В настоящей публикации рассматриваются вопросы, связанные с реорганизацией (реструктуризацией) корпораций. Исследуются нормативно-правовая база, бухгалтерский учет и налогообложение, внешние и внутренние разрешения и согласования, судьба активов и формальности, а также множество других вопросов, имеющих существенное значение при подготовке реструктуризации, во время и после ее проведения.
Use the Lexology Getting the Deal Through tool to compare the answers in this article with those from other jurisdictions.
Legal and regulatory framework
Types of transaction
What types of transactions are classified as ‘corporate reorganisations’ in your jurisdiction?
The Civil Code of Ukraine defines ‘corporate reorganisation’ in its narrow meaning as a transformation of the organisational form of a legal entity and legal succession of its assets, rights and liabilities. Such a ‘pure’ corporate reorganisation may take one of the following forms, as the law provides for amalgamation, absorption, transformation, division or spin-off.
However, in business practice corporate reorganisation is usually interpreted in a broader sense. In addition to the above forms of reorganisation, it may also include transactions between the companies of the same group (under the same control) leading to the changes in the corporate structure through the acquisition of shares or assets.
See also questions 4.
Rate of reorganisations
Has the number of corporate reorganisations in your jurisdiction increased or decreased this year compared with previous years? If so, why?
The number of internal group corporate reorganisations started to grow this year, and we expect this trend will go on, as several significant improvements have been introduced into Ukrainian regulatory framework governing corporate entities. We outline some key legislative changes in question 3.
In a global context, international processes such as BEPS, along with all associated initiatives, have a considerable impact on the Ukrainian landscape. Responsible local businesses dealing with foreign counterparties as well and multinational players with a presence in Ukraine consider international requirements to transparent business structures. Much stricter and more thorough compliance control, which banks have recently been reinforcing, has become a real challenge even for a law-abiding business.
Within the past few years, corporate governance in Ukrainian companies has been constantly developing. Progressive business and major state-owned enterprises are gradually moving to globally accepted standards and best practice. Implementation of good corporate governance often goes in parallel with the corporate reorganisation of a company and restructuring of the group of companies.
These new conditions triggered a noticeable trend for less complicated and more effective corporate structures, including for groups of companies. Consequently, we anticipate corporate reorganisations will tend to occur more frequently in Ukraine.
Jurisdiction-specific drivers
Are there any jurisdiction-specific drivers for undertaking a corporate reorganisation?
In June 2018, the new Law of Ukraine ‘On Limited Liability and Additional Liability Companies’ entered into force and significantly modernised the regulatory framework for these types of companies. In particular, the law introduced the long-awaited option of concluding corporate agreements. The law also removed the maximum limit on participants in an LLC and the restriction on one beneficial owner being the sole participant in two or more LLCs. To overcome the latter restriction, a participant of several LLCs had to engage an additional participant with a technical minority share (eg, 0.1 per cent). This restriction has now been abolished and sole participants of a few LLCs no longer need such artificial partners. This change might trigger a rearrangement of corporate structures. All references to LLCs in this chapter will also refer to the additional liability companies that are, nevertheless, not as popular in Ukraine as LLCs.
Regulation for joint stock companies (JSC) also changed for the better. Shareholders also may now enter into a shareholders’ agreements. Another novelty that the market has already used is a squeeze-out procedure, provided by Directive 2004/25/EC of the European Parliament and of the Council of 21 April 2004 on takeover bids, which Ukraine implemented following the Ukraine-EU Association Agreement.
After the recent changes to the law, a dominating majority shareholder (a group of shareholders), owning 95 per cent or more of the share capital of the JSC, may use its squeeze-out right and buyout shares of the rest minority shareholders without their consent. This option allows to dramatically minimise the number of shareholders, which in turn enables further corporate reorganisations. Many JSCs considers squeeze-out as an interim step to transformation into an LLC as a less regulated and more cost-efficient form.
Option agreements that have now become available to the shareholders (participants) of LLCs and JSCs also may boost corporate reorganisations and business restructuring.
