What is the main source of law authorising this entity form?

Economic Code of Ukraine (ECU) (Господарський кодекс України – ГКУ),
The Civil Code of Ukraine (CCU) (Цивільний кодекс України – ЦКУ),
The Law of Ukraine "On Limited Liability and Additional Liability Companies" (LLC Law) (Закон України "Про товариства з обмеженою та додатковою відповідальністю"),
The Law of Ukraine "On Joint stock companies" (Закон України "Про акціонерні товариства",
The Law of Ukraine "On Business Associations" (Закон України "Про господарські товариства").

Give a brief summary of the entity form:

Does the entity possess separate legal personality?
An LLC maintains a separate and distinct personality from that of its participants or related parties.

Maximum period of existence
An LLC has perpetual duration.

Governing document(s)
An LLC is governed by its Charter (статут). The first version of the LLC's charter shall be signed by all participants of the LLC. The authenticity of the participants' signatures shall be notarised.

Liability of incorporators/shareholders/members
Participants are liable to the extent of their contribution to the capital of the LLC and are not personally liable for the liabilities/acts/omissions of the LLC. The corporate veil may be lifted in cases provided by law.

Governing body or bodies
• The features of the LLC are the General Participants’ Meeting, the Supervisory Board (if established) and the Executive Body. Each participant of the LLC must make a full contribution to the charter capital within six months from the date of state registration of the LLC, unless otherwise provided by the charter.

Other particularities of note
Participants of the LLC may enter into a shareholders’ (participants’) agreement, under which participants shall undertake to exercise their rights and powers in a certain way or refrain from exercising them.

According to current legislation of Ukraine, LLCs may implement provisions to the charter on the shares' accounting in the depository system of the National Depository of Ukraine (NDU). This mechanism is provided to protect the participants from unlawful actions of third parties. This solution is rather new for LLCs and public authorities still need some time to implement the share accounting approach in practice. This tool allows the transfer of participants' shares from The Unified State Register of Legal Entities, Individual Entrepreneurs and Non-governmental Organisations (Unified State Register) to the NDU's share accounting system. The share remains with the previous owner, but it is now stored not in the state register but in a special NDU accounting system, similar to stocks and other securities.

Can this type of entity be involved in international transactions and restructurings (e.g. cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.)?

An LLC may be involved in international transactions and restructurings. It is not prohibited from being involved in cross border mergers, asset acquisitions and divestitures, equity acquisitions, conversions etc.

Can this type of entity be publicly listed or held, or its securities be issued to members of the public?

issued to members of the public? No, under Ukrainian law, the shares of an LLC cannot be traded on either regulated or non-regulated markets. Only joint stock companies may be listed/publicly traded.

Can this type of entity be used for a non-profit or charitable organization?

According to the Law of Ukraine "On Business Associations", an LLC is established for the purpose of making a profit, this is why it cannot be used for non-profit purposes.
An alternative type of company that is used primarily for non-profit purposes are:

• charitable foundation;
• charitable company;
• charitable institution.

Give a brief summary of the process of incorporation, formation, or organization, including:

Main documents required for incorporation of an LLC are:

• application form for the state registration;
• an original copy (notarised copy) of the founders' resolution;
• passport and local tax ID of the founders (for individuals);
• constituent document of the legal entity (charter);
• a document confirming the registration of a foreign entity in the country of its location (an extract from a trade, banking, court register, etc.) - if the founder is a foreign legal entity;
• ownership structure;
• a copy of the identity document confirming the citizenship of the person, who is the ultimate beneficial owner of the legal entity;
• power of attorney issued by the founder - if the founder is a foreign legal entity.

Documents provided by the foreign legal entities i.e. issued abroad, are subject to notary certification and legalization / apostille in the respective country of issuance. The documents will need to be submitted in original and in Ukrainian language. Ukrainian translation is normally arranged in Ukraine.
NB: Trade (banking, court, etc) register extract is valid within 1 month following the date of its issuance.

