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We know quite well that Ukrainian legislation is not easy for foreign businessmen. Donetsk Regional Advocate Association will be glad to assist you in this matter with useful information.
This article is an aid for those foreign people who would like to establish their own business in Ukraine.
Let us start with the most popular organization and legal forms of Ukrainian enterprises. The basic majority of enterprises now existing in Ukraine are founded in the form of economic societies. This group includes as follows: Joint-Stock Company, Limited Liability Company, Additional Liability Company, Full Company and Commandite Company. Joint-Stock Company is the society that has authorized capital divided by definite number of shares of equal nominal value and carrying the responsibility on obligations through the society ownership only. Limited Liability Company is the society with authorized capital divided by shares their value being determined by incorporation documents. Members of Limited Liability Company are not responsible for its obligations and carry the risk of losses related to the activity of the company according to their contributions value. Additional Liability Company is the society, which authorized capital is divided into shares their value being determined by incorporation documents. Members of such society are responsible for its debts making their payments to authorized capital, and when the sums are insufficient, they additionally use their own property the amount being proportional to a contribution by each member. Full Company is the society which members are involved in the same business carrying the joint responsibility for company obligations with their whole property. Commandite Company is the society where one or more members limit their responsibility by the contribution to the society ownership though there are one or more members who are responsible for the company’s obligations with their whole property and undertake business on behalf of the company. Any detailed description of each form of society is barely needed, as we know from practice that the majority of our clients including foreign ones usually prefer the form of Limited Liability Company. Such preference can be explained by the simplicity of incorporation and activity of Limited Liability Company. Besides, in the process of its practice there are fewer reasons for checks of such company as compared with Joint-Stock Company that is additionally checked by State Committee on Securities and Stock Market. Additional Liability Company, Full Company and Commandite Company are very rarely found in Ukraine because their founders have to carry an additional responsibility for such societies’ obligations.
INCORPORATION AND PROVISION WITH OWNERSHIP Either one or several natural or legal persons can be a founder of Limited Liability Company. To incorporate a Limited Liability Company one should provide an enterprise with the authorized capital its minimal value being UAH 37,500.00 (that is about USD 7,500.00). According to legal prescription it is allowed that no less than 50 % of the authorized capital value to be invested. Further, during one year, the authorized capital must be filled up to its full value. You can form the capital using either money or material things like equipment, buildings, office technologies, etc. The property imported to form the authorized capital is clear from customs fees. Nevertheless, if you sell it before the expire of three-year period since it has been imported to Ukraine, then the customs fee should be paid in full scale. To invest money for the authorized capital it is necessary to open an own currency account in Ukrainian bank to transfer money from abroad. Besides, it is necessary to open an account in the national currency of Ukraine, i.e. Hryvna. As soon as money has been transferred to your currency account it is to be converted to UAH and to transfer to UAH account. After that you can transfer sums from your own UAH account to an enterprise account for the authorized capital formation. Later, if required, you can increase the value of the authorized capital. To increase the authorized capital using money is the universal way to enlarge circulation fund of an enterprise without paying taxes. The authorized capital formation by foreigners as well as its enlargement is recognized to be an investment. In Ukraine there is an order for such investments registration in local bodies of executive power and tax inspections. Having registered an investment you can avoid the problem of further export or transfer of money earned in Ukraine due to investment activity. It takes about 10 working days to incorporate a company since the moment of Charters signing.
Management of an enterprise is by a head assigned by founders. Usually this person is called Director. Founders can state in the Charters of an enterprise that Director has no right to deal with real estate of a company without a written consent by founders, or to fix other limitations for a Director. A foreign founder of a company can become its Director himself. For such purpose you must get the permission for employment in Ukraine to be prolonged, usually annually. As a rule, our foreign clients use the following scheme of an enterprise management: a foreign founder is a President of a company while an authorized Ukrainian person acts as its Director. A President is responsible for important global issues while a Director is involved in everyday activities of an enterprise. The legal address of a company can be that of its head’s residence as well as any other premises being in a company’s ownership or rent. A company can start its activity only after state registration and its registration by tax inspection, statistic bodies, pension fund, population employment fund and some other institutions. Depending on types of activity an enterprise is designed for either general or simple form of taxation can be selected. The general system of taxation includes some taxes payment the basic ones being an income tax of 25 % and value added tax of 20 %. Here an enterprise decreases its taxable profit by the sum of costs supported with documents. The basic feature of the simple taxation system is to pay 10 % from an enterprise income regardless of its costs. Some types of activity require corresponding licenses reception from competent state bodies.
Sometimes our foreign investors have to buy real estate in Ukraine. In this case their rights are equal to those with Ukrainian citizens for purchase of dwelling and other buildings and premises. When a lawyer assists in the rights legalization on real estate he checks ownership documents as for this real estate, and whether this property is not arrested or mortgaged, etc. A notary certifies a contract of sales and purchase. Today we have an experienced notary just in our headquarters to certify any legal transaction, to execute a letter of attorney or to give an advice. Real estate rent by foreigners is provided with the same procedures as by citizens of Ukraine. A notary shall certify those rent contracts related to real estate designed for more than a year period. As for real estate building the procedure can be described in general terms as follows:
Having started their business in Ukraine a lot of foreign investors come across the need to use land sectors for their activity. The majority of land resources in Ukraine belong to the state. The corresponding local powers deal with the land on behalf of the state. As a rule, it is for business purposes that land is given to rent that is to temporary utilization for payment. An agreement of land rent is subject for notary certification. Here you can find summaries of some laws regulating business undertakings in Ukraine (Word format).
We believe our information is helpful for your initial knowledge of business establishment and conduct in our country. To get detailed advices please address our e-mail: advokat@online.dn.ua. |
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