Legal Entities in Ukraine
- Joint Stock Companies
A joint stock company (JSC) is a common form of legal entity used in Ukrainian business. It is a limited liability company in which the shareholders are responsible for the liabilities of the entity only up to the nominal value of their shares. The minimum capital of a JSC must be at least 1,250 times the minimum wage amount.
A joint stock company may be either 'open' (publicly held) or 'closed' (privately held). The shares of an 'open' joint stock company can be distributed through open subscription on the stock exchange. The shares of a 'closed' joint stock company are divided among the founders and cannot be distributed through subscription on the stock exchange. A closed joint stock company can be converted into a public joint stock company by registering its shares in accordance with the legislation on securities and the stock exchange and amending its Articles of Association.
Any legal entity and/or individuals can be founders of the JSC. At least two founding shareholders are necessary to create a joint stock company, although the two founding shareholders are free to determine among themselves the share distribution that each will have in the legal entity. Generally, a shareholder should pay 30% (for a public JSC) or 50% (for a private JSC) of its nominal share value to the temporary bank account of the JSC before registration with the state agency.
All joint stock companies, including those entirely held by foreign owners, are Ukrainian legal entities. They may enter into agreements, take on legal obligations, acquire property, and sue and be sued in their own names. Furthermore, these entities may engage in any commercial activity envisaged by their Articles of Association. Accounting records must be kept in UAH and comply with the Ukrainian National Accounting Standards, although accounts may also additionally be compiled according to any applicable international standards.
- Limited Liability Companies
Limited liability companies (LLC) are also a popular form of corporate organisation. They are a good option through which foreign companies can conduct business in Ukraine . An LLC has similarities to both a US corporation and a US partnership. It is similar to a corporation in that it is a limited liability company in which the interest holders are liable only to the extent of their capital contributions. However, it is similar to a partnership in that ownership interests are expressed in terms of contractual rights arising from the statutory documents.
There is a lower initial capital requirement of 100 minimum monthly wages in UAH (UAH 14,000 or approximately USD 2640, as at 1 February 2002). Again, from July 1 2002, with the minimum wage to UAH 165, this capital requirement will increase to UAH 16,500 (or USD 3,000). At least two founding participants are necessary to create an LLC. Each partner should pay 30% of their interest in the authorised capital to the temporary bank account of the LLC before registration with the state agency. Transfer of ownership rights is conducted through an assignment of contractual rights. A LLC has two governing bodies: the participants' assembly and the directorate (management).
LLCs have a slightly simpler registration process than joint stock companies and compared to a JSC require a less complex structure as regards increase of capital and management.
Joint ventures in Ukraine are generally established in the forms of a joint stock company or limited liability company. Joint ventures enjoy the status of a Ukrainian legal entity and do not have to comply with additional special requirements.
- Joint Activity Without Establishment of a Legal Entity
Ukrainian legislation provides a foreign investor with the right to invest in Ukraine without creating a legal entity by entering into a joint production or joint co-operation agreement with Ukrainian partners. Such investment is subject to state guarantees and should be registered as discussed above. A foreign investor is granted a right to get back their investment and repatriate the profit from it.
- Representative Offices of Foreign Companies in Ukraine
A Representative office of a non-resident in Ukraine is a place of the non-resident's business activity in the territory of Ukraine . Non-resident legal entities which carry out their activities via a Representative office in Ukraine do not exercise the status of the legal entity in Ukraine and are subject to the legislation of the country of their permanent establishment. Representative off ice execute accounting and reporting in accordance with the Ukrainian law.
The registration of the Representative offices is carried out by the Ministry of Economy of Ukraine . Business activities of Representative offices are regulated by the relevant Laws of Ukraine. Foreign investment activities of Representative Offices are regulated by the Ukrainian legislation on foreign investment. On 26 February 1993 the Cabinet of Minister issued a resolution which provides the Procedure for Accreditation of a Representative offices of Ukraine .
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