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RESOLUTION OF THE SUPREME ECONOMIC COURT OF UKRAINE

of May 22, 2007

About recognition invalid board decisions

(determination of Trial chamber on economic cases of the Supreme Court of Ukraine of 19.07.2007 it is refused to open production on review)

Case No. 1/1166-9/407

NAME OF UKRAINE

The Supreme Economic Court of Ukraine as a part of board of judges: V. Ovechkin - the chairman, E.Chernov, V. Tsvigun

with the assistance of representatives:

JSC LVOVORGRES - Polyansky V. E. - (time. of 04:05. 2007)

JSC Zapadenergoavtomatika:

- Andronov P. S. - (time. of 21:05. 2007)

- Yukhman Yu. M. - (time. of 21:05. 2007)

considered the writ of appeal of JSC LVOVORGRES

on the resolution of the Lviv Economic Court of Appeal of February 12, 2007

on case N1/1166-9/407 of economic court of the Lviv region

in the claim of JSC LVOVORGRES

to JSC Zapadenergoavtomatika

about recognition invalid board decisions

ESTABLISHED:

Decision of economic court of the Lviv region of 21.11.2006 (judge: L. Danko) claims are satisfied partially, board decision of JSC Zapadenergoavtomatika about sale of production rooms is nullified of 07.02.2005 (the protocol N 3). Regarding requirements about purpose of judicial examination proceeedings are stopped because of refusal of the claimant of the claim. For the rest in trebovaniyakhotkazano.

The judgment is motivated by those circumstances that the defendant performed sale of the corresponding property on non-competitive and unprofitable conditions, at the price is much lower than residual book value of objects of sale, than unreasonably reduced the assets and violated the interest of the claimant protected by the law as shareholder on profit earning from activities of the defendant; according to the charter of the defendant council of society, but not board shall make the decision on property acquisition.

As for requirements about purpose of judicial examination, the claimant submits the petition for refusal of carrying out the last as the defendant provided all necessary documents therefore in this part the court accepts refusal of the claimant and production stops.

Regarding requirements about further sale of rooms, the corresponding purchase and sale agreements are signed with physical persons and were matter in issue in the matter of N2-116/06, which was considered by Kamyanka-Buzhsky district court.

Resolution of the Lviv Economic Court of Appeal of 12.02.2007 (judges: G. Krayevskaya, L. David, H.Murskaya) the decision of economic court of the first instance is cancelled regarding satisfaction of requirements about recognition invalid board decisions, in this part is refused the claim, for the rest the decision is left without changes.

The appeal resolution is motivated by those circumstances that book (residual) value of fixed assets of the first group to which real estate objects and which is displayed in balance of the company belong is book value concerning which there are restrictions in the charter of the defendant by differentiation of competence of governing bodies of society п to decision making about alienation of the real estate; decision making about alienation of the real estate which book value is less than 2000 minimum wages is referred to powers of board; the balance sheet (residual) property value concerning which the decision on alienation is made made 331490, 75 UAH that less than 2000 minimum wages (524000 UAH) and therefore the question of decision making of alienation of fixed assets (real estate) does not belong to special powers of council of society are, and proceeding from contents of item 7.3.3 of the charter and according to item 7.4.2 of the charter is within the competence of board; making the disputed decision of 07:02. 2005, the board of society did not exceed the competence determined by the charter.

The claimant in the writ of appeal asks to repeal the appeal resolution for causes of infringement economic court of appellate instance of regulations of the substantive right, the decision of economic court of the first instance to uphold.

The complainant considers that the conclusion of appellate instance that book value in understanding of item 7.3.3 of the charter of the defendant is residual book value, contradicts item 43 of the Resolution of the Cabinet of Ministers of Ukraine of 03.04.1993 of N 250, and is wrong; in contradiction from Art. 4 of the Law of Ukraine "About financial accounting and the financial reporting in Ukraine" the appellate instance mistakenly was guided by the subordinate regulatory legal act - the Provision (standard) of the financial accounting 7 "Fixed assets", the Provision (standard) of financial accounting 25 "the financial reporting of small business entity", the Provision (standard) of the financial accounting 2 "balance" approved according to the Order of the Ministry of Finance of Ukraine of 27.04.2000 of N 92, by the Order of the Ministry of Finance of Ukraine of 25.02.2000 of N 39, the Order of the Ministry of Finance of Ukraine of 31.03.1999 of N87.

The Supreme Economic Court of Ukraine in proceeding in open court researched case papers, arguments of the writ of appeal and considers that the claim is not subject to satisfaction, proceeding from the following.

By economic courts it is determined that the board of JSC Zapadenergoavtomatika 07.02.2005 made the decision on sale of certain real estate which is drawn up by the N3 protocol of 07.02.2005.

According to part three of Art. 47 of the Law of Ukraine the board resolves all issues of activities of joint-stock company "Of economic societies", except those which are within the competence of general meetings and council of joint-stock company (supervisory board).

Powers of board of society are determined by item 7.4 of the Charter.

The board of society is its executive body which performs management of the current financial and economic activities, is accountable to general shareholder meetings and council of society, organizes accomplishment of their decisions, all questions of activities of society, except those which according to the current legislation and the charter or decisions of general shareholder meetings are carried to competence of other body of society are within its competence.

According to item 7.3.3 of the charter decision making about alienation of the real estate if book value exceeds it 2000 minimum wages is referred to powers of council of society, in particular.

According to Art. 83 of the Law of Ukraine "About the government budget of Ukraine for 2005" the minimum wage is established in the amount of 262 UAH.

Thus, the appellate instance reasonably came to conclusion that the board of society has the right to make the decision on alienation of the real estate which book value does not exceed 2000 minimum wages, i.e. 524000 UAH.

According to part two of Art. 3 of the Law of Ukraine "About financial accounting and the financial reporting in Ukraine" financial accounting is obligatory type of account which is kept by the company.

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