• An LLC must be registered in the Unified State Register by a notary or another state registrar. Documents for state registration may be submitted in paper or electronic form. It is also possible to register an LLC on the basis of a model charter through the online public service Diia.
• An LLC is registered within 24 hours after the documents are received by the registrar.
• There is no administrative fee for the state registration of an LLC. Notary services fees apply.
• The application form for state registration of a legal entity requires information on the types of economic activities of the LLC to be indicated, which must comply with the relevant codes of the Ukrainian classification of economic activities. Also, the information on the types of economic activities of the LLC shall be highlighted in respective decisions of the founder.

 

Minimum number of incorporators / shareholders and residency requirements

No minimum shareholders requirement (one shareholder / incorporator is enough), as well as no residency restriction, so, at least 1 person (individual or legal entity) is required to establish an LLC.

Minimum number of directors (or other applicable officers) and residency requirements

An LLC must have at least one (1) director. No nationality or residency restrictions. Work permit is required for foreign nationals if the latter is employed with the LLC. If appointment of a foreign national is made based on the civil law agreement, no work permit requirement.

Minimum share capital, or equivalent, and payment requirements (including opening a bank account)

No minimum charter capital requirement, so it can be just UAH 1,00 (one hryvnia 00 kopecks). The charter capital contributions can be made in kind or in monetary form, unless otherwise provided by law for respective business activity. To commence business activities an LLC should have a bank account with a Ukrainian bank. Personal presence of the director of the LLC for opening a bank account at bank's office is mandatory. Online client identification with the bank is not possible.

Is the physical presence of incorporators/directors/shareholders required in the jurisdiction for incorporation, formation, or organisation?

The physical presence of incorporators/directors/shareholders is not required.
Respective documents can be signed and submitted in Ukraine based on respective powers of attorney. As stated above, personal presence of the director is however mandatory while opening bank account with a Ukrainian bank.

Is a tax identification number, or equivalent, required? If so, how is it obtained?

A tax ID of an LLC - identification number from the Unified State Register (ЄДРПОУ) is automatically issued after the LLC's state registration with respective registers.

What is the title of the applicable company registry?

The Unified State Register is the Ukrainian company register. The register is maintained and operated by the State of Ukraine.

What types of information must be filed at the (company) register, and which of them will it be publicly available, e.g.: Articles or other formation document, Articles or other formation document, Group structure, Share capital, Directors, Accounts, Insolvency, good-standing, liquidation, Liens and encumbrances on the shares, Liens and encumbrances on assets of the entity, Other (e.g. litigation, tax matters)

The following information must be filed at the company register and is publicly available:

• LLC name;
• date of the LLC’s incorporation;
• identification code;
• organisational and legal form;
• registered office;
• information for communication;
• types of activities;
• type of constituent document;
• information about the director (members of the governing body);
• information on persons who may act on behalf of the legal entity;
• the amount of the charter capital;
• list of founders (participants);
• information on the ultimate beneficial owner;
• information on separate units;
• information regarding the LLC’s termination;
• information regarding the process of bankruptcy, rehabilitation proceedings, enforcement proceedings;
• data on legal entities – legal successors;
• place of storage of the registration file;
• date and number of the last registration action for state registration of changes to information about the legal entity, the ultimate beneficial owner.

What is the title of the executive body and its members? What are their main duties, tasks and responsibilities?

The executive body of the LLC may be a CEO or board of directors. The competence of the LLC's executive body includes resolving all operational issues related to the management of the LLC's day-to-day operations, except for reserved matters.

How are the members of the executive body appointed, dismissed and replaced?

The procedure for the appointment/dismissal or replacement of the director or members board of directors is generally governed by the LLC’s charter in line with the law. The General Participants’ Meeting is empowered to appoint and dismiss the director and members of the board of directors.

The LLC may conclude the civil-law or labour agreement (contract) with the director or members of the executive body. This agreement regulates the specifics of appointment/dismissal/replacement.

