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Can the Act of acceptance of services be drafted and signed by one individual who represents the interests of both parties to the contract?

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In practice, one of the common situation is where an individual entrepreneur provides services to a legal entity (LLC) under the relevant agreement, and simultaneously occupies (will occupy) a certain management position in the company (e.g. director). As a result, the signatory of the agreement and monthly Service Acceptance Certificates will be the same person.

In such a case, a strange situation arises. On the one hand, an individual entrepreneur acts as a service provider, and on the other hand, this person is a director of a company, receiving and paying for services.

And the question arises, Can the Service Acceptance Certificate be drafted and signed by one individual who represents the interests of both parties to the agreement?

Having analyzed the current legislation and court practice, we can conclude that such a person can’t do this (part 3 of Article 238 of the Civil Code of Ukraine; paragraph 3. 20.1.30 of the Tax Code of Ukraine, Article 22 of the Law of Ukraine “On Prevention of Corruption”). However, there is the way to manage the situation.

You may also like: The Advantages of Civil Law Contracts

What to do in this situation?

First, the director must notify the supreme authorities of the LLC in writing of the conflict of interest (if necessary, according to the specifics of the situation) within two days, otherwise the agreement with such director (if any) may be terminated without compensation.

In this case, a new question arises, Is there an agreement concluded with the director? Because if there is no such agreement, in practice it would be impossible to dismiss a person on such grounds, as this is not provided for in the Labor Code.

Secondly, it is necessary to immediately convene a meeting of the supreme body of the LLC (general meeting) and specify that the will to make the transaction and / or sign the certificate with an individual entrepreneur, which is also the company’s director, comes from the supreme body.

It is better to identify a third party at the meeting, which will be authorized to sign certificates on behalf of the company (specify all these issues in the minutes of the general meeting of the LLC). The power of attorney to the third party authorized to sign certificates with the director should be issued not on behalf of the director, but on behalf of the legal entity.

Third, if the type of services provided by the individual entrepreneur coincides with the activities of the LLC (according to KVED (types of economic activity)), the signing of civil law contracts with such individual entrepreneur requires a separate approval of the general meeting of the LLC, and shall be fixed in the minutes.

Fourth, if during the tax audit the controlling authority will pay attention to the documents signed by a person who acts as an individual entrepreneur and the director of the LLC, the important point is that such body has no right to define such documents as null and void in the act. This may be done only in a judicial procedure.

This is stated in the decisions of the Supreme Court (the decision of March 20, 2018 in the case No. 805/10886 / 13-a), namely: no law provides for the right of the body of the State Tax Service  to recognize, extrajudicially, the transactions and data specified by the taxpayer in tax returns as void. Therefore, the establishment of the nullity of the transaction by the act of inspection is beyond the competence of the tax authority and does not belong to the function of control over the taxpayers’ compliance with the tax legislation.

If your company has been faced with such a situation, our lawyers will:

  • Conduct a risk audit with reference to the individual nuances of the firm;
  • Examine already signed agreements and certificates and;
  • Provide assistance in drawing up minutes and other documents to avoid violation of legislation in the contractual sphere of your business.

In addition, we can provide you with legal support in case of a dispute with regulatory authorities or contractors

We make the solution of legal issues simple. So, if you have been faced with any problems in your business activity, don’t hesitate to contact us.

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