On 2 June 2016, the Ukrainian Parliament re-adopted the Law on Corporate Governance of State-Owned Enterprises and Municipally-Owned Companies (the “Law”).
It is the second attempt to implement this legislative initiative. The previous version of the Law was voted by the Parliament on 18 February 2016, but vetoed by the President. Now, following the President’s revisions, most of the fundamental provisions aimed at improving the corporate governance of owned enterprises (“SOEs”) survived. Meanwhile, the following exemptions to the Law’s regulatory structure will apply: (i) the Law will not apply to SOEs of military-industrial complex; and (ii) SOEs will not be obliged to disclose documents relevant to significant transactions to which a SOE is a party.
The most important provisions aimed at improving the corporate governance of SOEs, include:
- establishing supervisory boards at the level of enterprises and entities where the state controls a majority (50%+1) of the shares in a company;
- creating the basis for independent supervisory boards by including independent external board members. In particular, under the Law, independent supervisory board members should comprise more than a half of the board's membership; and
- requiring transparency and accountability of SOEs and municipally-owned companies, by (i) obliging SOEs to disclose their financial information and certain operating data on freely accessible web-sites, and (ii) controlling related-party and/or significant transactions.
This reform aims at removing corrupt public officials from management positions in SOEs, and will create professionally managed companies less subject to political influence. It will also make SOEs more attractive to foreign bidders within the anticipated privatisation process.
The Kyiv office of CMS Cameron McKenna was instrumental in assisting Ukraine’s Ministry of Economic Development and Trade with this important initiative and continues to advise on the reform of corporate governance of SOEs.
The Law still has to be signed by the President of Ukraine and will become effective upon its official promulgation.