Any changes, related to the LLC’s executive body are subject to mandatory registration with the Unified State Register, including changes of the directors’ personal details, such as passport number, residential address etc.

Is it possible to appoint corporate directors or must all directors be natural persons?

As for the general practice, only individuals (natural persons) with full capacity for acts in law can be appointed as a director/member of the board of directors. However, taking into consideration the peculiarities of Diia City regime, legal entity may be appointed as a director.

Diia City – is a special legal regime that creates good conditions for innovative business, development of digital infrastructure and investment attraction. It has special reduced taxation and labour terms.

Is there a requirement to have non-executive directors? How are they appointed, dismissed and replaced? Do non-executive directors serve on a separate body (two-tier structure) or can a one-tier board (with executive and non-executives) be appointed, or is some alternate structure used?

No, there is no mandatory requirement to have non-executive directors in an LLC. Having said this, both two-tier and one-tier structure may be used in LLCs.

A Supervisory Board may be established in an LLC. Subject to the provisions of the charter, the members of the Supervisory Board are appointed and dismissed by the General Participants’ Meeting. Members of the Supervisory Board must be individuals with full legal capacity and cannot be CEO / members of the board of directors of the same LLC.

What is the title of the body of owners / shareholders / members, and what are the main tasks / responsibilities / powers of that body?

The General Participants’ Meeting is the supreme body of the LLC. It has all rights and responsibilities which are not otherwise reserved under law or the charter to the LLC’s governing bodies. The main powers of the General Participants’ Meeting include strategic issues, such as appointing and dismissing members of the LLC’s governing bodies, amending the charter, approving annual financial statements, increasing, or decreasing the LLC’s charter capital, distributing profits, etc.

What are the majority and quorum requirements for decisions by the shareholders? Can they be varied or changed?

As a rule, resolutions of the General Participants’ Meeting are adopted by an absolute majority (50% + 1) of votes cast. Decisions on some specific issues should be adopted / voted by three-quarters of the votes of all members of the LLC (75 %) or unanimously (100 %). The law or the charter of an LLC can establish deviating rule on the majority.
These decisions should be adopted by three-quarters of the votes (75%):

• amendments to the LLC’s charter, decision on operating on the basis of the model charter;
• change the amount of the charter capital;
• decisions on spin-off, merger, division, accession, liquidation and transformation of the LLC, election of the liquidation commission, approval of the termination procedure of the LLC, the distribution procedure of property among shareholders in case of liquidation, approval of the LLC's liquidation balance sheet.

These decisions should be adopted unanimously (100 %):

• approval of the monetary value of a participant's in-kind contribution;
• redistribution of shares among the LLC's participants;
• establishment of other LLC's bodies, determination of their activity procedure;
• decision on acquisition of a participant's share (part of a share) by the LLC;
• decision on accounting or termination of accounting of LLC's shares in the depository system.

Any special governance regimes (e.g. depending on size, being listed at a stock exchange, or other criteria)?

As we have mentioned above, LLC can be regulated by Diia City regime. The main criteria for this regime is a digital type of activity (exact activities are defined by law). Residents of Diia City pays lower tax rates and can use alternative model for hiring employees (gig-contract).

What are the periodic accounting obligations incumbent upon the entity? To whom must those accounts be submitted?

An LLC must submit financial statements to the State Tax Service of Ukraine. The LLC must submit interim financial reporting, which is based on the results of the first quarter, first half of the year, nine months and annual financial statement.

The first reporting period of a newly established legal entity may be less than 12 months, but not more than 15 months.

Is the entity permitted to determine its own financial year?

Generally, an LLC is not allowed to determine its own financial year. The legislation defines that the financial year coincides with a calendar year (that is, it runs from 1 January to 31 December 2024). At the same time, the first financial year of a newly established company (including LLC) may be shorter than 12 months but not longer than 15 months.

Is the entity subject to any statutory (external) auditor obligations?

The law obliges the qualified enterprises to audit their financial statements. The qualified enterprises particularly encompass large- and medium-sized businesses, companies involved in the extraction industry, public joint stock companies, publicly traded companies, banks, insurers, private pension funds and other financial institutions.

