SPFU will finally sell the sanctioned assets of Russians: the Cabinet of Ministers approved a resolution that will unblock their privatization

At the end of November, the Cabinet of Ministers approved Resolution No. 1233, which sets out the procedure for managing sanctioned assets and provides for the possibility of their sale through the Prozorro.Sales system.. This document was developed so that the State Property Fund of Ukraine (SPFU) could sell assets that previously belonged to residents of aggressor states (meaning Russia and Belarus), and today are the property of Ukraine.

Among such assets are companies, plants, factories, real estate and other property that were confiscated from Russian/Belarusian businessmen and included in the income of our state.

SPFU announced back in the summer that the sanctioned property would be put up for auction. But due to the fact that there was no mechanism for selling it, the process was delayed. Now nothing prevents the fund from finding new owners and thus helping the state budget. The money raised during the auctions will be sent to the accounts of the Fund for Elimination of the Consequences of Armed Aggression.

How exactly the state will sell the assets of the aggressors, I figured out .

How is the sale of sanctioned assets regulated by law? In February 2023, Prime Minister Denis Shmygal promised that those objects that were and will be forcibly seized from the ownership of Russian residents will be sent for privatization. “The government will launch an open and absolutely transparent sale of this property,” Denis Shmygal said.

The Prime Minister clarified that the sale of assets will take place through open auctions, and the funds received from their sale will be used to restore the energy system, infrastructure, real estate, as well as mine clearance.

A few months later, on May 30, 2023, the Verkhovna Rada adopted Law No. 3137-IX, which came into force on June 22. It is associated mainly with large-scale privatization. But it contains some rules that relate to the management of assets confiscated from Russians. Namely:

sanctioned property will be transferred to the State Property Fund by decision of the High Anti-Corruption Court (HACC); The State Property Fund will independently decide what to do with such property — sell it or rent it out; all funds received as a result of the sale/rental will be directed to the Fund for Elimination of the Consequences of Armed Aggression.

And in November, the Cabinet of Ministers, fulfilling the requirements of the law, adopted Resolution No. 1233. As Deputy Minister of Economy Alexey Sobolev clarified, the Ministry of Economy developed this document to “launch sales of sanctioned property.”

True, here’s what’s interesting: shortly after the adoption of Law No. 3137-IX, the State Property Fund put up the first confiscated assets for sale. In particular, these are Investagro LLC and Tai-Minerals LLC, which previously belonged to Russian businessmen Mikhail Shelkov and Sergei Chemezov. The fund was unable to sell the first enterprise, and the date of the auction for the sale of the second enterprise has not yet been made public.

It is unknown whether the State Property Fund was in a hurry, without waiting for the relevant resolution of the Cabinet of Ministers, or whether it was trying to implement the objects within the framework of the existing regulatory framework at that time. But now, in theory, nothing prevents the Fund from sending for privatization all the sanctioned objects that it manages.

What does the new order of the Cabinet of Ministers provide for? The main points of resolution No. 1233 are as follows:

Sanctioned (confiscated) assets include real estate (including land), corporate rights, unified property complexes, securities, cash; after the assets are transferred to the SPFU, it carries out their inventory, assessment, carries out the necessary legal actions (registers ownership, enters data into registers, changes the composition of management bodies, etc.. d.) and determines the method of managing such assets; SPFU has the right to sell the asset or lease it, leave it in the operational management of the state. The third option can be implemented in different forms. As an option, the transfer of an asset to the authorized capital of a business company, the management of corporate rights of which is carried out by the State Property Fund; when choosing a method for managing assets (a confiscated enterprise, for example), the State Property Fund takes into account the availability of material and technical base and human resources, the state of settlements with the budget, trust funds and counterparties, the economic effect that the sale of an asset or its preservation in state ownership can bring; Separately, the possibility of transferring sanctioned assets to state-owned enterprises, institutions and organizations that can use them for the needs and requirements of the Armed Forces and other military formations (for the production of goods, provision of services) is provided; confiscated assets in the form of government bonds of Ukraine go to the SPFU account in securities, after which they are transferred to the account of the Ministry of Finance for repayment and cancellation. The funds received are sent to the Fund for Liquidating the Consequences of Armed Aggression. Assets collected for state income in the form of funds in accounts in banks and other financial institutions are immediately transferred to the state budget and sent to the mentioned fund; assets subject to sale (privatization) are included by the State Property Fund in a special list and put up for electronic auctions in the “Prozorro.Sales” system; information about the assets transferred to the SPFU for management, as well as information about the future fate of such assets, is open and is posted monthly on the official website of the fund.

How will the SPFU now manage its assets? Since February 24, 2022, Ukraine has confiscated hundreds of objects that previously belonged to residents of aggressor states. Unfortunately, there are no summary statistics on this issue.. But based on data in open sources, the value of assets recovered in favor of the state is estimated at billions of hryvnia.

According to the law firm VB Partners, among them are shares in the authorized capital of about fifty legal entities, about 150 real estate and land plots, funds in bank accounts in the amount of over $2 million, more than five thousand historical, cultural and material assets, the estimated value of which reaches 19 million euros

Accordingly, now the State Property Fund will have to decide how best and more efficiently to manage these assets. And it won't necessarily be a sale.. For example, a SPFU can lease a land plot for a long-term lease, which in the future will bring more money than selling this land “in the moment.”

At the same time, if the confiscated enterprise does not work and is mired in debt, it is more reasonable to find a buyer for it who will take away the problem object, while the state budget will receive “real” money. As an example, the mentioned Investagro LLC. His fund wanted to sell for UAH 55 million. The company has 17.2 million UAH of debt, which in any case must be repaid.

In general, the process of managing sanctioned assets should become simpler, and the State Property Fund will be able to quickly create lots and put them up for sale or lease. At the same time, the public availability of information about confiscated property will allow communication with potential investors who want to become new owners.

The main snag is only in the procedure for transferring sanctioned assets to the management of the State Property Fund. After all, for this it is necessary that appropriate court decisions be made, on the part of the HACS — including. And this, as you know, is a rather long process.