Structure
How are corporate reorganisations typically structured in your jurisdiction?
Solvent businesses may be structured through a variety of methods depending on the needs and goals of the companies affected by the reorganisation. Below we outline the most typical structures.
Mergers
Corporate reorganisation through a merger may have a form of amalgamation or absorption. Amalgamation is a merger of two or more companies into a newly established company. As a result of an amalgamation, the merging companies cease their legal existence, whereas a newly established company assumes all their property and liabilities. Merger by absorption results in passing all rights and liabilities of one or more companies to another existing company that is the only one surviving the merger.
Divisions and spin-offs
Division is a type of reorganisation when all the rights and liabilities of a company are divided between two or several new companies under the transfer protocol. Upon the division and passing rights and liabilities to legal successors, the former company terminates its legal existence.
A spin-off also results in the formation of the new company but, unlike in a division, without termination of the company being reorganised. Certain rights and liabilities of the reorganised company pass to one or several new companies under the transfer protocol.
All the above corporate reorganisations are quite long procedures. In practice it takes six months or more to follow all the necessary stages, that is, a tax audit (see question 13), a written notification of creditors (see question 14), premature repayment of obligations, etc.
Acquisition of shares
In a group of companies, internal reorganisations are often structured through sale and purchase of shares in the target company by one intra-group company from another. Such transactions are much easier than pure corporate reorganisations as described above and, therefore, may be done in a few business days. In many cases intra-group restructuring is a combination of acquisitions of companies with their further corporate reorganisations through mergers, divisions and spin-offs.
Acquisition of assets
The reorganisation may also involve the acquisition of the target’s particular assets. Ukrainian law allows to acquire an ‘integrated property complex’ of a target company – a specific item of real estate, which includes buildings, facilities and equipment of the company. Such acquisition often requires approval from the Antimonopoly Committee of Ukraine.
Laws and regulations
What are the key laws and regulations to consider when undertaking a corporate reorganisation?
When undertaking a corporate reorganisation companies should consider the following main laws and regulations. This list, however, is not exhaustive:
the Civil Code of Ukraine of 16 January 2003 (Chapters 7 and 8);
the Commercial Code of Ukraine of 16 January 2003 (Chapters 7-11);
the Law of Ukraine ‘On Limited Liability and Additional Liability Companies’ of 06 February 2018 (Chapter VI);
the Law of Ukraine ‘On Joint Stock Companies’ of 17 September 2008 (sections XI, XVI);
the Law of Ukraine ‘On State Registration of Legal Entities, Private Entrepreneurs and Civic Formations’ of 15 May 2003 (article 17);
the Law of Ukraine ‘On Protection of Economic Competition’ of 11 January 2001 (section V);
the Law of Ukraine ‘On Securities and Stock Market’ of 23 February 2006;
the Labour Code of Ukraine of 10 December 1975; and
the Tax Code of Ukraine of 2 December 2010.
National authorities
What are the key national authorities to be conscious of when undertaking a corporate reorganisation?
Depending on the type of particular corporate reorganisation, the volume of assets of the companies partaking in the reorganisation, their market share and industry different state authorities may be involved in the procedure.
Tax Authorities
According to the Tax Code of Ukraine, the companies affected by corporate reorganisation (except transformation) are subject to an extraordinary audit by the tax authorities (see question 13).
Antimonopoly Committee of Ukraine
Under the Law of Ukraine ‘On the Protection of Economic Competition’, if a corporate reorganisation (amalgamation or absorption) reaches certain financial thresholds, then it is qualified as a concentration. The concentration requires respective approval – merger clearance – from the Antimonopoly Committee of Ukraine.
National Securities and Stock Market Commission
When a corporate reorganisation is structured through the acquisition of shares of the target JSC, a potential acquirer who intends to buy 10 or more per cent of shares in the JSC must notify the National Securities and Stock Market Commission and each stock exchange where the acquired shares are listed (if any). Also, the acquirer should publish respective announcement on the official website (stockmarket.gov.ua).
