Private enterprise in Ukraine


The minimal number of founders (owners, shareholders) of a Private Enterprise in Ukraine is one corporate or natural (private) person, a resident or non-resident of Ukraine. The maximum number of founders (owners, shareholders) is unlimited if the founders are private (natural) persons. Therewith founders of a Private Enterprise can be either a corporate entity (i.e. only one corporate entity) or natural (private) persons (i.e. unlimited number of natural (private) persons), but not a corporate entity and natural (private) persons all together. This limitation is provided by clause 113 of the Commercial Code of Ukraine.

Relations of owners of a Private Enterprise are not regulated by Ukrainian laws and regulations, therefore it is provided that owners of a corporate entity in this organization form, if they want can regulate all aspects of their relations at their own discretion in Articles of Incorporation (also known as Articles of Association or Statute or Charter or bylaws) including possibility (or prohibition) to sale their corporate rights to any third parties and to establish procedures of taking decisions related to corporate governance (for example, it is possible to provide that decisions are taken by voting, when each owner has one vote or when each of the owners has quantity of votes proportionate to amount of his contribution into the authorized capital of a Private Enterprise (simple or special majority), etc.).

The minimal amount of the authorized (share) capital for a Private Enterprise in Ukraine is not stipulated imperatively by Ukrainian legislation; therefore it can be from UAH 1.00 and no upper limit, on discretion of founder(s) of the Private Enterprise. Requirements as regarding the minimal amount of paid-up authorized capital is also absent.

Also at the moment of incorporation of a private enterprise its owner(s) has to appoint a manager of the private enterprise. 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 maximum 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 enterprise.

Founders (owners) of PE 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 PE can distribute net profits of a private enterprise 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 the tax and accounting system they use).

The highest executive body of a private enterprise in Ukraine is its owner(s) (also known as founders, shareholders) or a meeting of such entities, which can adopt any decisions as regarding activity of the PE. However, Ukrainian laws do not provide any requirements as regarding periodicity of such meetings, place of such meetings, etc. Therefore, founders (owners, shareholders of the PE can regulate these procedure in Articles of Incorporation (Articles of Association, Statute or Charter) of the EP on their own discretion).

Each Ukrainian corporate entity, including private enterprise, has to confirm its registration information to the state registrar annually.

The corporate documents of a Ukrainian Private Enterprise are:

- protocols (decisions) of owner(s) (founder(s), shareholder(s)) or protocols of meetings of these entities;

- 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 private enterprise 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 some imperative requirements provided for contents of the same by numerous Ukrainian regulations and from the other hand creation and other corporate procedures for a private enterprise in Ukraine are not stipulated by Ukrainian laws and the same should be established in Articles of Incorporation (also known as Articles of Association or Statute or Charter or bylaws) of such PE in a very clear and detailed way in order to have no problems, conflicts and complications between founders (owners, shareholders) of the private enterprise in future. Therefore the Articles of Incorporation are to be drafted in strict accordance with provisions of Ukrainian regulations, otherwise the PE will not pass the procedure of state registration (incorporation) from one hand and are to be drafted in the manner, which provides very detailed and clear procedures for corporate governance in order to predict problems, conflicts and complications between founders (owners, shareholders) of the private enterprise in future from the other hand. 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 Private Enterprise in Ukraine, the law of Ukraine "About commercial entities" and the Civil Code of Ukraine as well do not provide any imperative regulations as regarding the legal issues of incorporation, managing and termination of a Private Enterprise, there only some general provisions as regarding all Ukrainian corporate entities in the Civil Code of Ukraine. The Commercial Code of Ukraine and the law of Ukraine "About commercial entities" also provide very few common provisions on Private Enterprises. The same is regarding relations between founders (owners) of the PE, relations of selling their corporate rights (shares in the authorized capital) among themselves. Therefore there are a lot 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) and from this point of view the Private Enterprise is a perfect choice if founder(s) of a corporate entity do not want to be guided in the matters of corporate governance by the imperative law regulations, but want to establish their own procedures for the corporate governance. Another one advantage is that there are no imperative requirements as regarding the minimal paid-up share capital.

Ukrainian Private Enterprise 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 PE can distribute net profits of the company between themselves and have their liability limited by property of the enterprise and their paid share capital.

Also, each Ukrainian corporate entity, including Ukrainian Private Enterprise, 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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