On 25 April, Julia Kiryanova, the CEO of Smart-Holding, as well as the directors of the businesses from the company’s structure, held a joint press conference where they said about an attempted take-over of the business with the help of the country’s law enforcement agencies, and also gave answers to all the questions from the public and journalists, which arose during the last month.
About the falsified charges
Julia Kiryanova retorted all the accusations of law enforcement agencies regarding the establishment of the Trust not in compliance with the law, and the alleged financing of terrorism by the Holding. She emphasized that all the actions exercised by law enforcement agencies recently are taking place solely because of the name of the former beneficiary Vadym Novynskyi.
The company’s CEO described in detail how the business relations with the ex-beneficiary have been discontinued. According to her, this process began in 2013 with the signing of an asset management agreement, which in part had some features of a Trust. The process of the complete transfer of all Vadym Novynskyi’s assets to two trusts – Smart Trust and Step Trust – was completed on 1 December 2022. This happened before the NSDC imposed sanctions against the former shareholder and was confirmed by legal opinions and expert audits. Currently, the ultimate beneficial owners of Smart-Holding are five international lawyers – citizens of the Republic of Cyprus.
“Is it possible to hide behind a trust and hide your assets? No, it is not. In accordance with international legislation, a wide circle of persons is audited in trusts: beneficiaries, trustees, protectors, and the founder. The founder will forever be the source of the assets contributed to the trust. Trusts do not save from sanctions and seizure of assets. But trusts protect against illegal confiscation,” said Julia Kiryanova.
On 10 April, based on a complaint from an individual, the Ministry of Justice cancelled registration deeds in the Unified State Register regarding the change of the ultimate beneficial owners of the Ukrainian companies belonging to Smart-Holding. The new owners of the assets were removed from the register, and Vadym Novynskyi was reinstated as the ultimate beneficial owner of part of the companies.
Since the Trust was created under the legislation of the Republic of Cyprus and its owners are the citizens of Cyprus, the logical step for the justice/rule of law agencies of Ukraine would be to challenge this fact in court in the Republic of Cyprus. Instead, the authorities of Ukraine resort to changes, ignoring the standards of international law, and baselessly accuse citizens of another country of ties with the Russian Federation.
As Ivan Gerasymovych, Chief Security Officer of Smart Holding, noted, the entire criminal case, which is currently the ground for blocking the operation of the Holding Company, is based solely on the accusation of the new beneficiaries, citizens of the Republic of Cyprus, of their connection with the aggressor state.
“Accusations of relations with the aggressor state are levelled against five citizens of the Republic of Cyprus, very respectful lawyers, known both in Ukraine and in the European Union. We began to study what these conclusions were based on, but all the connections described in the criminal case have no basis. The Criminal Code of Ukraine does not give any definition of the term “representative of the aggressor state”. This is a manipulation in order to open criminal proceedings against the gas production business of the Group,” Ivan Gerasymovych said.
About the blocking of the Holding Company’s gas production operations
On 13 April, on the basis of unfounded criminal proceedings, the Security Service of Ukraine announced the seizure of the property of Smart-Holding to the amount of more than UAH 3.5 billion, namely the seizure of the corporate rights to 40 Ukrainian enterprises and 30 gas wells.
The management of the Holding Company is convinced that the actions of law enforcement officers are deliberately aimed at blocking the gas extraction operations, because despite the war, this business remained profitable and proved attractive in terms of its possible take-over.
Last year, the dividends of Smart Energy Group amounted to USD 27 million, of which USD 13 million was donated to help the military and citizens affected by the war. The remaining part was used to support the workplaces and operational activities of the Group.
“For every day of downtime of Ukrgazvydobutok, where the gas production was stopped due to the revocation of the licence, the budget does not receive UAH 5 million. Today, this amount already totals UAH 70 million. The Ostroverkhivske field produced 450,000 cubic metres of gas every day. For today, 5.9 million cubic metres of natural gas has already been lost,” reported the CEO of Smart-Holding.
