On July 29, 2023, Oleksandr Kamyshin, the Minister for Strategic Industries, announced that SC Ukroboronprom officially ceased to exist. A new joint-stock company called Ukrainian Defence Industry emerged instead.
This is a historic change for Ukraine's state defence industry. The Ukroboronprom reform aims to implement the best corporate governance standards, mitigate corruption risks, increase the Ukrainian defence industry's competitiveness, and ensure the Ukrainian army is provided with high-quality support. NAKO sincerely welcomes such developments. We have supported the reform of Ukroboronprom since 2017.
NAKO analysed and formulated the following measures for the corporate reform of SC Ukroboronprom in 2023-24, which was re-registered as Ukrainian Defense Industry JSC, 100% of which is owned by the government.
NAKO reports this referencing the provisions of the law "On the reform of state-owned defence industry enterprises" dated October 6, 2021, the Resolution of the Cabinet of Ministers "On the formation of the joint-stock company "Ukrainian Defence Industry" dated March 21, 2023, and the OECD guidelines, according to which the transformation of Ukroboronprom should be carried out.
In particular, measures should be taken to form an independent supervisory board, reboot top management, and create special control and audit bodies.
Step 1: Development of the Action Plan for Ukrainian Defence Industry JSC Corporate Governance.
Step 2: Formation of the Supervisory Board (three state representatives – submitted by the Ministry of Strategic Industries, three – independent members).
Important: A person who is a citizen of the aggressor state and a non-citizen of Ukraine cannot be a member of the supervisory board.
Step 3: Formation of committees of the Supervisory Board.
Step 4: Election of a new Director General by the Supervisory Board (it can be the current director German Smetanin or another person).
Step 5: Formation by the Supervisory Board of internal audit, risk management, compliance and the Office of the Corporate Secretary units.
By the end of 2023, the transformation of the company should be finalised, namely:
- legal re-registration of participating enterprises of the former State Concern;
- concentration of production by branches: armored; aviation; missile; ammunition production, etc.;
- transfer of enterprises that do not function in the defence industry system to the State Property Fund.
It is expected that the newly created Ukrainian Defence Industry JSC will be able to attract investments and create joint ventures and innovative production centres with domestic and foreign businesses by the second quarter of 2024.
Earlier, German Smetanin was appointed as the director general of UOP JSC.