1. What is the general situation for foreign companies in your jurisdiction? (For example, common presence, difficulty to setup, restrictive system, open and welcoming jurisdiction?)
Foreign companies in Ukraine may be viewed as either foreign investors making investments into the country, or as Ukrainian subsidiaries of foreign entities. Ukraine is generally an open and welcoming jurisdiction for setting up business; foreign companies are represented in different industries of the Ukrainian economy. Foreign investors are generally treated equally with Ukrainian investors, including in terms of rights and obligations.
Overall, there are very few restrictions for foreign investors to do business in Ukraine.
2. What are the key laws and regulations that govern company law in your jurisdiction?
The key legislative acts governing company law in Ukraine are as follows:
- the Law of Ukraine on Commercial Companies 1991;
- the Law of Ukraine on Joint Stock Companies 2008;
- the Law of Ukraine on Limited Liability Companies and Additional Liability Companies 2018, which will enter into force on 17 June 2018;
- the Civil Code of Ukraine 2003;
- the Commercial Code of Ukraine 2003;
- the Law of Ukraine on State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations 2015; and
- Law of Ukraine on Holding Companies in Ukraine 2006.
3. What are the most common types of companies in your jurisdiction?
The law provides for the following types of companies in Ukraine:
- limited liability company;
- joint stock company;
- private enterprise;
- additional liability company;
- general partnership; and
- limited partnership.
The most common types of companies used for business setting up in Ukraine are the limited liability company (Ukr. – Tovarystvo z obmezhenoyu vidpovidalnistyu) ("LLC") and the joint stock company (Ukr. – Aktsionerne tovarystvo) ("JSC"), as they allow the benefit of limited liability for their participants (shareholders).
An LLC is the most common and easily administered form of legal entity used in Ukraine because its establishment and operation is significantly less burdensome and time-consuming as compared to a JSC.
At the same time, a JSC may be preferable if the company plans to attract financing by way of proposing newly issued shares at a premium without the need for all the shareholders to contribute into the capital proportionally to the amount of their stake. This is because, unlike in an LLC (the capital increases in which are usually performed at a nominal value), shares of a JSC are generally placed at the market price.
Private enterprises are commonly used for businesses with insignificant amounts of transactions, and they do not have a proper legislative regulation, which makes them less attractive for foreign investors.
The remaining types of companies indicated above are usually set up only when this is explicitly required by law due to their general impracticality and additional liability to their participants.
A foreign company may also set up a representative office in Ukraine, which is an equivalent to a branch; however, a representative office does not have a separate legal personality and hence, the parent company will not have the benefit of limited liability for debts of the Ukrainian subsidiary.
4. How long does it take to set up a company in your jurisdiction? (For example, it could be as fast as X amount of time, average setup time and then as slow as Y amount of time based on your experience – are there any mechanisms to fast track setup?)
The registration of an LLC is quite easy and quick and can be completed within 1 (one) business day as of the moment of submission of all required documents with the State Register of Legal Entities, Private Entrepreneurs and Public Formations (the "State Register") or in certain exceptional cases take a couple of days longer.
General average time for an LLC becoming operating in Ukraine is up to 2–3 weeks, including:
- preparation of documents for the company registration – 1–2 business days;
- submission of the documents to the State Registrar – 1–2 business days;
- registration of LLC as a value added tax (VAT) payer (if necessary) – 3–5 business days;
- . opening of bank accounts – 10–14 business days;
- payment of equity – 1–2 business days.
The registration of a JSC is a longer process as compared to an LLC. Given the necessity of share issuance and registration of the share issue with the National Securities and Stock Market Commission ("NSSMC"), the whole process of JSC registration may take around 6 (six) months.
5. What are the main registration requirements for companies in your jurisdiction? What are the fees?
State registration of an LLC is free of charge. The recent updates in corporate legislation removed anti-chaining rules (where an LLC could not have a company as a sole participant, if such company is owned by a sole participant) and a restriction regarding the maximum number of participants in LLCs.
Notably, there is no requirement as to the minimum equity capital of an LLC. Main registration requirements for a JSC are the following:
- a company cannot be a sole shareholder of the JSC, if such a company is owned by a sole shareholder;
- JSC cannot be entirely owned by shareholders – legal entities, the sole shareholder of which is one and the same person; and
- the minimum amount of JSC's share capital shall be equal to 1,250 minimum wages envisaged by law (i.e., approx. EUR 125,000).
State registration of a JSC is free of charge. At the same time, fee for the registration of the share issue with the NSSMC constitutes 0.1% of the nominal value of all issued shares of the company but cannot exceed 50 minimum statutory costs of living which are currently equal to approx. EUR 2,788 in UAH equivalent.
For all companies undergoing the registration procedure, it is mandatory to disclose their ultimate beneficial owners ("UBO"), i.e., each individual who owns 25% or more of the company's equity capital or votes, or has a determining influence on the decision-making process.
All foreign documents submitted for the company registration in Ukraine shall be duly apostilled or legalised in the country of their issuance and accompanied with the Ukrainian translation certified by a notary. Once all documents are duly prepared, an authorised representative of the applicant may submit them to the state registrar. There is no need to make any filings or registrations with tax authorities following the state registration of a company, as tax authorities will be automatically notified thereof by the state registrar. At the same time, in case the company wishes to be registered as a VAT payer or in case of reaching certain thresholds in its activity envisaged by the legislation (which require the registration as a VAT payer), the company shall undergo relevant registration procedure with tax authorities.
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Originally published in LexisNexis® Company Law Guide 2018–2019
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.