Adopted law facilitates procedure for decision-making on conclusion of transaction with value exceeding 50% of company’s assets value
Kyiv. February 4, 2011
The Law of Ukraine “On Amendments into the Law of Ukraine “On Joint Stock Companies” adopted with inclusion of the President’s propositions does not contain now the main inconsistent provision that drew a wide response after its initial enactment by the Verkhovna Rada, believes Mr. Drozhanskyi. “So, stakeholders owning 95 or more per cent of a joint stock company’s shares will have no right to force other holders to sell their stakes”.
The provision in question disappeared from the final wording of the Law possibly due to foreign investors’ criticism implying that Ukrainian companies’ shares would enjoy low attractiveness in case such provision is introduced. Moreover, it was doubtful whether this provision is consistent with the Constitution of Ukraine saying that the enforceable expropriation of private property shall be in place only as an exception and based on social necessity.
The adopted law simplified the decision-making procedure as regards the execution of a transaction the value of which exceeds 50 per cent of a company’s assets value. Now more than 50 per cent of shareholders, but not over three fourths as before, must vote for such transaction execution.
The law concerned, however, kept in force the provision on requirement for joint stock companies to be admitted for trading at one, at least, stock exchange. This requirement, in the expert’s opinion, is rather cumbersome and contradicts the announced state’s policy on business deregulation.
At the same time, holders of over 25 per cent of shares can no longer block the transaction execution the value of which exceeds 50 per cent of the total company’s assets, or in fact any (even the most major) transaction of the company. But such shareholders will be able to block some decisions like the introduction of amendments into the charter, changes of the incorporation form, stock placement or change of the authorized capital of the company.
Roman Drozhanskyi, partner with Vokov & Partners