Competent state registrar of companies
The state registrar is involved at different stages of corporate reorganisation. At the first stage, the participants (shareholders) of a company must notify the competent state registrar within three business days after they took a decision about such reorganisation. The reorganisation procedure is officially completed after the state registrar makes respective changes to the Unified State Register of Legal Entities, Individual Entrepreneurs and Civic Formations. Finally, the state registrar makes respective entries to the register reflecting the termination of the reorganised company (if terminated) and registers a newly established company – the legal successor of the former.
A few years ago notaries, including private ones, were officially allowed to act as state registrars. So, now business has an option to apply for respective registration service either to the state registrar or to the private notary, who usually renders respective service in a more effective and customer-friendly way, but charges a small fee for it.
Competent state registrar for real estate
Some corporate reorganisations result in passing a real estate to the legal successor of the reorganised company. In such cases, the legal successor must apply to the competent state registrar for re-registration of property rights over the real estate in such legal successor’s name. Based on the filed application with supporting documents, the state registrar or the notary records the legal successor as a new owner (lessee, etc) of the real estate in the State Register of Property Rights to Real Estate.
In addition to the said register for real estate, passing title to land plots is also subject to registration in the State Land Cadastre.
Industry regulators
Depending on the industry and other aspects of certain corporate reorganisation other authorities may be involved.
For example, any reorganisation of a bank in Ukraine needs approval of the National Bank of Ukraine (NBU). The NBU also approves the reorganisation plan submitted by the bank.
It is also required to obtain a consent from the NBU to acquire or increase a substantial shareholding (10, 25, 50 and 75 per cent) in a Ukrainian bank or other financial institution. Apart from the NBU, the National Commission for the Regulation of Financial Services Markets also approves such deals.
Other additional filings and mandatory submissions may follow corporate reorganisation. To name a few, intellectual property (IP) rights, cars and other machinery are subject to re-registration in the name of the company-legal successor. The same relates to special licences and permits, including for the use of natural resources or certain licensed business activities.
Key issues
Preparation
What measures should be taken to best prepare for a corporate reorganisation?
A comprehensive and accurate due diligence, especially of legal, tax, accounting and financial aspects, is extremely important when undertaking a corporate reorganisation. The scope of legal due diligence depends on the areas in which the relevant entities conduct their business and, therefore, may vary, but usually includes investigation of corporate, regulatory, real estate and other assets, IP, contracts employment and other areas.
We also recommend reasonable communication with the key stakeholders of the companies before the reorganisation to conduct it smoothly and without conflicts and other impediments from third parties.
Another recommendation is to check agreements with banks, customers and suppliers. They may contain change-of-control clauses which may require a prior notification trigger of early termination of the contract or provide other consequences. All such requirements should be considered in advance as they do not always have carve-outs for intra-group reorganisations.
Employment issues
What are the main issues relating to employees and employment contracts to consider in a corporate reorganisation?
Generally, corporate reorganisation does not affect the rights or obligations of employees. After a corporate reorganisation of the company, its employees are automatically transferred to the successor or surviving entity. The employees’ consent for such transfer is not required. All employment terms and conditions remain the same unless employees are made redundant owing to a reorganisation.
When a company decides to lay off employees or change employment terms in the course of reorganisation, it must comply with the statutory procedures and collective bargaining agreement. In particular, the company must notify its employees at least two months before the effective date of respective changes. The owner of the company being reorganised must consult with the local trade union on the measures to prevent layoffs in the course of the reorganisation.
The company must ensure statutory guarantees, such as severance payments, to all redundant employees. An employee may claim for a severance payment of at least one average monthly salary if he or she is laid off owing to reorganisation or redundancy. The employer is free to pay a higher ‘exit’ compensation.
What are the main issues relating to pensions and other benefits to consider in a corporate reorganisation?
The corporate reorganisation does not affect employees’ pensions and other benefits except for the right to a severance payment as described in question 9.
Financial assistance
Is financial assistance prohibited or restricted in your jurisdiction?