Additionally, LLCs that are registered as Diia City residents should annually file the reports evidencing their compliance with the statutory requirements applicable to the Diia City residents. Such reports should be audited by the qualified auditor or audit company.

Also, at the request of the participants, who collectively own ≥10 percent of the charter capital, an audit of the company's financial statements is conducted with the involvement of an auditor (audit firm) who is not related with the company, it's officers or participants.

Requirements to appoint other persons (officers, secretary, internal auditor / accountants). If so, what are their functions? Are there any residency requirements?

No, there are no such obligations in the case of LLCs.

What is the title designated for 'ownership interests' (e.g. shares, quota, interests, membership)?

Participatory interest or Share (частка).

Are different classes of ownership interests possible? If so, what are some examples of different classes?

No, different classes of ownership interests are not possible.

What documentation is required for the transfer of ownership interests?

The transfer of ownership interests takes place based on a share sale and purchase agreement, an application by the participant to withdraw from the LLC, or a court decision. The procedure for transferring ownership may be stipulated by the shareholders' agreement, a testament, the LLC’s charter, etc. Also, parties have to sing an act of transfer and acceptance of the share.

Are there any additional formal requirements required for the transfer of ownership (notary, approvals, stamping, filings, corporate records)?

Transfer of the ownership interest is subject to state registration with the register. For the registration of participant changes based on a share sale and purchase agreement, an act of transfer and acceptance of the share must be executed in front of a Ukrainian notary. This act is submitted to the Unified State Register and is the basis for respective record of the title transfer. The share sale and purchase agreement is not serve as a legal ground for state registration of the share transfer but should be presented to the notary while signing the act of the share transfer.
Each change of ownership must be registered in the Unified State Register. Therefore, the following documents must be submitted to register changes to the participant's information:

• Application form for state registration of changes to information about a legal entity,
• a copy of the original (notarised copy) of the decision of the authorised management body of the legal entity on changes to be made to the Unified State Register,
• a document on payment of the administrative fee,
• a new version of the LLC's charter, if the charter contained information about the participants,
• a copy of the original (notarised copy) of the decision of the authorised governing body of the legal entity:
  • on withdrawal from the membership), and/or
  • on compulsory exclusion from the founding members of the LLC, and/or
  • application of an individual on withdrawal from the membership, and/or
  • an agreement or other document on the transfer of a participant's share in the charter capital of the LLC, or
  • a photocopy of the individual's death certificate, a court decision declaring the individual missing.

Please note that if the new participant must disclose its ultimate beneficial owner (UBO), as an individual who ultimately owns or controls a legal entity, either directly or indirectly, with at least 25% ownership or voting rights. Furthermore, this new participant shall submit the full ownership structure, ending with the UBO, either as a physical person or indicating its absence (investment funds, states, publicly listed companies, etc.). Each foreign company in the ownership structure must be verified by the respective extract from the trade register on this entity, which must be submitted to the Unified State Register.

Are there any applicable stamp duties imposed when transferring ownership interests?

1 tax-free minimum income of citizens for notarisation of the SPA is applicable.

How are shares issued? (including information on payment obligations, registration requirements)

Under Ukrainian law, the actual issuance of LLC’s shares does not occur. Ownership is confirmed by a corresponding entry in the Unified State Register.

Further information on equity contributions, e.g., non-cash payments on shares, (share premium) contributions without issuances of shares, can partially paid shares/ownership interests be permitted and what are the restrictions on them?

An LLC’s participants may contribute to its share capital in the form of non-cash payments, i.e., in the form of an in-kind contribution. A participant's contribution may be securities, or other property, unless otherwise provided by law. The in-kind contribution must have a monetary value approved by a unanimous decision of the General Participants’ Meeting attended by all participants of the LLC.

