Cabinet of Ministers forces Ukrnafta and Ukrgaz-Energo to distribute accumulated earnings

Yesterday the Cabinet of Ministers of Ukraine put forward its draft law on the 2009 state budget to parliament, which imposes, inter alia, a penalty for Ukrnafta (UNAF: BUY) and Ukrgaz-Energo, if the companies do not distribute their 2006-2008 profits by September 1, 2009. The draft law presumes that if dividends are not paid by August 1, 2009, the companies will have to directly distribute the share of their profits to the state budget, in proportion to the state’s stakes, by September 1, 2009. If they don’t, they will be subject to a penalty equal to double the National Bank’s annual discount rate for each day overdue. Naftogaz of Ukraine holds 50%+1 of shares in Ukrnafta and 50% of Ukrgaz-Energo. Other companies, where the state owns 50% or more, will have to pay dividends for 2007-2008, by July 1, 2009. Vladimir Nesterenko: The initiative looks questionable to us from a legal standpoint, as according to legislation regulating the activity of joint stock companies in Ukraine, only shareholders can decide on the distribution of company profits. Regardless of whether the draft budget passes the Verkhovna Rada or not, we believe that the Cabinet’s initiative is hardly enforceable.