The entry on June 17, 2018 into force of the Law of Ukraine “On Limited and Additional Liability Companies” (hereinafter referred to as the LLC Law) produced almost the most influence on corporate law in general.
Less than a month remains when the provisions of the charters of LLC and ALC that do not comply with the LLC Law, will lose their force.
On the main changes, new opportunities in the field of corporate relations – in our future reviews.
- Changes in the corporate governance of LLC and ALC
Outdated and, as a consequence, already imperfect rules for regulating corporate governance issues in LLC and ALC (hereinafter referred to as the Companies), pushed the legislator to undertake the development and adoption of a new profile law that would bring governance issues in companies to a new and modern level.
In particular, the corporate governance of the company has also undergone significant changes – fundamentally changing some approaches and understanding among business representatives. The need for further application of such new rules has undoubtedly led to the reformatting by them of their work.
Among the main such changes that require more detailed study and explanation are the following:
1. the introduction of the Institute of the Supervisory Board, whose representatives are elected by the General Meeting and their main function is to monitor the activities of the executive body and resolve issues related to their competence by the meeting of participants;
2. a change in the decision-making procedure of the General Meeting:
– abolished the concept of quorum. The main requirement is to properly notify all participants about the convocation of the General Meeting.
– an absentee voting procedure was introduced.
– a criterion was introduced to achieve the level of the required number of votes for making certain decisions – from simple majority to unanimity that depends on the issues that are decided by the Meeting.
– the right to provide in the charter a different number of votes of the participants necessary for making decisions is clearly enshrined;
3. empowering members of companies with the right to hold a General Meeting outside the territory of Ukraine or to take part in them in a videoconference mode;
4. a mechanism has been introduced for converting debt into equity (a share in the authorized capital of an LLC), also known as debt-to-equity swap;
5. the possibility of settling the relations of the participants in the Corporate Agreement;
6. new rules of succession in the Companies were introduced;
7. the abolition of the obligation to elect the Audit Commission;
8. prohibition of competition for a member of the executive body in the field of activity that is the main one for the company.
If you have any questions, please contact Associate Partner Arthur Kiyan