Any requirements with respect to share cancellation, share repurchase and other capital reductions

The law allows an LLC to acquire a share in its own charter capital without reducing the capital size, provided that on the acquisition day, the LLC forms a reserve capital equal to the purchase price of the repurchased share, which cannot be used for participant payments. The purchase contract requires unanimous approval from all participants present at the general meeting. Shares owned by the LLC are excluded from voting results, profit distribution, and asset distribution in case of liquidation. If an LLC acquires a participant's share without reducing the charter capital, it must sell the share within one year, unless a different period is specified in the charter. This provision can be added, amended, or removed from the charter by unanimous decision of all participants.

An LLC has the right to reduce its share capital. In case of reduction of the nominal value of shares of all participants of the LLC, the ratio of the nominal value of their shares shall remain unchanged.

Any requirements with respect to distributions to shareholders?

Matters pertaining to the declaration of dividends are normally governed by the LLC’s charter.

Dividends shall be paid out of the LLC's net profit to persons, who were participants on the date of the decision to pay dividends, in proportion to the size of their shares.

Dividends may be paid for any period that is a multiple of a quarter, unless otherwise provided by the charter.

Dividends shall be paid within a period not exceeding six months from the date of adoption of the decision on their payment, unless another period is established by the LLC's charter/decision of the general meeting.

Can the owners or shareholders adopt a restrictive or governing agreement among themselves such as a Shareholders Agreement?

Yes, it is a corporate agreement under Ukrainian legislation. Under this agreement LLC's participants undertake to exercise their rights and powers in a certain way or to refrain from exercising them (dividends distribution, alienation procedure, deadlock resolution, etc.). It shall be made in writing. The LLC itself and third parties may be also as additional parties to a corporate agreement, aside from the participants.

 

Which are the typical annual maintenance costs of maintaining the existence and legal good standing of such an entity (excluding legal fees)?

There are no mandatory annual maintenance costs required to maintain the existence and legal good standing of an LLC.

What are the general corporate tax rates? (Specify if there is a national versus local distinction).

The basic corporate income tax rate is 18%. The local authorities are not authorised to introduce other income tax rates.

Summary of any specific matters, e.g. recent or prospective major legal developments

The Law of Ukraine "On Limited Liability and Additional Liability Companies" was adopted by the Verkhovna Rada of Ukraine on 6 February 2018. As the provisions of the law are fairly new, the law has not undergone major changes.
However, the law was supplemented/amended in certain articles, below are the most important changes.

Additional contributions by participants may be made by way of offsetting counterclaims of the same kind between the LLC and the participant and/or a third party (debt-to-equity conversion).

An agreement under which the emergence, change or termination of rights and obligations to alienate a share in the LLC's charter capital is conditioned by circumstances shall be concluded in writing. The essential terms of such an agreement shall include the amount of the share in the LLC's charter capital to be alienated, the price of the agreement, circumstances that determine the occurrence, change or termination of the parties' rights and obligations to alienate the share in the LLC's charter capital, and the term of the agreement.

The LLC's charter may impose restrictions on the alienation or encumbrance of a share (part of a share) in its charter capital.

The competence of the General Participants’ Meeting includes the decision to record or terminate the recording of the LLC's shares in the share accounting system instead of ordinary accounting in the Unified State Register.

In cases established by the law, the powers of the LLC's executive body may be exercised by a legal entity registered in accordance with the laws of Ukraine (the person performing management functions).

The law stipulates the possibility for the introduction of the limits for transactions to be concluded by the director, which shall be approved by the General Participants' Meeting:

• A decision on a transaction, if its value exceeds 50% of LLC's net assets value, is made exclusively by the general meeting of members unless otherwise provided by the LLC charter (material contracts);
• A transaction with interest involves dealings with LLC officers, significant shareholders (20%+), their affiliates, or management entities. The LLC's charter may specify the approval process for these transactions. If not defined, the rules of LLC law. Officers violating these rules are jointly liable for damages. Significant or interested transactions require proper approval to affect the LLC's rights and obligations. Subsequent approval can validate these transactions retroactively, following the same consent procedure (interested-party transactions).