Nationalization of “Kommunarka” and “Spartak”: review of privatization, 19 years later

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April 22, 2016 18:20

On October 16, the Supreme Economic Court’s press office published a statement regarding the dispute between the State Committee on Property and Joint Stock Enterprises


The decision of the Supreme Economic Court of August 22, 2012 which reviewed the results of privatization after a 19-year period, created a dangerous legal precedent. By purchasing a state-owned enterprise, any investor is under risk of losing assets even after a long period of time. 

In 1994, Belarus privatized its confectionery industry. Consolidated investment companies could buy shares in exchange for “Property” vouchers (these vouchers helped to partly distribute Soviet property among the population). In this way, between 1994 and1998, the company Double Star Int. run by Marat Novikov acquired 36.65% of “Spartak” shares. Shares of “Kommunarka” were bought by a confectionary concern “Babayevsky”. In 1998, the golden share rule was introduced in regard to “Kommunarka”. Also, circulation of its shares was banned. In 2001, company MOL Corp. controlled by Marat Novikov became a shareholder of “Kommunarka”. 

A block of shares in the amount of 9.38% was sold for USD 390 thousand. In 2010-2011, Marat Novikov increased his share in JSC “Spartak” to 54%, in “Kommunarka” to 34%. Nominally, the company Double Star Int controlled by Novikov owns 39.9% of shares of “Spartak”, although some shares owned by private investors also belong to him.

In 2011, the ban on circulating “Kommunarka” shares that had been purchased in the times of privatization in exchange for “Property” vouchers was lifted. In January - February 2011, there were a number of transactions to purchase these shares. During this period, Marat Novikov acquired 10% of “Kommunarka’ shares. On March 14, 2011 the President issued decree No.107 which granted local authorities priority to buy shares of an enterprise which had been bought for “Property” vouchers. The decree applied to all transactions concluded since the beginning of 2011.

Elimination of supervisory boards at “Kommunarka” and “Spartak” as well as the decision to increase government’s share in statutory funds to 57% and 60% respectively, voices, in fact, the decision of the Supreme Economic Court of August 22, 2012.

Under this decision, taken 19 years after privatization, joint stock companies are obliged to issue new shares and hand them over to the government due to the fact that in 1993, the value of statutory fund was underestimated. In other words, it could be called a dilution of block of shares owned by a private investor by means of increasing the authorized capital. In this case, all the extra shares are to be handed over to the government for free. Thus, the state will receive the controlling stake. The statutory capital of “Spartak” consisted of 253 223 shares, with the State Property Committee owning 14.46% of them. Under the decision of the Supreme Economic Court, 280 810 extra shares are to be issued and handed over to the state. All in all, the new statutory capital will consist of 534 033 shares, 60% of which will belong to the State Property Committee. A similar decision was taken in respect to “Kommunarka”.

Thus, the government can review the results of privatization at any time, accusing a shareholder of understating the statuary capital and the state’s share in it so that later it could gain control over such an enterprise without any expenses. In this situation, the investments will go to the state.

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