Kokhanevich E.. Usachev
V.A.
Donetsk National University of Economics
and Trade named after Mykhailo Tugan-Baranovsky
Private
enterprise in Ukraine
Ukraine’s economic freedom score is 46.3, making its
economy the 161st freest in the 2013 Index. Its score is 0.2 point higher than
last year, with modest gains in monetary freedom and business freedom that
outweigh declines in labor freedom and freedom from corruption. Ukraine is
ranked last out of 43 countries in the Europe region, and its overall score is
lower than the world average.
Economic freedom continues to be severely repressed in
Ukraine. Previous reforms, including implementation of competitive tax rates
and minor regulatory changes, have failed to spur broad-based economic
development or the emergence of a more dynamic private sector.
Such reforms are more than offset by poor policies and
weak institutional structures throughout the economy. Corruption is pervasive,
laws are poorly administered, and contract enforcement and protection of
property rights are seriously deficient. Progress in privatization and
attracting foreign investment has been meager. The primarily cash-based economy
is plagued by a lack of sufficient capitalization in the state-controlled
financial sector. The potential benefits of trade freedom are undermined by
institutional controls on capital and investment.
The
minimal number of founders (owners, shareholders) of a Private Enterprise in
Ukraine is one corporate or natural (private) person, a resident or
non-resident of Ukraine. The maximum number of founders (owners, shareholders)
is unlimited if the founders are private (natural) persons. Therewith founders
of a Private Enterprise can be either a corporate entity (i.e. only one
corporate entity) or natural (private) persons (i.e. unlimited number of
natural (private) persons), but not a corporate entity and natural (private)
persons all together. This limitation is provided by clause 113 of the
Commercial Code of Ukraine.
Relations
of owners of a Private Enterprise are not regulated by Ukrainian laws and
regulations, therefore it is provided that owners of a corporate entity in this
organization form, if they want can regulate all aspects of their relations at
their own discretion in Articles of Incorporation (also known as Articles of
Association or Statute or Charter or bylaws) including possibility (or
prohibition) to sale their corporate rights to any third parties and to
establish procedures of taking decisions related to corporate governance (for
example, it is possible to provide that decisions are taken by voting, when
each owner has one vote or when each of the owners has quantity of votes
proportionate to amount of his contribution into the authorized capital of a
Private Enterprise (simple or special majority), etc.
Founders
(owners) of PE are liable for its obligations within limits of their paid-up
share in the authorized capital and if the share was not paid in full also
within limits of the unpaid part of the same.
The
highest executive body of a private enterprise in Ukraine is its owner(s) (also
known as founders, shareholders) or a meeting of such entities, which can adopt
any decisions as regarding activity of the PE. However, Ukrainian laws do not
provide any requirements as regarding periodicity of such meetings, place of
such meetings, etc. Therefore, founders (owners, shareholders of the PE can
regulate these procedure in Articles of Incorporation (Articles of Association,
Statute or Charter) of the EP on their own discretion).
Each
Ukrainian corporate entity, including private enterprise, has to confirm its
registration information to the state registrar annually.
The
corporate documents of a Ukrainian Private Enterprise are:
-
protocols (decisions) of owner(s) (founder(s), shareholder(s)) or protocols of
meetings of these entities;
-
Notarized Articles of Incorporation (also known as Articles of Association or
Statute or Charter or bylaws) with signature and seal of the state registrar;
-
Certificate of state registration (also known as certificate of incorporation)
with signature and seal of the state registrar;
-
reference from the regional department of the State Statistics Committee;
-
references from appropriate District Tax Inspection and other state funds and
services.
While
incorporating a private enterprise in Ukraine it is very important to draft a
good Articles of Incorporation (also known as Articles of Association or
Statute or Charter) because there are some imperative requirements provided for
contents of the same by numerous Ukrainian regulations and from the other hand
creation and other corporate procedures for a private enterprise in Ukraine are
not stipulated by Ukrainian laws and the same should be established in Articles
of Incorporation (also known as Articles of Association or Statute or Charter
or bylaws) of such PE in a very clear and detailed way in order to have no
problems, conflicts and complications between founders (owners, shareholders)
of the private enterprise in future.
Ukraine entered into a recession in the second half of
2012, bringing growth in real GDP for the whole year to just 0.2 percent. GDP
declined by 1.3 percent and 2.5 percent y/y in the third and fourth quarters of
2012 respectively, compared to the first half of the year when real GDP grew by
2.5 percent. Slowdown in the global economy and, in particular, lower demand
for steel resulted in 5.2 percent y/y drop in Ukraine's steel output and led to
weak performance of industrial production (-1.8 percent y/y). Agriculture
suffered from lack of precipitation that cost some 4 percentage points of value
added in the sector. This was partially offset by robust consumption growth,
evidenced by an expansion of retail turnover (13.7 percent) that was fuelled by
a double digit increase of real wages. Consumer inflation, however, remained
close to zero due to decline in local food prices, postponed utility tariffs
adjustments and tight monetary policy. These trends continued in early 2013:
industrial production and consumer prices continue to post y/y declines, while
domestic demand supports retail turnover growth in double digits.
As
regarding incorporation and activities of a Private Enterprise in Ukraine, the
law of Ukraine "About commercial entities" and the Civil Code of
Ukraine as well do not provide any imperative regulations as regarding the
legal issues of incorporation, managing and termination of a Private
Enterprise, there only some general provisions as regarding all Ukrainian
corporate entities in the Civil Code of Ukraine. The Commercial Code of Ukraine
and the law of Ukraine "About commercial entities" also provide very
few common provisions on Private Enterprises. The same is regarding relations
between founders (owners) of the PE, relations of selling their corporate
rights (shares in the authorized capital) among themselves. Therefore there are
a lot of issues, which can be drafted in Articles of Incorporation (also known
as Articles of Association or Statute or Charter) at own discretion of founders
(also known as shareholders or owners) and from this point of view the Private
Enterprise is a perfect choice if founder(s) of a corporate entity do not want
to be guided in the matters of corporate governance by the imperative law
regulations, but want to establish their own procedures for the corporate
governance.
Ukrainian
Private Enterprise is a perfect choice for commerce in Ukraine and abroad as
well, when founders do not plane to transfer (trade) their corporate rights
(shares) too often (because each transfer of corporate rights should be made
through adoption and state registration of a new edition of Articles of
Incorporation). Owners of PE can distribute net profits of the company between
themselves and have their liability limited by property of the enterprise and
their paid share capital.
Also,
each Ukrainian corporate entity, including Ukrainian Private Enterprise, has to
file a lot of reports to the regional state tax inspection and to other
numerous state bodies during a calendar year and there are provided penalties
for those corporate entities and their officials, who fail to do this timely.
Reports are not public and cannot be disclosed by state officials to any third
parties without consent of the entity. Ukrainian laws and regulations also
provide possibilities for the regional state tax inspection and to the other
numerous state bodies to check accounting records of a corporate entity from
time to time.