UKRAINE'S PRESIDENT SIGNS LAW ON JOINT-STOCK COMPANIES
U.S.-Ukraine Business Council (USUBC), Wash, D.C.,
Wednesday, October 22, 2008
1. UKRAINE'S PRESIDENT REPORTED TO HAVE SIGNED LAW ON JOINT-STOCK COMPANIES
Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 22, 2008
2. UKRAINE: MAJOR FEATURES OF THE NEW LAW ON JOINT STOCK COMPANIES
ANALYSIS: By Armen Khachaturya, Partner, Asters and Asters law firm legal team, Kyiv, Ukraine
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, September 24, 2008
3. UKRAINE PARLIAMENT ADOPTS LAW ON JOINT STOCK COMPANIES
WITH REGULATIONS TO PROTECT FIRMS FROM ILLEGAL SEIZURE
Interfax Ukraine, Kyiv, Ukraine, Thursday, September 18, 2008
4. UKRAINE PARLIAMENT ACCEPTS JOINT STOCK COMPANY LAW
Acceptance will send positive signal to foreign investors, improve Ukraine’s sovereign ratings and will reduce domestic stock market risks
Sokrat Daily, Sokrat Financial Company, Kyiv, Ukraine, Thursday, September 18, 2008
5. NEW JOINT STOCK COMPANY LAW ADOPTED BY VERKHOVNA RADA OF UKRAINE
Hard to overestimate the relevance and importance of this piece of legislation
Analysis & Commentary: Arzinger & Partners Ukraine law firm, Kyiv, Ukraine, Thu, Sep 18, 2008
6. AMERICAN CHAMBER OF COMMERCE IN UKRAINE WELCOMES ADOPTION OF JOINT STOCK COMPANY LAW
Interfax Ukraine, Kyiv, Ukraine, Thursday, September 18, 2008
7. JOINT STOCK COMPANY LAW PASSED BY LAWMAKERS HAS 'HIDDEN OBSTACLES,' SAYS LAWYER
Interfax Ukraine Economic, Kyiv, Ukraine, Monday, September 22, 2008
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1. UKRAINE'S PRESIDENT REPORTED TO HAVE SIGNED LAW ON JOINT-STOCK COMPANIES
Interfax Ukraine Economic, Kyiv, Ukraine, Wed, October 22, 2008
KYIV - Ukrainian President Viktor Yuschenko has signed the law on joint-stock companies, representatives of the government reported at a meeting of Ukrainian Premier Yulia Tymoshenko with leading financiers and economists of the country in Kyiv on Tuesday. "We received a good news: the president signed the law on JSC," one of the meeting participants told Interfax-Ukraine.
He said that representatives of the stock market also discussed the freeing of dividends, which receive individuals, from taxation and provision of tax
benefits for funds that are invested for more than one year, which most developed countries have, and Russian recently adopted them.
He said that Finance Minister Viktor Pynzenyk did not support tax benefits. The agency did not manage to receive the confirmation of information on the
signing of the law on JSC from the presidential secretariat or cabinet.
Experts said that the new law on JSC adopted by the parliament improves legal conditions for protection of rights of shareholders in Ukraine and
eliminates gaps in the national legislation concerning the creation of JSCs in Ukraine and their activities.
The law also foresees a certain procedure for voting at general meetings of shareholders, which excludes the participation of those who have tried to
illegally seize companies. All joint stock companies that have over 100 shareholders vote using voting papers signed by each shareholder individually. In addition, a special procedure for the alienation of shares is introduced.
General meetings of joint stock companies are held only where the company is located. The possibility of some shareholders illegally holding meetings in
other places is excluded.
The law introduces regulations on the protection of minority shareholders rights, and the procedure for the management of corporation rights has been
simplified.
The law comes into effect in six months, apart from the clause on the transfer of all securities into a non-documentary form, which should be done
in two years. The transitive period for existing JSCs was cut from five to two years
USUBC FOOTNOTE: President signed the joint stock company law. Information from the Economic Pravda Newspaper.
LINK: http://www.epravda.com.ua/news/48feccd909e8b/.
2. UKRAINE: MAJOR FEATURES OF THE NEW LAW ON JOINT STOCK COMPANIES
ANALYSIS: By Armen Khachaturya, Partner, Asters and Asters law firm legal team, Kyiv, Ukraine
U.S.-Ukraine Business Council (USUBC), Washington, D.C., Wednesday, September 24, 2008
KYIV - On 18 September 2008 Ukrainian Parliament, the Verkhovna Rada, adopted by 358 affirmative votes the long awaited Law on Joint Stock Companies (the “New Law”).
