The Law of Ukraine

On Joint Stock Companies

Date of entry into force:
April 29, 2009

The present Law shall identify the procedure for setting up, operating, terminating, and separating joint stock companies, their legal status, and rights and obligations of shareholders.

According to Article 3 of the present Law, a joint stock company shall be a business entity whose authorized capital was divided into a certain number of shares of equal nominal value were corporate rights shall be attested by shares. A joint stock company shall not be liable for obligations of its shareholders. It shall not be possible to apply any sanctions to a joint stock company and its bodies that shall limit their rights in the instance when shareholders have committed illegal acts. Shareholders shall not be liable for obligations of a joint stock company and shall bear the risk of losses related to activities of a joint stock company only within the limits of shares belonging thereto. Shareholders shall not be subject to any sanctions that shall limit their rights in the instance when the relevant joint stock company has or other shareholders have committed illegal acts.

Article 5 of the present Law shall identify that joint stock companies shall be divided in terms of their types into public joint stock companies and private joint stock companies. The quantitative composition of shareholders of a private joint stock company shall not exceed 100 shareholders.

A joint stock company may be set up by one individual or entity or may consist of one individual or entity in the instance when one shareholder shall purchase all shares of a joint stock company. Information about that shall be subject to registration and publication for public information according to the procedure set forth by the State Commission for Securities and the Stock Market.

According to Article 7 of the present Law, shareholders of a public joint stock company may alienate shares belonging thereto without the agreement of other shareholders and the joint stock company. The Charter of a private joint stock company may provide for the preferential right of its shareholders and the joint stock company itself to purchase shares of such a joint stock company that shall be offered by their holder for sale to a third entity or individual.

Shareholders of a private joint stock company shall have the preferential right to purchase shares that shall be sold by other shareholders of the relevant joint stock company at a price and on terms and conditions offered by such a shareholder to a third entity or individual in proportion to the number of shares belonging to each of them. The preferential right of shareholders to purchase shares that shall be sold by other shareholders of the relevant joint stock company shall be valid within two months from the date when the relevant joint stock company receives a notification of such a shareholder of their intention to sell shares, unless a shorter deadline is specified in the Charter of the relevant joint stock company.

Article 9 of the present Law shall establish that the state in the person of the body authorized to manage state-owned property, the relevant territorial community in the person of the body authorized to manage communal property, as well as private individuals and/or legal entities that have made the decision to set up a joint stock company shall be recognized as founders of such a joint stock company. One, two or more individuals or entities may be founders of a joint stock company.

A joint stock company shall be set up following the below-mentioned stages:
  • the meeting of founders shall make a decision on setting up a joint stock company and on carrying out a closed (private) placement of shares;
  • an application and all the necessary documents shall be submitted to the State Commission for Securities and the Stock Market for the registration of the issue of shares;
  • the State Commission for Securities and the Stock Market shall register the issue of shares and shall issue a temporary certificate of registration of the issue of shares;
  • shares shall be assigned an International Securities Identification Number (ISIN);
  • a contract for servicing the issue of shares shall be concluded with a depositary of securities or a contract for keeping the register of holders of registered securities shall be concluded with a registrar of registered securities;
  • a closed (private) placement of shares shall be carried out among the founders of the relevant joint stock company;
  • founders shall pay full nominal value of shares;
  • the Constituent Assembly of the joint stock company shall approve the results of a closed (private) placement of shares among the founders of the joint stock company, the Charter of the joint stock company, as well as make other decisions stipulated by the law;
  • the joint stock company and its Charter shall be registered with bodies of state registration;
  • a report on the results of a closed (private) placement of shares shall be furnished to the State Commission for Securities and the Stock Market;
  • the State Commission for Securities and the Stock Market shall register the report on the results of a closed (private) placement of shares;
  • the joint stock company shall receive a certificate of state registration of the issue of shares;
  • founders of the joint stock company shall be issued documents that shall confirm the ownership right for shares.

According to Article 10 of the present Law, the Constituent Assembly of a joint stock company shall resolve issues related to:
  • the foundation of the joint stock company;
  • the approval of the assessment of property deposited by founders towards the payment for shares of the joint stock company;
  • the approval of the Charter of the joint stock company;
  • the creation of bodies of the joint stock company;
  • the authorization of a representative (representatives) to carry out further activities to set up the joint stock company;
  • the election of members of the Supervisory Board, Chairman of the collective executive body of the joint stock company (an individual who shall exercise powers of an individual executive body of the joint stock company) and members of the Auditing Committee (an auditor);
  • the approval of the results of a placement of shares;
  • the committal of other actions that shall be necessary to set up the joint stock company.

