The Verkhovna Rada supported the Law on Reform of Ukroboronprom in July 2021, and by the beginning of October it was waiting for the signature of President Zelensky. The law officially came into force on October 6, 2021, but according to the Director General of Ukroboronprom, preparations for transforming began in the summer.
What has already been done?
Yuriy Husyev said that back in August, the Supervisory Board approved a proposal to the Cabinet of Ministers of Ukraine (CMU) to reorganize Ukroboronprom and approved a decision to transform its member companies into joint-stock companies and limited liability companies.
Full-scale reform of Ukroboronprom should begin with the relevant CMU decision. The government has three months to do so. With the relevant CMU decision, the procedure for terminating the trust should officially begin, which will last until the formation of new joint-stock companies and the final liquidation of Ukroboronprom.
However, this process can start faster. According to the Director General, after the president signed the law, Ukroboronprom immediately sent the government a number of draft documents necessary to start the termination procedure. This refers to the acts on terminating Ukroboronprom and another 42 of its enterprises as a result of the transformation, as well as transforming the Government Enterprise “Iskra” (the so-called “kazenne”) into a joint-stock company. The CMU is expected to consider all the documents by the end of October.
From the moment the government makes the relevant decision, corporatization of the trust will begin. As a result, Ukroboronprom will be liquidated and a joint-stock company will be established instead, which will operate in accordance with international standards of corporate governance.
It is unknown how long corporatization will last. For example, it took about 16 months to transform Ukrposhta. However, it is expected that this process will be completed sooner for Ukroboronprom. To this end, the Law provides for a special process that should optimize and significantly simplify a number of procedures required to complete the transformation. It is a matter of simplifying the procedures for transferring property, which carries corruption risks and rightly raises concerns among both Members of Parliament (MPs) and civil society.
The Law established additional control guarantees to minimize the risks in the process of transferring the Ukroboronprom’s property and its enterprises. In particular, NAKO insisted on the obligation for Ukroboronprom to regularly and promptly publish information on property decisions. As a result, MPs, journalists, and civil society representatives will be able to actively monitor this process.
NAKO will continue to closely monitor the Ukroboronprom corporatization process and the reform of Ukraine’s defence industry.