We offer services for the drafting of the contract, registration, and legal support of the Joint venture agreement in Ukraine. We do also provide legal assistance during the process of negotiation and can guide you through the whole process of Ukrainian joint venture formation and further cooperation through the Ukrainian joint venture.
What is the legal status of Joint ventures in Ukraine?
By Ukrainian law, the joint venture is called a cooperation agreement (dogovir pro spilnu diyalnist) – an agreement of the parties to co-operate, for-profit or achieve other business goals. A joint venture in Ukraine is also called a “simple company”. That is because this legal form has many features of the company (like the manager, business account, rights, and obligations) but only one principal difference – the joint venture in Ukraine is not an entity.
Under the Ukrainian civil code, rights and obligations of the parties of the joint ventures are regulated by a cooperation agreement. And that is very good because parties can decide the way the will cooperate and algorithm of actions, as there are no so many restrictions for JV agreements. Consider that there are two forms of a Cooperation agreement in Ukraine:
- production sharing agreement;
- asset management agreement;
A joint venture agreement must be recorded in the tax (fiscal) authority in Ukraine. If one party of the agreement is a foreign citizen or a company, it shall be also be listed and verified by the Ministry of economic development and trade of Ukraine. Parties to the agreement must choose the operator or a manager of agreement (the person responsible for payment of taxes and fees). JV can be also registered as a VAT taxpayer and have a bank account. Usually, it is an operator of an agreement to have the right to sign financial documents and contracts from the name of a Joint Venture. Consider that before starting cooperation in the form of a joint venture, it is necessary to check Ukrainian company you intend to deal with.
Advantages of Joint venture in Ukraine
A great advantage of a joint venture, as a form of association of investors, compared with companies (JSC, LLC, LTD, etc.) is the ability to set the rights and obligations of the contract, based on the conditions under the agreement. The joint venture is constituted without establishing a legal entity and can be created by two or more parties. Although it has many features of a corporation like:
- can have a banking account;
- can invoice and be invoiced by companies and businesses;
- has Director (manager);
- is to be registered by the Ukrainian tax authority and pay duties;
Parties may agree on the amount of investment, liability for failure to fulfill obligations, the procedure for resolving disputes, and the obligation to refrain from certain actions. Ukrainian legislation grants the parties the right to establish the procedure itself: management, appropriation of profit/loss, and termination of the agreement. It is very flexible. So the agreement itself is the main law for all parties of cooperation contract. That is why it is very important to make a proper consent between the investors.
Today, a cooperation agreement has been widely spread in Ukraine, mainly in the oil and gas production industry. It is not so popular in production in Ukraine, but still, there are some examples. It can do for renewable energy generation (for example in the case if one party invests money needed to buy the required equipment and the other party invest land where it will be constructed). But we have never heard that such a legal form was used in agriculture activity. Although it can be potentially a solution if one party has agricultural land and the other has needed machines or/and real estate or funds.
Joint Venture agreements are not a very popular form of cooperation between two or more investors, but it is accounted for more than 9% of all global deals (see more at www.transactionadvisors.com).