Transformation of State Enterprise “Diia” into Joint-Stock Company: Legal Analysis and Critical Risks to State Property

This occurred one day after Mykhailo Fedorov was dismissed from the position of First Vice Prime Minister and Minister of Digital Transformation and appointed Minister of Defense. The official explanation is limited to general phrases about preserving state ownership, fulfilling European integration obligations, and maintaining service operations unchanged. The absence of public justification for the economic feasibility of such reorganization at this particular moment, especially under martial law, requires detailed legal analysis of consequences and risks.

Chronology of Events and Critical Temporal Coincidence

On January 13, 2026, the Verkhovna Rada of Ukraine dismissed Mykhailo Fedorov from the position of First Vice Prime Minister and Minister of Digital Transformation. On January 14, 2026, parliament appointed Fedorov as Minister of Defense of Ukraine. The state enterprise “Diia” was created in 2019 as Fedorov’s flagship project, his personal political brand and main achievement in the position of Minister of Digital Transformation.

On January 15, 2026 — one day after Fedorov’s appointment as Minister of Defense — a record appears in the Unified State Register of Legal Entities stating that the state enterprise “Diia” is in a state of termination due to change of organizational-legal form to a joint-stock company. During five years of work as minister, no such transformation occurred. The reorganization starts precisely when Fedorov transitions to a completely different sphere of activity and loses any levers of control over the Ministry of Digital Transformation.

This temporal coincidence cannot be random. If the transformation was a technical necessity to fulfill legislative requirements, why didn’t it happen earlier during the five years of the enterprise’s existence? If this is Fedorov’s decision as minister, why is it being implemented after his departure from the ministry? If this is a decision by the new Mintsifry team contrary to Fedorov’s position, why didn’t he as Vice Prime Minister block it before his transition to another position?

The most likely version: the reorganization was delayed until the moment when Fedorov would no longer have the ability to prevent it. The transition to Minister of Defense is not simply a change of position within the government. It is a radical change in the sphere of responsibility. The Minister of Defense has no authority regarding digital transformation. The transformation of the organizational-legal form of Fedorov’s main project starts precisely when he physically cannot prevent it due to change of department.

Legal Essence of the Transformation

A state enterprise functions on the basis of the Economic Code of Ukraine and the Law “On Management of State Property Objects”. The property of SE belongs to the state by right of ownership. The enterprise acts as executor of state functions with limited commercial independence. Any alienation of property, reorganization or liquidation requires a separate decision by the management body — the Cabinet of Ministers of Ukraine or the Verkhovna Rada depending on the object’s status.

A joint-stock company is governed by the Law “On Joint-Stock Companies” and the Civil Code. Property does not belong directly to the state — it is the property of a legal entity, and the state owns shares. This is a fundamental difference in the legal regime of assets. Management is carried out through corporate mechanisms: general meetings of shareholders and a supervisory board. Decisions on property disposal, capital attraction, creation of subsidiary structures are made by the company’s management bodies without mandatory coordination with the government.

The Ministry of Digital Transformation refers to the Law of Ukraine “On Peculiarities of Regulation of Activities of Legal Entities of Certain Organizational-Legal Forms in the Transitional Period and Associations of Legal Entities” (№4196) and the corresponding Resolution of the Cabinet of Ministers №1104. These normative acts indeed provide for transformation of state enterprises into joint-stock companies or limited liability companies during the transitional period.

Critically important: the law provides a choice of organizational-legal form. A state enterprise can be transformed into JSC or LLC. JSC provides significantly more opportunities for attracting investments through share emission, creating complex corporate structures, withdrawing assets through subsidiary companies. LLC has a simpler structure and fewer instruments for corporate manipulations. The choice of precisely JSC form for an enterprise managing a database of personal data of 18 million citizens creates maximum opportunities for future operations with this asset.

Change in Control Mechanisms and Asset Management

In the status of state enterprise, “Diia” is controlled directly through the Ministry of Digital Transformation. Appointment of management, budget approval, conclusion of major deals requires coordination with the ministry. Reorganization or privatization is possible only by decision of the government or parliament with compliance with procedures provided by relevant laws.

A joint-stock company is managed by a supervisory board. This body appoints the executive director, approves strategy, makes decisions on additional share emission, creation of subsidiary enterprises, attraction of investments. Formally, the supervisory board is appointed by general meetings of shareholders, where the state as the sole shareholder has one hundred percent control. Practically, the composition of the supervisory board is determined by political agreements, not by the state’s interests as owner.