As this voting coincided with political crisis in Ukraine it is to be seen if and when the President of Ukraine and the Chairman of the Verkhovna Rada complete all post-voting procedures required for the Law to come into force.
The New Law shall become effective six months following its official publication, which is expected to occur within 15 days of its execution by the President of Ukraine who must formally receive it from the Verkhovna Rada’s Chairman for review.
FOLLOWING NEW FEATURES INTRODUCED INTO THE CURRENT REGULATION
The New Law introduces the following major novelties to the current regulation of joint stock companies, as provided in the Civil Code of Ukraine, the Commercial Code of Ukraine, and the Law of Ukraine on Business Associations (collectively, the “Current Law”):
(1) Two types of joint stock companies, an open joint stock company and a closed joint stock company, are renamed in the New Law into a public joint stock company and a private joint stock company. The number of shareholders in a private joint stock company may not exceed 100.
(2) The founders of a joint stock company will be required to pay the full value (not 50 percent, as provided by the Current Law) of initially issued shares before convocation of the founding meeting of a joint stock company.
(3) The founding meeting of a joint stock company will need to be held not later than three months (not two months, as provided by the Current Law) after the founders pay for the first share issue in full.
(4) There should be unanimous vote of all founders for adopting resolutions on establishment of a joint stock company (currently 3/4 of the founders' votes is required), on appraisal of in-kind contribution to the capital fund (currently simple majority of the founders' votes is required) and on approval of the joint stock company's charter (currently 3/4 of the founders' votes is required).
(5) There is a long list of mandatory provisions in the charter of a joint stock company, such as the company’s name, the amount of its capital and the reserve fund, the general information regarding the company’s issued shares, the composition and competence of the company's corporate governing bodies, etc.
(6) The shareholder's pre-emptive right to subscribe for newly issued shares is preserved only for shareholders of a private joint stock company (currently shareholders of both open and closed joint stock companies have pre-emptive rights to subscribe for newly issued shares).
(7) The New Law expressly stipulates that shareholders of a private joint stock company do not have pre-emptive right to buy shares transferred to a heir-at-law or a legal successor of a current shareholder.
(8) The joint stock company’s reserve fund shall not be less than 15 percent (currently 25 percent) of its capital fund.
(9) Joint stock company’s shares shall be issued only in non-documentary form (this provision will take effect upon expiration of a two-year period after official publication of the New Law).
(10) Joint stock company’s preferred shares may be now issued in one or several classes providing different rights to their owners.
(11) A joint stock company is entitled to issue shares or bonds with the purpose to convert its obligations into securities.
(12) A public joint stock company is obliged to list its shares and to be registered at least at one stock exchange. On the contrary, shares of a private joint stock company may not be listed.
(13) Dividends may be paid to shareholders only in the monetary form (currently dividends may be paid either in the monetary form or in-kind).
(14) The exclusive competence of a general meeting of shareholders will now include, inter alia, all questions regarding issue of shares and approval of the joint stock company's internal regulations.
(15) A written notice on convocation of the general meeting of shareholders shall be sent to the shareholders not later than 30 days (not 45 days, as currently required) before the planned date of the meeting.
(16) The general meeting of shareholders shall be held in the city/town where a joint stock company is incorporated (while under unfair interpretation of the Current Law, shareholders of a company have an option to hold a general meeting of shareholders at any place in Ukraine), unless a joint stock company is a wholly owned subsidiary of a foreign parent, including an international organization or a stateless person.
(17) Voting at the general meeting of shareholders of a joint stock company with more than 100 shareholders shall take place only by means of voting bulletins signed by a shareholder or shareholder’s proxy.
(18) If there are not more than 25 shareholders in a joint stock company, they may adopt resolutions by polling in lieu of the general meeting of shareholders (the Current Law does not provide for such option).
(19) A supervisory council in a joint stock company is mandatory, if there are 10 or more (50 or more under the Current Law) shareholders.
(20) The supervisory council’s exclusive competence is significantly increased to include, inter alia, placement and buy out of the company's securities other than shares, election and recall of the head and members of the executive and other corporate bodies of the company, and various issues regarding general meeting of shareholders.
(21) The New Law introduces a position of the corporate secretary of a joint stock company who is elected by the supervisory council and is in charge of the company’s relations with shareholders and third parties..
