12.05.2026
Energy Club has addressed First Deputy Prime Minister – Minister of Energy of Ukraine Denys Shmyhal regarding the situation surrounding the formation of supervisory boards of distribution system operators (DSOs), the controlling stakes of which are held by JSC “Ukrainian Distribution Networks” (URM).
In the appeal, the club emphasizes that in recent years, Ukraine has consistently moved toward implementing European corporate governance standards in the state sector of the economy. A key element of this reform was the introduction of independent supervisory boards in state-owned companies and business entities directly or indirectly controlled by the state.
Energy Club points out that this approach was developed, in particular, within the framework of Ukraine’s obligations to international partners, including the IMF, and had a clear logic: to remove strategic state assets from manual management, ensure the sustainability of the economic course regardless of political cycles, increase management transparency, and create conditions for trust from creditors, donors, and investors.
According to information available to Energy Club, JSC “URM,” as the majority shareholder of a number of DSOs, is initiating decisions to terminate the powers of current supervisory boards and elect new compositions for JSC “Zaporizhzhiaoblenergo,” JSC “Khmelnytskyioblenergo,” JSC “Kharkivoblenergo,” JSC “Mykolaivoblenergo,” JSC “Ternopiloblenergo,” and JSC “Cherkasyoblenergo.”
Of particular concern is that the proposed approach may actually lead to the formation of supervisory boards without independent directors — primarily or exclusively from individuals associated with the management company JSC “Ukrainian Distribution Networks” itself.
This issue goes far beyond ordinary corporate procedure. It is not just about changing the composition of individual supervisory boards, but about the risk of a rollback from the European model of corporate governance in the state energy sector and a return to the practice of manual management of strategic assets.
“The logic of a supervisory board is to ensure professional control over the company’s activities, assess risks, prevent conflicts of interest, and protect the interests of the company itself. If DSO supervisory boards are primarily appointed with persons associated with the majority shareholder or the management company, a situation of corporate self-control arises,” the Energy Club appeal states.
Energy Club notes that distribution system operators are critical infrastructure. They handle consumer funds, tariff resources, investment programs, international aid, equipment for network restoration, and strategic decisions regarding the reliability of power supply. Therefore, the management of state and indirectly state-owned energy assets must be carried out transparently, professionally, and with appropriate safeguards against manual influence.
Energy Club also draws attention to the norms of the Law of Ukraine “On Joint Stock Companies.” According to part two of Article 76, in joint-stock companies where more than 50% of shares are directly or indirectly owned by the state, an audit committee, a remuneration committee, and a nomination committee must be established. Such committees must be chaired by independent directors, and the majority of their members must also be independent directors.
Furthermore, clause 21 of Section XIX “Final and Transitional Provisions” of this law stipulates that during the period of martial law and within six months after its termination or cancellation, these requirements remain mandatory for companies in which more than 50% of shares directly or indirectly belong to the state or which are under state control.
Since JSC “Ukrainian Distribution Networks” is a company 100% of the shares of which belong to the state represented by the Ministry of Energy of Ukraine, the distribution system operators, whose controlling stakes are held by JSC “URM,” are under indirect state control. Accordingly, the formation of their supervisory boards without independent directors may contradict both legal requirements and the essence of corporate reform.
Separately, in the appeal, Energy Club notes that in the case of JSC “Kharkivoblenergo,” independent directors have already expressed written objections to the proposed approach, pointing out risks to the legality of the supervisory board’s activities, the functioning of its committees, the business reputation of the supervisory board members, and compliance with OECD standards.
Energy Club believes that further promotion of decisions on the formation of DSO supervisory boards without independent directors may call into question the legality of the formation of governing bodies of strategic energy enterprises, make proper functioning of supervisory board committees impossible, create a conflict of interest between the shareholder function, the management function, and the independent control function, as well as weaken the trust of international partners, donors, creditors, and investors.
In this regard, Energy Club requests the Ministry of Energy to provide an official position on the application of the requirements of the Law of Ukraine “On Joint Stock Companies” to DSOs, the controlling stakes of which are held by JSC “Ukrainian Distribution Networks,” to ensure a review of the actions of JSC “URM” regarding the initiation of the formation of supervisory boards without independent directors, and to prevent the adoption of decisions that may lead to the formation of supervisory boards of strategic energy enterprises without independent directors.
Energy Club also requests to ensure that the charters and regulations on the supervisory boards of the respective companies are brought into compliance with the Law of Ukraine “On Joint Stock Companies,” the State Ownership Policy, and OECD principles on corporate governance of state-owned enterprises.
Separately, Energy Club asks to provide an assessment of the practice of nominating persons associated with JSC “URM” to the supervisory boards of several DSOs simultaneously from the perspective of professional competence, independence, integrity, absence of conflict of interest, and the ability to properly perform their duties.
“The institute of independent directors in the state energy sector cannot be a formality. An attempt to form supervisory boards of distribution system operators without independent directors is not a technical corporate procedure. This creates a risk of dismantling the system of checks and balances in the state energy sector, replaces independent oversight with self-control by the management company, and calls into question Ukraine’s compliance with declared OECD standards and obligations to European partners,” the Energy Club appeal emphasizes.
Energy Club requests the Ministry of Energy to take this issue under control and prevent decisions that could harm corporate reform, investment confidence, and efficient management of the state’s strategic energy assets.
