NEW LAW ON JOINT STOCK COMPANIES: KEY INTRODUCTIONS
NEW LAW ON JOINT STOCK COMPANIES: KEY INTRODUCTIONS
On 27 July 2022, the Verkhovna Rada of Ukraine issued a new version of the Law “On Joint Stock Companies”.
Advised by Roman Verbovskyi, Assistant Attorney at Law at Sokolovskyi & Partners.
The purpose of implementing the amendment (https://zakon.rada.gov.ua/laws/show/2465-20#Text) is to adapt national legislation to EU norms in the field of corporate governance and improve Ukraine’s position in the Doing Business rating based on the “protection of minority investors” indicator. Also, the innovations are aimed at increasing the level of corporate governance in business companies in accordance with European practices and standards.
More details about the amendments:
- Management structure of the joint-stock company.
The law provides for the introduction of: two options for building a management structure: one-level and two-level. A joint-stock company created with a one-level management structure has the right to decide on the transition to a two-level management structure, and vice versa. The management structure of the Company must be fixed in the Charter. It is worth noting that regardless of the chosen management structure, the highest management body of the joint-stock company remains the General Meeting
The one-level management structure provides for the performance of the functions of control and management of the joint-stock company activities by a single collegial body – the board of directors. The board of directors includes executive directors who perform the function of managing the current activities of the company, and may include non-executive directors who perform the function of supervision, risk management and control over the activities of the company and its executive directors.
The two-level management structure provides for a clear division of functions, where the Executive Body manages the current (operational) activities of the company, and the Supervisory Board performs the function of monitoring the work of the executive body and other managers of the joint-stock company.
- Advisor on corporate rights
The law introduced the institution of the advisor on corporate rights. The advisor’s duties include providing consultations and any other recommendations regarding the shareholder’s exercise of their corporate rights. It conducts internal research and then provides the received information to the company’s bodies and shareholders. A corporate rights advisor can only be a legal entity.
In order to fulfil the tasks assigned to it, the Advisor on a regular basis analyses the disclosure of regulated information about the issuer and other information about the joint-stock company, the shares of which have been publicly offered or the shares of which are admitted to trading on a regulated market.
- Methods of conducting general meetings
General meetings of shareholders can be held by:
- in-person voting (hereinafter referred to as in-person general meetings);
In-person general meetings provide for the joint presence of shareholders (their representatives) on the day and time of the general meeting at the place of its holding on the territory of Ukraine to discuss and make decisions on the agenda. Each shareholder has the right to participate in the in-person general meeting by means of electronic absentee voting using an authorized electronic system.
- electronic voting (hereinafter referred to as electronic general meetings);
Electronic general meetings are a new way of holding General Meetings; they do not involve the joint presence of shareholders (their representatives) and are held exclusively by electronic absentee voting of shareholders using an authorized electronic system. The Regulation on conducting electronic general meetings and functioning of the authorized electronic system will enter into force on 1 January 2024.
- surveys (remote general meetings).
Remote general meetings do not involve the joint presence of shareholders (their representatives) and are conducted by remote filling in of ballots by shareholders and sending them to the company through the depository system of Ukraine in accordance with the procedure established by the National Securities and Stock Market Commission.
Roman Verbovskyi, Assistant Attorney at Law:
“The amendments will help protect the rights of investors and expand the opportunities for attracting capital. New prospects will allow to perfect the management of companies and improve the legal and financial conditions for the use by shareholders of their corporate rights. I would advise the top managers and beneficiaries to definitely pay attention to the possibility of free choice of building and changing the management structure (one-level and two-level). The institution of the advisor on corporate rights and the mechanism for conducting general meetings with the use of electronic voting will also contribute to the more efficient work of the company. The law enters into force on 1 January 2023, and JSCs must bring their statutes into compliance with the new law by 31 December 2023. Therefore, there is enough time to prepare and study the amendment!”