The Law upon which investments in Ukraine depend

A round table seminar ‘Draft Law on Shareholding Companies: invitation to discussion’ organised by the State Commission on Securities and the Salkom Law Firm took place in Kiev on 20 February 2008. The subject of the seminar has not been chosen by coincidence since the legislative situation with corporate governance does not stimulate the economy growth and does not provide for a mechanism for resolving corporate disputes. The necessity of adopting a special law that would have regulated matters related to creation and activity of shareholding companies can be attributed to several important factors. First of all, there are a significant number of shareholding companies in Ukraine and approximately 16 million owners (shareholders), both legal entities and individuals. Secondly, the Law of Ukraine on Commercial Partnerships is not anymore able to provide efficient regulation for matters of corporate governance of partnerships hence worsening the investment climate in Ukraine and therefore creating barriers to serious contributions to the Ukrainian economy. The event has been attended by members of the working group for revision of the Law on Shareholding Companies created by the Science and Expert Committee of the State Commission on Securities and Fund Market, members of Parliament, representatives of the President’s Secretarial Office, ministers of the Cabinet of Ministers, judges of the Supreme Court of Ukraine and the Supreme Commercial Court of Ukraine, scientists, practising lawyers and other specialists. The participants discussed the matters of legal instruments for protecting rights of minority shareholders, legal status of shareholding companies with one shareholder, powers and mechanisms for interaction between various management bodies of a company, and procedures for transacting significant and other special deals by a shareholding company etc.   We must mention that on 15 May 2007 the Parliament of Ukraine assumed as a basis a Bill on shareholding companies (registration no. 0952) proposed by the Cabinet of Ministers of Ukraine. But since the Parliament of the fifth convocation had been dissolved prematurely its Committee for economic policies has not finished preparing a Bill for submitting it to the Parliament for consideration in its second reading. According to the Rules of the Parliament bills are to be submitted to the Parliament of the sixth convocation for consideration. Express poll Dr Natalia Kusnetsova, PhD, academician:
In terms of corporate law Ukraine falls behind our nearest neighbours, leave alone European countries. Hence if we do not take drastic steps in this direction Ukraine’s corporate law could be left behind even further which is not going to improve the investment climate in our country. Anatoliy Otchenash, President of Autoalliance Financial Group:
To date we have an industry of joint investments and institutional investors. These institutes require relevant instruments for ensuring their work. As it is known the last year has made a record in profitability of Ukrainian securities as profits had reached more than 100 per cent hence getting Ukraine the second place in the world. Yet the proposal of highly liquidable securities was limited and the market was overheated. So the industry of joint investments requires a substantial volume of securities that could be offered for money raised from Ukrainian citizens – members of pension and investment funds, insurance companies, brokers operating on the fund market and the bids market that is due to start working this year. Ievgen Kubko, President of the Salkom Law Firm
Since I had had an opportunity to compare laws on shareholding companies active in various countries I have reached a conclusion that regulations on shareholding companies reflect the level of civilisation of a society. Therefore preparation and discussion of the Bill on shareholding companies is a step towards civilised development of the country. Besides, when drafting this law we have been communicating with potential investors because the law is going to influence directly the investments and their legal status.