Thus, the suddenly halted operation of the gas production company results in the loss of the incurred investments and the failure on the part of the state to receive one of the most sought-after energy resources, as well as collect taxes.
About the undermined property rights and the risk for investors
The speakers paid special attention to the investment climate in the country and the attractiveness of Ukraine for foreign investors. The example of Smart Holding’s businesses makes it clear that investments are not protected in Ukraine.
According to Julia Kiryanova, Western partners are concerned about the share of the state in the country’s economy, which reached almost 70% during the war. Taking into account the terrible deterioration of corruption trends, such a situation is not healthy for the country, she emphasized. Considering Ukraine’s needs for large and rapid foreign investments immediately after the victory, such a situation bears a threat that international donors will turn their backs on our country.
Dmytro Krasnikov, the CEO of Smart Maritime Group (SMG), which is engaged in the shipbuilding business, said that due to the law-enforcement and information pressure on the holding company, clients are already terminating all previous contracts with SMG.
“Regular clients, who have vessels left in the city, have preliminarily agreed to cooperate, and one client made an advance payment. But when he heard about the pressure from law-enforcement on Smart-Holding, he refused. We don’t know when he will return. The business is left almost without orders now. Such actions of state authorities worsen the situation even more and prevent us from finding jobs, finding orders so that our employees could work and earn money,” said the company’s CEO.
At the same time, the CEO of Smart Urban Solutions, Roman Yemets, said that large foreign investors did not have and do not have any questions about the reputation or corporate governance of Smart Holding Group. According to him, despite the war, the company has been searching for large investment companies from abroad that plan to enter the Ukrainian market.
“Just yesterday, I had another conversation, in which two major global banks and the world’s largest architectural company participated. We talked with them not just about the reconstruction of some facilities/objects, but also about the reconstruction of residential neighbourhoods, districts, or small Ukrainian towns. We plan to create at least three large industrial parks in Ukraine based on our capabilities,” the company’s CEO said.
Dialogue is important in any scenario. Public offer
Smart Holding sees three possible scenarios for going further. The first involves a full verification of the facts under the charges and confirmation of the Holding Company’s position in a court of law, which will enable it to continue working and investing in Ukraine.
According to the second scenario, a situation is possible when, despite court conclusions and withdrawal of charges, despite all objective facts, there is a call from the authorities, according to which the company’s investing in Ukraine is deemed undesirable in the future. In this case, Smart-Holding plans a gradual withdrawal from all the businesses and further involvement of foreign strategic investors.
The third and most pessimistic option foresees an inexorable decision by the authorities to transfer Smart-Holding’s businesses and property through the ARMA mechanism to interested parties, or confiscate it. Under these conditions, it is expedient to agree on the support of this process in order to prevent the collapsing of the businesses and secure three thousand employees, as well as defend our rights in international and Ukrainian courts subsequently.
The CEO of Smart-Holding noted that the investment and industrial group was and remains a Ukrainian business by its origin and its values. For 25 years, the Holding Company has been working in eight sectors of the country’s economy, representing Ukraine on the London Stock Exchange, and has been audited by the Big Four companies. During the year of full-scale aggression, the Group donated USD 40 million to help the Ukrainian Armed Forces and civilians affected by the war, paid more than UAH 3.7 billion in taxes to the budgets of various levels, and provided jobs for more than 3,000 Ukrainians. That is why Smart-Holding is ready to defend its position in Ukrainian and international courts.
“We are ready for an open talk about the scenarios of the development of events and their consequences. It should be a civilized process that we are open to. We defend our honour and dignity. We want our people to keep their jobs,” Julia Kiryanova emphasized.
You can watch the recorded press conference of Smart-Holding management on the Interfax YouTube channel.
The public offer to the authorities can be found on the official website of Smart-Holding.