What are the articles of organization of a Ukrainian limited liability company?

An article of organization of a Ukrainian limited liability company is a document approved by the owners of the LLC. Under Ukrainian legislation, articles of organization are named as “charter” (in Ukrainian – statut). The article of organization governs all aspects of the company’s activities, except for those clearly defined by law. This document is signed before or at the time the Ukrainian company is registered. It is one of the most important company documents. The only exception is when the Ukrainian LLC is owned by a sole shareholder who is also an executive (CEO or Director). At any time, participants may amend a Ukrainian company’s charter.

What is the procedure to approve the articles of organization of a Ukrainian limited liability company?

The first step depends on the ownership structure and distribution of ownership interests, which directly affect the quorum required to make certain decisions. For example, if there are participants who own 60 percent or more of the votes, then by law such participants will have the right to change the management of the company and change the directions of the company’s activities without the consent of other participants, but only if otherwise is not specified in the charter. Accordingly, this part needs to be discussed, and if minority owners want to influence the resolution of issues regarding the appointment of the head of the LLC, then such points should be included in the charter. It is extremely important at the stage of developing the charter to take into account all the rights/obligations of the participants, as well as to model various situations that may occur. Consider also that some decisions require more than 75% of votes (for example, to start company restructurization or dissolution). If you are planning to register a Ukrainian LLC, ensure your share distribution strategy is fully integrated into the company’s charter.

Another important component is the presence of restrictions on the company’s executive director.

A Ukrainian company does not necessarily have restrictions on the head. But if the charter contains no restrictions, the head’s powers will still be limited by the Law of Ukraine on Limited and Additional Liability Companies.

If the participants intend to have specific requirements regarding control over the Ukrainian company’s director, those requirements should be reflected in the Ukrainian company’s charter in as much detail as possible. The articles of organization of a Ukrainian LLC may also provide for the establishment of a supervisory board (if it consists of two or more members) or an auditor (if it is a sole member), i.e., a body that exercises control over the executive director’s activities.

At the same time, the existence of such a control body is not mandatory; it’s a right, not an obligation. However, in the case of its establishment, the procedure for appointing/dismissing members of the supervisory board, as well as the rights and obligations, must be mentioned in the charter of the Ukrainian company.

Convening a general meeting and voting procedures. This is an extremely important paragraph if the company has 2 or more participants. The Ukrainian law on LLC contains general provisions on the procedure for convening and holding a shareholder’s meeting. That is why, when drafting a Ukrainian company charter, the founders or participants of a Ukrainian company must agree on this procedure in detail, taking into account all the nuances. For example, if the participants of a Ukrainian company are foreigners living abroad, they can hold a general meeting via video conference. At the same time, it is necessary to clearly outline the procedure for approving a decision in writing.

It should be noted that general meetings held remotely (via audio or video communication or via remote polling) do not have the right to make a decision regarding the following

Governance Appointments: Appointing and dismissing members of the supervisory board and executive body.
Charter Management: Amending the company’s charter or transitioning to operations under a model charter.
Corporate Restructuring: Approving mergers, acquisitions, splits, spin-offs, or legal conversions, including successor statutes.
Dissolution: Deciding on the voluntary liquidation of the company.
Equity Adjustments: Setting the authorized capital amount and determining participant share sizes as prescribed by law.
Membership Removal: Formally excluding a participant from the company.
Share Registry Management: Initiating or ceasing the tracking of shares within the official accounting system.

Consider also that the Ukrainian LLC Charter of Incorporation should contain a paragraph regarding the procedure for dividend payout. The Ukrainian LLC company law contains general regulations on this topic.

How to make changes to the charter of a Ukrainian limited liability company?

In fact, it is usually much more difficult to make changes to an already approved and registered charter compared to approving the necessary regulation in the charter of a company being created. Although, as we know, both the creation of an LLC and the amendment of the charter require the consent of 100% of the participants, in practice, obtaining approval for changes is much more difficult, given the following factors.
1 – It is much easier to agree on the points before the company is established, since only after the start of operations is there a likely conflict of interests and practical awareness of the rights regulated by the charter. Until the company is registered, a participant can simply refuse to participate in the establishment of the company and in making his contribution. After the Company’s creation, it is impossible to force another participant to agree to changes to the charter if he opposes them.
2 – A preliminary convening of a general meeting of participants is required if not all participants wish to participate in the meeting. That is, if 100% of the participants have verbally agreed to the draft amendments and their participation in the general meeting, then written prior notice is not mandatory. But if not all participants have expressed a desire, then written notice must be sent to each participant in advance in accordance with the current charter.
3 – If the participants are foreign citizens or companies, the latter must plan their visit to Ukraine or send their representative, with the appropriate supporting documents. As a rule, this is a notarized power of attorney, certified in the prescribed manner.
It is desirable to develop the charter in Ukrainian, since appeals of decisions of the bodies of a Ukrainian company are brought before Ukrainian courts, except in cases where there is a corporate agreement. At the same time, the final version can be presented in Ukrainian and English (in two columns)
To approve the charter, a decision is required (if there is one person as a participant, or a protocol if there are two or more participants in the company) with notarized signatures of all participants (or their legal representatives), as well as signing by the participants of the charter itself (also with notarized signatures). Given this, in practice, the draft amendments to the charter of a Ukrainian company are approved in advance, since Ukrainian legislation requires certification in a certain order (i.e., even before the visit to the notary, the participants already have an agreed version of the charter and the decision). Accordingly, the signatures on the decision
A mandatory component of the process is the state registration of changes, carried out by the state registrar (or a notary with appropriate access to the registers of the Ministry of Justice of Ukraine). That is, the signing of the decision/protocol and the statute in the new edition must be completed by state registration of the changes.