The Commercial Code Of Ukraine Will Be Repealed

The Verkhovna Rada of Ukraine has adopted the Law of Ukraine "On the Specifics of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms During the Transitional Period and Associations of Legal Entities" No. 4196-IX on January 9, 2025 (hereinafter referred to as the "Law"). This Law, in addition to repealing the Commercial Code of Ukraine (hereinafter "CCU"), introduces amendments to the Civil Code of Ukraine, the Law of Ukraine "On Limited and Additional Liability Companies" (hereinafter "Law on Companies"), and other laws, particularly regarding the activities of legal entities of certain organizational and legal forms, such as private, subsidiary, foreign enterprises, state and municipal enterprises, consumer cooperative enterprises, and associations of legal entities.

WHAT'S NEW?

COMMERCIAL AND CIVIL MATTERS

Repeal of the Commercial Code of Ukraine

According to the Law, the CCU will be recognized as repealed from the date the Law comes into effect.

Protection of Bona Fide Purchasers

The Law introduces amendments to the Civil Code of Ukraine, stating that property cannot be reclaimed from a bona fide purchaser if it was sold to them through an electronic auction conducted in accordance with the procedure established by law.

Statutory Penalty for Breach of Monetary Obligations

According to amendments to the Civil Code of Ukraine, a debtor who delays the fulfillment of a monetary obligation shall, at the creditor’s request, to pay a penalty equal to double the National Bank of Ukraine’s discount rate in effect during the period for which the penalty is charged. A lower penalty rate may be specified by contract.

Property Rights

The Law provides for the abolition of certain property rights, such as full economic management and operational management. At the same time, it introduces new property rights, including the usufruct of state property, the usufruct of municipal property, and the right to manage state property for the transmission system operator of electric energy, the gas transmission system operator, and the gas storage operator.

BUSINESS ORGANIZATIONS

Fiduciary Duties of Corporate Officers

The Law introduces definition of "fiduciary duties" for corporate officers. These officers will have obligations to the company, including ensuring proper, fair, and efficient management (fiduciary duties). According to the Law, corporate officers will be liable for damages caused to the company and compensate the company for any losses resulting from their actions (or inaction).

The term Corporate officers shall include: the director (sole executive body); the chair and members of the collective executive body; the chair and members of the supervisory board or board of directors; the liquidator, chair, and members of the liquidation (reorganization) commission; the chief accountant; the corporate secretary; the chair and members of any other corporate body, if such a body is provided for by law or the company's founding documents. Other individuals may also be recognized as corporate officers under the company’s founding documents.

Rights from the participation interest owned by the company

The Law amends the Law on Companies to correctly formulate provisions on determining voting results at shareholders' meetings in cases where a company owns a participation interest in its own authorized capital. The new wording of this provision states: "Participation interest owned by the company shall not be taken into account when determining the voting results at the general meeting of participants, when distributing the company’s profits, and when distributing the company’s assets in case of dissolution." This amendment corrects a technical error (the absence of a comma before "when distributing the company’s profits"), which had existed since the adoption of the Law on Companies and led to ambiguous interpretations of this legal norm.

TRANSFORMATION OF ENTERPRISES TO THE COMPANIES

The law provides for a consistent rejection of such an organizational and legal form as an enterprise.

Termination of Enterprises

Within six months from the effective date of the Law, the participants (founders) of an enterprise and the authorized entity managing state-owned assets must decide on the termination of the enterprise (except for state-owned non-commercial enterprises) whose sole participant (founder) is the state, except for enterprises subject to bankruptcy proceedings. The term "Enterprise" refers to a legal entity that, as of the effective date of the Law, is registered in one of the following organizational and legal forms: state enterprise, municipal enterprise, joint municipal enterprise, private enterprise, foreign enterprise, subsidiary enterprise, enterprise of an association of citizens (religious organization, trade union), or a consumer cooperative enterprise.

Regulation of Enterprises Under the Law on Companies

According to the Law, the provisions of the Law on Companies will apply to subsidiary enterprises, foreign enterprises, enterprises of associations of citizens, consumer cooperative enterprises, and private enterprises unless their relationships are regulated by their charters or other laws. If, during the transitional period, the owner (authorized body managing state-owned assets, authorized local government body) does not decide on the termination of a private, subsidiary, foreign enterprise, an enterprise of an association of citizens (religious organization, trade union), or a consumer cooperative enterprise, then after the transitional period, such enterprises will be regulated under the provisions of the Law on Companies governing LLCs. Any provisions in their charters that contradict the Law on Companies will be considered invalid.

Bringing Charters and Internal Regulations in Line with the Law

During the transitional period, the charters and internal regulations of enterprises and their successors must be aligned with the Law. Until these documents are updated, they will apply only to the extent that they do not contradict the Law.

ENTRY INTO FORCE

The Law was officially published in "Holos Ukrainy" No. 40 on February 27, 2025, entered into force on February 28, 2025, and will take effect on August 28, 2025, except for certain provisions specified in the Law.