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10 I Companies & Markets bne May 2023
Earlier Novynskyi claimed that he was being “persecuted on religious grounds.”
Kiryanova said the raid on the company on April 10 was “baseless” and claimed it is a corporate raid by an unnamed business rival supported by senior officials.
Criminal investigation
A criminal investigation has been opened into the Smart Holdings that gives the authorities wide powers to seize assets, confiscate documents and computers and makes it impossible to operate.
In addition to metal, Smart Holdings is a major player in Ukraine’s domestic gas production business but has been forced to shut down one field near Kharkiv that directly pipes gas to the city.
“We shut down operations on Thursday, as the general director could have been arrested. We don't sell gas directly to the city – we sell it on the market – but our field is closest and directly piped gas to the city, which has been under constant Russian bombardment,” says Kiryanova. “Throughout the war despite the danger our staff has continued to work, supplying gas to the city.”
In December last year the government formally sanctioned the reclusive Novynskyi on the grounds of “aiding an aggressor state” based on his religious affiliation with Ukrainian Orthodox Church.
Under the Ukrainian law there is only one ground for sanctioning a citizen and that is for financing of terrorism, which has to be proved in a court of law.
“Sanctions mean you have to have committed some terrible crime: terrorism,” says Kiryanova. “However, ten months of investigation there has been no trial, no verdict. But now our assets have been arrested on the basis of this charge. Now the assets are being stripped. What needs to happen is to go to court if they think something wrong has been done.”
Register changed
The company’s assets can be seized thanks to the sanctions on Novynskyi, whose name has been returned to the Ministry of Justice’s register of legal entities.
The ownership to of Novynskyi’s shares in the group were transferred to trusts last year and legally registered, but Kiryanova says the trustees have been deleted from the register and Novynskyi returned as the ultimate beneficiary owner of the gas company Ukrgazvydobutok, or UGV, that is a rude violation of Ukrainian laws.
“The Ministry of Justice just opened their own ledgers and added his name,” says Kiryanova. The change of ownership is important, as under Ukrainian law (#2805) the subsoil licenses can be suspended if a company belongsto a sanctioned individual.
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However, one of the two gas companies currently under state control is Enwell Energy, which is listed on London’s Alternative Investment Market (AIM), and circa 18% of its shares are owned by international hedge funds and other investors. The trustees are still listed as the owners in London. The authorities have given Enwell Energy one month to “fix the problem,” says Kiryanova.
“If you have a problem with the trusts then you need to challenge the trust itself in court, but trustees are all EU licensed lawyers and the trusts were accepted by the
“If you have a problem with the trusts then you need to challenge the trust itself in court, but trustees are all EU licensed lawyers and the trusts were accepted by the Ministry of Justice when they
were registered last year”
Ministry of Justice when they were registered last year,” says Kiryanova. “If that is the case, then that is a matter for the civil courts, but we are facing a criminal investigation claiming Cypriot trustees being Russia`s agents acting in its favour. That`s mind-blowing.”
The criminal charges have brought the business to a halt. If the dispute was a civil case, then the company could continue to operate, but in a criminal investigation, the company’s banks would refuse to work with it, effectively freezing operations.
Gas business in the crosshairs
The criminal case against Novynskyi has been brought on the vague charges of “aiding the aggressor”, but the raid of Smart Holding’s offices on April 10 were very specific.
“They took all the detailed information about our gas fields; propriety geological information detailing all quirks and idiosyncrasies of the gas fields – big volumes of technical information,” says Kiryanova. “If they are investigating
how Novynskyi was aiding Russia then why do their need information about gas fields? They have seized the deeds to the three gas fields we operate as well.”
Kiryanova says the company has been under pressure
from SBU investigations since sanctions were imposed on Novynskyi last year and during questioning, the SBU officers were asking about the gas business as well.
Kiryanova suggests that there is a commercial rival behind