OVERVIEW OF GOVERNANCE REGIME  In Ukraine the primary law making body is the Ukrainian Parliament (‘the Parliament’). The power to make laws may be delegated to lower governments or specific bodies of Ukraine but only for prescribed purposes. The State Stock Market Securities Commission of Ukraine (‘the SSMSC’) is the regulator for the securities market. SSMSC was established in 1995 pursuant to the 1991 Law on Securities and Stock Exchange, which was replaced in 2006 by the Law on Securities and Stock Market. According to the Law on the State Regulation of the Securities Market in Ukraine, the key tasks of the SSMSC include formation and insuring of unified state policy implementation concerning development and functioning of securities and the derivatives market in Ukraine, as well as coordination of state authorities’ activities in the specified sphere. The SSMSC, which is financed from the state budget, licenses and regulates stock market participants and registers securities issues of domestic and foreign issuers.

An important aspect of implementation of state policy in the securities market is cooperation between the SSMSC and the Cabinet of Ministers of Ukraine and the Parliament.

Ukraine has recently made various efforts to improve its corporate governance environment in order to bring it into compliance with international standards and to overcome the existing shortcomings. I n particular, these efforts included the introduction of a voluntary corporate governance code in 2003 and the passage of a new securities law in 2006. Most importantly, a new Law on Joint-stock companies (‘the JSC Law’) came into force in October 2008. The adoption of the JSC Law is a significant step towards the establishment of a comprehensive corporate governance regime.

Currently, the legal framework regulating joint-stock companies (JSC) basically comprises the JSC Law, the Law on Business Associations, the Civil Code of Ukraine, the Commercial Code of Ukraine, the Law on Securities and Stock Market (the Securities Law), the Law on State Regulation of Securities Market in Ukraine, and the Law on the National Depository System.

By removing many gaps in current legislation regarding JSC activity, the JSC Law is a significant step forward for Ukraine in the protection of interests of both minority shareholders and major investors. Although not perfect, to this point it is the most comprehensive and well thought through piece of legislation in the sphere of corporate governance in Ukraine. The JSC Law represents a major improvement over the Law on Business Associations with regard to the protection of minority shareholders’ rights. For example, cumulative voting became possible, minority shareholders were given the right to place items on the agenda of shareholder meetings and dissenting shareholders were given the right to demand that their shares be bought out if they disagreed with major corporate decisions. All of these were long-awaited steps towards a modern company law in Ukraine.

Further, in the first half of 2010 the SSMSC approved a number of clarifications of important provisions of the JSC Law. The main goal of such clarification is to iron out some drawbacks and inconsistencies in the new JSC Law by explaining how certain key norms can be applied in practice. All JSCs, both public and private, stand to benefit from these efforts to rationalise and simplify Ukrainian corporate law.

On 2 March 2011, the Law of Ukraine on Improving Regulation of Joint-stock companies was officially published and became effective (except for certain provisions that shall enter into force as of 1 January 2012). I t makes significant amendments to the JSC Law and is ultimately aimed at further developing existing legislative provisions on JSCs, enhancing protection of rights and interests of shareholders, creating new impediments to raider attacks, and solving problems and curing irregularities arising in the corporate governance area upon implementation of the JSC Law.

II CORPORATE LEADERSHIP

i Board structure and practices

Generally, in Ukraine there is a two-tier board structure comprised of the management board (‘the board’) and the Supervisory Council (‘the council’). Both shall exercise general governance over JSC’s activities except for matters of exclusive competence of the general meeting of shareholders (‘the general shareholders’ meeting’).

According to the JSC Law, the council is a body that defends shareholder’s rights, and controls and regulates the activities of the board within the competence specified by the company’s charter and the JSC Law.

In JSCs that have 10 or more shareholders, establishment of the council is obligatory. I n JSCs with nine or less shareholders and in absence of a council, its powers shall be performed by the general shareholders’ meeting. I n such cases, the authorities of the council on preparing and holding the general shareholders’ meeting envisaged by the JSC Law shall be performed by the board unless the company’s charter stipulates otherwise.

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