The Law “On Joint-Stock Companies” allows the company to make decisions on additional share emission. At the same time, the state is not obliged to purchase new shares proportionally to its stake. If the state refuses or does not have funds to participate in additional emission, its share automatically decreases. This is a mechanism of dilution of state property that does not require formal privatization. Precedents of such dilution exist in the practice of corporatization of Ukrtelecom, where the state lost the controlling stake through a series of additional emissions in favor of “strategic investors”.

A joint-stock company can create subsidiary enterprises and transfer assets to them. The “Diia” database, software, intellectual property rights can be withdrawn into separate legal entities. Then shares in these subsidiary structures are sold to private investors. The parent company remains state-owned, but real assets pass into private hands through a multi-level corporate structure. This scheme has been worked out at Ukrzaliznytsia, Ukrenergo, Naftogaz, where the most profitable assets have been withdrawn into subsidiary companies with opaque ownership structures.

Critical Risks to State Property and National Security

The main asset of “Diia” is not software or IT infrastructure. It is a database of personal data of Ukrainian citizens. As of January 2026, more than 18 million people use the application. The database contains biometric data, information about place of residence, marital status, property, vehicles, medical data, border crossing data, financial transactions through Diia.Card, data on mobilization deferment. This is the most complete digital model of the country’s population, created at state expense over five years.

The market value of a database of such volume and quality is measured in billions of dollars. Leading technology corporations build their business models precisely on monetization of users’ personal data. Facebook is valued at hundreds of billions of dollars not because of software, but thanks to a database of behavior of three billion people. Google earns tens of billions annually on targeted advertising thanks to user data. The “Diia” database contains much more complete and reliable information about Ukrainians than any private company can collect legally.

Transformation into a joint-stock company creates a legal possibility of transferring this asset to private structures. The supervisory board can decide to create a subsidiary enterprise for managing databases and digital services. This enterprise receives a license to use information. Then a share in the subsidiary enterprise is sold to a “strategic partner” — for example, an international IT corporation, investment fund, or structure connected with certain political forces. Formally, the state retains ownership of shares in the parent company JSC “Diia”. Actually, citizens’ personal data becomes a commercial asset in the hands of private capital.

The Law of Ukraine “On Protection of Personal Data” prohibits transfer of personal data databases to third parties without subjects’ consent. But this norm concerns direct transfer. Corporate restructuring, when a database passes from one enterprise to another within one group of companies, is formally not transfer to third parties. After creating a subsidiary structure, it can be sold without violating the law on personal data — the database remains with the same legal entity, only the owner of this entity’s shares changes.

The risk to national security lies not only in commercial exploitation of data. Possession of a complete database of citizens’ personal data provides opportunities for social engineering, manipulation of public opinion, targeted disinformation. If this database falls under control of structures connected with foreign states or private political interests, it creates a threat to sovereignty. During electoral campaigns, access to such a database allows pinpoint influence on voters’ moods in key regions and districts. During war, this database contains information about persons deferred from mobilization, which represents strategic value.

An additional risk is created by the possibility of using shares as collateral. A joint-stock company can issue bonds or take bank loans secured by its assets, including shares of subsidiary enterprises. If JSC “Diia” fails to fulfill obligations to a creditor, the pledged assets pass to the creditor. This is another mechanism for withdrawing state property without formal privatization — through bankruptcy and satisfaction of creditors’ claims.

Absence of Economic Justification and Procedural Guarantees

The Ministry of Digital Transformation has not published a single document that would explain the economic feasibility of transformation precisely now. No public consultations were conducted. There is no independent valuation of the enterprise’s property. It is not determined what exactly problems in the work of the state enterprise should be solved through change of organizational-legal form.

Deputy Minister Valeriia Koval in media comments limited herself to general phrases: “Diia remains 100% state-owned”, “in the new status the company will receive modern development tools”, “it will be easier to build partnerships with Ukrainian business”. No specifics regarding what exactly tools, what exactly partnerships, why the state enterprise cannot realize these goals in current status.

