselves the agreement which determines procedure them joint activities for creation of joint-stock company, responsibility to persons who were signed on the share, and the third parties, then all shareholders based on provisions of article 11 of the mentioned Law shall observe this agreement and carry out it.

Thus, part two of article 28 of the Law of Ukraine "About economic societies", regulating the share acquisition bases among which: share acquisition based on the contract with their owner or the holder at the price which is determined by the parties, or by the price which developed in the stock market; acquisition of right to shares according to the procedure of inheritance of citizens; acquisition of right to shares according to the procedure of successorship of the parties, does not compete with article 11 of the specified Law which establishes obligations of members of the society including closed to observe constituent documents, to fulfill the obligations to society, to perform other duties if it is provided by this Law, other legislation of Ukraine and constituent documents. Initial edition of part two of article 28 of the Law of Ukraine "About economic societies", the changes made to it by the relevant Law provide restrictions concerning opportunity to establish constituent documents of private company within the current legislation of Ukraine the privilege to share acquisition it by shareholders in case of their alienation by other shareholders of this society.

Since January 1, 2004 such right is affirmed legislatively, in particular by part three of article 81 of the Economic code of Ukraine. To the same as follows from contents of this Article, the privilege to share acquisition which are on sale other shareholders of society is one of the main signs on which the joint-stock company is considered closed.

4.2. Article 4 of the Law of Ukraine "About property" determines that the owner at discretion owns, uses and disposes of the property belonging to it (Item 1), but, performing the rights, it not violate the rights and interests of citizens, legal entities and the state protected by the law (paragraph one of Item 5).

Shares according to Item 1 of article 13 of the Law of Ukraine "About property" are objects of the right of private property, and according to provisions of article 41 of the Constitution of Ukraine the person of law of property has the right to own them, to use and dispose to shares, i.e. can sell, exchange, grant, cram, bequeath without restrictions them and so forth. At the same time from content of provisions of this Article and article 13 of the Constitution of Ukraine it is seen that the property right can be to a certain extent limited as use of property cannot do harm to the rights, freedoms and advantage of citizens, interests of society. I.e. opportunity to perform competences concerning ownership is legally provided, cannot be beyond use and the order of the owner of the property belonging to it, the established precepts of law governing the relations in the field of property.

According to Item 7 parts one of article 92 of the Constitution of Ukraine the legal regime of property is determined only by the law. Therefore, the special procedure for activities of subjects which object of the property right are, in particular, shares can be established by the law, and only the law can set concerning it certain restrictions and assign subsidiary duties to such subjects (shareholders).

Such restrictions and obligations follow, for example, from provisions of the Law of Ukraine "About economic societies": shares of closed joint stock company cannot extend by subscription, be bought and on sale at the exchange (Article part one 25); members of society shall adhere to constituent documents of society and carry out decisions of general meeting and other governing bodies of society (Article Item "and" 11); fulfill the obligations to society including connected with property participation (Article Item 11); perform other duties if it is provided by this Law, other legislation of Ukraine and constituent documents (Article Item "g" 11); founders of joint-stock company sign among themselves the agreement which determines procedure them joint activities for creation of joint-stock company, responsibility to persons who were signed on the share, and the third parties (Article part two 26) etc.

The agreement according to Item of 1 part two of Article 11 of the Civil code of Ukraine is the basis of emergence of the civil laws and obligations. The civil laws and obligations arise both from the agreements provided by the law, and from the agreements which are not provided by the law, but such which do not contradict it.

The agreement is category of the civil law which is determined as the arrangement of two or more parties directed to establishment, change or the termination of the civil laws and obligations. General provisions about obligations are applied to obligations which arise from agreements if another does not follow from the law or the agreement. As well as any transaction, it is the strong-willed act as expresses general will of the parties which is realized in the agreement. Contents of the agreement is, actually, those conditions on which the parties agree to carry out the agreement, and they shall follow the undertaken obligations. As the foundation agreement is type of the civil agreement, it involves accomplishment of obligations for the group of people which signed it. And violation (non-compliance) of these obligations gives the grounds for contractual responsibility.

Considering the reasonings stated in the previous Item, the Constitutional Court of Ukraine came to conclusion that when constituent documents of closed joint stock company fix shareholder preemptive right of society on share acquisition which are alienated by other shareholders of this society, it is not restriction of the right of the shareholder to own, use and dispose of the property as, signing constituent documents of closed joint stock company within the current legislation of Ukraine, the shareholder voluntarily agrees to establishment of special procedure for alienation of objects of the property, assuming at the same time the corresponding obligations.

Instructions of constituent documents of closed joint stock company concerning the privilege of its shareholders to share acquisition who are alienated by other shareholders of society do not limit the owner's right to the order to the property, and establish special procedure for its alienation in its consent. If persons having the privilege to share acquisition offer lower price for shares or will require their alienation at the prices, is lower from market, then the shareholder has the right to alienate them at the market price, i.e. this right is not absolute.

Based on stated and being guided by Articles 147, 150 Constitutions of Ukraine, Articles 63, of 67, 69 Laws of Ukraine "About the Constitutional Court of Ukraine", the Constitutional Court of Ukraine solved:

1. In aspect of the constitutional address:

1.1. Provision of part two of article 28 of the Law of Ukraine "About economic societies" in system communication with Article part five provisions 4, parts one of article 25 of this Law need to be understood as it which establishes the share acquisition bases (in particular under the contract with its owner or the holder at the price which is determined by the parties, or at the price which developed in the stock market and also according to the procedure of inheritance of citizens or successorship of legal entities) and therefore it does not exclude and did not exclude opportunity to provide in constituent documents of private company shareholder preemptive right of society on share acquisition which are alienated by other shareholders of society.

1.2. Item provision 1, of paragraph one of Item 5 of article 4 of the Law of Ukraine "About property" in the context of parts one, the seventh article 41 of the Constitution of Ukraine, in system communication with part three of article 81 of the Economic code of Ukraine it is necessary to understand so that the owner at discretion owns, uses and disposes of the property belonging to it, but, performing the right, it not violate the rights and interests of citizens, legal entities and society protected by the law, including the privilege (which is not absolute) the shareholders of private company on share acquisition alienated by other its shareholders.

2. The solution of the Constitutional Court of Ukraine is obligatory to execution in the territory of Ukraine, final and cannot be appealed.

Decision of the Constitutional Court of Ukraine is subject to publication in "the Messenger of the Constitutional Court of Ukraine" and in other official publications of Ukraine.

 

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