News

Registration of a Company in Ukraine: Investor’s Perspective

Analysis of 2017 Regulations

Selecting a Business Structure

Prior to starting a registration process in Ukraine, one should consult with an attorney and an accountant to consider all legal aspects around tax, liability, management, continuity, transferability of ownership interests, and formality of operations.

The Ukrainian law provides foreign investors with a quite a few options for a business structure. Business activities in Ukraine are regulated by the following legislature:

• Civil Code of January 16, 2003 (Ukrainian: Цивільний кодекс України, від 16.01.2003 р.).
• The Economic Code of 16 January 2003 (Ukr.: Господарський кодекс України, від 16.01.2003 р.).
• The Law on Economic Partnerships of 19 September 1991 (Ukr.: Закон України «Про господарські товариства» від 19.09.1991 р.).
• The Law on Joint Stock Companies of September 17, 2008 (Ukr.: Закон України «Про акціонерні товариства» від 17.09.2008 р.).

Generally, businesses are created and operated in one of the following forms:

1)   Physical Person – defined as an entrepreneur.

2)   Civil Partnership – this is a very rare form of business that typically does not have a status of a legal entity.

3)   Partnership.

4)   Corporation – this form of business has a status of a legal entity, with all partners bearing full responsibility with all their assets.

5)   Limited Partnership – this form of business has a status of a legal entity. There are two categories of partners under this type of business, with one being responsible for the business activities with all their assets and the other responsible only within the limits of their contribution.

6)   Company with Additional Liability – this form of business has a status of a legal entity. Under this type of business, partners, in addition to the shares, are also responsible within the limits of a certain amount specified in the company's articles of incorporation.

7)   Limited Liability Company – has a status of a legal entity and is one of the most common forms of doing business in Ukraine.

8)   Joint Stock Company.

9)   Private Enterprise – this form of business has a status of a legal entity.  Evolving from the 1990s, currently, this is a rare form of business because of the lack of precise regulations under the current law.

10)   Affiliate of a foreign entity.

Our analysis focuses on the most common forms of doing business in Ukraine:

• Limited Liability Company
• Affiliate

With an exception of the joint-stock companies, other forms of business entities are rarely found in the Ukrainian economy. Mostly because of the level of liability and obligations, business owners shy away from such forms as full, civil, or additional liabilities company structures.

Limited Liability Company (LLC)

Under this structure, the liability of the shareholders or partners is limited to their investment in the partnership. The LLC has a share capital (so-called a partnership fund), the minimum size of which is not specified by the current regulations of the Ukrainian Law. In fact, theoretically, the share capital may be as small as 1 UAH. The LLC may have one or many partners. The LLC is governed by its shareholders, board of directors (i.e., executive director, director, general manager), and a Reserve Committee.

Registration Process

Below we discuss the basic regulations concerning the registration of a company using an LLC as an example.

The rules to register a company in Ukraine are defined by the Law on the State registration of Legal Entities, Private Entrepreneurs, and Public Formations, dated 15.05.2003. (Ukr.: Закон України “Про державну реєстрацію юридичних осіб, фізичних осіб - підприємців та громадських формувань від 15.05.2003 № 755-IV), - hereinafter the Registration Act.

A State Registrar (Ukr.: державний реєстратор) performs the registration of a company. In Ukraine, there is the National Registry of Legal Entities, Private Entrepreneurs, and Public Formations (Ukr.: - Єдиний державний реєстр юридичних осіб, фізичних осіб - підприємців та громадських формувань). The National Registry contains data of all business operators and is available online at

usr.minjust.gov.ua/ua/freesearch

State Registrars operate in each region (respective county or “oblast”) of Ukraine.  In order to register a company, one needs to submit an application form (note: the format of application form is standard and is approved with the order of Ministry of Justice of Ukraine dated 6 January 2016 No. 15/5), together with the required documents to the State Registrar in the city where the company is to be based. The application can also be submitted to another Registrar in the region (oblast), where the company will be based.

In addition to the application, the following documents are required to be submitted to the State Registrar:

• LLC charter, signed by all shareholders or partners (not required to be notarized);
• Meeting minutes of the shareholders (not required to be notarized);
• Power of attorney, if the application and documents are submitted by an attorney;
• If a shareholder is a foreign company, the original copy of the relevant legal or commercial registration (with the company’s seal) must be submitted. The copy should be translated to Ukrainian and notarized.

An attorney may perform the registration on behalf of the LLC, as long as the power of attorney is in place. What this means is that the founding partners do not have to come to Ukraine, but instead each partner or shareholder must provide an attorney with the notarized power of attorney.

Prior to the registration process, one should decide about a composition of the board of directors that will become part of the LLC’s governing body. In Ukraine, it is accepted that a board of directors can be a one-person board, represented by a Director or a General Manager. Unfortunately, the Ukrainian regulations are designed such that an appointment of a foreigner as a board member who doesn’t have a permanent residency in Ukraine may result in the Ukrainian government treating this as a violation of the Labor Law in Ukraine (i.e., working in Ukraine without the appropriate work permits) and could lead to penalties and fines. Therefore, it is strongly advised that the members of the board of directors should be either Ukrainian citizens or foreign citizens holding permanent residency status in Ukraine.

It is also worth noting that if a partner is a natural person, he or she is required to have a Ukrainian tax identification number. The registration is not possible without the tax identification, and in this case, the entire LLC registration process should start with obtaining a personal tax identification number.  

To obtain the tax identification, the following documents are required to be submitted to a tax office in Ukraine:

• Application.
• Notarized (translated, if necessary) copy of a passport.

The filing may be done by an attorney as long as the power of attorney is in place. The process to obtain a personal tax identification typically takes one week.

According to Article 26 of the Registration Act, the registration of a company should be carried out by the State Registrar within 24 hours.