New management rules are being prepared for LLCs and joint-stock companies: Committee evaluated the bills

In Ukraine, the improvement of corporate legislation continues as part of adapting national law to the standards of the European Union. The new legislative initiatives aim to update corporate governance rules and align them with European approaches.

The Verkhovna Rada Committee on Ukraine's Integration into the EU reviewed bill No. 15148 on improving corporate governance in private law entities and concluded that the document does not contradict the Association Agreement and EU law but requires further refinement.

The Committee made a similar conclusion regarding bill No. 15149 on amendments to current legislation aimed at improving corporate governance in companies, as well as the alternative bill No. 15149-1.

As the authors of bill No. 15149 note, the document is aimed at improving certain provisions of the legislation, in particular by defining the conditions for the validity of a corporate agreement in joint-stock companies, limited liability companies, and additional liability companies. It is also proposed to establish the obligation of the company to specify its location as a legal entity in the charter.

Furthermore, the bill provides for detailing the procedure for convening and holding general meetings of members of limited liability and additional liability companies, regulating certain issues related to the termination of powers of a member of the company's executive body, as well as making changes to expand the list of information about legal entities contained in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations.

Recall, "Judicial and Legal Newspaper" wrote that Ukraine is considering the possibility of a comprehensive update of approaches to corporate governance in joint-stock companies, as well as in limited and additional liability companies. This concerns bill No. 15149 "On Amendments to Current Legislation Regarding the Improvement of Corporate Governance in Companies," which provides for clarifying and detailing the main corporate governance procedures, as well as aligning Ukrainian legal mechanisms with European standards.

What will change

The bill provides for amendments to the Law of Ukraine "On Joint-Stock Companies," the Law of Ukraine "On Limited and Additional Liability Companies," and the Law of Ukraine "On State Registration of Legal Entities, Individual Entrepreneurs, and Public Formations."

The main goal is to improve the legal regulation of corporate relations, in particular by clarifying the activities of company management bodies and their officials.

Among the main provisions of the project:

• clarification of the regulation of the corporate agreement in joint-stock companies: written form, possibility of paid or unpaid agreements, participation of the joint-stock company and third parties, consequences of non-compliance with the written form;
• establishment of similar approaches for LLCs and additional liability companies regarding the corporate agreement: written form, possibility of paid or unpaid agreements, participation of members, the company itself, and third parties, nullity in case of non-compliance with the written form;
• mandatory inclusion in the charter of LLCs and additional liability companies of information about the company's location;
• fixing in the charter of LLCs and additional liability companies information about management bodies and their competence;
• introduction of the right of any member to submit proposals to the agenda of general meetings with indication of data, share, and content of proposals;
• mandatory inclusion in the agenda of proposals from members holding 5% or more of the authorized capital;
• regulation of participation in general meetings through representatives with the possibility of voting by assignment or at their own discretion;
• establishment of notarization of a natural person's power of attorney and execution of a legal entity's power of attorney by its body or authorized person;
• possibility of sole decision-making in a company with one member with written documentation.

Additionally, in the event of the death of the sole member, a notary will be able to appoint a manager of corporate rights at the initiative of the heirs until the inheritance is formalized.

Requirements for the executive body are also clarified: its members are obliged to notify in writing about early termination of powers and initiate the convening of extraordinary general meetings.

In the field of state registration of legal entities, it is proposed to expand the information in the Unified State Register, in particular regarding persons authorized to act on behalf of a legal entity, representation restrictions, and managers of corporate rights.

The need to update the legislation is explained by Ukraine's European integration process and the need to harmonize national norms with EU directives. European approaches focus on transparent and flexible regulation of corporate governance, which should increase the attractiveness of Ukrainian companies to foreign investors.

Subscribe to our Telegram channel t.me/sudua and to Google News SUD.UA, as well as to our VIBER and WhatsApp pages on Facebook and Instagram to stay informed about the most important events.