Paragraph 8 of Article 11.5 of the Law of Ukraine "On Management of State Property" is unconstitutional, - CCU

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 Paragraph 8 of Article 11.5 of the Law of Ukraine "On Management of State Property" is unconstitutional, - CCU

 

On July 22, the First Senate of the Constitutional Court of Ukraine adopted a Decision upon the constitutional complaint of Stock Company Closed Non-diversified Venture Corporate Investment Fund AVANPOST (SC AVANPOST) on compliance of paragraph 8 of Article 11.5 of the Law of Ukraine "On Management of State Property" of September 21, 2006 № 185–V as amended (hereinafter - the Law) with the Constitution of Ukraine.

By this Decision, the Court found the disputed provisions of the Law to be inconsistent with the Constitution of Ukraine.

The entity appealed to the Constitutional Court to declare the eighth paragraph of Article 11.5 of the Law unconstitutional, claiming that the disputed provisions of the Law violate the right of everyone to possess, use and dispose of their property and violate the right to private property.

According to the disputed provisions of the Law, "companies with authorized capital of the state and companies with 50 and more percent of shares (stakes) in the authorized capital of companies, the share of which is 100 percent, which have not decided to accrue dividends before May 1 of the year following the reporting year, shall pay to the state budget part of the net profit in the amount determined by the basic standards of deduction of the share of profit directed to the payment of dividends set for the year, but not less than 30 percent, by July 1 of the year following the reporting year; the amount of such funds is accrued by the bodies of revenues and fees in the manner prescribed by paragraph six of this part, which is paid to the general fund of the State Budget of Ukraine".

The Constitutional Court of Ukraine notes that the guarantees of protection of property rights provided for in Article 13.4, Article 41 of the Basic Law of Ukraine apply to the corporate rights of a member of a business organization. Therefore, interference with such rights must be conditioned by public necessity, as well as carried out in accordance with the law in compliance with the rule of law and common constitutional principles, ensuring a reasonable balance of interests of each of the participants in legal relations.

The mechanism provided for in the eighth paragraph of Article 11.5 of the Law, "which consists in the mandatory direction of part of the net profit to the state budget without the will of the participants of the business organization, restricts their corporate rights, including such a component as the right to participate in the economic organization management", - the Decision states.

The Constitutional Court considers that the mentioned normative regulation puts the state in a privileged position in comparison with other members of the economic organization of the state sector of the economy, that is, it is discriminatory.

Such normative regulation, in the opinion of the Constitutional Court, is not consistent with the conditions that allow state intervention in the right to property, in particular with the observance of the principles of justice and proportionality. Thus,  the Constitutional Court declared the fifth paragraph of Article 11.5 of the Law unconstitutional.

The decision of the Constitutional Court of Ukraine is binding, final and may not be appealed.

Developed with the support of OSCE Project Co-ordinator in Ukraine
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