Implementation of corporate agreements in the legislation of Ukraine

Most countries are familiar with the concept of corporate agreements – agreements concluded
between members of business associations and regulated relations between them in areas not
regulated by the Charter, or issues on which the parties seek confidentiality.
The legislation of Ukraine regulating limited liability companies does not include the concept of
corporate agreements. Until recently, the conclusion of such agreements was not settled in any
Today, the law has come into force, which has changed some acts of legislation by introducing
provisions on corporate agreements to them. The Verkhovna Rada adopted the law in March
2017, but the President signed it only in more than 10 months. Finally, February 17, 2018 it was
published, and the next day came into force.
The law introduces amendments to the Civil Code of Ukraine, the Law "On Business Associations"
and the Law "On Joint Stock Companies".
The law contains certain innovations for our legislation, but the concept of "corporate agreement"
is not introduced. The specified term is contained only in the title of the law. The contract is
defined as "an agreement on the exercise of the rights of the participants (founders) of a limited
liability company" for LLC and an "agreement between shareholders of the partnership" for joint
stock companies.
The list of issues that may be specified in a corporate agreement is not exhaustive, but an
indicative list of key areas of regulation is given. These include the obligation for participants to
exercise their corporate rights in a certain way or refrain from exercising them in a certain way, to
secure voting at the meeting of participants in the manner specified in the contract. The contract
can also consolidate the right or obligation of the participants to sell or purchase shares on certain
terms, as defined in advance in the contract, in the event of certain circumstances, depending or
not depending on the will of the parties to the contract. In addition, the agreement may specify
the obligation to coordinate the acquisition or sale of a share with other participants or cases in
which such acquisition or sale must be agreed. The agreement can determine the concrete ways in
which the fulfillment of obligations and measures of civil liability arising out of their violation can
be ensured.
There are also provisions which corporate agreement can not contain – namely, the obligations of
a participant to vote in accordance with the instructions of the management bodies of the
company in the event that the party is a member of such a body. Such requirements in the
contract will be invalid.
The law defines a mandatory written form with the certification of signatures on a corporate
agreement, as well as the possibility of concluding a corporate agreement for a certain or
indefinite term.
An attractive factor is the confidentiality of the content of corporate agreements, of course if
other provisions are not contained in the contract itself or in the law. Instead, there is a
requirement to inform the company that the parties have entered into a corporate agreement
within 3 working days from moment of conclusion. Such a duty is arranged on one of the parties,
and therefore the party that will inform the company should be defined in the contract to avoid
misunderstandings in future. The notice must in any case contain information about the term of
the contract; other information is indicated only at the request of its parties.
A corporate agreement, as well as a contract, the conclusion of which violates the terms of the
corporate agreement, may be declared invalid in court. However, in no case a breach by a
participant of the terms of a corporate contract can not invalidate a company's decision.
Thus to recognize the invalidity of an agreement that violates a certain clause of a corporate
agreement, it must first be proved that the other party is aware of the limitations in the corporate
agreement regarding the exercise of the rights of the participant, or the fact that the other party
should have been aware of such limitations.
In case of violation of the obligation to buy or sell the share in the company under certain
conditions, the party concerned may require to fulfill the obligation through the court.
It is unusual for Ukrainian legislation to determine the possibility of concluding a corporate
agreement between the members of the company and its creditors. Such an agreement is
inherently corporate and regulates similar areas of activities of the company's members.
In particular, a contract with creditors may involve the commission of actions aimed at protecting
the interests of creditors when exercising their rights to manage a company. Such actions may
include the method of voting at the meeting of participants, other concerted actions, such as the
acquisition or sale of shares on certain conditions or in certain circumstances, or refraining from
certain actions.
Under the law, we have to apply the general provisions of corporate agreements to contracts with
creditors, unless otherwise provided by the essence of the regulated legal relationship.
The reason for the adoption of the law on corporate agreements was the need to resolve this
issue in the current realities of the existence of LLC. Although the possibility of concluding a
corporate agreement existed before, despite the legal uncertainty of this issue, the adoption of
the law on corporate agreements should promote them among the founders of LLC and joint stock
Our law firm will gladly help you with drafting, analysis of the corporate agreement, as well as
provide legal support for its conclusion. To do this, you only need to contact us.]]>

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