What should private enterprises do in today's realities in Ukraine?

In recent years, almost no private enterprises are registered in Ukraine. The limited liability companies (LLCs) left no room for them. This situation was caused by several factors:

• Lack of regulation of the private enterprises (PE) activities;
• Similar legal nature of a LLC and a PE;
• Foreign partners do not properly understand this type of a legal entity, as opposed to a limited liability company.

However, in Ukraine there are still a lot of private companies that were registered earlier and need to carry out some registration-related activities from time to time. Thus, in this publication we will elaborate on the actions to be taken in conditions, when most people have already forgotten what a private enterprise is.

 How to change the composition of the private enterprise?

Until recently, a private enterprise was likened to a LLC. It’s worth mentioning that the procedure for setting up, carrying out activities, and making changes to these legal entities is the same.

But the Law of Ukraine “On Limited Liability Companies and Additional Liability Companies” radically changed the situation. This law reshaped the procedure of transferring shares in the authorized capital of the LLC, as we have already discussed in one of our previous publications.

Relate article: Bringing The Charter Into Compliance With The New Legislation: Myths And Reality

But the changes did not affect private enterprises. Thus, the procedure for changing owners is still regulated by the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organizations” (hereinafter - the Law on State Registration).

Pursuant to part 4, Article 17 of this Law, in case of a share transfer, the following documents shall be submitted to the state registrar:

• Agreement (i.e. a share purchase agreement) or any other document confirming the share transfer. This is usually a declaration of a share transfer; 
• Decision of the owner or owners, if there are more than one;
• New edition of the Charter of the private enterprise, certified by a new owner.

How to change the director of the private enterprise?

Some owners of private enterprises are usually confused by part 4 of Article 128 of the Economic Code of Ukraine, which stipulates that the owner of the private enterprise is entitled to manage his/her enterprise personally or using a hired director. In case of hiring a person, an employment agreement shall be concluded by and between the company’s owner and a hired director.

A common mistake! The owners who have personally managed their enterprises for a long time, believe that in order to authorize a hired director to manage their enterprise, it is enough to conclude an employment agreement with him/her.

But in fact, no one canceled the abovementioned Law on State Registration. This means that a new person becomes a director only after the state registration of changes. To do this, you need to submit the following documents to the state registrar:

• Appropriate decision of the owner, certified by a notary;
• Statement in the prescribed form.

What to do in case of other changes to the information about private enterprises?

In case of change of the name, location, means of communication or other information about a private enterprise, it is enough to provide the state registrar with the owner’s decision and a new version of the Charter, if the changed information was specified in the Charter.

Today, there are fewer and fewer private companies, and their activities are not well regulated. But such a type of legal entity can still exist. The only challenge is to clearly understand the procedure for making changes.

If you own a private enterprise and need a legal advice on making changes or any other aspect of the private enterprise activities, please don’t hesitate to contact us!