The Law of Ukraine ‘On Joint Stock Companies’ (article 24) prohibits a joint stock company from providing a loan for acquisition of its shares.
Other forms of companies, including the most popular, the limited liability companies, are free from these or any other restrictions on financial assistance for corporate reorganisations.
Common problems
What are the most commonly overlooked issues or frequently asked questions in a corporate reorganisation?
Among the most commonly overlooked and frequently asked questions in a corporate reorganisation we can list the following:
prior approvals from the state authorities required to undertake corporate reorganisation (see question 6);
tax consequences of the contemplated reorganisation, including assignment of the tax credit of the terminating company, etc;
post-reorganisation measures which the legal successor should take;
the effectiveness of licences, permits and agreements transferred to the legal successor of the reorganised company;
the effectiveness of the property rights to the assets, including real estate property and land plots, transferred to the legal successor, re-registration of property rights in the name of the latter;
subsidiary liability of legal successor for liabilities of the reorganised company (the law provides for such liability);
compatibility of certain specific forms of legal entities (farms, private enterprises, non-government organisations, etc) for transformation into business companies (LLCs, JSCs, etc);
procedure and time frame required to complete corporate reorganisation; and
the corporate governance update as well as rearranging the shareholders’ agreement after the reorganisation, especially in a group of companies.
Accounting and tax
Accounting and valuation
How will the corporate reorganisation be treated from an accounting perspective? How are target assets and businesses valued?
The accounting rules that apply to corporate reorganisation consistently depend on the type of reorganisation. The participants of a particular reorganisation approve a transfer protocol or a distribution balance sheet listing the transferred assets and liabilities and their book value.
The corporate reorganisation of the state or municipal enterprise or a company with a state or municipal share in equity requires a mandatory market valuation of the assets by the certified appraiser.
Tax issues
What tax issues need to be considered? What are the tax implications of carrying out a corporate reorganisation?
First, the companies affected by corporate reorganisation (except transformation) are subject to an extraordinary audit by the tax authorities.
Generally, the surviving company or the successors assume all the tax liabilities, profits and losses of the reorganised company. However, the outstanding tax liabilities of the latter company usually significantly complicate the reorganisation procedure, as in this case, the reorganisation needs the tax authority’s approval.
Regarding corporate income tax (CIT), corporate reorganisation is a neutral transaction under the national accounting regulations (standards). The Tax Code of Ukraine provides for no adjustments of the financial result of companies involved in the reorganisation. Accordingly, corporate reorganisation does not lead to any CIT.
The Tax Code of Ukraine also excludes reorganisation procedures (amalgamation, absorption, transformation, division and spin-off) from taxation by the value added tax.
Consent and approvals
External consent and approvals
What external consents and approvals will be required for the corporate reorganisation?
A company for which shareholders have decided to conduct a corporate reorganisation must notify its creditors. Under the law, the creditors may request early fulfilment of the company’s obligations or granting security. The reorganisation is accomplished only after all the creditors’ outstanding claims are satisfied. Creditors shall have at least two months after the announcement of a reorganisation to file their claims to the company planning the reorganisation.
In some cases, mandatory consents, approvals of the government authorities or notifications may be required (see questions 6 and 13).
Internal consent and approvals
What internal corporate consents and approvals will be required for the corporate reorganisation?
Under Ukrainian law, any type of ‘statutory reorganisation’ requires the approval of the general participants (shareholders) meeting. To approve such decision at least three-quarters of the company participants (shareholders) should vote for such a decision. Also, shareholders’ agreements often require all the shareholders’ consent for any reorganisation to protect minor shareholders.
A shareholder in a JSC who has registered at the general shareholders meeting and voted ‘against’ a decision on a corporate reorganisation may claim from the company to buy out its shares at the market value. Having received such a claim, the company must buy out the shares within 30 days.
Under the law, acquisition of shares does not require the approval of the shareholders in JSC or participants in LLC correspondingly. However, shareholders (participants) may agree upon and set forth such approval in the charter of the company or the shareholders agreement. The latter may even set a lockout period during which the shareholders (participants) cannot sell their shares. Start-ups often use this limitation to preserve the corporate structure until a certain business development milestone or a round of investment.
