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Asset securitization - what is it?
By Natalia Osadcha, Advocate, PhD in law,
Partner of Law Firm "Syutkin&Partners",
Kyiv Post, Fri, Jan 22, 2016, Kyiv, Ukraine
Asset securitization is the development and implementation of a set of legal measures aimed at the preservation of property. This practice has evolved in a separate area in connection with the increasing number of raiders, corporate conflicts with Ukrainian partners, lots of losses of already privatized objects, return of previously purchased objects from private property to the State, etc. Practicing for more than 15 years in the field of investment protection, we have noticed a clear link between legal errors made at the stage of investment object acquisition / creation and the seizure of the company at the stage of a corporate conflict or the loss of ownership of the object.
According to our statistics, owners / foreign investors lost their objects only in those cases where initially the facilities had legal defects or where in the process of acquisition of such objects there were made such legal errors as incompliance with registration procedure or other statutory provisions, legal errors in contracts, absence of legal guarantees etc.
In up to 99% cases we can identify the problems and show investors how they can lose one or another object.
In what ways an asset may be lost in Ukraine:
• Through unlawful seizure or raiding;
• Through corporate conflicts (often with Ukrainian partners);
• Through unlawful actions of state bodies (e.g., institution of criminal and court proceedings for the recovery of investor’s property back into the state property, termination of PPP contracts by the government, withdrawal of licenses, permits, application of tax arrest etc.).
At what stage of the investment in Ukraine is it necessary to carry out securitization? An unambiguous answer – at the earliest stage, that is, ideally:
• At the Due Diligence stage before the acquisition of assets / corporate rights;
• At the stage of making a deal of: the sale, lease, public-private partnership (PPP);
• At the stage of creating a company with Ukrainian partners, CEO.
The ideal situation is that the client gets a full picture of all risks before making the actual investment and a road-map of how to fix the existing errors, provided that they can be fixed in principle. If there is no opportunity to fix the errors or to guarantee the client the safety of the investments in the future, in the adoption of the decision to abandon the idea of "dubious" investment the client is still in the win position, as he has preserved his asset.
Yields of asset securitization to business:
- Preservation of investments (assets / equity)
- Receipt of the planned profit
- Courage in making investment decisions
- Clear rules of "game" with Ukrainian partners
- Feeling of safety
- Friendly environment
If we draw an analogy, asset securitization is the preventive care, a kind of "virus vaccination", which provides high guarantees of avoiding "infection" or "death" in the future, it is an investment in a healthy business in a country with unusual and unstable "game rules". Anyone can enter the Ukrainian market, but the issue is whether the business will be a success, or whether the planned profit will be received, and the assets preserved and increased. Based on our experience, I can clearly say that success will remain with those companies, who plan their actions 10 steps ahead, that is, who are clearly aware of what kind of market they are entering, who are aware of the risk of property loss, who turn to the professionals, "proxies", whose knowledge and experience can help to be informed and neutralize possible risks.
We are for reasonable, balanced and profitable investment in Ukraine.
Natalia Osadcha, Advocate, PhD in law, Partner of Law firm "Syutkin&Partners".