Amendments to the Law of Ukraine “On Joint-Stock Companies”

Dentons, Kyiv, Ukraine, 
Fri, March 27, 2015 

On 19 March2015 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Joint-StockCompanies” (concerning payment of dividends by a joint-stock company) (the“Law”), signed by the President of Ukraine on 25 March 2015. The Law entersinto force the day after its publication (except for the rules on the procedurefor submitting proposals on the agenda of the general meeting and determining aquorum in the event of early termination of powers of members of the supervisoryboard, which shall take effect two months after the day the Law is published).

The Lawprovides for a reduction to the quorum of the general meeting of all jointstock companies from 60% to 50% plus one share. Other amendments to the Law “OnJoint-Stock Companies” are also envisaged, in particular regarding theprocedure for paying the dividends, the procedure for submitting proposals onthe agenda of the general meeting and for determining a quorum of thesupervisory board. Specifically, the Law envisages (i) the mechanism for forcedcollection of dividends from a joint-stock company by a shareholder (by virtueof a notary writ) in case of the adoption of a decision to pay dividends andfailure to pay the dividends within the period of time determined by law; (ii)a ban on any derogation in the charter of a joint stock company from ashareholder’s right to submit proposals on the agenda of the general meetingand changing the procedure for their submission. It is also stipulated that inthe event of early termination of powers of members of the supervisory board(and until the election of all members of the supervisory board) the meeting ofthe supervisory board shall be competent to transact business provided that thenumber of competent members of the supervisory board shall be more than half ofthe full number of its members. 

Please beadvised that Law No.91-VIII “On Amendments to Article 41 of the Law of Ukraine‘On Joint-Stock Companies’ regarding the quorum of the general shareholders’meetings of joint stock companies, in which the State owns the majorityshareholding” took effect earlier.  TheLaw No.91-VIII provided that the reduction of the quorum of joint-stockcompanies in the authorized capital of which there were State corporate rightsand in which the State owned 50% or more of ordinary shares of the companywould be implemented from the moment the Law is publicized (as for all otherjoint-stock companies, the respective amendments would take effect from 1January 2016). The Law provides for the cancellation of Law No. 91-VIII.

Thus,according to the Law, the reduction of the quorum of the general shareholders’meeting shall take effect simultaneously as for all joint-stock companies (onthe day after the Law is published.)

Previouslythe law of Ukraine enabled the shareholders jointly owning more than 40% ofordinary shares to block general meetings of a joint-stock company, whichresulted in hindrances to the activity of some joint-stock companies facingconflict of interests between majority and minority shareholder(s). Upon entryinto force and publication of the Law, the presence of shareholders owning morethan 50% of voting shares in the company will suffice to hold the generalshareholders’ meetings of all joint-stock companies (and to pass the respectiveresolutions).

After theLaw enters into force, the shareholders will have an additional mechanism tocollect dividends from a joint-stock company if they are not paid, which isparticularly important for minority shareholders.

The currentlaw provides for the right of each shareholder who owns shares in a company tomake proposals with regard to the agenda of the general meeting, and theproposals submitted by the shareholders owning five percent or more of theshares shall be subject to mandatory inclusion in the agenda of the generalmeeting. However, there are many cases when the company charter provides forrestrictions / deprivation of the shareholders’ right to submit proposalsregarding the agenda of the general meeting. Upon entry into force of therelevant amendments envisaged by the Law, the above practice will be expresslyprohibited by law.

The Law ofUkraine “On Licensing Types of Business Activities”

On 2 March2015 the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On LicensingTypes of Business Activities” (the “Law”) which significantly reduced thenumber of licensable business activities, simplified the licensing procedure aswell as determined the licensing authorities and scopes of their powers. On 25March 2015 the President of Ukraine signed the Law, which is now pendingpromulgation and will take effect three months thereafter.

The Lawintroduces a uniform licensing procedure and procedures for drafting andapproving licensing conditions, clearly determines grounds for refusing toissue and revoke licenses, and envisages administrative responsibility forofficials and officers of licensing authorities for not complying with itsrequirements.

The numberof licensable business activities is reduced from 54 types to 29. The Lawestablishes that licensing conditions must contain an exhaustive list ofdocuments required to apply for a specific license.

Once theLaw is in effect, a construction license will be required only for constructionof the 4th and 5th complexity categories. A number of other business activitieswill become non-licensable - such as supply of electrical power  at a non-regulated tariff, centralized watersupply and sewage services at a non-regulated tariff, generation,transportation and supply of thermal energy at a non-regulated tariff,extraction of precious metals and precious stones, production of veterinarydrugs and preparations; wholesale and retail trade in veterinary drugs andpreparations; trade in pesticides and agrochemicals (plant growth regulatorsonly), introduction, importation, exportation of holographic security elements;production of forms of securities, customs brokerage; production, export andimport of disks for laser reading systems, matrixes; development, production,sale, repair, modernization and disposal of weapons, military equipment,military weapons and ammunition thereto; trade in liquid biofuels and biogas,digital signature services, industrial fishing in inland waters and rivers,transportation of freight (except hazardous goods) by river, sea, road, railand air.

At the sametime, the Law requires a license to carry out such activities as, inparticular, banking activities, financial services (except for professionalactivities in the securities market), professional activities in the securitiesmarket, television and radio broadcasting activities; activities in the fieldof electric power industry, production and sale of ethyl alcohol, cognac andfruit spirits, alcoholic beverages and tobacco, telecommunication activities,manufacturing of medicinal products, wholesale and retail trade in medicinalproducts, importation of medicinal products, fire suppression services andworks, particularly hazardous substances and waste management, medicalpractice, tour operator activities, transportation of hazardous cargo by river,sea, road, rail and air transport, international carriage of passengers andgoods by road; transportation of oil and oil products by main pipeline,transportation and distribution of natural gas.

The Lawaims to significantly simplify the procedure for obtaining licenses, improvebusiness environment in Ukraine and bolster investments in the economy ofUkraine.