(22) The New Law introduces the notion of a “significant contract” of a joint stock company defined as its contract valued at more than 10 percent of the company’s assets, provided that conclusion of a significant contract with the value up to 25 percent of the company’s assets requires a preliminary approval of the supervisory council (if established), conclusion of a significant contract with the value from 25 to 50 percent of the company’s assets must be approved by a simple majority of the shareholders’ votes at a general meeting of shareholders, and a significant contract exceeding 50 percent of the company’s assets must be approved by 3/4 of the shareholders’ votes at a general meeting of shareholders.
(23) An acquirer of 10 or more percent of the capital fund of a joint stock company shall notify a joint stock company and the State Commission on Securities and Stock Market of Ukraine at least 30 days prior to the anticipated acquisition.
(24) An acquirer of 50 or more percent in the capital fund of a joint stock company shall (a) within 20 days from the acquisition date send to all other shareholders a public irrevocable offer to purchase their shares and (b) send an acquisition notification to the State Commission on Securities and Stock Market of Ukraine and the stock exchange where joint stock company’s shares are listed.
(25) A shareholder may demand that a joint stock company buy out this shareholder’s shares, in case of a general meeting of shareholders’ decision on (a) the reorganization of a joint stock company, (b) the change of the capital fund, and (c) entering into a significant contract, provided that this shareholder voted against the respective decision.
(26) Joint stock companies with up to 100 shareholders may elect a sole auditor, while in other cases election of an audit committee is mandatory.
(27) The New Law provides for certain simplified corporate procedures in joint stock companies with one shareholder, e.g., there is no necessity to execute the founders' agreement or to comply with the general procedure on convocation and holding of the general meeting of shareholders.
Under the Law, charters and internal regulations of existing joint stock companies shall be made compliant with the new requirements within two years of its effective date.
FOOTNOTE: Asters law firm is a member of the U.S.-Ukraine Business Council (USUBC), www.usubc.org. Asters was established in Kyiv, Ukraine in 1995 by two partners - Igor Shevchenko and Oleksiy Didkovskiy - and bore their names for 12 years, Shevchenko Didkovskiy & Partners. Shevchenko Didkovskiy & Partners announced on February 21, 2008 that it changed its name to Asters. Today, with 9 partners, more than 70 lawyers and 110 employees, Asters is one of the largest Ukrainian law firms (www.asterslaw.com).
3. PARLIAMENT ADOPTS LAW ON JOINT STOCK COMPANIES
WITH REGULATIONS TO PROTECT FIRMS FROM ILLEGAL SEIZURE
Interfax Ukraine, Kyiv, Ukraine, Thursday, September 18, 2008
KYIV - The Verkhovna Rada, Ukraine's parliament has adopted a law on joint stock companies. A total of 358 out of 437 MPs registered in the hall supported the law.
Introducing the draft law in parliament, the head of he subcommittee for economic policy, Yuriy Voropayev (Regions Party faction), said the law introduces regulations to protect companies from illegal seizure, in particular, joint stock companies.
The law also foresees a certain procedure for voting at general meetings of shareholders, which excludes the participation of those who have tried to illegally seize companies. All joint stock companies that have over 100 shareholders vote using voting papers signed by each shareholder individually. In addition, a special procedure for the alienation of shares is introduced.
Voropayev said that according to the law, general meetings of joint stock companies are held only where the company is located. The possibility of some shareholders illegally holding meetings in other places is excluded.
He also said that the law introduces regulations on the protection of minority shareholders rights, and the procedure for the management of corporation rights has been simplified. The law stipulates that general meetings of shareholders can have a quorum only if the owners of over 60% voting shares are registered at the meetings.
4. UKRAINE PARLIAMENT ACCEPTS JOINT STOCK COMPANY LAW
Sokrat Daily, Sokrat Financial Company, Kyiv, Ukraine, Thursday, September 18, 2008
KYIV - On Wednesday, September 17, 2008 The Parliament accepted a law regulating the activity of joint stock companies. The law defines the order for the creation, activity and liquidation of JSCs, as well as their legal status, rights and responsibilities of the shareholders.
Specifically, the law especially protects the rights of minority shareholders and is aimed at JSC protection against raiders and more efficient decision-making. The law requires any JSC with more than 100 shareholders to use signed ballots when voting at the GMs.
Additionally, shareholders’ meetings may be organized only at the JSC’s venues, thus reducing risks of raiders’ attacks. The meeting quorum is achieved whenever shareholders owning more than 50% of the voting rights participate. The law also describes a number of other JSC procedures regulating these companies.
Most parts of the law will come into force in six months, except of the part requiring stocks to exist in electronic form only, which will come into force in two years’ time instead of the initially proposed term of five years.
