General information on the management of the seized assets

General information on management of seized assets

The functions of the National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes (hereinafter - the National Agency) are understandable for most countries of the world, but absolutely new in the system of state authorities of Ukraine. Today, for most countries of the European Union, the existence of agencies like the National Agency is a long-established practice. In particular, Article 10 of the EU Directive of 04/03/2014 No 2014/42 / EU requires all EU Member States to take measures on effective asset management, which have been seized, as well as establishment of special institutions responsible for managing such assets in order to preserve them or preserve their economic value.

Thus, management of the seized property is one of the functions of the National Agency and it is the implementation of relevant EU practices on the management of a seized property. This function is not just another regulatory activity of the state, it creates a fundamentally new mechanism for public-private partnerships, the analogies of which did not exist in Ukraine, and involves the development of new markets of management of seized property and the market of seized property (but not yet confiscated).


The Law of Ukraine "National Agency of Ukraine for Finding, Tracing and Management of Assets Derived from Corruption and Other Crimes" (hereinafter - the Law)  defines relatively simple conditions of management of the seized property - the National Agency shall manage the assets seized in criminal proceedings, including as injunctive relief only in respect of a claim filed in the interests of the state with setting a prohibition on disposal and/or use such assets, the amount or value of which equals or exceeds 200 minimum salaries established as of 1 January of a relevant year, and which should be recognized as material evidence in criminal proceedings.

There are only two grounds for managing the seized property - a court ruling in a criminal proceeding (a ruling of an investigative judge or court), or consent of the assets owner. The national agency cannot decide at its own discretion what can be managed, and what - not. If there is a court ruling on the transfer of property into the management, the National Agency is obliged to fulfill it, as well as the owner of the assets or other persons entitled to them, - the mandatory implementation of court rulings is determined by the Constitution of Ukraine.

When such ruling is made or the asset is transfered to the National Agency for management with the consent of the owner, this indicates the appearance in the Agency of assets of a separate property right to manage the seized asset. This is a special fixed-term right to property, similar to other property rights for someone else's property, as defined by civil legislation.

The legal and organizational principles of transfer by the National Agency of assets into management under the contract are regulated by Article 21 of the Law, according to which the assets are managed on the basis of a contract concluded in accordance with Chapter 70 of the Civil Code of Ukraine, taking into account the specifics determined by this Law.

Asset management, in accordance with part 3 of Article 21 of the Law, is carried out on terms of efficiency, as well as preservation and increase of their value. The manager has the right to pay (remuneration), as well as to reimburse necessary expenses incurred by him in connection with asset management, deducted directly from the proceeds from the use of assets taken into management. The manager has no right to alienate the assets he/she has taken into management.

Validity of the asset management agreement shall be discontinued in case of cancellation of seizure of assets accepted under management or confiscation thereof, special confiscation, other court ruling on forfeiture to the state.

In accordance with Article 22 of the Law, the National Agency shall perform periodic, but at least once per month, check of efficiency of management of seized assets transferred by it under management. A manager is obliged to provide authorized persons of the National Agency with access to the assets accepted under management for inspection, as well as to the documents related to management of such assets and use of them.

These and other terms of asset management shall be provided for by the agreement between the National Agency and manager.


Who is such manager in the understanding of the institution on seized property management?

It is a company that has successful experience of commercial activity in a specific market for goods, works and services, has a good reputation, works legally and is able to offer such a model for seized property management, that will allow for a reasonable level of income. Consequently, it can be both the owner of a certain type of asset, that is managed by him or the provider of commercial management services, regardless of the legal form of such activities (sublease, property management, commission, commercial concession, joint activity, etc.). The National Agency is interested in the effectiveness of management - reasonable income, reasonable expenses and reasonable remuneration for the services rendered.


How do management companies appear?

The National Agency selects managers by the competition in accordance with the procedure, established by the legislation on public procurement. However, such a competition has its own peculiarities:

1) the manager can receive payment for services rendered by him, as a rule, in the form of a percentage of income from management. This, in turn, means that the relevant payment is not made at the expense of state funds. In addition, the actual amount of such a payment depends on the effectiveness of the management, and therefore unknown in advance;

2) the effectiveness of the seized property management directly depends on the promptness of the transfer of property into management of the manager. Consequently, the process of selecting the appropriate manager cannot be too long.


What is the mechanism for selecting managers?

At the first stage of selection the companies are invited for cooperation in the management of a certain type of property and must confirm having sufficient operational capacity, experience and ability to profitably manage the specified property. Companies must also demonstrate their willingness to undertake certain obligations in the event of transfer of property into their future management (in particular, to insure the safety of such property and their professional responsibility), to prove that the authorized capital has been formed, confirm the financial capacity and absence of debts to the budget, etc. Thus, when selecting a potential manager, an emphasis is made on his professional achievements and the ability to manage the assets profitably. If companies meet the defined criteria, they shall be included by the Tender Board of the National Agency in the List of persons, who can potentially manage property of a specified kind. The corresponding list was published on the official website of the National Agency and is available for public viewing.

Inclusion in such a List means recognition of the suitability of the company for management of certain type of property, but not any property. One and the same company can be recognized as fitting for management of various types of property, but for this purpose, it needs to confirm its ability for separate management of each type of the specified property. The first stage of the selection is not time-barred and functions continuously.

In cases, when the National agency accepts into management a separate real property that is not subject to sale, the second stage of selection of the manager begins. It is the continuation of the competition among companies that have been previously recognized as potential managers of this type of real property, which has been transferred under the management of the National Agency.

In future, the preliminary selection mechanism shall be improved, the eligibility criteria shall be modified according to the specifics of the respective markets, asset segmentation shall be deepened. The list of potential managers shall be constantly opened for public viewing on the website of the National Agency and the active representatives of the business community shall be able to access it.


Infographics on the mechanisms of management of seized assets by the National Agency.