03.04.2026
Juscutum Partner Oleksiy Hnatenko on the limits of the state’s powers as a shareholder, risks for the supervisory boards of energy companies and the price of legal uncertainty for the market
By the decision of the Kyiv City Commercial Court of March 25, 2026, in case No. 910/16129/25, the claim of Andriy Kostrytsa was partially satisfied: the court declared invalid the decision of the Ministry of Energy of Ukraine, issued by order No. 505 of December 9, 2025, regarding the termination of his powers as an independent member of the supervisory board of JSC “Ukrainian Distribution Grids” (UDG). The full text of the decision was signed on March 30, 2026.
Energy Club: Why is this case important and much broader than just a dispute over the dismissal of one member of the supervisory board?
Oleksiy Hnatenko: Because in fact this is not a dispute about one position or a conflict around one personality. This is a dispute about the limits of state discretion in corporate governance in such a specific area as energy. In this case, the court actually returned the discussion to a basic legal principle: the state, even if it is the sole shareholder, cannot manage a company outside the framework of a special law. For state-owned companies, not only the Law of Ukraine “On Joint-Stock Companies” applies, but also the special Law of Ukraine “On Management of State Property”, which establishes separate rules for companies where the state owns more than 50% of the shares. This is the essence of the matter. If the state is building a corporate governance reform, it cannot itself demonstrate that the special regime is in effect only as long as it is convenient.
Energy Club: What legal node is key in this case?
Oleksiy Hnatenko: The key legal node in this case has clear signs. Clauses 24–26 of Part Two of Article 39 of the Law “On Joint-Stock Companies” refer to the exclusive competence of the general meeting to elect members of the supervisory board, approve the terms of contracts with them, and terminate their powers. But for state-owned companies, the analysis does not stop there. Part Eight of Article 11-2 of the Law “On Management of State Property” directly states that the powers of a member of the supervisory board of such a company may be terminated early exclusively on grounds specified by law. If the reason chosen is failure to meet the objectives of the activity, the law also ties it to the results of the assessment of the activities of the supervisory board under Article 11-7 of this Law. This transition from general corporate regulation to a special regime became decisive. The court directly noted that referring only to government acts and the general logic of renewing the composition does not replace the grounds established by law.
Energy Club: So the court did not deny the right of the state to change supervisory boards, but only outlined the conditions?
Oleksiy Hnatenko: That’s right. And it is important to state this correctly so that the discussion does not descend into populism. The court did not say that the state cannot renew the supervisory boards of energy companies. The court said much more precisely — this renewal must take place within the framework of the law. In this case, the defendants referred to Order of the Cabinet of Ministers No. 1258-р of November 17, 2025 and Resolution of the Cabinet of Ministers No. 1596 of December 3, 2025, but the court separately noted that a by-law does not nullify the provisions of the law. In the legal system, this is not a question of political expediency, but a question of the hierarchy of norms, as set out in Article 19 of the Law of Ukraine “On Legislative Activity”. Simply put, the will of the state as a shareholder is not unlimited. It is legitimate only to the extent that it is implemented within the law. Discretion does not mean permissiveness.
Energy Club: In this story, there is a lot of talk about cumulative voting, the full composition of the supervisory board and the charter. Why is this not a technical procedure, but a real legal problem?
Oleksiy Hnatenko: Because it is in such “technical details” that corporate law either works or makes the system ineffective. Article 72 of the Law “On Joint Stock Companies” provides for cumulative voting as the basic model for electing the supervisory board and proceeds from the fact that the full composition of the body is of fundamental importance. In addition, Article 80 of this Law states that in the case of cumulative voting, the general meeting can terminate powers only in relation to the entire composition. In the current Statute of JSC “UDG” (version of 14.12.2025), this is written even more strictly. Clause 17.5 stipulates that the board consists of seven people, and clause 17.6.11 states that the board is considered formed only if the full quantitative composition is elected. Therefore, the number of board members is not a “trifle.” If the procedure did not secure the full composition required by the charter, it creates a direct risk to the legitimacy of all further decisions.
Energy Club: To what extent is Andriy Kostrytsa’s public position on the composition of the new supervisory board legally correct and balanced?
Oleksiy Hnatenko: It is an important legal signal. In his publication on Energy Club dated March 31, 2026, Andriy Kostrytsia indicated that the new board was appointed with only five members, while the charter requires seven. This argument is vital because the charter is the basic internal act of organizing management. While this public position doesn’t automatically dictate a judicial outcome for every future decision, it creates a serious governance risk that any proper compliance department, creditor, or investor will take into account.
Energy Club: What are the practical consequences of such a situation for the company itself?
Oleksiy Hnatenko: The consequences are very practical. When there is doubt about the legality of terminating one board and forming another, the company enters a state of managerial vulnerability. This means the risk of appealing decisions and a slowdown in personnel and business procedures. The official announcement of JSC UDG dated December 30, 2025, recorded that after the board’s powers were terminated, its functions were temporarily performed by the Ministry of Energy. This corporate instability is moving into operational mode. For an energy infrastructure company, such a pause in the normal management model is an expensive and dangerous state.
Energy Club: Does this matter to the market and investors?
Oleksiy Hnatenko: Absolutely. For international financial institutions and strategic partners, corporate governance is an element of risk assessment. The OECD Review of the Corporate Governance of SOEs in Ukraine 2026 states that while Ukraine has improved its legal architecture, gaps in implementation remain. For an investor, there is no separate “good law” and “bad practice” — it is one system. If the system shows that the law can be ignored for quick personnel decisions, the market prices that as a risk, leading to more expensive capital and greater distrust.
Energy Club: What should be the legal way out of this situation?
Oleksiy Hnatenko: It should be legally balanced, not political. First, any termination of powers must be strictly tied to Article 11-2 of the Law “On Management of State Property”. Second, appointments must fully comply with the Law “On Joint-Stock Companies” and the company charter. Third, the practice of using “urgency” as a self-sufficient legal basis must stop. Urgency explains why a decision is fast, but it doesn’t replace legal grounds. Finally, the state should not be the strongest participant in these disputes, but the most accurate. The market expects discipline, not legal improvisation.
Energy Club: Your final conclusion?
Oleksiy Hnatenko: Corporate governance in the energy sector cannot be maintained in **manual management**. It either works as a system of norms and responsibilities, or it turns into a series of temporary solutions that trigger endless legal uncertainty. For a country that is at war and rebuilding, that is too high a price. This case is not a private conflict; it is a test of the maturity of the state’s model for managing strategic assets.