Participants of LLCs have the statutory pre-emptive right to acquire shares that the other participant offers to a third party. In that case, first the share must be offered to other participants on the same terms as offered to a third party. An external buyer may acquire a share in the company only if none of its participants have accepted the respective offer within 30 days or any other period fixed in the company charter. Nevertheless, participants in an LLC have the option to restrict the pre-emptive right in the charter of the company, in which case the shares will be free for sale to third parties.
Assets
Shared assets
How are shared assets and services used by the target company or business typically treated?
Ukrainian law does not regulate this matter. Participants of corporate reorganisation may enter into a termination (reorganisation) agreement and define therein the terms for the transfer of assets, rights and obligations to the legal successors. If shared assets and services used by a target company to the corporate reorganisation are necessary after the corporate reorganisation, the way to treat these shared assets and services may be agreed in the said agreement.
Transferring assets
Are there any restrictions on transferring assets to related companies?
Transferring the assets between the related companies is generally allowed, and there are no specific legal restrictions. However, transfers of assets between Ukrainian company and its related foreign company may be qualified as ‘controlled operations’ under the Tax Code of Ukraine. The commercial terms of such transactions must comply with an ‘arm’s-length principle’. Otherwise, the Ukrainian company may suffer negative tax consequences.
Can assets be transferred for less than their market value?
Yes, assets, including shares, can be transferred for less than their market value as long as the assets transfer within the corporate group complies with the ‘arm’s-length principle’ (see question 17).
Formalities
Date of reorganisation
Can a corporate reorganisation be backdated or deemed to have already taken place, for example from the start of the financial year?
No, a corporate reorganisation may not be backdated or deemed to have already taken place. Under the Ukrainian law, corporate reorganisation is completed from the moment of the state registration of termination of the reorganised company (if it terminates) and state registration of its legal successors in the state corporate register (see question 6).
Documentation
What documentation is required in a corporate reorganisation?
The list of required documents depends on the contemplated type of corporate reorganisation. The Civil Code of Ukraine lists the minimum documentation required for corporate reorganisation. A legal entity when implementing any type of corporate reorganisation will require at least the approval of the general shareholders (participants) meeting, amalgamation (absorption) agreement or division plan, a transfer protocol or a distribution balance sheet. For registration in the state corporate register the company-legal successor also submits minutes of the founders’ meeting, the charter and respective application for the state registration. Above we have listed only basic documentation without supplementary documentation, which varies from case to case.
Representations, warranties and indemnities
Should representations, warranties or indemnities be given by the parties in a corporate reorganisation?
Ukrainian law generally does not recognise the concepts of representations, warranties and indemnities. Sometimes parties, by analogy with common law, include representations, warranties and indemnities in the buy-sale agreement governed by Ukrainian law. However, enforceability of such provisions in courts is questionable.
If parties are willing to have enforceable warranties and representations in a share purchase agreement they use foreign law, typically English one. However, under Ukraine law, it is possible only if a foreign element is present in the deal, for example, at least one party is a foreign entity.
Nevertheless, warranties and representations are rarely used for corporate reorganisation between the members of the same group, as risks also remain within the same group as opposed to transactions with the third parties.
Assets versus going concern
Does it make any difference whether assets or a business as a going concern are transferred?
From a tax perspective, a transfer of a business as a going concern through a corporate reorganisation is a tax neutral operation. In case the assets are transferred under a sale and purchase agreement, respective tax liabilities occur. See also question 13.
From the mere practical perspective, business as a going concern is permanently changed. So, naturally, it is more challenging to list all rights and liabilities of the respective company for its further corporate reorganisation compared to the company which only holds assets without operating activity.
Types of entity
Explain any differences between public, private, government or non-profit entities to consider when undertaking a corporate reorganisation.
