[ESTABLISHING A BUSINESS ENTITY IN UKRAINE] 509
ESTABLISHING A BUSINESS ENTITY IN UKRAINE
1. Types of business entities In order to start business activities involving Ukraine, foreign investors have to choose one of the business forms proposed by Ukrainian legislation. The most popular form of legal presence in Ukraine is the limited liability company (“ LLC ”). Sometimes, foreign investors may also choose to open a branch (subdivision) (“ branch ”) in Ukraine. Other business forms are less popular both among foreign investors and local entrepreneurs, such as (the list below is not exhaustive):
• an LLC may conduct any business activities in Ukraine (except for some directly forbidden by law) • an LLC may be incorporated by either local or foreign individuals/legal entities • in contrast to a branch (where a foreign company is fully liable for the actions of a branch), an LLC is solely liable for its obligations with its own property • participants in the LLC are not liable for the LLC’s obligations, and the LLC is not liable for the participant’s obligations; participants in the LLC are liable for the LLC’s obligations only in the amount of their contributions to the statutory capital • an LLC enjoys a comparatively (with regard to, e.g., joint-stock companies) simple regulatory environment Branch In accordance with Ukrainian legislation, foreign legal entities have the right to open branches in Ukraine. Basically, the branch is a separate subdivision of a foreign company without the status of a legal entity. It carries out activities in the name and on behalf of its headquarters (foreign company). The main function of the branch is usually to represent the interests of the foreign company in Ukraine with the aim of preparing the background for entering the Ukrainian market. Thus, branches are usually used upon entry onto the new market or for support in foreign economic activities – for market and social opinion studies and alike. Depending upon the types and extent of such activities (preparatory/auxiliary nature or actual trading operations similar to the main
Joint-stock company
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Additional liability company
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General partnership
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• Limited partnership, etc. In rare cases, Ukrainian legislation requires a business to be performed under specific types of business entities, e.g., banks or certain financial institutions can be established according to the law only in limited business forms, in particular, in the form of a joint-stock company. Below, we provide a short overview of the limited liability company and the branch, and in the subsequent sections, we will focus on details related to the limited liability company as the most popular type of legal presence in Ukraine. Limited Liability Company A limited liability company is the most popular form of set-up among both local and foreign investors, in particular, due to its numerous advantages for business: • first and foremost, an LLC acts as an independent legal entity (on its own behalf) with full business capacity in relations with third parties
ILN Corporate Group – Establishing a Business Entity Series
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