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Law of Ukraine ON JOINT STOCK COMPANIES - PDF
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1 Unofficial Translation as of December 2008 As signed by the President of Ukraine on 9/17/2008 Law of Ukraine ON JOINT STOCK COMPANIES CHAPTER I. GENERAL PROVISIONS Article 1. Scope of Application of the Law 1. This Law specifies the procedure of incorporation, operation, termination, split-off of joint stock companies (hereinafter referred to as companies), their legal status, the rights and obligations of shareholders. The operations of State joint stock companies and State holding companies, whose single founder and shareholder is the State in the person of authorized governmental agencies, shall be regulated by this Law, taking into account the specifics envisaged by special laws. The specifics of the legal status, incorporation, operation, termination of joint stock companies operating on the markets of financial services and of State-owned joint stock companies shall be stipulated by laws. 3. The specifics of the incorporation of joint stock companies in the process of privatization and corporatization, their legal status and activities in the period preceding the privatization plan implementation (placement of shares) shall be specified by the legislation on privatization and corporatization. Joint stock companies whose statutory capital includes corporate rights of the State or of a local community shall be managed taking into account the specifics stipulated by the law. 4. The incorporation, termination of a joint stock company, assuming stocks for ownership or management thereof and the acquisition of control over a company shall be in compliance with the legislation on protection against unfair competition. Article 2. Definition of Terms In this Law the following terms shall be used in the following meaning: 1) affiliated persons with respect to each other (hereinafter referred to as affiliated persons): legal entities, provided one of them exercises control over the other or if both of them are under control of a third entity; next of kin (family members) of a natural person: husband (wife), parents (foster parents), guardians (trustees), brothers, sisters, children and their husbands (wives); a natural person and his/her family members and a legal entity if this natural person and/or his/her family members exercise control over this legal entity. 2) share buyout acquisition of own shares by the issuing joint stock company for a certain price;
2 3) voting share a share giving its owner the right to vote at a general shareholder meeting (hereinafter referred to as general meeting ) for a decision on matters specified by the law and by the articles of incorporation of the company; 4) significant transaction a legal transaction or several interrelated legal transactions (except for the legal transactions related to the placement of its own shares by a company) executed by a joint stock company, if the market value of the underlying property (services, works) is 10% or more of the value of the company assets according to the company s latest annual financial report; 5) significant block of shares a block of shares that amounts to 10% or more of common shares of a joint stock company; 6) controlling interest - a block of shares that amounts to 50% or more of common shares of a joint stock company 7) control decisive influence on business activity of an economic entity which is exerted, in particular, due to exercise of the right of ownership or use of all assets or a significant part of them, the right which ensures decisive influence on formation of the makeup, the results of voting and approval of decisions by the management bodies of the economic entity and also execution of legal transactions giving an opportunity to define conditions for business activities, to give mandatory instructions or perform the functions of a management body of the economic entity; 8) corporate rights the totality of the property and non-property shareholder rights that proceed from share ownership, including the right to participate in corporate governance, to get a share of company profits in the form of dividends and a share of company assets in case of its liquidation in conformity with the law, and other rights and competencies envisaged by law or company articles of incorporation; 9) cumulative voting voting during election of company s bodies when the total number of votes of a shareholder is multiplied by the number of members of a joint stock company s body being elected, and a shareholder has the right to cast all votes calculated this way for one candidate or distribute them between several candidates; 10) liquidation value of a preferred share of a certain type the amount of funds received by the owner of such a share during liquidation of a joint stock company; 11) mandatory buyout of shares mandatory acquisition of the shares placed by a shareholder for a fee and on his/her demand by a joint stock company; 12) persons acting jointly natural persons and/or legal entities coordinating their actions for achievement of their shared goal; 13) official printed organ one of the official press editions of the Verkhovna Rada of Ukraine, the Cabinet of Ministers of Ukraine or the Securities and Stock Market State Commission; 14) shareholders notification announcement that includes the information envisaged by law and by company charter to be sent to addressees by registered mail, with the list of contents attached; 15) officers of joint stock company's bodies the natural persons who occupy the posts of the chairman and members of the supervisory board, executive body, audit commission of a joint stock company, a corporate secretary as well as the chairman and members of another company s body if establishment of such a body is stipulated by the company charter; 2
