The new Law of Ukraine "On Limited Liability and Additional Liability Companies", No. 2275-VIII, became effective on 17 June 2018, replacing the outdated provisions of the 1991 Law of Ukraine "On Business Companies" that regulated the operation of limited liability and additional liability companies (LLCs and ALCs).
The key novelties of the Law include the introduction of a corporate (shareholders) agreement, absence of participants' limit, amended requirements for drawing up constitutional documents, establishment of clear decision-making mechanisms to be used by participants and of the procedure for setting up a supervisory board. Furthermore, the Law lifts the mandatory quorum and audit commission requirements; creates the potential for management and supervisory board liablility; establishes the principles of good faith in the interests of LLCs, removes the ban on debt to equity swap, improves the rules for share transfers and protection of title to shares, addresses pre-emptive rights, pledge, exit, expulsion, succession etc.
The Law also gives LLCs and ALCs one year to bring their charters in line with the new Law and to have the relevant amendments subject to the state registration, without paying a registration fee. Provisions of the current charters shall prevail until 17 June 2019 (or until the date of any amendments to a charter by a company's decision).
Anna Babych, Aequo’s Partner, Head of Corporate/M&A, is a key driver of the LLC Law reform, who proactively elaborated the Draft Law "On Limited Liability and Additional Liability Companies" as one of its authors.
Anna said: “The adoption of the Law on limited liability and additional liability companies has become one of the most long-awaited events in the history of reforming corporate legislation in Ukraine. The law will change the rules of the game for more than 500,000 limited liability companies in Ukraine and ensure the liberalisation of corporate governance, the maximum flexibility in doing business by the key business players of the country, as well as protection of businesses from hostile takeovers. Besides, the law will contribute to the country's GDP growth by creating favourable conditions for doing business and attracting investments in the Ukrainian economy in the long run. I would also like to acknowledge the high professionalism of the expert group involved in drafting and promoting the law, and to thank everyone for the great contribution to the successful realisation of this complex project."