Ukraine: Ukraine Chapter For The Merger Control Review

Last Updated: 24 September 2015
Article by Dmitry Taranyk and Maksym Nazarenko

I INTRODUCTION

The Antimonopoly Committee of Ukraine (AMC) is the authority exclusively responsible for dealing with mergers.

i Notion of concentration

Merger approvals are required whenever a concentration is consummated, provided that the parties thereto meet or exceed the relevant financial thresholds. In particular, for the purposes of the Ukrainian merger control rules, a concentration is deemed to occur, inter alia, in cases of:

a mergers between undertakings (i.e., when two or more independent undertakings amalgamate into a new undertaking and cease to exist as separate legal entities);

b absorption of one undertaking by another (with one retaining its legal identity and the other ceasing to exist as a legal entity);

c acquisition of control directly or through other persons or entities by one or more undertakings over one or more undertakings, including by the way of:

  • direct or indirect acquisition (gaining control over or acquiring a lease) of assets that amount to a going concern or a structural subdivision of an undertaking;
  • appointment to the post of a chair or deputy chair in the supervisory council, the executive (management) board or any other supervising or executive body of an individual who already occupies one or more such positions in another undertaking; or
  • composition of the supervisory council, the executive (management) board, or any other supervising or executive body of an undertaking, in such a manner so as to enable the same individuals to represent more than 50 per cent of the members of such bodies in two or more undertakings;

d establishment by two or more undertakings of a joint venture, which in turn is intended to perform on a continuing basis all the functions of an autonomous economic entity; and

e direct or indirect acquisition of assets or participation interests (including shares) in an undertaking that allows the acquirer to reach or exceed 25 or 50 per cent of votes in the target undertaking's highest management body.

ii Definition of control

Ukrainian competition laws contain a very broad definition of control that is largely based on the EU example, but in practice is even wider in scope. Control is broadly defined in the Law of Ukraine 'On Protection of Economic Competition' as follows:

[...] decisive influence by one or more related legal entities and/or individuals over the business activity of an undertaking or its part, which is exercised directly or through other persons, in particular due to: the right of ownership or use of all assets or a major portion of them; a right that ensures a decisive influence over the formation, voting results or decisions of the managing bodies of the company; conclusion of agreements or contracts which allow the determination of the conditions of business activity, the giving of mandatory instructions or the performing of the functions of a managing body of the company; or the occupation of the position of chairman or deputy chairman in the supervisory council, the executive (management) board, or any other supervising or executive body of an undertaking by a person who already occupies one or more of the listed positions in another business entity. Related undertakings are those legal entities and/ or individuals that perform business activity jointly or in coordination, including if they jointly or in coordination exercise influence over the business activity of an undertaking. In particular, spouses, parents, children, brothers and sisters are considered to be related.

The local competition regulation provides a number of criteria based on which the undertaking is deemed to have or be subject to a 'decisive influence', including the following:

a undertakings in which the acquirer or the target undertaking directly or indirectly:

  • owns more than 50 per cent of the authorised capital;
  • holds more than 50 per cent of the votes of the managing bodies;
  • has the right to appoint the director, vice-director, chief accountant or more than 50 per cent of the members of the supervisory council, the managing body (e.g., the board of directors) or the audit committee; or
  • has the right to receive not less than 50 per cent of the net profits;

b undertakings that have the rights and powers mentioned in (a) above in relation to the acquirer or the target undertaking;

c undertakings that:

  • are managed by the acquirer or the target undertaking pursuant to a trust agreement, joint cooperation agreement, lease agreement or other agreement; or
  • have the same persons holding the positions of director, vice-director or chief accountant, or not less than 50 per cent of the members of the supervisory council, the managing body or the audit committee; and

d undertakings that provide financial assistance that is used to achieve the concentration, if this may result in a decisive influence of one undertaking over another.

