Agriculture, Good for Business, Latvia, Legislation, Markets and Companies, Ukraine
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Sunday, 05.05.2024, 05:16
Latvian criminal police initiates criminal proceedings regarding illegal takeover implemented by NCH Capital in Ukraine
The State
Police is not disclosing any details, however, it has been made known that
criminal proceedings have been initiated regarding possible fraud, abuse of
authority and bribery enacted by nationals of Ukraine and other countries in
order to take over the capital shares of the Ukrainian registered entity Golden
Sunrise (Agro) Ltd.
No comments
have so far been issued by neither entrepreneur Kārlis Cerbulis, who was
initially involved in bringing the Latvian entrepreneurs together with the
Ukrainian representatives of NCH Capital and developing the
relationship, nor the Ukrainian or US representatives of NCH Capital.
However, it is known that the case of issue is the desire of the US
entrepreneurs to push the Latvian company out of the joint venture at a
significantly lower share price than the company’s initial investment.
As
previously reported, information disclosed by the Ukrainian authorities, which
(just like the authorities in Latvia and the USA) are reviewing the facts,
indicates that about 14 years ago, in late 2006, an agricultural company was
founded in the country by offshore company Trittico Holding Limited
owned by NCH Capital and Latvian joint stock company Dobeles
dzirnavnieks.
However,
less than a year later, Dobeles dzirnavnieks was replaced by another
Latvian company – LU Invest owned by Vitauts Paškausks, and a month
later, when the Latvian representative Valdis Muižnieks was appointed as the
Director General of Golden Sunrise (Agro), he received 4% of the
company’s shares.
Even with
this 4%, the Latvian side was in the minority: the Cypriot offshore company Unagro
Finance Limited, which had replaced Trittico Holding Limited, owned
50,01% of the shares, while LU Invest and Valdis Muižnieks together
owned 49,99%. Yet the rights and obligations of the parties were rather
strictly regulated, including the rights of the minority shareholders, such as
that they were the ones to nominate the Director General of the company.
According
to the Ukrainian authorities, already in 2010 the actions of NCH Capital
in “optimising” various costs had started to cause some concern to the Latvian
partners. The suspicious activity had mostly been related to two basic
operations of the company – purchasing of raw material and sale of produced
grain.
With time,
these processes were increasingly taken over by the representatives of NCH
Capital, thus effectively bypassing the official Director General of Golden
Sunrise (Agro). Raw material was often purchased for inflated prices, while
grain was sold for suspiciously low prices.
However,
the information collected by Ukrainian authorities shows – this does not
necessarily mean that the representatives of NCH Capital deliberately
chose to incur losses. Quite the opposite, the NCH Capital
representatives who controlled the supply of raw material and grain customers –
offshore companies, had chosen to gain profit through those, rather than share
it with their Latvian partners and Golden Sunrise (Agro).
According
to unofficial sources, Ukrainian authorities have gained access to
correspondence between Valdis Muižnieks and the CFO of an offshore company
involved in the NCH Capital offshore chain, who clearly admits to the
existence of this financial scheme and the fact that profit is being gained by
the offshores in Cyprus, bypassing the Latvian partners, who are left with only
losses.
The
situation had become completely obvious in 2017-2018 when the possible goal of
the NCH Capital representatives had been revealed – to not only gain
extra profit through the offshores, but also to force the Latvian partners out
of Golden Sunrise (Agro), purchasing their capital shares at the lowest
possible price by taking advantage of the shareholders’ agreement and the pre-emptive
rights contained therein.
This
assumption was confirmed in late 2018, when objections voiced by LU Invest
and Valdis Muižnieks as to never having received any dividends throughout the
duration of the company’s existence, were met with an NCH Capital offer
to buy the Latvian partners’ shares for 5 million dollars. Other offers
followed, topping out at 8.5 million dollars. Meanwhile, the average annual
profit of Golden Sunrise (Agro), which through the financial scheme had
been moved to the offshores, had been approximately 9 million dollars, while
the company’s actual value was over 70 million dollars.
The
materials collected by Ukrainian authorities show that when these offers were
rejected, NCH Capital representatives effectively implemented a takeover
of the company. Despite the company by-laws stipulating that a shareholders’
meeting shall have consensus only if the owners of at least 60% of shares are
present, in March of last year the representatives of NCH Capital
managed to register a new Director General for Golden Sunrise (Agro) in
the Ukrainian Enterprise Register thus removing Valdis Muižnieks from office,
even though this decision was taken without the presence of the Latvian
partners, thus with only 50,01% shares being represented.
According
to the Ukrainian authorities, this illegal takeover was facilitated by finding
an especially favourable place of registration, and as a result the Latvian
entrepreneurs have lost both actual and official control over an agricultural
company worth several tens of millions.
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