EBA Odesa Business Breakfast with Arzinger
In Ukraine, it is difficult to find an industry without any reforms. The corporate law was no exception. Business has repeatedly stated that gaps are main obstacles for its development in Ukraine, which makes it go offshore and conclude agreements abroad. During a meeting of the Ukrainian President Petro Poroshenko and Prime Minister Volodymyr Groysman with the EBA members, the long-awaited law on “Limited Liability Companies” was signed. In this regard, on March 23, at the EBA Odesa Business Breakfast with Arzinger we decided to discuss new rules of the game concerning small and medium-sized businesses (LLC is the most common form of small and medium business).
Victoria Dobrynska, lawyer of corporate and M&A Practice at Arzinger, told about the important provisions of the Law “On Corporate Contracts” and the Law on “Obligatory Redemption of Shares (squeeze-out).” In particular, she clarified key aspects in structuring relations though corporate agreements, including world practice, and accounted main details to pay attention in using such contracts. Also, the benefits and cornerstones in the appliance of a squeeze-out procedure as new law were highlited. Individuals like owners of dominate shareholding was provided with some advices. Ms. Victoria noted that these laws envisage the possibility of agreeing in advance on the voting at a general meeting, on the procedure for alienation of shares or the refusal to hold such alienation. The new legislation allows parties to apply effective and comprehensive mechanisms for resolving corporate disputes.
Ann Zoria, partner, Head of Corporate and M&A practice at Arzinger and as co-author of the Law on Limited Liability Companies, highlighted the changes coming from its adoption. “The purpose of the legal act, first of all, is to provide the participants with maximum discretion in the management of the enterprise, turning the LLC into a comfortable form for both small and large business,” Anna said. The speaker drew attention to the fact that this Law offers a balance between the interests of minority and majority members. Among the most important amendments is the institute of supervisory boards in LLC, simplified procedure for entering the membership of the company. It allows mitigating the possibility of excluding the participant from the partnership, and conversion of debt into capital (debt-to-equity swap). Participants also learned just as the Law proposes to cancel the restrictions on the maximum number of participants in the LLC, so it will facilitate the transformation process of those joint-stock companies artificially driven into the existing organizational-legal form.
In general, the business attitude to these changes is positive. In fact the access of Ukrainian businesses to financing, and hence to investment depends on the normal construction of the corporate governance system.