The Law of Ukraine
On Business Associations
Date of Entry into Force:
October 1, 1991
This Law defines business associations as enterprises, organizations and establishments established on the basis of agreement between legal entities and citizens, through consolidation of their assets and entrepreneurial activity with the aim of gaining profit.
Business associations are joint stock companies, limited liability companies, additional liability companies, full liability companies and differentiated liability companies.
Article 4 stipulates that joint stock company, limited liability company and additional liability company shall be established and act on the basis of constituent agreement and statute; full liability company and differentiated liability company - on the basis of constituent agreement. The constituent documents of the association shall be agreed with the Antimonopoly Committee of Ukraine in cases provided by the legislation in force.
A company becomes a legal entity from the date of its state registration.
Article 10 determines general rights of participants of association. Article 11 sets forth duties of the participants of the association.
Article 13 sets the types of property which a participant or a founder may or may not contribute to the statutory fund of a company.
Article 14 requires establishment of a reserve (insurance) fund in the association. The fund shall amount not less than 25 per cent of the statutey fund, as well as other funds, provided for by the legislation or the statute.
Article 15 determines sources of association profits, and general requirements to the calculation of net profit. This Article also lays down basic principles of using association profits.
Article 19 of the law sets forth that activity of association shall be terminated by its reorganization (merger, joining, split, spin-off and transformation) or liquidation with observance of requirements of the legislation on protection of economic competition. Reorganization of association shall be conducted according to a decision of its highest body. This Article specifies grounds for the dissolution of association.
Article 23 defines management bodies of an association and officials of such bodies. This Article enlists the persons who are not eligible to participate in the management of association.
Chapter II is devoted to some types of associations. This Chapter addresses peculiarities of regulation of activity of every association defined by this law.
Article 24 defines a joint stock company. It is a an association with statute fund divided into specified number of shares having equal nominal value that is liable for commitments by its assets only. Minimum statute fund of a joint stock company should amount not less than 1,250 minimum wages.
The law defines two types of joint stock companies:
public joint stock companies (PJSC) - companies, the shares of which can be distributed through the public subscription or purchase- and - sale at stock exchange;
closed joint stock companies (CJSC) - companies, the shares of which are divided between the founders and can not be distributed through subscription, or purchase -and-sale at stock exchange.
The law also governs such issues as the issuance of shares, their acquisition, distribution, including subscription and allocation of all shares among the founders.
The Law prohibits public joint stock companies to issue shares with the purpose of covering losses connected with their activities.
The Law governs issues relating to the rules of procedure of joint stock companies such as meetings of founders, procedures of holding a meeting, authority and decision- making at general meetings of shareholders, a procedure governing changes of the volume of statutory fund of a joint stock company. The law also governs activity of executive and control bodies of the company.
Article 50 of the Law defines a limited liability company an association with statute fund divided into shares the amount of which is determined by the constituent documents. A participant is liable to the extent of his contributions.
Minimum statutory fund should be equal to 100 minimum wages.
The Law governs issues relating to admission of participants, legal succession of a participant, withdrawal of a participant. The Law also lays down rules regarding operation of a limited liability partnership, its constituent bodies and officials.
Article 65 regulates activity of additional liability company. This Article defines additional liability company as an association the statute fund of which is divided into shares equal to the amount determined by the constituent documents. The participants of such association are responsible for its debts within their contributions to the statutory fund, and, in case of insufficiency of such sums - additionally with their property in amount equal for all participants, which corresponds to the multiplied contributions of each participant.
Article 66 defines a full liability company. It means an association where all participants conduct joint entrepreneurial activity and undertake joint liability with all their property under commitments of the association.
Article 75 defines a differentiated liability company. It means an association in which, along with one or more participants who carry out entrepreneurial activities on behalf of the association and bear liability for the association's obligations with all their property, there are one or more other participants whose liability is limited by their contribution into the association's property (“contributors”).