Under Ukrainian law, any Ukrainian company whose share capital is at least 10% comprised of foreign investment qualifies as a company with foreign investment. Such companies are in the main subject to the general rules of Ukrainian company law. Thus a number of options are available for foreign company or individual to set-up business in Ukraine. The main laws that govern the establishment and activity of legal entities in Ukraine are the Civil Code, the Commercial Code.
The most commonly forms of business in Ukraine are the limited liability company, the joint stock company and representative office. Such forms of business as joint ventures, partnership, additional liability company, and non-corporate joint activity is available, but is not optimal form for foreign investors.
Limited liability company (LLC)in Ukraine is the most optimal legal form.
Pursuant to Ukrainian law there are 2 types of LLC in Ukraine:
a) shareholders are non residents having 100% of corporate rights in the LLC
b) shareholders are residents that are legal o natural persons or other non residents.
LLC in Ukraine may consist of minimum one and maximum 10 shareholders.
The limited liability company as a legal unit is authorised to create its subsidiaries in order to develop and to be present in different regions of the country, with no limit on quantity of the last-mentioned. The subsidiaries usually have the same name as the parent company with precise indication of “subsidiary”. The subsidiaries do not have the status of legal units. Subsidiaries are created and supported by the parent company. The subsidiary must have the director which is dependant and controlled in full by the General Director of the parent company. The taxation of the subsidiaries is the same as for parent company.
The limited liability company is governed by three bodies:
• The general meeting of participants, which is the company’s highest body;
• The Board of Directors and/or General Director, which are the executive body governing the company’s day-to-day operations;
It is important to highlight that the LLC can be founded with 100 per cent of foreign investments and can be owned either by the only one legal person (the owner) or several legal persons.
The minimum share capital of a LLC in Ukraine is 1.000.00 UAH – +/- 130 USD.
The share capital shall be paid as follows:
- 50% of the share capital with the opening of the temporary bank account is necessary for the formation of share capital;
- 50% within 365 days from the date of incorporation.
Social capital may be paid in the form of monetary investment and / or in form of assets investment (such as computers, furniture, real estate, cars, etc…)
LLC in Ukraine is a legal unit and is authorized to do all the activities stipulated in the Statute, as well as all operations necessary or useful for the attainment of social purpose of the LLC.
A joint-stock company is a company with statutory capital divided into a certain number of shares with definite equal nominal value. Shareholders are liable for the company’s commitments only within the limits of their shares.
The Law on Companies provides for two types of joint-stock companies:
• Open or public joint-stock company (OJSC), whose shares are distributed through open subscription and may be circulated on a stock exchange;
• Closed or private joint-stock company (PJSC), whose shares are distributed among the founders and cannot be distributed through open subscription or circulated on a stock exchange.
The main drawbacks of setting up a joint-stock company, either private or public, are complicated registration and stock issuing procedures.
A foreign company may set up a representative office in Ukraine. A representative office is not a legal entity under the Ukrainian law but only acts for and on behalf of the foreign founder.
In practice, representative offices of foreign companies may be of two types: a representative office through which a non-resident entity carries out its business activity in Ukraine—which is considered a branch from the legal viewpoint—and a representative office whose functions are generally limited to representing the interests of the foreign entity, performing marketing activities, and providing other support functions to promote the business of the foreign founder. Representative offices must be registered with state authorities under Ukrainian law.
The Procedures of Establishing Business in Ukraine
All businesses shall be officially registered by the Registrar at the place of residence of a business entity. Also it involves registering in tax authorities, the statistic offices and various pension and social funds.
If the owner is a foreign legal entity, an extract from the trade, bank or court register must be produced to certify registration of the investor in the country of origin. Also, a company charter and a power of attorney (proxy), specifying formation of business, for the individual who will represent the company in Ukraine are recommended. These documents must be duly approved according to legislation of the country of issue, translated into Ukrainian and legalized abroad. If the owner of the LLC is a foreign individual, such person has to obtain a Ukrainian identification code. This procedure can take about 10 days.
The procedure for setting up a Ukrainian company, including the preparation of documents and contribution of funds to the company’s authorized capital, takes around one month.
1)Open a bank account for initial capital
Founders must contribute 50% of their charter fund contribution before registering the company. Founder contributions may be made in cash, including foreign currency, as well as in kind.
Temporary accounts are restricted to receiving the contributions of funds for the formation of the nominal (share) capital of the company being incorporated. No other operations are allowed.
According to the National Bank of Ukraine’s Regulation No. 492 of November 12, 2003, “On the Procedure of Opening, Using and Closing of National and Foreign Currency Accounts,” the following documents must be submitted to the bank to open a temporary account:
- Application for opening the account in the form established by Regulation No. 492. The application should be signed by the person authorized by the founders of the legal entity (could be a separate power of attorney granted to the individual concerned).
- Original or notarized copy of the constituent documents (charter and, in some cases, foundation agreement).
- The founders’ decision to grant a power of attorney, which should be notarized if at least one founder is an individual).
- The signature specimen and the imprint of the seal (as specified in Regulation No. 492). The signature specimen should contain the signature of the person(s) authorized by the founders to sign the bank account documents. While the company is under formation, it does not have a corporate seal. Thus, at this point, the card should be submitted without the seal and signed by the authorized bank employee.
2)Register at the Registration Office
Founders must submit the following documents when registering at the Registration Office:
- The charter (two copies).
- Minutes of founders’ meeting.
- Application form (registration card).
- Bank document, evidencing payment of registration fee.
- Proof of payment of minimum capital requirement.
As the registering authority, the State Registrar issues a certificate of registration, which becomes the company’s incorporation document. According to the Law of Ukraine No. 755-IV, “On the State Registration of the Legal Persons and Private Persons – Entrepreneurs” (dated May 15, 2003), the State Registrar should perform all due registrations with the State Committee of Statistics of Ukraine, the state social funds, (the State Pension Fund, the Employment Insurance Fund, the Social Security Fund, and the Fund for Social Insurance) and the tax authorities for the newly registered company. However, in practice, the State Registrars does not register with the State Committee of Statistics, and that registration is usually performed by the company itself.
3)Register at the State Statistics Committee
Companies must register with the State Statistics Committee, although the Registration Office has already filed some information with the Statistics Office.
4)Register VAT at the State Tax Authority and obtain a VAT number
5)Approval of Ministry of Internal Affairs to prepare a company seal
6)Prepare a seal
7)Open a permanent bank account
After the company is registered with all relevant state authorities, a temporary bank account can be converted into an operational account, which under Ukrainian banking law, is designated as a “current account.” To change the account status from temporary to current, the bank must receive the following:
- The set of company documents stipulated by Ukrainian banking law (the same documents as those to be provided by an existing company) to open a new bank account. One of these is the copy of the company’s certificate of registration, which contains the company’s tax identification number.
- A confirmation (reply) from the tax authorities that they have registered this bank account.
8)Notify the District Tax Inspectorate of the opening of the permanent bank account
“A.T Consulting”, specializing in the management of investment projects, has the primary task, to assist foreign investors, which intend to enter in the Ukrainian market.
Our operational methods ensure dynamic and flexible responses that take into account the needs of every single Client, assuring assistance from the first moment of his entry in Ukraine and till the last moment of business completion.
Do not hesitate to contact us.