Agenda

JOINT STOCK COMPANIES

15/01/2024

A long-awaited Law of Ukraine "On joint stock companies" No. 2465-IX ("the Law") has entered into force from January 1, 2024. The draft of the Law was enhanced with an orientation towards EU practice. The Law provides guidance for the market participants - joint-stock companies (JSC) considering relevant changes in their operations.

The compelling novelties of the Law:

  • The nuanced changes to the definitions of shareholdings: "X and more" has been changed to "more than X", this wording can affect the rights and obligations of shareholders. At the same time, the meaning of "significant package of shares" left behind the understanding of a package in the amount of 5 % or more of ordinary shares of JSC.
  • Sizes of share packages under the new Law:

For dominant controlling package: in the amount of more than 95% of ordinary shares (previously 95% or more of ordinary shares).

For a significant controlling package: in the amount of more than 75% of ordinary shares of a public JSC (contrary to previous regulation - 75% or more of ordinary shares of a public JSC).

 For controlling package of shares: in the amount of more than 50% of ordinary shares (in comparison to earlier law-50% or more of ordinary shares).

  • Levels of JSC management structure: one-level or two-level.

Under the one-level structure: the governing bodies general meeting and the board of directors. In a private JSC with the number of shareholders up to 10 people, instead of a board of directors, a one-person executive body with the same powers can be formed.

Under the two-level structure (the most familiar for Ukrainian business): the governing bodies-the general meeting, the supervisory board (monitors the work of the executive body and other managers of the JSC), and the executive body (collegial/individual), which directly manages the current JSC activity.

 Remarkably, that those legal entities that did not have a supervisory board under the previous law must either create one or work under a one-level structure and form a board of directors. Nonetheless, the company has the right at any time to decide on the transition from a one-level to a two-level management structure or vice versa, which will not be defined as a reorganization or transformation of a JSC.

  • Regulation of general meetings. The new Law changed the term of the highest body of JSC, i.e. from "the general meeting of JSC" to "the general meeting of shareholders".
  • 3 ways to vote on issues on the agenda:(1) Face-to-face voting; (2) Electronic voting; (3) Polls - remote general meetings.
  • The possibility of a shortened procedure for convening an extraordinary general meeting of shareholders with the notification of the holding of the extraordinary general meeting made no later than 15 days before the date of its holding.
  • Mandatory presence of the corporate secretary: (1) for JSCs whose securities are admitted to trading on the organized capital market or whose securities have been publicly offered; (2) for banks, insurers, non-state pension funds, other JSCs that are of public interest; (3) for private JSCs with a number of owners of ordinary shares of the company of 100 or more people.
  • The possibility of concluding a corporate agreement by shareholders. It is a quite new practice in Ukraine, previously presented in the Law of Ukraine "On Limited and Additional Liability Companies". From now on such an effective tool for interaction, management, and conflict resolution within the company is provided also for JSC.

Despite the fact that the content of the corporate agreement is confidential, there are such nuances: 1) information about the conclusion of a contract in a public JSC is notified to the company by one of the parties to the contract within 3 working days; 2) if the party is the state, a territorial community, a state or communal enterprise or a legal entity, in the authorized capital of which more than or equal to 25% of the shares belong directly or indirectly to the state or territorial community, the contract is made public within 10 days by posting it on official websites of the relevant authority and JSC.

  • A public joint-stock company can be created exclusively by changing the type of joint-stock company from private to public or by converting from another business company. Thus, the possibility of immediately entering the market as a public JSC is excluded;
  • The minimum amount of the JSC's authorized capital has been significantly reduced - from 1,250 to 200 of the minimum wage
  • Notification of shareholders on the possibility of exercising the preemptive right in the case of an additional issue of shares can be submitted at any time before the start of the issue (previously, the restriction was valid - no later than 30 days before the placement);
  • An additional ground to exclude the right to make a decision on the payment of dividends and to pay dividends on ordinary shares, namely: if the assets of the company are insufficient to satisfy the demands of creditors for obligations whose fulfillment period has come, or as a result of making such a decision will be insufficient to meet such requirements;
  • The execution of one transaction is considered to be the execution by a company of several transactions with one counterparty (and/or with affiliated persons) in relation to one object during the year.
  • The audit control of financial statements can be conducted at the request of shareholders who own 5 % or more of voting shares (instead of 10).

 

 

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