3 16) proportionate redemption of shares acquisition of own shares by joint stock company proportionately to the number of shares of a certain type and/or class put up for sale by every shareholder; 17) simple majority of votes more than 50 percent of votes of the shareholders that took part in a general meeting; 18) securities placed the securities of a joint stock company sold by a company to other persons in accordance with the procedure established by the legislation; 19) statutory capital the aggregate value of the shares issued by the company indicated in the company charter; 20) members of the executive body officers members of a collegial executive body. The person exercising the powers of a one-man executive body of a company also has the status of a member of the executive body. Article 3. Legal Status of a Joint Stock Company 1. A joint stock company is an economic entity the statutory capital of which is divided into a certain number of shares of an equal nominal value the corporate rights under which shall be certified by shares. 2. A joint stock company shall not be liable for the obligations of its shareholders. Company and its bodies shall be indemnified of any sanctions restricting their rights in the event of shareholders committing illegitimate actions. Shareholders shall not be liable for the obligations of the company and shall run the risk of losses related to operations of the company within the value of their shares, unless specified otherwise by law. In the cases specified by the company s charter the shareholders who have not paid in their shares in full shall be liable for obligations of the company within the unpaid portion of the value of their shares. 3. A joint stock company may be incorporated through incorporation or merger, division, spin-off or transformation of commercial society (ies), State-owned, communal and other enterprises into a joint stock company. A company shall be incorporated for an unlimited period, unless specified otherwise in its charter. A company shall be deemed incorporated and it shall acquire the rights of a legal entity from the date of its state registration in accordance with the procedure established by the legislation. 4. The full name of a joint stock company in Ukrainian shall have an indication of its type (public or private) and an organization-and-legal form (a joint stock company). A company may have an abbreviated name in Ukrainian as well as a full and abbreviated name in a foreign language. Article 4. Shareholders of a Company 1. Company shareholders shall be natural persons and legal entities, as well as the State represented in by the body authorized to manage the State property, or a community represented by the body authorized manage communal property as owners of company shares. 3
4 A joint stock company may not have another entrepreneurial society whose participant is one person as its sole shareholder. A joint stock company may not include only shareholders legal entities whose only participant is the same person. 2. No obligations of shareholders that contravene the law shall be established by the company memorandum or articles of incorporation. Article 5. Types of joint stock companies 1. There shall be public and private joint stock companies. There shall be no more than 100 shareholders in a private JSC. 2. A public JSC may perform public and private placement of shares. A private JSC shall perform only private placement of shares. Should the general shareholders meeting of a private company decide to perform public placement of shares, the company charter shall be amended accordingly, including a change of the company type from private to public company. Changing the company type from private to public company shall not be considered its transformation. Article 6. Joint Stock Company with One Shareholder 1. A joint stock company may be established by one person or may be comprised of one person if one shareholder has acquired all shares of the company. Information on this shall be subject to registration and publication for the public in accordance with the procedure established by the Securities and Stock Market State Commission (SSMSC). Article 7. Procedure for Alienation of Company Shares 1. Shareholders of a company may sell their shares without consent of other shareholders and/or the company. 2. The charter of a private JSC may include the pre-emptive right of its shareholders and of the company to buy shares of the company offered to third parties by its shareholders. If the company charter includes the pre-emptive right provision, it shall be exercised in accordance with clauses 3-6 of this article. 3. Private JSC shareholders shall have the pre-emptive right to buy shares of the other shareholders of the company at the price and upon the terms offered to third parties on the pro rata basis proportionately to the number of shares owned by each of them. The pre-emptive right shall be in effect for two months since the date of a shareholder sale notification, unless a shorter period is specified by the company charter. The charter of a private JSC may envisage the pre-emptive right to buy out shares offered by its shareholders, if other shareholders have not exercised their pre-emptive right. The company pre-emptive right can be exercised within 10 days following the expiry of the preemptive right, unless a shorter period is specified by the company charter. The validity of the pre-emptive right period specified in the company charter shall not be less than 20 days from the notification date. The validity of the pre-emptive right period shall be terminated if, prior to its expiry, written applications have been received from all company shareholders and from the company itself about exercising of refusal to exercise the pre-emptive right. 4
5 4. A private JSC shareholder intending to sell his/her shares to a third person shall notify all the company shareholders and the company, indicating the price and other terms of sale. The shareholders shall be notified via the company. The company shall mail the notification copies to all other shareholders in writing within two business days of receipt. Unless otherwise specified by the company charter, the notification of company shareholders shall be at the cost of the shareholder wishing to sell his/her shares. If the private JSC shareholders and/or the company fail to make use of their pre-emptive right to buy all the shares offered for sale, the shares may be sold to a third party within the timeline established by this law or by the company charter, at the price and on the terms as have been notified to the company and to its shareholders. 5. In the event of a violation of the pre-emptive right to buy shares as established by this article, any shareholder of the company and/or the company, if the pre-emptive right is envisaged by the charter, shall have the right to demand in court assign the rights and obligations of the share buyer for three months from the date of the shareholder or the company found out or should have found out such a violation. 6. There shall be no transfer permitted of the pre-emptive right to other persons. 7. This pre-emptive right of private JSC shareholders shall not apply to cases of transfer of ownership of this company s securities as a result of inheritance or legal succession. 8. In case of the emergence of the distraint right on shares that have been pledged, such shares shall be alienated in compliance with the pre-emptive right of shareholders thereto. Article 8. Determination of Market Value of Property 1. The market value of property performed under this Law, other legislative acts or the company charter shall be determined through independent valuation to be performed in accordance with the legislation on the valuation of property, property rights and professional evaluation activities. The decision of employing a subject of valuation activities as a business subject shall be approved by the supervisory board of a JSC (or by the founders meeting if this happens in the process of incorporation of a company). 2. The market value of equity securities of joint stock companies shall be determined: 1) for unlisted securities: as the value of securities to be determined in accordance with the legislation on the valuation of property, property rights and professional evaluation activities. 2) for listed securities: as the value of securities to be determined in accordance with the legislation on securities and the stock market. 3. The market value of property (securities) shall be approved by the supervisory board of a JSC (or by the founders meeting if this happens in the process of incorporation of a company). 5
