On 2 November, the Law "On Amendments to Certain Legislative Acts of Ukraine on the Protection of Property Rights" No. 159-IX (the "Law") came into force. The purpose of the Law is to protect title to property, including shares, during registration procedures. Also, the Law simplifies the procedure for execution of material transactions provided for by the Law "On Limited and Additional Liability Companies" (the "LLC Law").
The Law introduces, among others, the following instruments against illegal takeovers:
- municipal enterprises no longer have authorities of the state registrars. According to statistics, these enterprises most frequently abused the law;
- notaries must print state transfer and acceptance acts of participation interest and other documents required for registration on the notarial forms. Document forgery becomes difficult;
- a representative may register the change in the composition of the participants only with a notarized power of attorney. It is easy to forge a non-notarized power of attorney;
- to perform registration acts, registers must pass through a two-phase authentication to prevent unauthorized access to the registry;
- owners and management of companies will be able to receive online notifications of registration acts with respect to a company. So far, this useful feature is at the stage of its technical development. We hope that soon they may receive SMS or email notifications of registration acts with respect to a company;
- the Law has strengthened liability for violations of registration procedures.
We hope that the changes provided by the Law will reduce the number of illegal takeovers of business.
Material transactions in LLC – no longer a problem
The existing practical question of the LLC Law is that the transactions (agreements) for an amount exceeding 50% of the net assets value require consent of the general meeting. But the net assets of an LLC can sometimes be minor or even negative. In this case, virtually every transaction, even a small one, requires calling participants' meeting. The Law allows to change the procedure for approval of such agreements in the charter, including to make participants' meeting approval non-obligatory.
What should be done for this? – to restate the charter and to provide for such a procedure for approval of material transactions as the most practical for your business.
Opportunity to update the charter
We remind that according to the LLC Law the charters should have been aligned with this law by 17 June. Therefore, to anyone who has not yet done so, we recommend not to delay and restate the charters. However, if you have already restated the charter, the novelty of the Law allows to simplify execution of material transactions by the company.