19 September 2019

Must-knows about recovering corporate assets after search

Owners of a business, which has come to the attention of government officials, should, well in advance, take measures to have their property protected from possible (and not often legal) takeovers by the law enforcement. Textbook examples include search measures, which involve the seizure of property and  documents and the obstruction of further business activities of a company.

The prosecution have their ‘favourite’ articles of the Ukrainian Criminal Code, which allow them to enter a minimum required and fuzzy information (‘at an unknown time, persons identified  …’) into the Integrated Register of Pre-Trial Investigations and to institute criminal proceedings. The existence of pending proceedings formalises investigative activities, including search measures.

Possible reputational loss and the risk of business obstruction has become a real problem for even transparent companies, which has been traditionally addressed in Ukraine by either negotiating the ‘fixing’ of the problem with the troublemakers or maintaining a clear and sound legal position before government authorities and courts,’ Drozdova & Partners Law Firm Director Ms Olena Drozdova explains. ‘Unfortunately, those choosing the latter option traditionally are in the minority. This option is, of course, somewhat more complicated. However, this is the only way to reduce the risk of further occurrence of this situation. In addition, an active and transparent use of legal remedies reduces pressure, which is being put on the business community as a global, adverse phenomenon.

Ms Drozdova points out that three simple ‘preventers’ will allow businesses to significantly mitigate possible adverse effects. In particular, it is recommended that they should:

1) introduce corporate safety rules of maintaining records and managing information flows;

2) develop recommendations in the case of search measures subject to aspects of a company’s business, provide training to employees on the rules of conduct in the case of, and designate employees responsible for the taking of certain actions during, search measures;

3) execute an engagement agreement with an attorney who will, in the case of investigative actions at the office or in the territory of a company, have statutory authority to take part in such actions, and to prevent, identify and record offences on the part of investigation officers and criminal investigators.

Fake legal reasons for the taking of search measures and abuse of procedure by the law enforcement can serve as arguments to have seized property promptly and successfully recovered to the owner.

It is due to professional and consistent conduct of attorneys of Drozdova & Partners Law Firm that a Ukrainian permanent establishment of an international business has recently managed to resume its operations. Search was carried out at the offices of that company and its source documents, computer hardware and corporate seals were seized in connection with an investigation into an offence provided under Article 212 (evasion of taxes, duties, or charges) of the Ukrainian Criminal Code. A clearly formulated legal position and necessary, prompt procedural measures allowed the company to have the decision on the seizure of the property set aside.