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Law on Amendments to the Law on Joint Stock Companies
Arzinger law firm, Kyiv, Ukraine, Wed, April 1, 2015
On27 March 2015 theLaw on Amendments to the Law on Joint Stock Companies dated 19.03.2015 No. 272-VIII (hereinafter, the Law) came into effect. Under the Law,ageneral shareholders meeting is eligible subject to the participationregistration of shareholders jointly owning more than 50 percent of thevoting shares.
The Law has rendered the Law of Ukraine onAmendments to Article 41 of the Law of Ukraine on Joint StockCompanies invalid. It should be noted that the Law has delayed the reduction ofthe quorum for JSCs without a state share.
Also, the Law empowers a JSC’sgeneral shareholders’ meeting to decide on shortened dividendpayment terms. If dividends are not paidin due time, shareholders are entitled to apply to notaries for writs ofexecution, under which debts are recovered without recourse. The list of suchdocuments shall be set by the Cabinet of Ministers of Ukraine.
Apart from that, it is established that therights of shareholders to submit proposals on matters put on the agenda of therelevant JSC’s general shareholders’ meeting as well as regarding newcandidates for members of the company’s bodies and the procedure for their submissionmay not be changed by the joint stock company’s articles of association. Incase of early termination of powers of one or several supervisory board membersand until its whole composition is elected, a supervisory board meeting shallbe deemed eligible, provided that the number of active supervisory boardmembers constitutes more than half of its members.
It is also stipulated that JSCs’ articles ofassociation shall be applied to the extent that they do not contradict with theLaw, until they are brought into line with it.
The Law applies only to JSCs and does not changethe quorum requirements for meetings of other legal entities, including limitedliability companies.
It should be noted that one of the key companiesto be influenced by the new Law is "Ukrnafta", in which the minorityshareholders have repeatedly blocked the conduct of general shareholders’meetings, the change of management as well as the payment of dividends.
In our view, the establishment of a quorum at thelegislative level was not necessary. Thus,in someEuropean countries the law does not set any quorum for general shareholders’meetings. In the Anglo-Saxon law system, there are no quorum requirements forgeneral shareholders’ meetings at all, while in the US and the UK the eligiblenumber of shareholders is that of the shareholders attending the meeting. We believe that the most reasonable solution is to entitle shareholders to determine the quorum, while the relevantprovision should be integrated in articles of association rather than at thelegislative level.
Recommendations:
JSCs should amend their articles of associationto bring them into line with the Law. The Law does not prescribe the term forsuch amendments or liability for failure to make them. However, theprovisions of the Law prevail over JSCs’articles ofassociation regardless of whether the latter have been brought into line withsuch provisions.
Please use the LINKto download the PDF version of the alert.
Kind regardsand best wishes,
Anna Zorya
Partner, Head of Corporateand M&A Practice
Maksym Cherkasenko
Partner, Head of Corporateand M&A Practice
Maksym.Cherkasenko@arzinger.ua