If it were about attracting investments for development — this requires concrete figures: how much funds are necessary, for what purposes, why the state budget cannot finance these needs, which investors are interested, on what conditions. If the reason were management inefficiency — this requires analysis of current indicators and explanation of how corporatization will increase efficiency. If the goal were entering international markets — a strategy of expansion and business plan would be necessary.

Instead, the public receives standard reassuring phrases and references to fulfilling European integration obligations. The same argument was used for corporatization of “Antonov”, “Energoatom”, Ukroboronprom. In all these cases, “European integration” turned out to be a formal pretext for changing the legal status of assets with subsequent attempts to privatize them or withdraw the most valuable parts into private structures.

Under normal conditions, reorganization of a state enterprise of such scale requires expertise from the State Property Fund, conclusion from the Antimonopoly Committee on impact on competition, assessment from the National Securities Commission in case of creating a joint-stock company. Martial law allows simplification of procedures, but does not cancel the need to justify decisions affecting strategic state assets.

The Accounting Chamber of Ukraine as a parliamentary control body has the right to check the efficiency of use of state property. However, the Accounting Chamber’s powers regarding joint-stock companies even with one hundred percent state participation are limited compared to control over state enterprises. JSC can cite commercial secrecy to refuse to provide information. This narrows the possibilities of parliamentary oversight over use of property created at budget expense.

Context of Systemic Transformation of State Assets

The transformation of “Diia” is not an isolated case. This is part of a large-scale campaign to transform state enterprises into joint-stock companies. In 2023, Ukroboronprom and Energoatom were corporatized. In April 2024 — SE “Antonov”. Each time the same set of arguments is used: fulfilling European integration obligations, creating a modern corporate governance system, preserving one hundred percent state ownership, no changes for users or employees.

The critical difference between these enterprises and “Diia” lies in the nature of assets. “Antonov” is production capacities and intellectual property for aircraft. Energoatom is nuclear power plants and energy infrastructure. Ukroboronprom is defense factories and technologies. All these assets have physical embodiment, their value can be assessed through material indicators.

“Diia” is a database of personal data. The asset is intangible, but its value is much higher than any production enterprise. This is not just a commercial asset — it is an instrument of control over the population. Whoever owns this database can influence social processes, electoral campaigns, formation of public opinion. Transfer of such an asset into a corporate structure where decisions are made by a supervisory board, not the state directly, creates risks much more serious than privatization of a factory or power plant.

The International Monetary Fund includes privatization and corporatization of state assets in the conditions for lending to Ukraine. During war, direct privatization of strategic objects is politically unacceptable — it will cause public protest. Transformation of state enterprises into joint-stock companies with one hundred percent state participation is formally not privatization. But after the end of the war, these joint-stock companies can be quickly privatized through sale of shares without public tenders, independent valuations and public discussions. The legal infrastructure for privatization is being created now, when society’s attention is focused on military events, and implementation will occur later.

Why Precisely Now: Analysis of Political Context

Fedorov’s appointment as Minister of Defense created a window of opportunity for transformation of “Diia” without resistance from the person who created and controlled this project. If reorganization had begun while Fedorov was in the position of Minister of Digital Transformation, he would have had the opportunity to block the process, demand additional expertise, make risks public. As Vice Prime Minister, he could also have influenced the decision through government mechanisms.

Fedorov’s transition to the Ministry of Defense is not simply a change of position within one government. It is a radical change in sphere of responsibility. The Minister of Defense must completely concentrate on the war, reforming the Armed Forces, work with recruitment centers, procurement of weapons. He physically has no time and legal authority to interfere in digital transformation processes. The new Minister of Digital Transformation gets free hands for reorganization without the need to coordinate decisions with the previous head.

Martial law creates additional opportunities for non-transparent decisions. Society follows the front, mobilization, energy crisis. Transformation of the organizational-legal form of a state enterprise does not cause public resonance compared to news about military operations. Journalists write about troop movements, not about changes in statutes of state companies. Deputies vote for the defense budget and laws on mobilization, not analyze legal nuances of corporatization of IT assets.

If we assume that transformation is occurring contrary to Fedorov’s interests, this indicates a serious conflict within the ruling elite. Someone had enough influence to initiate reorganization of the Vice Prime Minister’s main project immediately after his transition to another position. If transformation is occurring by agreement with Fedorov, this indicates the existence of a plan regarding future withdrawal of the asset from state ownership, for implementation of which a change of legal form was needed.

