Registration of consolidated companies
Under current conditions of the post crisis period and tough competition on different markets one of the possible ways for keeping companies alive is a union of companies aiming to solve issues mutually.
In Ukraine the main types of such unions are associations, concerns, consortiums, holdings and corporations.
The procedure for state registration of corporation, associations, consortiums, concerns and holding companies is usually similar to the general procedure for registration of legal entities, but it also has its own features.
Thus, in particular, for registration of a legal entity (e.g. a limited liability company), as well as for registration of a business combination one is to submit to the respective state register (at the place of the registered office) the following documents:
A registration card for state registration of legal entities (an application for the registration of a legal entity).
A resolution of the founders on establishing a legal entity. For example, during the registration of a holding company in accordance with Art. 4 of the Law of Ukraine “On holding companies in Ukraine” the role of such a decision can play the Agreement of the founders. The resolution of founding a holding company is adopted by the owners of the respective corporate packages and is documented by the relevant agreement.
Two copies of the incorporation documents. In accordance with the Commercial Code of Ukraine such an incorporation document for the registration of associations and corporations is a contract, and for the registration of a consortium, a holding company or a concern is a charter.
The document confirming the payment of a registration fee for state registration of a legal entity. Today the registration fee is UAH 170.
The document with information about the ownership structure of founders – legal entities.
In Ukraine, such a document is an extract from the Unified state register. If one of the founders of the association is a legal entity, one should submit a document that confirms the registration and the structure of the founders of the respective legal entity (e.g., an extract from the judicial or trade register).
In addition to the abovementioned documents, in accordance with Art. 24 of the Law of Ukraine “On State Registration of Legal Entities and Individual Entrepreneurs” in some cases additionally there can be submitted a copy of the decision of the Antimonopoly Committee of Ukraine or the Cabinet of Ministers of Ukraine on granting permission for concerted actions or concentration of legal entities. The application of this resolution is exactly the main difference in the procedure of registration of consolidated companies and legal entities.
The Law of Ukraine “On State Registration of Legal Entities and Individual Entrepreneurs” does not specify what kinds of “some additional cases” are due, referring obviously to the antitrust laws.
However, it is worth noting that the antitrust laws (including the Regulation on concerted action and the Regulation on the concentration) do not contain a list of clearly defined cases, which provide for obtaining the above-mentioned resolution, and therefore are often interpreted differently by the Antimonopoly Committee of Ukraine.
Although no legislative act provides for a direct obligation to submit AMCU permission for concerted actions or concentration of legal entities during the state registration, in practice such a business combination is to a greater extent is regarded by state authorities (including the AMC) as concerted actions or concentration. Therefore, when registering any business combination the AMC officials demand from founders obtaining a prior permission for concentration or concerted actions. Wrong interpretation of antitrust laws often leads to unnecessary costs, i.e. obtaining the mentioned authorization from the AMC even in cases where it is not necessary to obtain it. However, it is reasonable for members (founders) of the business combination to pay the costs for obtaining a prior permission of the AMC for concerted actions or concentration. The official fee for obtaining permission for concentration is of 300 non-taxable minimum incomes of citizens, that is UAH 5100; for obtaining permission for concerted actions – 150 non-taxable incomes of citizens, that is UAH 2550. In addition one should also consider the time required to obtain such permission (only time to consider the documents in the AMC may take up to 3 months). Otherwise one will be charged with a fine for violating the law on protection of economic competition for conducting business without the necessary permission of the AMC. The amount of such fine can be up to 5 % of the income of a business entity for the last year preceding the year in which the fine was imposed. After all, the amount of such penalty may be hundreds of thousands of hryvnas or even millions.
It is worth mentioning that the AMC authorities grant the permission for concentration and concerted action if the activities of the respective consolidated company do not lead to monopolization or substantial restriction of competition in the entire market or part thereof.
Also taking into account that if the AMC refused to issue a permit (for example due to a significant restriction of competition), the specified resolution may be issued by the Cabinet of Ministers if it comes to the conclusion that the positive effect of this concentration for public interest prevails over the negative effects of competition restriction.
Based on the aforementioned information, the process of registration of consolidated companies in Ukraine is really quite difficult, especially in terms of obtaining necessary permits of the AMC. Therefore, to minimize the risks and costs, it is better to seek professional help. Such professionals are employees of the COLARES Law Company, who always give you legal advice regarding features of registration of business combinations in Ukraine, as well as help to obtain a prior permission of the AMC or permission for concentration or concerted action, and register your business at the state registrar.