Formalities

Date of reorganisation

Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?

No, a corporate reorganisation may not be backdated or deemed to have already taken place. Under the Ukrainian law, corporate reorganisation is completed from the moment of the state registration of termination of the reorganised company (if it terminates) and state registration of its legal successors in the state corporate register (see question 6).

Documentation

What documentation is required in a corporate reorganisation?

The documents required depend on the type of corporate reorganisation contemplated. The Civil Code of Ukraine lists the minimum documentation required for corporate reorganisation. A legal entity when implementing any type of corporate reorganisation will require at least the approval of the general shareholders (participants) meeting, amalgamation (absorption) agreement or division plan, a transfer protocol or a distribution balance sheet. For registration in the state corporate register the company-legal successor also submits minutes of the founders’ meeting, the charter and respective application for the state registration. Above we have listed only basic documentation without supplementary documents, which vary from case to case.

Representations, warranties and indemnities

Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?

Ukrainian law generally does not recognise the concepts of representations, warranties and indemnities. Sometimes parties, by analogy with common law, include representations, warranties and indemnities in the buy-sale agreement governed by Ukrainian law. However, enforceability of such provisions in courts is questionable.

If parties are willing to have enforceable warranties and representations in a share purchase agreement they use foreign law, typically English one. However, under Ukrainian law, it is possible only if a foreign element is present in the deal, for example, at least one party is a foreign entity.

Nevertheless, warranties and representations are rarely used for corporate reorganisation between the members of the same group, as risks also remain within the same group as opposed to transactions with the third parties.

Assets versus going concern

Does it make any difference whether assets or a business as a going concern are transferred?

From a tax perspective, a transfer of a business as a going concern through a corporate reorganisation is a tax neutral operation. If the assets are transferred under a sale and purchase agreement, respective tax liabilities occur (see question 13).

From the mere practical perspective, business as a going concern is permanently changed. So, naturally, it is more challenging to list all rights and liabilities of the respective company for its further corporate reorganisation compared to the company which only holds assets without operating activity.

Types of entity

Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.

In a corporate reorganisation of a legal entity (without state or municipal participation interest in its registered capital), the assets and liabilities may be transferred at their book value. If state (municipal) companies pass through corporate reorganisation, the assets valuation and the determination of the assets’ market value by the certified appraisers is mandatory.

A corporate reorganisation of the public legal entities usually requires high-level approval up to the governmental level.

As to non-profit entities, the Civil Code of Ukraine (article 104) prohibits reorganisation of a legal entity, which has no right to distribute profit among its participants if, among the legal successors of such legal entity, another legal entity is granted with such right. So, a non-profit entity cannot be reorganised into an LLC, JSC or other business company. Opposite reorganisation - from a business company to a non-profit entity - is allowed upon the unanimous consent of all shareholders (participants) of the business company.

Post-reorganisation steps

Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?

Post-reorganisation steps (in the case of statutory reorganisation) usually include the following:

  • re-registration of ownership title to real estate in the State Register of Property Rights to Real Estate in the name of the legal successors or the surviving company;
  • execution of assignments to the land lease agreements with further re-registration in the state register and the land cadastre;
  • execution of novations with customers, suppliers and other counterparties;
  • submission of applications for new licences and permits to be re-issued;
  • respective filings with the competent patent or trademark office;
  • administrative matters, including execution of a new e-reporting agreement for submission statements of the company; and
  • updating relevant company books and records.

Under the law, the target JSC (not other companies) must disclose details of the following events relevant to corporate reorganisations:

  • change in officers of the JSC (including as a result of a share deal);
  • change of owners of voting shares whose shareholding reaches or exceeds the thresholds of 5, 10, 15, 20, 25, 30, 50, 75 or 95 per cent of voting shares (including as a result of a share deal);
  • changes to the JSC’s charter, related to the changes of the shareholders’ rights (including as a result of the shares transfer);
  • a decision of the JSC to reduce the share capital; and
  • direct or indirect acquisition by an entity of 50 per cent and more, 95 per cent and more of shares in the JSC and 75 per cent and over of shares in the public JSC, including purchase price and the name of the acquirer (including as a result of a share deal).