Yaroslav Shevel

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An expert in corporate and international corporate law. He has many years of experience in establishing and reorganizing companies, supporting M&A transactions, as well as providing legal support for opening and running a business in the EU, Asia, and North America.

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Case: Appeal Filed Against the Decision to Revoke Diya City Resident Status

Corporate law
Reading time: 5 min.

Client: An IT company that held:

Regulator: Ministry of Digital Transformation of Ukraine

Purpose of the Appeal

To protect the company from losing its Diya City resident status and the associated legal and organizational benefits, specifically:

  • maintaining its status as a business critical to the economy;
  • maintaining reserved employees;
  • preventing disruption to business continuity;
  • restoring the company’s procedural rights in its interactions with the regulator.

The Issue

The client’s company received a notice from the Ministry of Digital Transformation regarding the impending revocation of its Diya City resident status. The regulator cited the following grounds for this decision:

  • alleged disregard of previous notices from the Ministry of Digital Transformation;
  • failure to submit initial reports on compliance with Diya City residency criteria within the timeframe established by law.

At the same time, in reality:

  • the company had not received any prior notifications or warnings;
  • the client was not given the opportunity to remedy the violations;
  • the company continued to meet the Diya City residency criteria.

The situation posed critical risks to the business, as the loss of Diya City resident status could automatically lead to:

  • loss of critical enterprise status;
  • loss of employee reservations;
  • tax and organizational consequences;
  • significant reputational risks for the company.

Our Actions

1. Analysis of the Situation and Legal Position

After a detailed analysis of the case circumstances, communication with the Ministry of Digital Transformation, and review of applicable legislation, our lawyers identified the following key facts:

Established Facts:

  • The company had indeed failed to submit the initial report on compliance with Diya City residency criteria.
  • However, the client submitted an annual report that effectively confirmed compliance with all necessary criteria.
  • Throughout its entire period as a Diya City resident, the company diligently complied with legal requirements.
  • The Ministry of Digital Transformation did not properly send an electronic notification regarding the identification of grounds for loss of status.
  • The client was not provided with the opportunity guaranteed by law to: provide an explanation; remedy the violation; exercise the right to defense.

Despite this, the Ministry of Digital Transformation decided to revoke the company’s Diya City resident status.

2. Identified Procedural Violations

The legal analysis revealed significant violations of administrative procedure by the regulator, namely:

  • failure to follow the procedure for notifying the company;
  • violation of the right to participate in the procedure;
  • denial of the opportunity to remedy deficiencies;
  • failure to adhere to the principles of due administrative process;
  • making a decision without ensuring the company’s right to a defense.

In fact, the decision to revoke the status was issued without observing the mandatory procedural safeguards provided for by Ukrainian law.

3. Preparation and Filing of the Complaint

After gathering the necessary documents, including:

  • the history of communications with the Ministry of Digital Transformation;
  • email excerpts;
  • submitted reports;
  • internal supporting documents,

our lawyers prepared a comprehensive complaint against the Ministry of Digital Transformation’s decision, which the client submitted to the Ministry in a timely manner in the form prescribed by law.

The complaint argued that:

  • the notice was not properly served;
  • the company was not notified in a timely manner of the identified issues;
  • the decision-making procedure did not comply with legal requirements;
  • the client was effectively deprived of the opportunity to exercise its procedural rights;
  • the violation was purely procedural in nature and could have been remedied without resorting to the extreme measure of revoking status.

Result

Following the filing of the complaint, the Ministry of Digital Transformation organized a meeting of the appeals commission to review complaints regarding the loss of Diya City resident status.

During the review:

  • the commission examined the legal position we had prepared;
  • the commission members agreed with the arguments presented;
  • the fact of a significant violation of the administrative procedure was confirmed.

The commission concluded that:

  • the company’s rights had been violated;
  • compliance with the procedure would have allowed the client to remedy the deficiencies without losing its status;
  • the decision to revoke the status was premature and unfounded.

As a result of the review:

  • the Ministry of Digital Transformation’s decision to revoke the client’s Diya City resident status was overturned;
  • the client was given the opportunity to resubmit the initial reporting;
  • the company’s right to provide explanations and rectify the deficiencies was restored.

As a result, the client gained a real opportunity to preserve:

  • Diy City resident status;
  • critical business status;
  • employee retention;
  • business process stability.

Practical Conclusions

This case highlights several important practical aspects of business interactions with government agencies:

1. Procedure Matters

Even if the regulator believes there are formal grounds for imposing sanctions, it is required to:

  • follow the established procedure;
  • ensure the company’s right to be heard;
  • provide an opportunity to remedy the violation.

A violation of administrative procedure may constitute an independent ground for overturning the decision.

2. Not every violation is an automatic ground for loss of status

In many cases, the situation can be remedied through:

  • proper communication with the regulator;
  • timely submission of explanations;
  • utilizing administrative appeal mechanisms.

3. A prompt response is critically important

In matters related to Diya City resident status, deadlines and the speed of response are crucial, as the consequences may affect:

  • the company’s workforce stability;
  • employee retention;
  • the tax burden;
  • business operations.

How we can help

“Prikhodko & Partners” assists companies with the following matters:

    • obtaining Diya City resident status;
    • maintaining compliance with Diya City criteria;
    • preparing and submitting reports;
  • passing inspections;
  • communicating with the Ministry of Digital Transformation;
  • appealing decisions regarding loss of status;
  • protecting the status of a critical enterprise;
  • employee retention issues;
  • developing internal compliance procedures for Diya City residents.

We help not only to respond to problems but also to prevent them from arising through systematic legal support for your business.

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