With the adoption of the Law of Ukraine “On Limited Liability Companies”, the Corporate Agreement took a special place in the organization of corporate relations between the members of economic partnerships.
A corporate agreement is a contract by which the members of the partnership undertake to carry into effect their rights and powers in a certain way or refrain from their implementation.
What to consider when entering into a Corporate agreement:
1. the form of the contract is written (notarization is not required);
2. the contract is non-refundable;
3. the parties to the contract are only members of the partnership;
4. A corporate agreement is mandatory only for its parties (ie it is not legally valid for other participants and third parties);
5. A corporate agreement is confidential, information about it is not available in the Unified State Register of Legal Entities, Individual Entrepreneurs.
An exception is the conclusion of an agreement to which the state, a territorial community, a state or communal enterprise or a legal entity, in the authorized capital of which 25 and more percent directly or indirectly belongs to a state or a territorial community, is a party;
6. A corporate agreement, which establishes the obligation of the participants to ensure voting in accordance with the instructions of the management bodies of the company, is null and void.
What can be contemplated in the agreement:
– the obligation of the participants to carry into effect their rights and powers in a certain way;
– the obligation to refrain from selling a share before certain circumstances;
– additional obligations of participants;
– determine the procedure for redemption or alienation of a share in the authorized capital;
– determine the conditions on which a participant has the right to acquire or to alienate his share and the cases in which such right arises;
– to identify cases in which the participant has the right or obligation to sell his share and the terms of such sale;
– to include a provision in case of violation of which the enforcement of the obligation to sell the share is foreseen;
– determine the procedure for valuation of property, which is invested in the authorized capital;
– the parties may provide for fines for violating the confidentiality regime of the Corporate Agreement, the settlement of disputes, and so on.
Taking into account that in practice disputes between the parties arise quite often, in order to avoid litigation and to resolve conflict situations in a timely manner, the use of the Corporate Agreement can greatly optimize business activity.
Regarding the development of Corporate Contracts, disputes arising out of its implementation, please contact Arthur Kiyan, an Associate Partner of the Firm.