On 1 May 2016, the long-anticipated Law of Ukraine No 289-VIII, dated 7 April 2015, (the "Law") came into force. Among the changes introduced by the Law is the concept of a derivative claim. This mechanism provides shareholders of Ukrainian companies with the right to protect the interests of the company against wrongdoings committed by its officials, by initiating a legal proceeding against the latter.
This change is an extremely important and positive signal to local and international investors on the legislative improvements in the corporate sector in Ukraine and is further supported by the Ukrainian high court (Information note of the High Commercial Court of Ukraine No 01-06/474/16 dated 25 April 2016), which issued non-binding guidelines in respect of certain procedural issues relating to the application of the Law prior to its entry into force (the “Guidelines”).
Shareholders of both limited liability companies and joint-stock companies (the most widely used types of companies in Ukraine) may now employ this mechanism, which will be realised as follows:
- Shareholders holding more than 10% of the share capital of the company may initiate with the local commercial court a proceeding in the interests of the company against its officials to compensate damages incurred as a result of their wrongdoings;
- Such claims may be initiated against the following officials: director; members of the executive board, supervisory board, audit commission; and other officials determined by the company’s charter;
- Such claims may be initiated, if an official: (i) acted in excess of or abused his/her powers, (ii) acted in violation of the procedure for approving certain transactions, (iii) provided false information, which was necessary for approving the transaction by the shareholders' meeting or the supervisory board, (iv) failed to take certain actions when such actions were required (this list is not exhaustive); and
- All procedural documents related to the proceeding initiated under the derivative claim are subject to a special procedure requiring their publication in order to ensure full and immediate disclosure of the relevant information.
We believe that the Law is a positive step towards improving the corporate legislative and investment climate in Ukraine, as it implements effective methods to protect the rights of minority shareholders. The next phase — uniform application of the Law — has already been commenced by the Guidelines, which form an important part of the uniform and consistent application of the Law by Ukrainian courts.