Ukraine: Non-profit/For-profit Company Registry Requirements

Non-profit registry requirements

Article 54 of the Ukraine Company Law regulates the criteria of getting non-profit status. According to this article organization must have such requirements:

to be established and registered according to the laws which regulate non-profitable organizations’ activity;
organization’s incorporate documents must have prohibition of distribution of profits or their parts among establishers, members, members of management, workers (except their salaries and Single Social Contributions) and other persons;
organization’s incorporate documents must have clauses about transferring NGO’s property to one or more similar non-profitable organizations or transferring property to a state budget in a case of liquidation (merger of organizations, division of organizations, affiliation or reformation of organizations);
organization must be included on the Register of non-profitable organizations.

It’s important to use all organization’s profits only for realization non-profitable organization’s targets according to its charter.

The Law of Ukraine “On Public Associations” which entered into force on January 1, 2013, provides new requirements to activities and charters.

The law divided voluntary organizations into two organizational forms:

Non-governmental organization (only individuals can found and be members);
Public association (only legal entities can be founders, individuals as well as legal entities can be members).

Taking into consideration the fact that rights of two forms are equal after registration, the only difference we have – possibility of membership.

Legal entities will be entitled to found organizations (associations) the membership in which can be obtained by individuals and legal entities. Individuals will be able to found non-governmental organizations the membership in which will be available only for individuals. At the same time if legal entities give up their membership in public association there will be only individuals left and such association will actually be no different from a non-governmental organization.

Requirements:

For founders - individuals:

copies of the passports of the founders;
copies of the identification numbers of the founders;
copy of the passport of the Director (Chairman);
copy of the identification code of the Director (Chairman).

For registration of a public association which intends to act as the legal entity:

notarized application, signed by the Director;
charter (two copies);
minutes of the general meeting of a public association;
details concerned with the governing bodies of public associations (indicating the name, date of birth of the head (Director) and the other members of the governing bodies, as well as their positions in governing bodies);
separate branches (if any), indicated in the minutes of the meeting of founders;
in the case of registration of a public union – it’s necessary to provide information about the owners indicating the name and family name, date of birth, place of registration; for unions of citizens’ associations - it’s necessary to indicate the name of the association, the location of the higher statutory bodies, as well as copies of legalization documents. Registration term - 30 business days.

The procedure of registration of a public association includes the following steps:

Preparation of the Charter of the public association;
registration of a public association;
manufacturing of the stamp (if necessary);
Opening of the bank account.

Representative offices

A representative office of a foreign business in Ukraine is not a legal entity, but rather an “extension” of its parent company. A representative office may either represent its foreign parent company on the market and carry out various auxiliary activities, or carry out business (commercial) activities that may give rise to a taxable PE. From legal point of view, representative office is a non-profit form of foreign organization, which operates non-profit business activities in Ukraine (represents business abroad, conducting researches, marketing, customer support, legal compliance etc.)

It is not possible for foreign entities to conduct full commercial activities through a commercial representative office (i.e. permanent establishment). Nonetheless, a number of law firms and other service providers have established their presence in Ukraine in this manner.

Representative offices that do not carry out business activities and simply function as the representation of a legal entity (“non-commercial representative offices”) are only required to register with the Ministry of Economic Development and Trade of Ukraine (hereinafter, the “Ministry of Economy” or “MEU”). However, in practice, non-commercial representative offices also register with the tax authorities and social security funds. Unlike non-commercial representative offices, PEs (“commercial representative offices”) are required to register with the local tax authorities and social security funds. Opening of the RO.

Representative offices are legally obliged to register with the MEU.

The registration process for representative offices involves the following steps:

filing a set of registration documents, as required by law, and payment of a state registration fee (USD 2,500);
examination of the documents by the MEU (within 60 working days);
approval or rejection of the registration (may be appealed in court);
upon receipt of the approval, inclusion of the RO into the Unified Register of Representative Offices and issuance of a Registration Certificate;
then the RO is obliged to register with the tax authorities and State Statistics Service of Ukraine within 10 days after its registration with the MEU;
approval of a design of the official RO seal and opening of bank accounts

Upon completion of the above procedures, a registered entity has the right to apply to the respective departments of the Ministry of Internal Affairs to obtain visas and register passports of its employees.

State tax authorities:

a representative office must file the required documents with the tax authorities in the region/ district in which it is located;
not later that on the next business day after submitting the documents, tax officer shall make a decision on whether to approve or reject the registration;
the tax authorities issue a Certificate of Registration for a corporate income taxpayer.

For-Profit Organizations

The basic rules governing the establishment, maintenance and liquidation of business legal entities in Ukraine are provided in the Civil Code of Ukraine (the Civil Code) and the Commercial Code of Ukraine (the Commercial Code) 2004, the Law of Ukraine On Companies (the Company Law) 1991, and the Law of Ukraine on Joint Stock Companies (the JSC Law) 2008, govern various issues related to establishing, maintaining and liquidating companies in Ukraine. The Law of Ukraine On the State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations became effective on 13 December 2015.

Foreign companies doing business in Ukraine most commonly take the form of:

legal entities (primarily, limited liability companies, public and private joint-stock companies);
joint ventures
representative offices (common for foreign companies that are only planning to perform marketing, promotional and other auxiliary activities).

