Oleksandr Pysarenko. Attorney at law, MBA degree.

Establishment of a company in Ukraine and management of its share.

Generally, foreign investors provide direct investments in Ukraine by establishment and taking part as a co-party in limited liability entities. Investors’ financial inflow is presented in a form of contribution to chartered capital of such entities, leading to the ownership of shares in charted capital based on investors’ inflow amounts. Starting from the date of the state registration of a limited liability company in Ukraine, the investors acquire status of a co-partyand therefore are entitled to the rights of shareholders, which are stipulated by current legislation and the relevant business entity charter.

Shareholder of a limited liability company in Ukraine has a right to dispose of it’s share of property in chartered capital in case of decision to withdraw from LLC in Ukraine.
Efficient options for disposal of the co-party share in chartered capital are as follows:
1. Share sale,
2. Withdraw from the entity in compliance with the order stipulated by the current legislation and the relevant business entity charter.

In case of cessation of business activities in Ukraine through sale of the share in chartered capital the shareholder shall offer its share acquisition, first of all, to other co-parties of the LLC, as the Civil Code and the Law of Ukraine “On commercial companies” stipulate the priority right for the share acquisition by other shareholders of LLC. Investor-co-party shall offer other shareholders to purchase its share under the same price and contractual terms, which are offered to third parties. However, if other co-parties of the LLC disclaim of priority right for the share acquisition, shareholder has a right to sell its share to the third party on the same terms and conditions. The settlement for the share acquisition is conducted between foreign shareholder and purchaser. Breach of the established regulations might to be a cause for declaring the Share Sale-Purchase Contract as illegal.

In case of cessation of business activities in Ukraine through withdrawing from a limited liability company the foreign shareholder shall make an appropriate statement. Its share is reapportioned among other co-parties of the LLC. In this case the limited liability company shall pay out the withdrawing co-party the cost of it’s part of the LLC property and profit, pro rata to the withdrawing co-party’s share percentage in chartered capital. The settlement is conducted between former shareholder and the limited liability company itself.

Settlement with shareholder in case of its withdrawal from a company in Ukraine.

Some aspects in respect of settlements with shareholder in case of withdrawal from limited liability company in Ukraine (herein after – LLC) are described in this article based on the lawsuits processed.

If the LLC shareholder intends to cease business activity and there is no parties interested in acquisition of its share on adequate price, the legislation provides the shareholder with a possibility to withdraw from LLC.

Two options for the definition of the date for the withdrawing shareholder from LLC have framed.
Per Article 148 of the Civil Code of Ukraine shareholder can withdraw from LLC, having notified the other parties 3 months prior his withdrawal, if another term is not stipulated by relevant LLC charter. The Supreme Commercial Court of Ukraine interprets that shareholder is considered to be withdrawn from LLC starting from the moment of decision of the shareholders meeting referring its withdrawal based on notification on behalf of the shareholder about withdrawal. While in case of absence of such decision – starting from the date of termination of a 3-months period or another term, envisaged by the charter, for the withdrawal notification submission (p.3.5. RECOMMENDATIONS OF PRESIDIUM OF THE SUPREME COMMERCIAL COURT OF UKRAINE, dated 28.12.2007, Nr. 04-5/14 “On practice of application of legislation in court proceedings associated with corporate relationship”).
The other option for the date definition is the date of withdraw, approved by the shareholders meeting, which does not coincide with the above mentioned dates, however, remaining within a 3-months or another period, stipulated by the LLC charter, for submission of notification about withdrawal. Shareholders’ meeting is a supreme body of LLC, entitled to make decisions on all issues of its activities.

Oleksandr Pysarenko, attorney at law, MBA degree,
Pysarenko Law Office. Kiev, Ukraine.

Tel.: +38 (044) 270 60 46
E-mail: info@fides.com.ua