How to consolidate the relationship of business owners in Ukraine, if some of them are foreigners?

The quality of the relationship execution between business owners has a direct impact on whether their interests will be taken into account in the operation of the company. Such aspects as a smooth withdrawal from the company, distribution of profits or your authority in the management of the company depend on whether you have provided for all the variants of events in advance.

The relations must be formalized at the stage of business establishment in Ukraine - you must stipulate them in the Charter of the company  and use other methods of owners' interests protection.

The situation can be a bit more complicated if some or all of the owners are foreigners - not only do they have little understanding of the laws and regulations of Ukraine, but their status may require additional attention and regulation.

Today, we will talk about the basic legal tools, which allow you to correctly build up the relationship between business owners, their mutual rights and obligations.

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What should be the top priority for business owners?

There are a number of issues that will help settle the relationship of business owners in the future and prevent, or at least alleviate, a number of possible disputes. They include:

  • Who, when and how finances the business? It is necessary to settle the financing issues, including the formation of the authorized share capital, the provision of reimbursable financial assistance, etc.
  • How will controversial issues be resolved? It is necessary to determine not only the procedure for resolving controversial issues, but also to identify those issues that require the participation of all owners and those that will be left to the discretion of the majority owner, if any.
  • What issues will be resolved by the director of the company? It is necessary to define the director's duties and powers, to outline the list of issues, which will be fully under his/her authority. Determine the levers of pressure on the director - it is especially important for foreign investors who want to have full control over the business in Ukraine.
  • How can the owner withdraw from the business? How can they transfer their shares?
  • What will be the procedure of the company income distribution? What will be the withdrawal procedure if the owner of the business in Ukraine is a foreign company or individual?

There are a number of other issues that you can foresee for your business at the stage of its registration. Making these things clear will give you strong protection, and show you ways to manage your business in Ukraine.

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Where to stipulate the powers and rights of business owners in Ukraine?

The first thing that comes to mind is the Articles of Incorporation, but this is not the only legal tool that owners can use. In addition to the Articles of Association, a shareholders' agreement, a corporate agreement, a description of the main conditions, an investment agreement, etc. can also be used.

The choice of the tool depends on the type of your business, the interests of the founding members, and other aspects. You can also use several tools at the same time.

For example, one excellent combination is the corporate agreement and the company Articles of Incorporation developed on its basis.

A corporate agreement helps to regulate those issues which cannot always be reflected in the Articles of Incorporation. For example, you can prescribe an option to sell or buy a share in the business, or provide for a schedule and ways to finance the business. One of the main advantages of the agreement is the possibility to prescribe penalties for its violation.

Of course, the presence of a foreign partner strongly influences the choice of instruments and the number of issues that need to be settled at the start. For example, in case of large investments, a foreign partner may want to use the law of his/her country of residence/registration rather than Ukrainian law to settle controversial issues. In such a situation it is necessary to analyze his/her concerns and consider whether it would be more profitable for a foreigner to use the law of another country.

Our company offers you to register a business in Ukraine on your terms. Our services include:

  • Development of the optimal solution for business registration in Ukraine.
  • Personal preparation of constituent documents of the company and development of additional tools for securing the relationship of owners.
  • Full legal support of company registration in Ukraine.
  • Assistance in obtaining necessary licenses and permits for a business in Ukraine.
  • Business support, including accounting, auditing and staff solutions, more details here.  

Do you want to start a business in Ukraine and secure all guarantees? Don’t hesitate to contact us! We will offer the option which will suit your needs.

Didn’t find an answer to your question?

Learn more about Starting a Business in Ukraine here.

Everything about Company Registration procedure in Ukraine here.

Publication date: 30/11/2021

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