Article 13 of the present Law shall specify that the Charter of a joint stock company shall be the constituent document of the relevant joint stock company. The Charter of a joint stock company shall contain information about:
  • full and abbreviated name of the joint stock company in the Ukrainian language;
  • the type of the joint stock company;
  • the size of its authorized capital;
  • the size of its capital reserves;
  • the nominal value and the total number of shares, the number of each type of shares placed by the joint stock company, including the number of each class of privileged shares, as well as the consequences of the failure to fulfill the obligations to buy out shares;
  • terms and conditions of, as well as the procedure for converting privileged shares of a certain class into ordinary shares of the joint stock company or into privileged shares of a different class in the instance when the joint stock company provides for the issue of privileged shares;
  • rights of shareholders holders of privileged shares of each class;
  • the availability of the preferential right of shareholders of a private joint stock company to purchase shares of this joint stock company that shall be offered by a shareholder for sale to a third individual or entity, and the procedure for its realization;
  • the procedure for notifying shareholders of the payment of dividends;
  • the procedure for convening and holding the General Meeting;
  • the competence of the General Meeting;
  • the way for notifying shareholders of changes in the agenda of the General Meeting;
  • the composition of the bodies of the joint stock company and their competence, the procedure for establishing them, electing and recalling their members, and for making decisions thereby, as well as the procedure for changing the composition of bodies of the joint stock company and their competence;
  • the procedure for introducing amendments to the Charter;
  • the procedure for terminating the joint stock company.

The minimum size of the authorized capital of a joint stock company shall constitute 1,250 minimum wages, proceeding from the rate of the minimum wage that shall be in effect at the moment of setting up (registering) the joint stock company. The authorized capital of a joint stock company shall determine the minimum size of the joint stock companys assets that shall guarantee interests of its creditors (Article 14 of the present Law).

The authorized capital of a joint stock company shall be increased by way of raising the nominal value of shares or placing additional shares of the current nominal value according to the procedure set forth by the State Commission for Securities and the Stock Market. The authorized capital of a joint stock company shall be decreased according to the procedure set forth by the State Commission for Securities and the Stock Market by way of lowering the nominal value of shares or by way of withdrawing shares purchased earlier by the joint stock company and reducing their total number, if this is envisaged by the Charter of the joint stock company.

According to Article 18 of the present Law, a joint stock company shall have the right to consolidate all shares placed thereby. As a result, two or more shares shall be converted into one new share of the same type and class. A joint stock company shall have the right to split up all shares placed thereby. As a result, one share shall be converted into two or more new shares of the same type and class. In the instance of consolidating or splitting up shares, the relevant amendments related to the nominal value and the number of shares placed shall be introduced to the Charter of the joint stock company.

Article 20 of the present Law shall establish that a share of a joint stock company shall attest corporate rights of a shareholder with respect to the relevant joint stock company. All shares of a joint stock company shall be registered shares. Shares of joint stock companies shall be issued exclusively in the non-documentary form. A joint stock company may place shares of two types: ordinary shares and privileged shares. The Charter of a joint stock company may provide for the placement of one or several classes of privileged shares, which shall grant different rights to their holders.

A joint stock company may issue shares only on the basis of a decision of the General Meeting. A joint stock company may place other securities, in addition to shares, on the basis of a decision of the Supervisory Board, unless otherwise is envisaged by the Charter of a joint stock company. The decision to place securities for the amount that shall exceed 25 percent of the value of the joint stock companys assets shall be made by the General Meeting of Shareholders.

According to Article 25 of the present Law, each ordinary share of a joint stock company shall grant its holder the shareholder an equal package of rights, including the right:
  • to participate in managing the joint stock company;
  • to receive dividends;
  • to receive a part of property of the joint stock company or its cost in the instance of liquidation of the joint stock company;
  • to receive information about business activities of the joint stock company.

