Ukraine has become one of the most accommodating business destinations as of recent. There are many types of companies provided for by the current legislation of Ukraine. Prospective investors can choose from the limited liabilities company, the joint stock company (private or public), Joint Venture or Representative Office. It is the investor’s choice to choose which types of companies in Ukraine suits their business interests.
These types of companies in Ukraine vary in terms of ease of incorporation and ease of business operation. Thus, the investor might need to consider the different forms of structure of these legal entities in order to see which one would suit them in terms of capital, liability and taxation among other factors. There are advantages and disadvantages to each type of business structure in Ukraine. These need to be weighed against the investor’s needs.
The Limited Liability Company. LLC
This is one of the most popular types of companies in Ukraine. It can be small as a one man consultancy or as big as a multinational company. You can register an LLC in Ukraine as an individual or a company. It is suitable for small and medium sized businesses.
In this type of company you find that the shareholder is only liable for what they have invested. Shareholders’ personal Assets are separate and protected from the company liabilities. A feature that is distinct to Ukrainian LLC is the division of share capital into parts, unlike number of shares. Every member of the LLC owns a part of the company.
Key Features of LLCs
- Registration is fairly straightforward
- The process can be done in one to two days.
- Simple compliance and Reporting requirements
LLCs are generally simple less regulated legal entities.
An LLC must have a minimum of 1 and a maximum of 100 members or shareholders. These shareholders can be domestic or foreign. They are the members of the highest body of the LLC.
An LLC can have one or more directors. Also, like shareholders they can be domestic or foreign. The Director is appointed by the Shareholders body, the GSM. They are expected to have industrial relations with the LLC.
The Audit Commission is appointed by the GSM. There are 3 members in the commission from the shareholders which means that this board can only be created if the LLC has more than 3 shareholders. This is the controlling body that supervises the director. Their other role is to approve the annual financial report.
- It is easy to register.
- It can be easily converted to a JSC.
- Its share capital is divided into parts.
- It offers liability protection to its shareholders.
- It is taxed at standard Cooperate tax rates.
- It is not ideal for big companies.
Joint Stock Company (JSC)
This is a type of Legal entity whereby the JSC is entitled to issue shares. JSC shares are to be registered with the Securities Commission. These types of companies are significantly more complex. It is ideal for large business companies.
The shares of the JSC can be traded privately or publicly at the stock exchange. In that sense the JSC will be a public limited liability company. Alternatively JSC share can be held privately as a Private limited liability company.
Key Features of JSC
- Complex Registration Process.
- A JSC is expected to complete a series of pre-registration requirements.
- Tight Compliance and Reporting regulations
- This type of company is more regulated by the Ukrainian law. For example there is the protection of the rights of the minority shareholders. Also, they are required to publish financial statements, annual external audits etc. The procedures for electing governing bodies is also specialised.
- Limited Shareholder liability.
Shareholders are not liable for the company’s debts but only their share capital.
A JSC must have at least one shareholder but there is no limit of shareholders.
JSC directors are appointed by the shareholders.
The Supervisory Board
This board is mandatory for JSC that has more than ten shareholders. It is appointed by the shareholders and is composed of 5 members who are shareholders and or independent Directors. There should be independent Directors who cannot be influenced by shareholders and the executive board.
This is the board of Directors or Director. It is selected and supervised by the Supervisory board. This body comprises of private individuals.
Though not mandatory the supervisory body may appoint a Company secretary. The secretary is the go between for the JSC and the shareholders.
- Minority shareholders’ rights are protected.
- It offers full liability protection to its shareholders.
- It is only ideal for large companies.
- Shareholders are not liable for JSC debts.
Joint Venture. JV
This is a type of company whereby a foreign investor partners with a Ukrainian company. It is suited for partners who want to realise profits and other specified arrangements.
Key Features of a JV
- A joint venture can be entered into without creating a legal entity.
- The profits and the losses of the joint venture are shared among the partners according to their understanding.
- The two partners create a JV agreement that defines the terms and conditions of the joint agreement. For example how profits and losses are distributed.
- A separate account is created for the JV’s activity and financial reporting.
- All parties are responsible for the JV’s Profits and losses.
- It can be for short or long term operations.
- It is not a legal entity.
Representative Office. RO
This type of legal entity in Ukraine can be opened by a foreign company for purposes of market research. It is suitable for a foreign organizations that are not yet ready to invest in Ukraine but would want to study the markets of Ukraine.
Key Features of a RO
- It is an extension of a foreign company located in Ukraine.
- The liabilities of an RO extent to the main company.
- An RO is registered with the Ministry of Economic Development and Trade of Ukraine.
- They are governed by the main company.
- A foreign company that is not yet ready to invest can explore the market.
- It can use the name of the main company and benefit from its reputation.
- No transactional operations can be exercised.
To conclude, the investor has to choose which type of company suits their needs from the above. There are different advantages and disadvantages to each type of company which should be weighed with the investor’s need. All in all these types of companies suit different needs like the capital one has to invest into a company, how big a company one has in mind and the intentions of the investor at that moment. Everyone can find a type of company setup that is ideal for them in Ukraine.