In a corporate reorganisation of a legal entity (without state or municipal participation interest in its registered capital) the assets and liabilities may be transferred at their book value. In cases when state (municipal) companies pass through corporate reorganisation, the assets valuation and the determination of the assets’ market value by the certified appraisers is mandatory.
A corporate reorganisation of the public legal entities usually requires high-level approval up to the governmental level.
As to non-profit entities, the Civil Code of Ukraine (article 104) prohibits reorganisation of a legal entity, which has no right to distribute profit among its participants, if among the legal successors of such legal entity is another legal entity granted with such right. So, a non-profit entity cannot be reorganised into an LLC, JSC or other business company. Opposite reorganisation – from a business company to a non-profit entity – is allowed upon the unanimous consent of all shareholders (participants) of the business company.
Post-reorganisation steps
Do any filings or other post-reorganisation steps need to be taken after the corporate reorganisation takes place?
Post-reorganisation steps (in the case of statutory reorganisation) usually include the following:
re-registration of ownership title to real estate in the State Register of Property Rights to Real Estate in the name of the legal successors or the surviving company;
execution of assignments to the land lease agreements with further re-registration in the state register and the land cadastre;
execution of novations with customers, suppliers and other counterparties;
submission of applications for new licences and permits to be re-issued;
respective filings with the competent patent or trademark office;
administrative matters, including execution of a new e-reporting agreement for submission statements of the company; and
updating relevant company books and records.
Under the law, the target JSC (not other companies) must disclose details of the following events relevant to corporate reorganisations:
change in officers of the JSC (including as a result of a share deal);
change of owners of voting shares whose shareholding reaches or exceeds the thresholds of 5, 10, 15, 20, 25, 30, 50, 75 or 95 per cent of voting shares (including as a result of a share deal);
changes to the JSC’s charter, related to the changes of the shareholders’ rights (including as a result of the shares transfer);
a decision of the JSC to reduce the share capital; and
direct or indirect acquisition by an entity of 50 per cent and more, 95 per cent and more of shares in the JSC and 75 per cent and over of shares in the public JSC, including purchase price and the name of the acquirer (including as a result of a share deal).
Update and trends
Update and trends
Updates and trends
Global processes will stimulate Ukrainian business to meet common requirements. Ukrainian businesses tend to be effective and mobile, on the one hand, and transparent for stakeholders, including foreign ones, on the other hand. The trend for groups of companies to downsize will proceed. Banks with their compliance control will further motivate businesses to have clear corporate structures. Investors will also probably prefer transparent and clear organisational structures for financing.
From a local perspective, in June 2019, the transition period for a simplified ‘corporate’ squeeze-out procedure will expire. Therefore, we expect that the number of squeeze-outs will continue to rise within the next year to make timely use of this opportunity. After a squeeze-out, some JSCs will transform into LLCs to avoid surplus control from the National Securities and Stock Market Commission securities regulator and additional costs of maintaining a cumbersome form of a JSC.
The Ukrainian President recently submitted to parliament a draft law known as an Exit Capital Tax. If the parliament votes for this law, it may significantly change the tax system and entire business environment. These possible changes may significantly reshape the approach for structuring business in Ukraine.
Demand for good corporate governance will hopefully grow. More owners of the businesses will shift from personal inolvement in management to an institutional approach with the implementation of global best practice. These processes often go in parallel with corporate reorganisation.
Finally, in 2019, both presidential and parliamentary elections will be held in Ukraine. As a result, the political situation and business climate will be predictable for the next five-year period. Business will get a good opportunity to conduct strategic and time-consuming projects such as corporate restructuring.
Авторы: Volodymyr G. Igonin, Taisiia Asadchykh (В. Игонин, Т. Асадчих)
Источник: https://www.lexology.com/library/detail.aspx?g=b632f96c-9315-4602-a060-ec1e2dcbb4ef&utm_source=lexology+daily+newsfeed&utm_medium=html+email+-+body+-+general+section&utm_campaign=lexology+subscriber+daily+feed&utm_content=lexology+daily+newsfeed+2019-04-26&utm_term=