On 18 February 2016, the Ukrainian Parliament adopted the Law on Corporate Governance of State-Owned Enterprises and Municipally-Owned Companies (the “Law”).
Since independence, Ukraine’s state-owned enterprises (“SOEs”) have been mismanaged and often used for corrupt purposes, due largely to opaque and clientelist governance.
The Law, inter alia, introduces a range of provisions aimed at improving the corporate governance of SOEs, including:
- 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.
The Law also aims to make SOEs more attractive to foreign bidders to maximise benefits from the anticipated privatisation process in Ukraine.
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 will become effective after it is signed by the President of Ukraine upon its official promulgation.