A third possibility: this is fulfillment of agreements with international financial institutions or foreign governments. Ukraine needs loans and assistance. Creditors demand structural reforms, including corporatization and privatization. “Diia” as the most successful Ukrainian digital project is of interest to international technology corporations. Creating a joint-stock company allows in the future to attract these “strategic partners” through sale of part of shares.

Recommendations for Public Control

People’s deputies should initiate a parliamentary investigation of circumstances of decision-making on transformation. Who specifically initiated this decision in the Ministry of Digital Transformation. Was this decision coordinated with Fedorov as Vice Prime Minister before his appointment as Minister of Defense. What expert conclusions were the basis for choosing precisely the form of joint-stock company instead of limited liability company. Were consultations conducted with the National Security and Defense Council regarding risks to the state’s information security. Did the ministry receive recommendations from international financial organizations regarding corporatization of state IT assets.

The public should demand public justification of transformation with concrete economic indicators. What problems exist in the work of state enterprise “Diia” that are confirmed by financial reporting and audits. Why these problems cannot be solved without changing the organizational-legal form. What concrete results should corporatization bring in measurable indicators. Who conducted analysis of the efficiency of the current management model. What alternative options were considered and why were they rejected.

An independent valuation of the assets of enterprise “Diia” is necessary, taking into account the personal data database as a key asset. The valuation should be conducted by an international audit company with publication of a full report. The valuation methodology should take into account not only IT infrastructure and software, but also the market value of a database of 18 million users with a full set of personal information. This will give understanding of the real economic value of the object being transferred to a new legal form.

The statute of the future joint-stock company should be made public before registration with mandatory public discussion. The statute defines the powers of the supervisory board, procedures for making decisions on additional share emission, creation of subsidiary enterprises, alienation of assets. The public has the right to know what restrictions will be embedded in the statute to protect state interests. Will there be a ban on additional emission without parliament’s consent. Are requirements established for the composition of the supervisory board with mandatory participation of independent directors. Are mechanisms for public reporting by the supervisory board to the public provided.

The Verkhovna Rada should legislatively establish that personal data of citizens collected by state bodies for performance of public functions cannot be the subject of commercial operations and transfer to private structures even through corporate mechanisms. The “Diia” database was created for performance of state functions of citizen identification and provision of administrative services at budget expense. This database should remain in state ownership regardless of the organizational-legal form of the enterprise managing it. Any operations on monetization of personal data or their transfer to subsidiary structures with private participation should be legislatively prohibited.

Anti-corruption organizations should monitor the composition of the supervisory board that will be appointed after creation of the joint-stock company. Presence in the supervisory board of persons connected with private business in IT sphere, international technology companies, investment funds or political forces will create a conflict of interest. Decisions by such persons on attracting “strategic investors”, creating subsidiary enterprises or emission of additional shares cannot be considered made exclusively in the state’s interests. A principle of zero tolerance for conflicts of interest should operate in the supervisory board of a company that owns personal data of all users of state electronic services.

Media should pay attention to the opacity of the procedure, temporal coincidence with personnel changes and absence of public discussion. Transformation of an asset worth billions of dollars one day after the departure of its initiator from the relevant ministry cannot be a coincidence of circumstances. The authorities’ silence regarding real motives of corporatization precisely at this moment should become the subject of journalistic investigations. Who specifically will benefit from changing the legal status of the enterprise. Are there preliminary agreements with potential investors. What international structures are interested in access to the database of personal data of Ukrainians. Is this transformation connected with conditions of international lending.

Every citizen should understand: change of the organizational-legal form of “Diia” one day after Fedorov’s departure from Mintsifry is not a technical detail and not a random coincidence, but a potential threat of loss of state control over personal data of all users of the system. If in the future there appear reports about “attracting a strategic partner”, “creating a joint enterprise for development of digital services” or “share emission for infrastructure modernization”, this will mean implementation of a privatization scenario, the legal basis for which is being laid precisely now.

The absence of public explanation why transformation is occurring precisely now, one day after personnel changes at the highest level, indicates the presence of non-public motives. When authorities carry out large-scale changes in the status of strategic assets without justification and during war, using a window of opportunity after personnel reshuffles — these are classic signs of preparation for non-transparent operations with state property.

Oleh Cheslavskyi — independent historian and analyst specializing in deconstructing imperial narratives.

Originally published at Femida.ua