Foreign investors that plan to carry out active business operations may choose to establish a legal entity in Ukraine, instead of opting for the representative office. From a foreign investor’s perspective, the choice will tend to be either an LLC, a JSC, or in certain circumstances a representative office engaged in either commercial or non-commercial activities. For a 100% investment, using an LLC tends to be more convenient. It is easier and quicker to establish (up to 4 weeks, including opening a bank account), has no minimum capitalization requirements and is less regulated.

At the same time, the legislation covering this area requires the identification of an LLC’s ultimate shareholders during its state registration in Ukraine. Namely, the founders (legal entities) have to disclose their ownership structure up to the level of individuals with a significant shareholding (10% of shares or more).

Establishing a legal entity in Ukraine involves registering with:

A local State Registrar (filing a set of registration documents, as required by law, and payment of a state registration fee, including founders’ information, company name, business activity, draft charter (memorandum & articles of association), application form, fees)
The tax authorities, The State Fiscal Service of Ukraine
The Ukraine State Statistic Service
The Ukraine National Pension Fund
Opening a bank account,
other formalities (licensing for operating securities - the Ukrainian National Commission on Securities and the Stock Market (the Securities Commission) etc.)

Required Documents:

To register a company in Ukraine, the foreign citizen must submit a set of documents. These documents differ depending whether the company is founded by an individual, or by a legal entity.

When the individual registers business, the foreigner must submit the following documents:

copy of the passport of the founder;
a copy of the tax ID number;
list of proposed types of activities;
contact details of the foreigner;
notarized power of attorney for registration documents and the signing of the charter for the legal entity. A foreign legal entity shall submit:
copy of passport and a copy of tax ID number of the Director of Chief Accountant;
a copy of the statute of non-resident legal entity (copy must be notarized);
a copy of the document confirming registration (copy also must be notarized);
a copy of the document certifying authority of an official (notarized);
notarized power of attorney for the right of signing statutory documents and performing other actions on incorporation;
document confirming the location of legal entity (e.g. renting contract).

Other forms of legal entities

Limited Liability Company

A limited liability company (LLC) does not have shares in a traditional sense. Instead, participants in an LLC own a percentage in the company’s capital (participatory interest), as specified in its Charter. Because the investors’ interests in an LLC are not ‘securities’ as defined by law, they are not subject to registration with the National Securities and Stock Market Commission. This means that an LLC can be established more quickly than a JSC, and is easier to maintain.

An LLC may be established by a single participant, provided that the founding company is not itself owned by a single participant. Also, a person (legal entity or individual) may not establish more than one LLC with a single participant. The governing document of an LLC is its Charter. The Charter determines the company’s objectives, scope of activities, the size of its Charter capital, the composition and competencies of the governing bodies and the rules for decision making.

There is currently no minimum amount for the charter capital of an LLC. The participants may establish its amount at their own discretion.

Private joint stock companies and Public joint-stock companies

A JSC is a company whose charter capital is divided into shares of equal par value. Shareholders of a JSC are liable for the latter’s obligations only to the extent of their respective equity contributions to its charter capital.

A JSC may be established either by a single founder or by a group of founders. At the same time, the following statutory restrictions apply to the establishment and operation of a JSC: (a) a wholly-owned subsidiary in the legal form of a JSC may not be established by another wholly-owned subsidiary (either foreign or Ukrainian); (b) a JSC may not have among its shareholders only legal entities that are wholly-owned by the same person; and (c) a subsidiary in the legal form of a JSC that is wholly-owned by a foreign company may not own agricultural land in Ukraine under the current version of the Land Code of Ukraine (the Land Code). The minimum capitalization of 1,250 times the officially established minimum monthly salary as of the date of the formation of the JSC is required to establish a JSC (i.e., as of 1 May 2016 till 30 November 2016, UAH 1,812,500 or approximately USD 69,7261 / EUR 61,2712).

An issuance of shares by both a private and a public JSC must be registered with the Ukrainian National Commission on Securities and the Stock Market (the Securities Commission) with the registration of a share issue and an offering prospectus, as well as a report on the results of the placement of the shares and the issuance of a certificate on the registration of the shares issue.

The main difference between public and private joint-stock companies is that the shares of private joint-stock companies are distributed exclusively among the founders, while the shares of public joint-stock companies are offered for public subscription or may be sold publicly on the stock market.

A public joint-stock company (“PJSC”) may have an unlimited number of shareholders. Subject to elaborated disclosure requirements, the PJSCs are the only form of a legal entity whose shares may be openly traded and, thus, are similar to “public” companies in the usual sense.

The minimum authorized share capital for these companies is set at 1,250 minimum monthly wages (as at 1 January 2015, the minimum monthly wage is fixed at UAH 1,218).

Joint Venture/Cooperation Agreements

Contractual investment vehicles are represented in Ukraine by a variety of agreements on joint business activities. The most common type of such agreements is the joint activity agreement, whereby the parties combine their funds, know-how, business reputation, and/or publicity into their joint operations. Such contractual joint ventures must maintain separate accounting records and must establish separate bank accounts for their joint operations. Any income generated by the participants in such contractual joint ventures from their engaging in such joint operations is also taxed separately from their respective incomes generated from their principal business activities. Both domestic and foreign investors may carry out investment activities on the basis of joint activity agreements. Joint activity agreements between foreign investors and their Ukrainian partners must be registered in the manner established by the Cabinet of Ministers of Ukraine.

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