How to acquire or sell shares of Ukrainian limited liability company?

This is one of the fundamental juridical aspects of M&A in Ukraine. If you are selling or buying a business in Ukraine, most probably it will be an LLC as it is the most popular company type in Ukraine. As of 01.04.2021, there were almost 250 000 limited liability companies registered in Ukraine of 319 360 all legal entities (including NGOs and beneficiary organizations). So more than 75% of all companies in Ukraine are formed as LLCs. Sometimes this procedure can be much more complicated than Ukraine company registration.

What is the procedure for acquiring shares of a Ukrainian company?

The main and fundamental document that confirms the transfer of shares is the so-called ACT (of receipt and transfer of shares). This certificate is the only document that is provided to the state registrar of companies in order to register the shareholder rights. The act of Ukrainian company share transfer is signed at the notary office and confirms that the shares have been already transferred. Such a document also confirms the fact that all the payments (if there were any) had been properly made. Consider also that the new shareholder (that buy shares) is called during the transaction and by the law as the third party. The act is always based on an agreement or a contract and is signed at the notary office. It can be a share sale agreement (in case the shares are acquired) or it can be a deed of gift or another contract that can be concluded under the civil code of Ukraine. Anyway, the share transfer agreement can not be dated after the act has been endorsed. Often our clients sign both documents (share sale agreement and share transfer act) and make a payment in one day, and this is the best way to proceed that reduces risks for both parties. After the act has been signed, it is to be submitted to the state registrar of the companies of Ukraine. It can be presented to the registrar personally by one of the parties or by the representative under the power of attorney. During this procedure, the registration officer checks all the data and conducts amendments to the Ukraine company’s register.

Actual stockholders have a priority right to acquire shares. So there shall be consent from the side of actual shareholders on transactions made by other shareholders. The procedure sometimes can be complicated depending on the LLC corporate structure and amount of shareholders. Consider also that transaction is possible only on the share that has been fully paid by the current owner. Actually, this is the obligation of a current shareholder not to sell a share that has not been refunded.

To assume everything mentioned above, the legal procedure of the Ukrainian company share purchase is the following:

negotiations;
share transfer agreement;
share transfer act;
registration of a new shareowner at a government office.

Consider, if this is a real business purchase transaction, you should conduct due diligence of Ukrainian company before you will start the LLC purchase procedure. One more important thing to consider is to check the seller’s debts. It is forbidden to get a share from the owner that has any proven financial obligations in front of the Ukrainian government. This is the basis for the registration officer to refuse the registration of the share transfer.

What other important features of the procedure for the purchase of a Ukrainian LLC?

If you are going to be a majority stockholder of a Ukrainian business, you should do your best to get the right legal grounds to be able to control a company director. Despite the fact that you have acquired shares does not make you a company manager. There is a special procedure to remove the Ukraine company director or manager from his position. And consider that only the company manager is entitled to make financial and banking transactions as well as the conclusion of a treaty from the name of Ukrainian LTD. If the shares are bought from or sold to an individual, be sure to obtain consent from his/her spouse, if he/she is married. This fact shall be controlled by the notary.

There is also a way to get a share in a company through increasing share capital. If the company needs and additional financial funds to boost up business, shareholders have the right to accept a new shareholder that will increase the company’s capital and will get a share. In this way, there is no need to make a share purchase agreement and to sign an act. Consider that all (100%) of the shareholders of the Ukrainian company shall approve such transactions.

There are other documents that shall be made:

minutes of a general meeting or so-called protocol (it is a document in which shareholders take a decision to increase the authorized capital and to allow a third party to become the company’s owner);
corporate contract (optionally);

This procedure is a bit bureaucratic and can’t be done during one legal procedure. After the protocol has been signed, during some period (mentioned in that decision) the third party has to make an investment in the company. After the payment has been done, current shareholders have to call the general meeting and to approve the fact of investment and accept the third party as a shareholder. The same legal document approves the decrease of shares of other stakeholders.

Before June 2018 there was no special law that could regulate the legal status of LLC in Ukraine. Now there is a special law on limited liability companies and the legal status is quite well regulated. As of today the procedure of share sale and the purchase is properly organized.

Since May 2019 there is a growing interest in the Ukraine market. Ukraine economy growth is boosting up. So we hope that this article will be useful to thousands of businessmen from all over the world.