One ordinary share of a joint stock company shall give a shareholder one vote to resolve each issue at the General Meeting, except for the instance when a cumulative voting is held. Shareholders who shall be holders of ordinary shares of a joint stock company may also have other rights set forth by legislative acts and the Charter of the joint stock company.

Each privileged share of one class of a joint stock company shall grant its holder the shareholder an equal package of rights. The Charter of a joint stock company shall identify the volume of rights that shall be given to a shareholder who is holder of each class of privileged shares. Also, the Charter of a joint stock company shall specify:
  • the size of and the order for paying out dividends;
  • the liquidation value and the order of payments in the instance of liquidation of a joint stock company;
  • the instances, terms and conditions of converting privileged shares of the relevant class into privileged shares of a different class, ordinary shares or other securities;
  • the procedure for receiving information (Article 26 of the present Law).

Article 28 of the present Law shall stipulate that officials of bodies of a joint stock company and other individuals that shall have employment relationships with a joint stock company shall not have the right to demand from a shareholder who shall be employee of the joint stock company to provide information about how they have voted or how they intend to vote at the General Meeting, or about the alienation by a shareholder who shall be employee of the joint stock company of their shares or the intention to alienate them, or to demand the transfer of a power of attorney to participate in the General Meeting.

According to Article 30 of the present Law, a dividend shall be a part of net profits of a joint stock company that shall be paid to a shareholder calculated per one share of a certain type and/or class belonging to such a shareholder. The same size of dividends shall be calculated for shares of the same type and class. A joint stock company shall pay out dividends with the help of cash resources only. Dividends shall be paid for shares where the report on the results of placing such shares was registered according to the procedure set forth by the legislation.

The size of dividends under privileged shares of all classes shall be determined in the Charter of a joint stock company.

Article 32 of the present Law shall stipulate that the General Meeting shall be the highest body of a joint stock company. A joint stock company shall have to convene the General Meeting (the Annual General Meeting) every year. The Annual General Meeting of a joint stock company shall be held not later than April 30 of the year following the reporting year.

The exclusive competence of the General Meeting shall include:
  • identifying the main areas of activities of the joint stock company;
  • introducing amendments to the Charter of the joint stock company;
  • making a decision on withdrawing redeemed shares;
  • making a decision on changing the type of the joint stock company;
  • making a decision on placing shares;
  • making a decision on increasing the authorized capital of the joint stock company;
  • making a decision on decreasing the authorized capital of the joint stock company;
  • making a decision on splitting up or consolidating shares;
  • approving the regulations on the General Meeting, the Supervisory Board, the executive body, and the Auditing Committee (an Auditor) of the joint stock company, as well as introducing amendments thereto;
  • approving other internal documents of the joint stock company, unless otherwise is specified by the Charter of the joint stock company;
  • approving the annual report of the joint stock company;
  • distributing profits and losses of the joint stock company;
  • making a decision on buying out shares placed by the joint stock company;
  • making a decision on the form in which the shares shall exist;
  • approving the size of annual dividends;
  • making decisions on issues related to the procedure for holding the General Meeting;
  • electing members of the Supervisory Board, approving terms and conditions of civil and legal or labor contracts that shall be concluded with them, establishing the size of their remuneration, electing an individual who shall be authorized to sign civil and legal contracts with members of the Supervisory Board;
  • making a decision on terminating powers of members of the Supervisory Board;
  • electing Chairman and members of the Auditing Committee (an Auditor) and making a decision on terminating their powers pre-term;
  • approving conclusions of the Auditing Committee (an Auditor) and making a decision on terminating their powers pre-term;
  • making a decision on separating and terminating the joint stock company, on liquidating the joint stock company, on electing the liquidation commission, on approving the procedure and deadlines for liquidation, the procedure for distributing the property that shall be left after claims of creditors have been satisfied among shareholders, and approving the liquidation balance sheet;
  • making a decision on the basis of the results of examining the report of the Supervisory Board, the report of the executive body, and the report of the Auditing Committee (an Auditor);
  • approving the principles (the code) of corporate management of the joint stock company;
  • electing a commission for terminating the joint stock company;
  • tackling other issues that shall belong to the exclusive competence of the General Meeting according to the Charter of the joint stock company or the Regulation on the General Meeting of the joint stock company.

