On June 17, 2018, the Law of Ukraine "On Additional and Limited Liability Companies" (the Law) comes into force setting forth new requirements to operation of LLCs and their charters. According to clause 1 of article 9 and clause 2 of article 11 of the Law, an LLC charter shall stipulate only the following mandatory provisions (which also coincide with those established in clause 1 of article 88 and clause 3 of article 90 of the Civil Code of Ukraine):
- Full and (if applicable) short names of the company (name and legal form)
- Corporate governing bodies, their authority, procedure for taking decisions; and
- Procedure for entrance into and exit from the company
At first glance, one may argue that such changes simplify significantly the operation of LLCs since according to the Law any other information (e.g., amount of the charter capital, amount of share interests, list of shareholders etc.) is to be registered with the Unified State Registry without the need for amending the charter and that the companies would have to bring their charters in compliance with the Law.
This being said, we note that the Law has not amended clause 4 of article 57, clause 3 of article 80 and clauses 2 and 4 of article 82 of the Business Code Ukraine, which apply to charters of any business undertakings, including an LLC, and set forth the following mandatory provisions for a charter:
- Purpose and subject matter of operation
- Amount and procedure for creation of the charter capital and other funds
- Procedure for distribution of profits and losses
- Reorganization and liquidation
- Type of the company
- Composition of founders and shareholders
- Amount of share interests of each shareholder; and
- Amount, composition and procedure for making contributions by shareholders.
In addition, clause 8 of article 65 of the Business Code of Ukraine requires that a charter stipulate the authority of the working collective regarding its participation in the management of the company, and article 5 of the Law "On Foreign Economic Activity" stipulates that a legal entity shall have the right to engage in a foreign economic activity as envisaged by its charter.
As stated in clause 3 of chapter VIII of the Law, within one year from the date of effectiveness of the Law, provisions of an LLC charter which do not comply with the Law shall remain valid to the extent they comply with legislation in effect on the date when the Law comes into force.
Taking into account that the above referenced articles of the Business Code of Ukraine mostly reiterate provisions for an LLC charter required by the Law "On Business Companies" which ceases to become applicable to LLCs on June 17, 2018, and since section 6 of article 11 of the Law permits for an LLC charter to contain other information which is not in contradiction with law, an argument can be made that charters of almost all LLCs created before June 17, 2018 would in principle comply with legislation in effect on the date when the Law comes into force.
In view of the above, at present we do not see the necessity of amending charters of the existing LLCs unless the operation itself of LLCs requires doing so. For example, a company needs to change address or participants or amount of the charter capital which are indicated in the existing charter, or the company wishes to benefit from the Law thereby cancelling provisions on an audit commission or introducing a supervisory board or instituting a procedure for consenting to a significant transaction or a self-interested transaction etc.
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