How a Foreign Business Owner Can Properly Cease Operations in Ukraine: Changing the Director of an LLC

A foreign business owner in Ukraine reached out to us for advice. He was also the director of his business but had to consider pausing or completely winding down his operations due to certain circumstances. He wanted to do this legally to avoid any unpleasant and unpredictable situations in the future. Wisely, he decided to consult with our lawyers before pausing his business operations, which was the right decision. Why?

The necessity for this caution stems from Ukrainian legislation, which mandates that foreign directors must have a special work permit in Ukraine. They must continue to receive their salaries and pay the Unified Social Tax (UST) regardless of the business’s operational status. Furthermore, regular reporting to authorities is required, and because the director's salary would continue, these reports cannot simply be nil. Given these requirements, the client needed more than just advice; he needed comprehensive support to manage the financial and legal aspects of his situation, including basic accounting services. Our firm undertook this case to address the client’s primary concerns. Continue reading to learn how we tackled the client’s key issues.

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Changing the Company Director: Advantages of Appointing a Ukrainian Candidate

The main issue was the need to change the director of the LLC. During the initial consultation, we discovered that the client's wife is Ukrainian. Since his wife is a Ukrainian citizen, our lawyers recommended appointing her as the new director. This step allowed us to resolve several issues:

• Now that the director is Ukrainian, the company’s charter can stipulate that no salary is paid during periods when the business is not operational. The director can also take unpaid leave for a specified period.
• This appointment places a trusted individual in the director role—a person who is reliable and can be depended upon.

Furthermore, it's worth mentioning that if the client did not have a Ukrainian wife, our legal firm would be ready to provide trustworthy candidates for the temporary director role of the company.

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Changing the Company Director Without the Presence of a Foreign Member

What are the benefits of dismissing a foreign director and appointing a Ukrainian if the company has decided to pause operations? The main advantage is that it becomes possible for the Ukrainian director to temporarily forego salary payments, as mentioned earlier. Therefore, we prepared for the director change, but our client, the foreign business owner, was unable to be present in person for the procedure.

For our lawyers, conducting company changes without the presence of members or directors has become a fairly standard procedure. However, the client, a foreign entrepreneur, was concerned about the possibility of executing this process without his personal presence and wondered whether he would need to travel to Ukraine at any stage of the changes. We assured him that no physical visit was necessary and provided a draft power of attorney, which he simply needed to apostille in his country. He did so.

After receiving the apostilled power of attorney, our lawyers quickly began the change process, which was completed in less than a week. Yes, with the help of our specialists, who have extensive experience in handling such matters, the client was able to achieve his goal. We made the changes at the company without the personal presence of the director, finding the most advantageous and optimal option. Most importantly, our approach saved the client’s time and resources since he did not have to travel to Ukraine, ensuring transparency in the process and a high level of organization.

We hope our material was useful to you and that you are convinced that making changes in a company without the physical presence of the director or members is entirely possible, and you have learned why a Ukrainian director is a beneficial solution for a paused foreign LLC. If you need practical help or consultation, please contact us. Our team is ready to assist with all business management issues and provide a high level of legal support. With us, you will receive not only the optimal solution for your situation but also maximum comfort and convenience in working with us.

Don't waste time; contact us now to discuss your needs and find the best solutions for your successful business!