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Business in Ukraine legal aspects. Optimal variant for a foreign investor.

A lot of companies with foreign investments in different organization business forms operate in Ukraine. Foreign entrepreneurs show more and more interest every day to possibilities of opening their business on the territory of Ukraine. Notion of non-resident in Ukrainian legislation is most clearly defined in the sphere of tax legal relations.

Pursuant to Tax Codex, legal entities and their structural divisions which are situated outside Ukraine and are created and operate in accordance with other state legislation are deemed non-residents in Ukraine.

There are no limitations pertaining legal form of business entities that are created by non-resident in Ukraine. The following organizational legal forms are most popular: limited liability companies, joint stock companies, and subsidiaries.

Companies in all legal forms should have a statutory fund in the amount, determined by a founder, though no less than determined by the legislation. The common feature of all of them is that all legal forms of companies are created on the basis of decision taken by property owners or a body authorized by them. The practice shows that two founders are enough to register limited liability and joint stock companies in Ukraine. There are no limitations as to distribution of shares between them in Ukrainian legislation: ratio up to 99% to 1% is quite possible. Also there occurred cases when one of founders is a legal entity and the other one is an individual.

Founders of business entity created in Ukraine should appoint the head of a new entity (head of the board for joint stock company, or director or general director for subsidiary and limited liability company).

The fact that statutory fund of a limited liability company should be formed during one year from the date of state registry is a peculiarity of Ukrainian legislation.

Minimal amounts of statutory fund are fixed for different types of companies in the following amounts: - limited liability company: There is no legal minimum.

- joint stock company: in the amount of 1,250 minimal wages or UAH 1 522 500,00 or approximately 167 000 Euro or USD 190 300 (on the date prior to the 31/12/2013). It is necessary to subscribe for at least 100% of shares for state registration.

- minimal amount of statutory fund for subsidiaries is not fixed.

Joint stock companies along with limited liability and private companies are most popular forms of business in Ukraine. Therefore you should pay attention at these two forms of business while choosing organizational and legal form of the company. A special heed should be paid to a limited liability company, because its minimal statutory fund in accordance with the current legislation can be relatively small if compared with the minimal statutory fund of a joint stock company.

Certain peculiarities of different organizational and legal business forms would be further considered. Procedure of creation and further activities of joint stock companies is complicated by necessity to register shares emission in a due order, to maintain shareholders register, to submit additional reports, as well as to observe a procedure of general shareholders meeting convocation that is prescribed by legislation (following terms, publication of an announcement in newspapers, etc.)

Overwhelming majority of joint stock companies in Ukraine are companies, created in the process of large state enterprises and collective farms privatization with dozens or hundreds of shareholders. Any shareholder in an open joint stock company herewith has the right to sell shares that s/he owns to any legal entity or individual any time. Other shareholders cannot influence such sale. It can result in undesirable changes in the list of shareholders.

Shares in private joint stock companies cannot be distributed by subscription, sale, or quotation on exchange. They are distributed among founders, and the order of their further distribution is prescribed by founding documents of the company. As a rule, a multistage order of transferring ownership rights for shares is envisaged in these types of companies with the purpose to secure maximal stability of private joint stock companies shareholders. In particular, a shareholder that decided to transfer the block of shares or its part to another owner, is obligated to propose this block to all other shareholders. S/he will have the right to propose the stock to the third parties only in case the rest of shareholders refuse to purchase them, provided conditions of a transaction would not be better than those proposed to other private joint stock company shareholders.

As opposed to joint stock companies, limited liability company has a mechanism of control over changes in a list of founders. Other founders of the company have preemptive rights to purchase a share. Participants have the right to alienate the share to the third parties only if other founders reject the proposal to purchase it. Division of a statutory fund into shares allows to react to amendments of changing Ukrainian legislation promptly. Limited liability company has more flexible management system if compared with a joint stock company.

Subsidiary company has an optimal scheme of its activities management, because all corresponding decisions are taken directly by a mother company (there is no necessity to call a meeting of participants/shareholders). Meanwhile, Ukrainian legislation still did not stipulate regulation of subsidiary companies activities in the state. As soon as its statutory fund is not divided into shares, all limitations, imposed by Ukrainian legislation at non-residents activities in Ukraine are extended for this organizational business form.

The closest connection to a mother company, as it is the only founder/owner of a subsidiary, is an advantage of subsidiary company creation in Ukraine. Besides, subsidiary company is responsible for obligations of the founder, while the founder is responsible for obligations of a subsidiary exclusively in the amount of its contribution to the statutory fund. To add, Ukrainian legislation does not contain a norm stipulating a minimal size of a statutory fund, which means that its size is determined exclusively by decision of a founder.

In case the organizational form of subsidiary company is selected during creation of a company, control over the company activities and management are simplified, because all decisions that are necessary to be fulfilled by a subsidiary are taken by a founder independently. At the same time, it is necessary to conduct a meeting of founders in compliance with all limitations envisaged by legislation (observance of terms, prior to which participants of the meeting should be informed about calling of a meeting, presence of participants, manner of voting, distribution of votes necessary for taking a decision, etc.) in limited liability company and joint stock company to take a decision that is obligatory for execution.

Taking into account all abovementioned, limited liability company is an optimal organization form of doing business for foreign investors, which is most spread in Ukrainian residents business as well. It provides possibility to make repartitions of participants shares in the statutory fund as opposed to subsidiary, and does not demand to maintain shareholders register and to submit quarterly reports on shares as prescribed in a joint stock company.

List of documents for non-resident company that buys (creates) a company in Ukraine :
notarized and legalized ( apostilled ) proxy representative with a purchase ( creation) and the signing of the contract of purchase of corporate rights and share capital , of the revised statutes , protocols enterprises (text added);
decisions by the founder of the statute of purchase (the creation of ) a particular company - notarized and apostilled (text added);
legalized ( apostilled ) more or less fresh date in the prescribed manner a document confirming the registration of non-resident companies - the certificate of registration (translating doing in Ukraine); legalized ( apostilled ) more or less fresh date in due course Statute resident company (doing translation in Ukraine);
Document Structure of ownership and founders to non-resident individuals - an extract from the register of companies.

List of documents for a non-resident citizen who buys (creates) a company in Ukraine:
translation of the passport - to do in Ukraine
tax code in Ukraine - get in Ukraine on the basis of power of attorney
later work permit to guide the company - preferably diploma of education

At the time of registration General director must be Ukrainian with tax code. You may be Financial director with same authorities. But you can not open a bank account to obtain a work permit and Financial director have to has passport with the stamp on the place of residence.
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