The Law on Joint Stock Companies

July 2022 brought an important event in the area of corporate law, in particular, the new Law of Ukraine “On Joint Stock Companies” (the “Law”) was adopted, which stipulated for new possibilities for JSCs and LLCs.
The Law is aimed at bringing the activities of JSCs in line with the EU legislation.

We have prepared a summary of major new developments and provided comments from Deloitte.

Also, we announce further analytical materials on the topic.

The Law will come into force effective from 1 January 2023. Besides, by 31 December 2023, there will be a transition period in place, during which it will be necessary to bring charters and internal documents of JSCs in line with the Law requirements.

The Law has expanded possibilities for filing a derivative lawsuit, fixed the right to elect a foreign regulation for corporate contracts, and detailed the fiduciary duties of JSC executives. Those mechanisms are designed to create additional guarantees for investors, especially in terms of a potential protection of their interests through judicial dispute settlement mechanisms. In addition, tools for the protection of rights of JSC creditors and pledge holders of LLCs shares have been implemented.

We also consider as attractive the changes related to accounting for shares in LLCs in the depository system, fixing one-tier and two-tier models of corporate governance, a possibility of creating committees, and excluding the provisions related to a revision commission in JSCs. Such changes are aimed at eliminating a formalistic approach to a company’s management and giving companies a possibility to create those bodies the functioning of which is reasonable from the point of view of business interests. In addition, we hope that fixing the details of the legal status of the corporate secretary will also have a positive effect on the corporate governance of JSCs.

We expect that the norms stipulated by the Law will improve and make more understandable and flexible the possibilities for doing business in Ukraine for both local and international companies. The updated “rules of life” for JSCs and LLCs should create conditions for increasing the attractiveness of Ukraine in the eyes of investors. We believe that business should assess the new developments and their impact on the company’s operations.

Our team has gained a significant experience in the area of corporate law and is ready to assist you at your request.

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