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Kinstellar Overviews The New Ukrainian Law “On Joint Stock Companies” – Shareholders



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On 18 August 2022, the President of Ukraine signed the new Law
“On Joint Stock Companies” No. 2493 (“the
Law”). It will enter into force on 1 January 2023. The Law was
enacted to ensure the fulfilment of Ukraine’s obligations under
the Association Agreement with the EU regarding
the harmonisation of national legislation with EU legislation in
the field of corporate governance, as well as to improve
Ukraine’s position in the World Bank’s
“Doing Business” ranking
, specifically on the
indicator “Protecting Minority Investors”.






















Main changes introduced by the Law

01

The possibility to establish a single-level management
structure for joint-stock companies (“JSC”)

According to the Law, a JSC’s management structure can be
single-level or two-level. In a single-level structure, the
governing bodies are the General Meeting and the Board of
Directors, a collegial body that combines control and management
functions. In a two-level management structure, which provides for
a clear distribution of management and control functions, the
management bodies are the General Meeting, the Supervisory Board,
and the Executive Body.

02

The possibility to conduct General Meetings by means of
electronic voting

Along with face-to-face and remote General Meetings, the Law
introduces a new way to hold such meetings—electronic voting.
Electronic meetings are to be held using an authorised electronic
system, i.e., the software and servers of Ukraine’s Central
Depository maintained by the National Securities and Stock Market
Commission.

03

Harmonisation with EU law of a number of legislative
provisions on representation

  •  A depository institution can act as a shareholder’s
    representative;

  • A potential representative must inform the shareholder of the
    existence of a conflict of interest and provide the shareholder
    with information about any facts that may affect the decision of
    the shareholder to appoint a representative;

  • An irrevocable power of attorney may be issued not only for the
    purpose of fulfilling a corporate agreement but also in connection
    with a pledge of shares;

  • In the event of a violation of the rights and interests of the
    principal, the representative under an irrevocable power of
    attorney must, at the request of the principal, stop using such a
    power of attorney and renounce it.

 


04

Strengthening the protection of the rights of minority
shareholders

The Law expands the rights of minority shareholders that own 5%
or more of a company’s ordinary shares. Thus, at the request of
such shareholders, an Extraordinary General Meeting may be
convened, and an independent assessment of property and audit of
the JSC’s activities can be enforced.


The protection of the rights of minority shareholders of limited
and additional liability companies (LLCs / ALCs) has also been
strengthened. In particular, the Law stipulates that the agenda of
the General Meeting must include issues submitted by the
company’s participants (shareholders) who collectively own 5%
or more of the authorised capital.


According to the amendments to the Economic Procedural Code
introduced by the Law, such minority shareholders have the right to
file a claim for damages caused by the company’s
officials.

05

Cancellation of requirements regarding the position of
the auditor (audit commission) in a JSC

The Law cancels the requirement for the existence of an audit
commission or an auditor in a JSC.

06

Regulation of the activities of the Corporate
Secretary

The Corporate Secretary is an official responsible for the
JSC’s interaction with shareholders and investors; the
coordination of the JSC’s actions to protect the rights and
interests of shareholders; maintaining the effective work of the
Board of Directors and Supervisory Board; and other functions
determined by law and the charter of the JSC. Its involvement is
mandatory in public JSCs (“PJSCs”), JSCs of public
interest, and JSCs with 1,000 or more shareholders/owners of
ordinary shares.

07

Regulation of the liability of JSC
officials

The Law details the liability of JSC officials, establishes a
mechanism for reimbursement of losses caused by them, defines
restrictions on holding positions in JSCs, and establishes the
possibility of early termination of the powers of officials in case
of damages caused by them.

08

Strengthening corporate governance in PJSCs and JSCs,
where the state share is 50% or higher

For PJSCs and JSCs with a state shareholding of 50% or higher,
the Law establishes the obligation to create committees of the
Supervisory Board to oversee the appointment, remuneration, and
audit functions of the company. At the same time, one-third of a
PJSC’s Supervisory Board should consist of not less than two
independent directors. In JSCs where the state share is 50% or
higher, independent directors must be the majority of all members
of the Supervisory Board.

09

The possibility to record shares in LLCs / ALCs in the
accounting system of the Central Depository

The General Meeting of the company’s participants can decide
to record the company’s shares in the accounting system of
shares maintained by the Central Depository in the manner
established by the National Securities and Stock Market
Commission.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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