On 11 April 2012 the Cabinet of Ministers of Ukraine (CMU) adopted the Procedure for the Execution of Joint Activity Agreements ("JAAs"), Commission or Agency Agreements and Property Management Contracts by Companies, Enterprises, Organisations and Business Entities in Which the State Holds More than a 50% Stake (hereinafter – the "Procedure"). This new Procedure therefore applies to any companies, enterprises, organisations and business entities in which the State holds more than a 50% stake (hereinafter – the "State-Controlled Companies").
In general terms the new mechanism envisages that any JAAs, commission or agency agreements and any property management contracts (hereinafter – the "Contracts") may only be executed between State-Controlled Companies and private entities (investors) subject to prior approval of the competent public bodies.
In particular, the Procedure requires the following steps to be followed:
- A State-Controlled Company intending to execute such a Contract must file an application to the competent public body (e.g. a central executive body managing the relevant State-Controlled Company), supported by the following documents (hereinafter – the "Set of Documents"):
(a) the Draft Contract, approved by the State-Controlled Company and its counterparty;
(b) notarised copies of the charter of the State-Controlled Company and its counterparty;
(c) information on the State-Controlled Company's production capacity, its personnel, its financial data (including data on profitability and accounts payable and receivable for the previous 3 years), evidence of legal title to any buildings and land plots, details of any encumbrances imposed on the relevant movable property (including pledges, tax liens and leasing contracts);
(d) a business plan (indicating stages and timeframes of the suggested deed, sources of finance and the expected financial results);
(e) information on the State-Controlled Company's counterparty (e.g. its name, registration documents and documents evidencing its financial and professional capabilities);
(f) an independent expert valuation of any property necessary for the implementation of the Contract (based on the market value of such property);
(g) a statement explaining why the parties wish to enter into the proposed transaction and setting out the benefits that are envisaged as a result of it (including financial calculations).
- The competent state body will check if the suggested transaction is compliant with all the applicable legislation and if it is in line with the relevant state development programs.
- Subject to approval by the Ministry of Economic Development and Trade, the Ministry of Finance, the State Property Fund and the Ministry of Justice of Ukraine, the competent public body is to draft the relevant CMU resolution within a month following submission of the Set of Documents.
- The competent public body then has to submit the above-mentioned draft resolution (along with the Set of Documents) for review and approval by the CMU. No timeframe for such submission, review and approval are set by the Procedure.
Law: Resolution No. 296 of the Cabinet of Ministers of Ukraine "Procedure for the Execution of Joint Activity Agreements, Commission and Agency Agreements and Property Management Contracts by Companies, Enterprises, Organisations and Business Entities in Which the State Holds More than a 50% Stake" dated 11 April 2012.
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The original publication date for this article was 14/05/2012.