We would like to ensure that you are still receiving content that you find useful – please confirm that you would like to continue to receive ILO newsletters.
02 June 2003
The closed joint stock company is one of the corporate forms available in Ukraine. According to the Ukrainian Companies Act 1991, the shares of a closed joint stock company must be distributed among the founders and may not be distributed by means of an open subscription, or purchased and sold on stock exchanges.
There are no other restrictions for the circulation of shares of a closed joint stock company. However, some companies include special provisions for stock circulation in their founding documents (bylaws). For example, the bylaws of many Ukrainian closed joint stock companies contain a provision confirming the shareholders' pre-emptive right to buy the stock of other shareholders should they decide to dispose of it. As the law does not regulate this issue, lawyers can interpret the possibility of establishing such restrictions in different ways.
This gap in regulation has provoked conflicts and even corporate and courtroom battles, the most well-known of which is Obolon v Sarmat. Sarmat, a brewing company, attempted a hostile acquisition of 40% of fellow brewer Obolon's shares. Obolon filed several suits against Sarmat and its own shareholders, claiming that according to its bylaws, shares had to be offered to the board of Obolon before they could be sold to Sarmat. The latest decision of the Ukrainian Supreme Court in this case has not laid the matter to rest. The court did not examine the case on the merits, but merely noted that since Sarmat was not a shareholder in Obolon, it had no right to claim invalidity of the provisions in Obolon's bylaws which restricted shareholders' rights to dispose of their stock.
The case is now back before the local courts and Ukrainian corporate lawyers
are awaiting the arrival of what will be one of the important precedents in
Ukrainian company law.
For further information on this topic please contact Sergei Konnov or Galina Zagorodnyuk at Konnov & Sozanovsky by telephone (+380 44 490 5400) or by fax (+380 44 490 5490) or by email (email@example.com).
The materials contained on this website are for general information purposes only and are subject to the disclaimer.
ILO is a premium online legal update service for major companies and law firms worldwide. In-house corporate counsel and other users of legal services, as well as law firm partners, qualify for a free subscription.
Sergei V Konnov