In addition, related entities of the party concerned may include any affiliates that might have an ability to influence the respective party, or to be so influenced, as follows:

a undertakings in which the acquirer or the target undertaking and their related entities, as defined above, directly or indirectly:

  • own more than 25 per cent of the authorised capital;
  • hold more than 25 per cent of the votes of the managing bodies;
  • have the right to appoint the director, vice-director, chief accountant or more than 25 per cent of the members of the supervisory council, the board (or other management body) or the audit committee; or
  • have the right to receive not less than 25 per cent of the net profits; and

b undertakings that have the rights and powers mentioned in (a) above with respect to either the target undertaking or the acquirer or any of their respective related entities.

It therefore follows that, under Ukrainian merger control rules and local practice, the ability to exercise de jure or de facto control (including negative control) is the prerequisite for establishing a control relation between undertakings. Namely, if an undertaking can, on the basis of rights, contracts (shareholders' agreement, etc.), historic pattern of attendance at annual general meetings or other means, obtain any form of control (including the possibility to exercise the right of veto over strategic commercial decisions such as the budget, business plan, appointment or removal of senior management, major investments) over undertakings, it necessarily follows that a control relation between such undertakings is established.

It should be noted that the list above is not exhaustive, leaving the AMC with full discretion to find other cases where a control relationship may arise.

iii Financial thresholds

Wherever a transaction gives rise to a concentration as described above, the Ukrainian filing requirement would be triggered if the parties meet all of the following financial thresholds for the last financial year preceding the transaction:

a the aggregate worldwide value of assets or sales for all parties to the concentration, including related entities, exceeds €12 million;

b the aggregate worldwide value of assets or sales for each of at least two of the parties to the concentration, including related entities, exceeds €1 million; and

c the value of assets or sales in Ukraine of at least one party to the concentration, including related entities, exceeds €1 million.

iv Market shares threshold

In addition to the above financial thresholds, the Ukrainian merger control rules also establish a market share threshold that, if met, also triggers the Ukrainian merger filing requirement. Thus, irrespective of whether the financial thresholds are exceeded by the parties to the concentration, a requirement to seek a merger approval in Ukraine would arise if the market share of any party or the combined market share of all parties to the concentration on any product market in Ukraine exceeds 35 per cent, and the concentration takes place on the same or a neighbouring product market.

v Block exemptions

It should also be mentioned that the Ukrainian competition laws provide for certain specific exceptions from the notion of a concentration. They are intended to provide clarity and legal certainty, outlining which sorts of transactions do not amount to concentrations and therefore do not trigger the Ukrainian filing requirement, which include, in particular, the following:

a establishment of a joint venture undertaking by two or more undertakings that, in turn, results in the coordination of activities among the founders or between the founders and the new undertaking (such actions are instead treated as concerted practices and may also require a separate approval from the AMC);

b acquisition of shares or other equity interest in an undertaking by a person or entity whose main activities are financial or securities transactions, for the purpose of reselling such shares or other equity interest within one year, provided that the acquirer does not participate in the undertaking's managing bodies;

c actions otherwise constituting a concentration that occur between undertakings connected by control relations, provided that the latter were established in compliance with the Ukrainian merger control rules; and

d acquisition of control over an undertaking by an insolvency administrator or a state official.

The Ukrainian merger control rules also provide for a pre-notification procedure. Unlike in some jurisdictions, there is no requirement to make a pre-notification filing in Ukraine provided certain conditions are met. Instead, the procedure is generally used by the parties to ascertain whether a particular transaction requires a merger filing in Ukraine. In other words, the parties can seek a comfort letter (in Ukraine, 'preliminary conclusions') from the AMC to confirm whether a merger filing is required under particular circumstances.

No statutes, regulations or guidelines relating to merger control issues were issued during 2014. However, important legal developments are still in the pipeline that may have far-reaching consequences regarding when the Ukrainian merger filing requirement is triggered. These are considered in Section V, infra.

To see the rest of the review, please click here

Footnotes

1 Dmitry Taranyk is a counsel and Maksym Nazarenko is a senior associate at Sayenko Kharenko.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions