Less than a month remains until June 17 when the Law “On Limited Liability and Additional Liability Companies” (the “Law”) will come into effect.
This is generally a positive development: the new Law will introduce many up-to-date provisions replacing the obsolete law on business companies of 1991.
The most essential opportunities opened up by the new Law are as follows:
1. The registered capital and shareholding structure will now be fixed not in the charter, but in the state register – there is no need to amend the charter each time when participants change the registered capital amount or transfer their shares; 2. Participants will now be able to enter into a confidential shareholders agreement where agree upon how they will exercise their shareholders’ rights. We outlined the opportunities of the shareholders agreement under the new Law in two papers in Ukrainian available by clicking here and here; 3. Limited liability / additional liability companies are expressly allowed to establish a supervisory board – to supervise the management and perform strategic functions; 4. The Law defines material transactions and interested party transactions. The charter may regulate the procedure for approving and executing such transactions depending on the needs of any particular company; 5. Groups of companies will now be able to optimize their corporate structure and simplify governance and make it more effective.
Alongside with the new opportunities, the Law also requires companies to align their charters to the new provisions of the Law within one year as of 17 June 2018. However, if any changes to the charter are made during this grace period, the entire document now needs to conform with the new provisions of the Law, and there are many. At some moment participants may struggle with time to consider all legislative novelties and properly update the charter.
Importantly, unlike the current imperative legislation, the new Law provides that the company participants decide mostly on their own how to regulate one or another issue in the charter.
In our practice, we have already elaborated solutions for good governance in limited liability and additional liability companies that may be used to draft charters in compliance with the new Law. We would be happy to explain the novelties of the Law in more detail and help with drafting a new wording of your company’s charter considering the new legislation.