Limited liability company in Ukraine

The minimal number of founders (owners, shareholders) of a limited liability company in Ukraine is one corporate or natural (private) person, a resident or non-resident of Ukraine. The maximum number of founders (owners, shareholders) is ten persons. The founder can sale his corporate rights (shares in the authorized capital of a LLC) to the other founder of a LLC and only in a case if none of the other founders of the LLC wants to buy it such corporate rights can be sold to a third person.

The minimal amount of the authorized (share) capital for a limited liability company in Ukraine is required in accordance with Ukrainian regulations and is equal to 100 minimal salaries as of the date of state registration of incorporation. Amount of the minimal salary is constantly and gradually increased by Ukrainian Parliament (The Verkhovna Rada of Ukraine) and is fixed in the Law of Ukraine "About the state budget of Ukraine", which is adopted for each coming year. Therewith, the Law of Ukraine "About the state budget of Ukraine" as a rule provides sub sequential gradual increase of the minimal salary several times per each calendar year. As on February 01, 2008 the amount of the minimal salary in Ukraine makes UAH 515, which is equal to about USD 100, and accordingly the minimal amount of share (authorized) capital of a limited liability company makes UAH 51'500, which is equal to about USD 10'000. The maximal amount of the share capital of a limited liability company is unlimited. Also there is the requirement that not less than a half of the share capital of a limited liability company is to be paid-up before state registration of incorporation and the other half of the share capital is to be paid-up by the founders within one calendar year starting from the moment of state registration of the company incorporation, otherwise the company will be terminated (liquidated).

Also at the moment of incorporation of a limited liability company it is necessary to appoint a manager of the limited liability company. The manager can be only a natural (private) person, resident or non-resident of Ukraine. Therewith, for non-residents it is required to get a permit for work in Ukraine first. The minimal number of managers is one, the maximal number of managers is unlimited and can be arranged as a board of directors, therewith there is always should be one general manager, who represents the corporate entity and acts for and on its behalf without a power of attorney on the grounds of Articles of Incorporation (Articles of Association, Statute or Charter) and signs each corporate document with his personal signature and a corporate seal, but his powers are limited by the applicable Ukrainian regulations and by the articles of incorporation as well. This person is also liable of all activities of the company.

Founders (owners) of LLC are liable for its obligations within limits of their paid-up share in the authorized capital and if the share was not paid in full also within limits of the unpaid part of the same.

Founders (owners) of LLC can distribute net profits of a limited liability company among themselves as well. Therewith such profits should be taxed using the tax rate, which is applicable to appropriate share holder (the tax rate is different for corporate and natural (private) persons as well as for resident and non-resident private and corporate entities and even different for resident corporate entities and depends on tax and accounting system they use).

The highest executive body of a limited liability company is the general meeting of shareholders (founders, owners), which can adopt any decisions as regarding activity of the LLC. Such meeting should be held at least twice per a calendar year and confirmed with appropriate protocol of the meeting.

Each Ukrainian corporate entity, including limited liability company, has to confirm its registration information to the state registrar annually.

The corporate documents of a Ukrainian Limited Liability Company are:

- protocols of general meeting of the shareholders;

- Notarized Articles of Incorporation (also known as Articles of Association or Statute or Charter or bylaws) with signature and seal of the state registrar;

- Certificate of state registration (also known as certificate of incorporation) with signature and seal of the state registrar;

- reference from the regional department of the State Statistics Committee;

- references from appropriate District Tax Inspection and other state funds and services.

All the above documents are (to be) issued in Ukrainian language, which is recognized as the state language of Ukraine in accordance with Ukrainian Constitution.

Each Ukrainian corporate entity has its seal, which certifies signature of the manager of the entity. Manufacturing and use of the seal is controlled by bodies of the Ministry of Internal Affairs of Ukraine (i.e. by Ukrainian police) as well.

While incorporating a limited liability company in Ukraine it is very important to draft a good Articles of Incorporation (also known as Articles of Association or Statute or Charter) because there are a lot of requirements provided for contents of the same by numerous Ukrainian regulations. Therefore the Articles of Incorporation are to be drafted in strict accordance with provisions of Ukrainian regulations; otherwise the LLC will not pass the procedure of state registration (incorporation). Therefore, it is always better to entrust the incorporation procedure to a competent Ukrainian attorney at corporate law or to appropriate Ukrainian law firm.

As regarding incorporation and activities of a Limited Liability Company in Ukraine, the Civil Code of Ukraine, the Commercial Code of Ukraine and the law of Ukraine "About commercial entities" as well imperatively regulate most legal issues of incorporation, managing and termination of a Ukrainian Limited Liability Company as well as relations between founders (owners) of the LLC, relations of selling their corporate rights (shares in the authorized capital) among themselves and to third parties and also provide imperative distribution of powers between manager(s) and owner(s) of a LLC. Therefore there is quite a small list of issues, which can be drafted in Articles of Incorporation (also known as Articles of Association or Statute or Charter) at own discretion of founders (also known as shareholders or owners) because the most issues are imperatively regulated by Ukrainian laws.

A Ukrainian Limited Liability Company is a perfect choice for commerce in Ukraine and abroad as well, when founders do not plane to transfer (trade) their corporate rights (shares) too often (because each transfer of corporate rights should be made through adoption and state registration of a new edition of Articles of Incorporation). Owners of LLC can distribute net profits of the company between themselves and have their liability limited by property of the company and their paid share capital.

Also, each Ukrainian corporate entity, including Ukrainian Limited Liability Company, has to file a lot of reports to the regional state tax inspection and to other numerous state bodies during a calendar year and there are provided penalties for those corporate entities and their officials, who fail to do this timely. Reports are not public and cannot be disclosed by state officials to any third parties without consent of the entity. Ukrainian laws and regulations also provide possibilities for the regional state tax inspection and to the other numerous state bodies to check accounting records of a corporate entity from time to time.

The above information is provided herein in educational and informative purposes only. It is provided that you have to get appropriate legal advice as regarding the legal and other issues of your interest in Ukraine in order to have the exact, extensive and up-to-date legal and other related information.

Do not hesitate to contact us if you have any questions or issues of legal nature, our Law Firm is working for you and our experienced legal specialists are always ready to help providing the client with appropriate legal consultations, legal reports and summaries, reasonable legal advices and all the other required legal support, assistance, coverage and protection.

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