The law was supported by 358 parliamentarians out of 450. This number is more than enough to bail the President’s veto out if it occurs. The Parliament has tried to accept the JSC law several times already since 1996, but it has been vetoed by both President Leonid Kuchma and, later, by President Viktor Yuschenko.
The lack of such a law has often been named as the main reason for the Ukrainian stock market’s underdevelopment and for the problem with raiders. International financial organizations have stressed the necessity of such a law and argued that its absence impedes foreign investment in the Ukrainian market.
SOKRAT FINANCIAL COMPANY VIEW: We applaud the passing of the JSC law and anticipate that its acceptance will send a positive signal to foreign investors. We also anticipate that the law’s passing will improve Ukraine’s sovereign ratings and will reduce domestic stock market risks.
5. NEW JOINT STOCK COMPANY LAW ADOPTED BY VERKHOVNA RADA OF UKRAINE
Hard to overestimate the relevance and importance of this piece of legislation
ANALYSIS & COMMENTARY: Arzinger & Partners Ukraine, Kyiv, Ukraine, Thu, Sep 18, 2008
KYIV - We are very pleased to announce that on September 17th the Verkhovna Rada of Ukraine has adopted The Joint Stock Company Law.
The law will come into force six (6) months from the moment it is officially published. Existing joint stock companies must bring their statute documents in compliance with the law within two years from the date the law comes into force. The joint stock companies that will be created after the law comes into force must be established in compliance thereof.
NEW LAW IS A SIGNIFICANT STEP FORWARD
It is hard to overestimate the relevance and importance of this piece of legislation for the improvement of the investment climate and the general economic situation in Ukraine.
Adoption of this law is a significant step forward in bringing Ukraine to world standards in the sphere of corporate governance and ownership issues.
The law removes many gaps in current legislation in the sphere of establishment, operating, governing and cessation of joint stock company activity. In particular according to the new legislation:
[1] Clearer and more comprehensible requirements concerning formation and activity of the management bodies such as the Supervisory Board and the Revision Commission of joint stock companies are envisaged;
[2] This will allow for the implementation of more flexible operative management procedures: the most important issues which concern shareholders’ interests remain in the exceptional competence of General Meetings; many issues have been transferred to the competence of the Supervisory Board;
[3] The procedure for summoning and holding the General Shareholders’ Meeting is simplified;
[4] The procedure for managing the Company with one shareholder is implemented for the first time: the law envisages issuance of a written decision made by a shareholder.
Changes of legislation about joint stock companies will allow the implementation in Ukraine of modern principles of corporate governance. In particular, according to the new law, the importance of the Supervisory Board which will be elected by cumulative voting is significantly strengthened. The Supervisory Board will consist of individuals that will allow it to appoint unbiased non-executive directors.
The Law envisages the right of the Supervisory Board to organize committees and commissions and to elect a corporate secretary. One of the issues of the exceptional competence of the General Shareholders’ Meeting will be adopting The Code of corporate governance.
Adoption of the law significantly moves Ukraine forward towards the protection of interests of both minority shareholders and major investors restricting at the same time possibilities of usage of ‘raiding’ mechanisms. In particular the law implements:
[1] The transfer to non-documentary (electronic) circulation of shares that will take place within two years from the moment the Law is in force and is aimed at restricting the possibilities of manipulating the register of shareholders;
[2] The responsibilities of shareholders to inform about the intention to acquire shares and as a result of this acquisition they together with the affiliated persons will control more than 10% of shares of the company. And after the acquisition of the controlling stock, such a shareholder will be obliged to offer to the other shareholders the option to sell the shares they possess;
[3] The detailed mechanism of realization by the shareholders of the preemptive right for the acquisition of shares of the additional emission, which will provide protection of existing shareholders from ‘dilution’ of their shares;
[4] The definition of significant transactions, interested party transactions and the procedure for the approval of entering into such transaction;
[5] Additional in comparison to the current legislation guarantees for the shareholders for obtaining information concerning the company’s activity.
INCREASE INVESTMENT ATTRACTIVENESS
We are reckoned that the adoption of the law facilitates the increasing investment attractiveness of Ukraine due to the implementation of civilized mechanisms of protection of investors’ interests, increasing the positive image of Ukraine as a country with a market economy, growth of capitalization of joint stock companies and further adjustment of the legislation of Ukraine to that of the European community.
The Law company Arzinger & Partners provides the necessary advice and legal support to all interested parties in the process of adjusting the activity of already existing companies and newly established companies to the requirements of the new Joint Stock Companies Law which will allow them to take full advantage of the new possibilities of this important piece of legislation in corporate governance.