According to Article 37 of the present Law, the agenda of the General Meeting of a joint stock company shall be preliminarily approved by the Supervisory Board of a joint stock company and, in the instance of convening an extraordinary General Meeting upon request of shareholders by shareholders who shall request such a meeting.

Article 39 of the present Law shall provide for the possibility of representation of shareholders. A representative of a shareholder at the General Meeting of a joint stock company may be a private individual or an authorized person of a legal entity, as well as an authorized person of the state or a territorial community. A shareholder shall have the right to appoint their representative on a permanent basis or for a certain period of time. A shareholder shall have the right, at any moment, to replace their representative, notifying the executive body of the joint stock company thereof. The power of attorney for the right to participate and to vote at the General Meeting may be verified by a registrar, a depositary, a keeper, a notary, and other officials who shall commit notarial acts, or according to some other procedure set forth by the legislation.

According to Article 41 of the present Law, the availability of a quorum at the General Meeting shall be determined by a registration commission at the moment when the registration of shareholders for the participation in the General Meeting of a joint stock company is finished. The General Meeting of a joint stock company shall have a quorum on condition of registration of shareholders for the participation in the General Meeting who shall jointly hold at least 60 percent of voting shares.

In the instance when a decision of the General Meeting or the procedure for making such a decision violates the requirements of the present Law, other legislative acts, the Charter, or the Regulation on the General Meeting of a joint stock company, a shareholder whose rights and interests protected by the law have been violated by such a decision may appeal such a decision in court within three months from the date when such a decision has been made.

Article 51 of the present Law shall envisage that the Supervisory Board of a joint stock company shall be a body that shall protect the rights of shareholders of a joint stock company and, within the limits of competence identified by the Charter of the joint stock company and the present Law, shall oversee and regulate activities of the executive body. It shall be imperative to set up a Supervisory Board in joint stock companies where the number of shareholders who shall be holders of ordinary shares shall be ten individuals or entities and higher. In the instance when there is no Supervisory Board in joint stock companies where the number of shareholders who shall be holders of ordinary shares shall be nine individuals or entities and lower, powers of the Supervisory Board shall be exercised by the General Meeting.

According to Article 58 of the present Law, the executive body of a joint stock company shall manage day-to-day operation of a joint stock company. The competence of the executive body shall include the solution of all issues related to management of day-to-day operation of a joint stock company, except for the issues that shall be included in the exclusive competence of the General Meeting and the Supervisory Board. The executive body of a joint stock company shall be accountable to the General Meeting and the Supervisory Board and shall organize the fulfillment of their decisions. The executive body shall act on behalf of the joint stock company within the limits established by the Charter of the joint stock company and the law.

An individual or an entity (individuals or entities that shall act together) that has (have) purchased 50 and more percent of ordinary shares of a joint stock company (the controlling stake) shall, within 20 days from the date of purchasing the controlling stake, have to propose to all shareholders to purchase their ordinary shares of the joint stock company, except for the instances of purchasing the controlling stake in the process of privatization.

According to Article 73 of the present Law, the General Meeting shall elect an Auditing Committee (an Auditor) to carry out an inspection of financial and business activities of a joint stock company. It shall be necessary to institute the office of an auditor (or to elect an Auditing Committee) in joint stock companies where the number of shareholders who shall be holders of ordinary shares of a joint stock company shall be below 100 individuals or entities. It shall be imperative to elect an Auditing Committee in joint stock companies where the number of shareholders who shall be holders of ordinary shares of a joint stock company shall be above 100 individuals or entities.

Article 83 of the present Law shall provide for the possibility of a merger of joint stock companies. A merger of joint stock companies shall be recognized the emergence of a new joint stock company that shall be the legal successor involving the assignment thereto according to the deeds of assignment of all rights and obligations of two or more joint stock companies simultaneously with their cessation. A joint stock company may participate in a merger only with another joint stock company.

Voluntary liquidation of a joint stock company shall be carried out on the basis of a decision of the General Meeting, including in connection with the expiry of the period for which such a joint stock company was set up or upon the achievement of the purpose for which such a joint stock company was set up. Voluntary liquidation of a joint stock company shall be carried out according to the procedure specified by the Civil Code of Ukraine and other legislative acts, with due consideration for the specifics set forth by the present Law. Other reasons and the procedure for liquidation of a joint stock company shall be determined by the legislation (Article 88 of the present Law).
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