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Starting Business in Ukraine

When a foreign company or individual plans to establish business presence in Ukraine, a number of options are available.The forms of business most commonly used by foreign investors in Ukraine are the joint stock company or share corporation, the limited liability company and representative office. Other options are available under Ukrainian law, such as joint ventures, subsidiaries, partnership, limited partnership, additional liability company, and non-corporate joint activity, but they are rarely used.

The main laws that govern the establishment and activity of legal entities in Ukraine are the Civil Code, the Commercial Code, the Law on Companies and the Law on Joint-Stock Companies.

Foundation and registration

In Ukraine, a company may be founded by Ukrainian and/or foreign legal entities, individual citizens as well as foreign citizens and individuals without citizenship. A company acquires the status of a legal entity after state registration.

Companies are established and act on the basis of their statutory documents, charter or foundation agreement. The foundation documents should contain information about the name of the company, the subject and purposes of its activity, the founders and participants, the amount and nature of statutory capital, the procedure for distributing profits and losses, the management structure and competence, the procedure for governing bodies to adopt decisions, the procedure for amending statutes, the procedure of dissolving the company, and other issues specifically defined for certain companies, based on their organizational form.

Joint-stock companies, limited companies and additional liability companies act on the basis of a charter and partnerships act on the basis of a foundation agreement. Although the conclusion of a foundation agreement is not obligatory for the companies with certain organizational forms, the founders may choose to conclude a foundation agreement in order to establish procedure for contributing to statutory capital, to set out the conditions for joint activity in the foundation of the company, and so on.

Dissolution/Liquidation

Companies may terminate their activity through reorganization (merger, takeover, split-up, transformation) or through dissolution. When a company is dissolved, its property, rights and obligations are transferred to its legal successors. A company may be liquidated based on (i) a decision by the participants/shareholders or (ii) court decision. Upon dissolution, the creditors’ demands, if any, are satisfied in the order established by Ukrainian  property left after all creditors’ demands have been settled is distributed among its participants in the order provided by the foundation documents.

Joint-stock company (or Aktsionerne tovarystvo in Ukrainian (AT)

A joint-stock company is a company with statutory capital divided into a certain number of shares of definite equal nominal value. Shareholders are liable for the company’s commitments only within the limits of their shares, that is, shareholders cannot be required to make any further contributions beyond their contributions to the statutory capital and cannot be liable for the company’s commitments.

The statutory capital of a joint-stock company cannot be less than the equivalent of 1,250 minimum salaries, based on the rate effective at the moment the company is establishment. Effective April 4, 2011 the minimum wage was equal to UAH 960 per month.

All shares are nominal and exist only in a book-entry form.

The Law on Aktsionerni Tovarystva (joint stock companies) provides for two types of AT companies:

• Public joint-stock company or Publichne aktsionerne tovarystvo (PAT).

• Private joint-stock company or Pryvatne aktsionerne tovarystvo (PrAT).

Limited liability company (or Tovarystvo z obmezhenoiu vidpovidal’nistiu in Ukrainian (TOV)

A limited liability company is a company with its statutory capital divided into participatory shares, as determined by the foundation documents. Participants are liable only to the extent of their contributions. For example, participants bear any risks related to the company’s activity only in proportion to their contributions. A participant who systematically breaches obligations before the company may be excluded from the company if other participants holding more than 50% of the total amount of the company vote in favor of such a decision.

The statutory capital of a limited liability company must be not less than the equivalent of one minimum salary based on the rate effective at the time of company’s establishment. Effective April 4, 2011 the minimum wage was equal to UAH 960 per month.

A limited liability company is governed by three bodies:

• The general meeting of participants, which is the company's highest body;

• The Board of Directors and/or General Director, which are the executive body governing the company's day-to-day operations;

• The audit committee, which controls the financial and business activity of the executive body.