NOTE: Arzinger & Partners Ukraine with offices in Kyiv and Lviv is a full service law firm with a professional staff of 70 specializing in all major areas of business law and serving large international, as well as domestic companies, in Ukraine and beyond. [www.arzinger.ua]
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6. AMERICAN CHAMBER OF COMMERCE IN UKRAINE
WELCOMES ADOPTION OF JOINT STOCK COMPANY LAW
Interfax Ukraine, Kyiv, Ukraine, Thursday, September 18, 2008
KYIV - The Law on Joint Stock Companies, passed by the Verkhovna Rada, Ukraine's parliament, on Wednesday, "creates legal conditions to protect the rights of shareholders in Ukraine and removes many gaps in current legislation regarding the establishment and operations of joint stock companies," reads a statement by the American Chamber of Commerce in Ukraine.
"The adoption of the Law on Joint Stock Companies will help to improve the investment climate, increase Ukraine's competitiveness in the global arena, create conditions for development of the stock market in Ukraine and will help to further guarantee protection of property rights," Jorge Zukoski, the President of the American Chamber of Commerce in Ukraine, commented on the parliament's decision.
"The Chamber fully understands that the current version of the Law on Joint Stock Companies is not perfect but to this point it is the most comprehensive and well thought through piece of legislation in the sphere of corporate governance in Ukraine."
The statement points to the "anti-raidering" impact of the Law on Joint Stock Companies. According to the statement, the law removes commonly used mechanisms to mount an illegal raider attack by restricting: the manipulation of the list of shareholders, covert acquisition of controlling stock by a raider, as well as groundless appeals of the decisions of the general meeting making illegal takeovers more difficult to execute.
The law will come into force in six months from the moment it is officially published except for the second sentence of the second part of Article 20, which comes into force in two years from the moment it is published ("the stocks of companies exist only in electronic format").
Some last-minute changes were introduced to the law, in particular, the lawmakers changed the deadline for existing companies to comply with the new law moving the time frame from five 5 years to two 2 years from the day when the law comes into force.
The Chamber stresses that throughout 2007 and 2008 the specialists of the Chamber Legal Committee and the Chamber Joint Stock Company (JSC) Working Group in conjunction with the best experts in the sphere of corporate governance legislation worked diligently to advocate for the adoption of the Draft Law on Joint Stock Companies.
The Chamber also notes that the Law on Joint Stock Companies in general complies with the EU Directives provisions in the sphere of corporate governance and is in line with principles of corporate governance recommended by the Organization of the Economic Cooperation and Development as well as international corporate governance principles.
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7. JOINT STOCK COMPANY LAW PASSED BY LAWMAKERS HAS 'HIDDEN OBSTACLES,' SAYS LAWYER
Interfax Ukraine Economic, Kyiv, Ukraine, Monday, September 22, 2008
KYIV - The Law of Ukraine on Joint Stock Companies passed by lawmakers on September 17, 2008, has “hidden obstacles,” which need to be taken into consideration when the law is executed, says Lesia Kovtun, a lawyer of the Volkov, Koziakov and Partners law firm.
"For example the law does not directly envisage that the price of common stocks, in the case of an offer to buy common stocks by the holder of a controlling stake, should be assessed by an independent expert,” she told Interfax-Ukraine.
The fixed 50% threshold for a controlling stake, in her opinion, makes it almost impossible for small stockholders, in particular employees with small stakes, to sell minority stockholdings. Kovtun says the law lacks a clause outlining the responsibility of a joint stock company's management to stockholders.
"One should legislatively regulate the responsibility of supervisory board and executive board members for damage done by their activities to a joint stock company, and the right of a joint stock company or a stockholder to appeal to the courts against a manager for the compensation of losses," she said.
The lawyer said the obligation of a joint stock company to buy stocks from stockholders who voted against a number of decisions stipulated in the law does not concern stockholders who did not attend a general meeting. She also says that there is no clear definition of the term "considerable deal."
On the whole, Kovtun said, the passed law is progressive, and she forecast that if it is signed by the president, it will fill in many gaps in the legislation that allowed violations of stockholders' rights.
The Volkov, Koziakov and Partners law firm was set up in August 2008 through a merger of two law firms Volkov and Partners and Serhiy Koziakov and Partners. The key spheres of the firms' practice are corporate rights, disputes in court, A&M, real estate, antimonopoly regulation, investment and natural resources. Currently, the law firm employs 40 lawyers.
