Russian business in Ukraine hides its beneficiaries and does not indicate them in the register
Russian companies in Ukraine hide their origins, and Ukrainian companies in Russia establish legal entities that are engaged in wholesale trade and register public organizations. This is the conclusion reached by the analysts of the system for checking the YouControl counterparties , who refer to data on companies in the Russian Federation.
It is noted that, despite the tense Ukrainian-Russian relations, there are still branches of Ukrainian companies in Russia. Thus, according to the Russian register of the Unified State Register of Legal Entities, 85 wholesale companies and 84 non-profit organizations still have open branches in Russian cities. Also, companies involved in real estate transactions, construction and temporary catering have their subdivisions in the Russian Federation.
At the same time, economist at the Center for Economic Strategy (CES) Daria Mikhailishina explained that sometimes Ukrainian companies have no choice but to continue to supply their goods to Russia. This is especially true for such industries as metallurgy, where production chains were tied to the Russian Federation even before Ukraine’s independence, and this is still the case.
YouControl noted that the majority of companies with branches in Russia are from Kiev – 210. In addition, the founders of legal entities in the Russian Federation are companies from South-Eastern Ukraine:
- Crimea – 70;
- Donetsk region. – 56;
- Kharkov region. – 55;
- Dnepropetrovsk region. – 48;
- Zaporozhye region – thirty.
But in Western Ukraine there are almost no such companies: in Ivano-Frankivsk, Volyn, Ternopil and Transcarpathian regions there is only one such company, in Khmelnytsky – 2, in Chernivtsi – 3, in Rivne – 4, and in Lviv – 5.
In turn, according to the Unified State Register of Legal Entities, there are significantly fewer branches of Russian companies in Ukraine – only 104.
“However, branches are not the only type of connection that can exist between a company in Ukraine and Russia. For example, according to the Unified State Register of Legal Entities, in June 2020, 12,970 companies operated in Ukraine that had Russian founders or beneficiaries,” they added analysts.
According to the CES, over the past 10 years, the Russian presence has dropped in Western Ukraine, but has grown in the Transcarpathian, Sumy, Cherkassy, Kirovograd and Chernigov regions. However, this does not necessarily indicate a systematic increase in the Russian presence. For example, in the Transcarpathian and Cherkasy regions, a key factor was the acquisition by a Russian company of a local oblenergo.
According to Mikhailishina, some Russian companies hide the real beneficiary and do not indicate it in the register, although this is contrary to the law. These companies want to hide from Ukrainian sanctions and continue to work in Ukraine.
Former general director of NJSC Naftogaz of Ukraine Yuriy Vitrenko believes that only the capital market can help really reduce the Russian influence in Ukraine.
“To reduce Russian influence in Ukraine, it is necessary to reduce the influence of Russian institutions, and for this it is necessary to offer an alternative. There is such an alternative, this is the capital market. Successes in the gas sector demonstrate this. At the center of all the reforms introduced were not the politicians, but the market”, – he said.
Analysts report that Russian companies are located primarily in Kiev, as well as in eastern Ukraine. Ukrainian companies also continue to do business in Russia, being both members of Russian non-profit organizations and founders of commercial organizations in Russia.
“How ethical cooperation with the aggressor country is, each Ukrainian company decides on its own. Of course, such activities carry reputational risks,” said the deputy director of YouControl for legal issues Daniil Globa.
According to him, legal risks for such companies may arise when legal entities or associated individuals representing their interests are under Ukrainian or international sanctions.