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Anti-raider Amendments to the Criminal Code: Will Anything Change?

27.12.2016

Iryna Kuzina, attorney at law, Head of Kharkiv Office at Ilyashev & Partners Law Firm
Source: Jurist&Zakon

The Law of Ukraine “On amendments to some legislative acts of Ukraine regarding improvement of state registration of rights to immovable property and protection of property rights” of October 6, 2016, No. 1666-VIII, is effective since November 02, 2016.

The Law amended Articles 358 and 3652 of the Criminal Code of Ukraine specifying the list of entities that provide public and administrative services.

Article 358 of the Criminal Code “Forgery of documents, seals, stamps and letterheads, sale or use of forged documents, seals, stamps”.

In Part 1 the new subjects were added, which forgery, use and sale of official documents, seals, stamps and letterheads is punishable:

– notary public;
– state registrar;
– subject of state registration of rights;
– person authorized to perform functions of the state on registration of legal entities, individual entrepreneurs and public organizations;
– state enforcement officer;
– private enforcement officer.

The minimum criminal penalty of fine will also increase – 1000 tax-free personal income (earlier 100 tax-free personal income).

In Part 2, the subjects of the perpetrators of crime on drawing up or issuing of forged official documents were added:

– notary;
– state registrar;
– subject of state registration of rights;
– person authorized to perform functions of the state on registration of legal entities, individual entrepreneurs and public organizations;
– state enforcement officer;
– private enforcement officer,
– any other person who carries out professional activities on provision of administrative services.

Article 365 (2) of the Criminal Code “Abuse of power by persons providing public services”.

The new perpetrators of crime were added:

– state registrar;
– person authorized to perform functions of the state on registration of legal entities, individual entrepreneurs and public organizations;
– state enforcement officer;
– private enforcement officer.
Certainly, such clarifications are necessary as the law lacks the definition of public services, and the scope of persons providing such services shall be determined by their enumeration. And the mere clarification of the Ministry of Justice of Ukraine of December 18, 2009, No. 967-0-2-09-22 that administrative services are a kind of public services, would be not enough for bringing to criminal liability under Arts. 358, 3652 of the Criminal Code.

However, the amendments to Article 206 of the Criminal Code stir particular interest.

Article 206 of the Criminal Code “Counteraction to legitimate economic activity”.

According to the disposition of this article, counteraction to legitimate economic activity is unlawful demand:

– to cease economic activity, or
– to limit it (or − ed.),
– to conclude agreement, or
– not to perform the concluded agreement, which performance (default) may cause material damage or limit the legitimate rights or interests of those engaged in economic activity,

combined with the threat of:

– violence against the victim or persons close to him; (or − ed.).
– damage to or destruction of their property

New !!!:

or

– seizure of the integral property complex, its part or buildings, constructions, land plot, construction facilities, other facilities,
and (concurrently − ed.)
– unlawful termination or limitation of activity at such sites, and limiting access to them in the absence of elements of extortion.

At first glance, it is the most “anti-raider” article.

However, despite many reports in the media about the “business takeovers”, only the sentence under Article 206 of the Criminal Code was found for the period of 2015-2016, and it was canceled by the court of appeal (in accordance with the Unified Register of Judgments, the sentence of the Zhytomyrskyi District Court of Zhytomyr region of January 19, 2016, No. 278/4278/14-k). According to the background of the case, the law breakers extorted money from the intercity bus drivers, and in case of refusal – prevented carrying out activities. That is, even the criminal proceedings have no relation to the classic raiding.

The situation suggests that something is wrong with the disposition of Article 206 of the Criminal Code. Let us try to understand what it is, and whether amendments to the Criminal Code have improved the situation.

The objective aspect

The generic characteristic of the concept of “counteraction to legitimate economic activity” in Article 206 of the Criminal Code is the “demand” meaning proposal stated in a strong language that is unlawful and strictly regulated in content (see above).

The demand should be associated with at least one of the following threats (the list as amended see above).

Threat in criminal law means manifested externally (oral, written, action) intent to commit specific actions (the list of which is defined above), actual, addressed to a specific victim. Treat is considered to be made when it was brought to the attention of the victim.

Object means freedom of legitimate economic activity. The additional object may be human life and health, property of a victim or enterprise, etc.

Subjective side means direct intent.

Subject is general.

However, the laid out list of demands may bring business competitors rather than the persons who are trying to take it over.

The common understanding of the concept of raiding is as follows:

Raiding (Eng. raid – incursion, or raider – holdup man) – hostile (usually forced) takeover of enterprise against the will of its owners, who have a privileged position in the enterprise, and/or its chief executive. Capturing business by raiding is called illegal takeover. Corporate blackmail (“greenmail”) is also referred to raiding activities.

Therefore, raiding means, firstly, specific actions rather than abstract demands towards takeover of enterprise (which are often unexpected rather than announced in advance for the owner and the administration of the enterprise).

Secondly, the goal of the raiders is takeover of enterprise and premises. The same Article 206 of the Criminal Code sets forth that takeover is just the way to pursue the demand.

Thus, the classic hostile takeover of production plant is as follows: the athletically built men enter the production facilities of the enterprise and close from the inside, letting employees freely to the outside (but not letting anyone back). The property is not destroyed, not damaged and not brought outside the premises, but physically the buildings and the equipment are in the possession of the invaders, production is suspended. The invaders have disputed rather than forged documents in hands, e.g. court decision, which was reversed by the higher authority, or minutes of the general meeting carried out in violation of the procedure (but not challenged at the time of takeover). Upon arrival the police patrol and the investigative team do not take any physical pressure against the invaders, because they do not see the crime in progress that must be stopped. If there is no damage to any property, removal of equipment and products, the police refuses to recognize property crime at the scene (e.g. Articles 186
-187 of the Criminal Code), confirming lack of “appropriation” of property. Penetration of law breakers into the territory of the enterprise and taking possession of real estate objects do not cause any objections from the police.

Was any demand raised to the owner and the administration of the enterprise? No, as it is difficult to prove such a demand. It means that the main drawback of corpus delicti according to Article 206 of the Criminal Code (during fight against raiding) is its generic characteristic and this defect was not corrected.

Therefore, amendments to Article 206 of the Criminal Code will not help to prevent raiding in any way.

Unfortunately, the lawmaker did not pay attention to the possibility of amending Article 2062 of the Criminal Code “Misappropriation of property of enterprise, institution, organization” – misappropriation of property of enterprise, institution or organization, including shares, stocks, equity interests of their founders, members, shareholders, equity holders, through transactions with forged or stolen documents, seals, stamps of enterprise, institution or organization.

For example, disposition of Article 2062 of the Criminal Code could be as follows:

“Misappropriation of property of enterprise, institution, organization” means misappropriation of property of enterprise, institution or organization, including shares, stocks, equity interests of their founders, members, shareholders, equity holders, integral property complex, its part, buildings, constructions, land plot, construction facilities, other objects, including through actual capture or restriction of access to them and simultaneous termination or restriction of activities in such objects, or carrying out transactions using forged or stolen documents seals, stamps of enterprise, institution or organization.

CONCLUSION:

Therefore, the wording of the Criminal Code of Ukraine of September 05, 2016 will not fundamentally improve criminal law protection of business against raiding.

 

 
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