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Commercial Law in Ukraine

Business “feeds” the economy all year round. And so it is no wonder that the effectiveness of the legal means regulating economic activity directly influences the economy’s investment environment and potential.

In accordance with the Commercial Code of Ukraine “entrepreneurship is an independent, proactive, systematic, at one’s authority economic activity, carried out by economic entities (entrepreneurs) intending to achieve economic and social benefits and profit” (Article 42).

Unfortunately, commercial activity in Ukraine contains many risks. Contemporary business challenges continue so far in corruption, bureaucracy, insufficient protection of property rights. In 2011 official Kiev was trying to resolve these issues, which are painful for every businessman, but quite often didn’t even pay attention to the views of entrepreneurs.

Every person planning to launch his own business should resolve the following issues: how clear and logical are the rules of the game within the market? How much does the business process depend on the “good will” of the official? Are taxes reasonable? Is there political stability in the country? How quickly can an entrepreneur wind up his business? Let’s clear up the aforesaid issues.

Business Start Up 

Business incorporation in Ukraine can take about 24 days and this term, despite the numerous amendments to Ukrainian legislation in 2011, has hardly changed.

A number of legislative acts were approved in the spring of 2011 which were compelled to facilitate the business launching procedure.

Thus, according to the On Amendments to Some Laws of Ukraine regarding the Number of Members of Limited Liability Company Act of Ukraine of 12 May 2011, No.3326-VI, the legal maximum number of shareholders in a limited liability company (hereinafter — LLC) was increased from 10 to 100 persons.

Furthermore, legislators provided that in case of an increase in charter capital regarding the transformation of LLC to Joint Stock Company (hereinafter — JSC), the formation of the charter capital shall be carried out by the entity within 5 years.

The minimum size of the charter capital for a JSC is currently at least 1,250 minimum salaries (as of 1 December 2011 it amounted UAH 1,255 million), which is quite large sum of money for many shareholders. As to the minimum size of charter capital for the LLC, then from 6 June 2011 according to the On Amendments to Some Legislative Acts of Ukraine on Simplification of Business Launching Procedure Act of Ukraine of 21 April 2011, No.3263-VI, shareholders independently decide the size of the charter capital (hitherto the legal minimum size of the charter capital shall equal one minimum salary — about UAH 990).

Henceforth the charter capital can be paid within the first year from the time of state incorporation. This right concerns the LLC, state commercial enterprises, municipal unitary enterprises and commandite companies. Specifically before the mentioned changes, members of the LLC should pay at least 50% of their contributions before state registration, and other non-paid contributions — within the first year of the company’s activity.

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Authors:
Yuriy SEMENYUK, Partner, Law firm Lexfor
Eugene VLASOV, an Associate with LEXFOR

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