6 CHAPTER II. INCORPORATION OF A JOINT STOCK COMPANY Article 9. Incorporation of a Joint Stock Company 1. The state represented by the body authorized to manage state owned property, a territorial community represented by the body authorized to manage municipal property as well as natural persons and/or legal entities that approved a decision to found a company shall be founders of a joint stock company. 2. One, two or more persons may be founders of a joint stock company. 3. Founders may enter into a founding agreement (memorandum of association) specifying the method of joint operations of the JSC, the amount, type and class of its shares to be purchased by each of the founders, the nominal value and the purchase price of the shares, the timeline and the form of payment for such shares, and the period of validity of the memorandum. To incorporate a JSC, its founders shall perform private (public) placement of its shares, call a founding meeting, and perform the State registration of the company. The memorandum is not part of the articles of incorporation, and it is valid until the SSMSC registers the report on the results of the company shares private (public) placement. The memorandum shall be in writing. If a company is incorporated with natural persons participation, their signatures on the memorandum of association shall be duly notarized. If a company is incorporated by a sole, no memorandum of association shall be required. 4. In the course of a JSC incorporation, its shares shall be placed exclusively among the founders by the private placement method. Public placement of JSC shares shall be possible following the receipt of the shares first issue registration certificate. Special features of incorporation of a joint stock company by way of a merger, division, spin-off or transformation of an entrepreneurial society(ies), state-owned and municipal enterprise(s) in a joint stock company shall be stipulated by the Securities and Stock Market State Commission, and if state-owned and (or) municipal enterprises participate in it by the Securities and Stock Market State Commission as agreed with the Sate Property Fund of Ukraine. 5. Incorporation of a joint stock company shall proceed in the following stages: 1) approval of a decision on incorporation of a joint stock company and on closed (private) placement of shares by a meeting of founders; 2) filing of an application and all required documents for registration of securities issue with SSMSC; 3) registration of the securities issue and issuance of a temporary certificate of registration of securities issue by SSMSC; 4) assignment of the International Securities Identification Number (ISIN) to shares; 5) conclusion of an agreement on service of the securities issue with a depository; 6) closed (private) placement of shares among founders of the company; 7) payment of the 100% share nominal value by founders; 6
7 8) approval of the results of closed (private) placement of shares among founders of the company by the company foundation meeting, approval of the company Charter a as well as approval of other decisions provided for by law by the foundation meeting; 9) registration of the charter with state registration bodies; 10) filing a report on the results of closed (private) placement of shares with the Securities and Stock Market State Commission; 11) registration of the report on the results of closed (private) placement of shares with the Securities and Stock Market State Commission; 12) receipt of a certificate on state registration of the securities issue; 13) issuance of the documents proving shares ownership to founders of the company. Article 10. Founders Meeting of a Joint Stock Company 1. The founders meeting of a JSC shall be held within three months of the date of full payment for the shares by its founders. The number of votes that a founder has at the foundation meeting shall be determined by the number of the company s shares allocated for purchase by the founder pursuant to the founders agreement. 3. The founders meeting of a joint stock company shall take a vote and decide the following issues: 1) the company incorporation; 2) approval of valuation of the property contributed by the founders as payment for shares of the company; 3) approve the company s charter; 4) form the company s management bodies; 5) provide authorization to a representative (-s) to continue actions for the company incorporation; 6) elect members of supervisory board, chairman of a collegial executive body of the company (the person who exercises the powers of a sole executive body of the company), members of an audit commission (auditor); 7) approve the results of share placement; 8) take other actions as required for the company incorporation. 3. The decisions mentioned in items 1-3 of part 3 of this Article shall be deemed approved, if all founders of the joint stock company have voted unanimously for them. Decisions on other issues shall be approved by a simple majority of votes of the founders unless otherwise envisaged by the foundation agreement. Minutes of the foundation meeting shall be signed by all founders of the company. 4. In case of the foundation of a joint stock company by one person, the decisions mentioned in part 2 of this Article shall be made by this person solely and be documented in the memorandum of 7
8 association of the joint stock company. If the sole founder is a natural person, his/her signature on the decision on its foundation shall be subject to notarization. Failure to approve the charter of a joint stock company by the founders meeting shall be considered a refusal by its founders to incorporate this company and the grounds for returning to the founders the contributions made them as payment of shares. Article 11. Payment of Shares by Founders of a Joint Stock Company 1. Payment of the shares placed during incorporation of a joint stock company may be made in cash or with property, property and non-property rights, securities (except for debt securities issued by the founder and promissory notes). 2. The price of property contributed by founders of a joint stock company as payment for the company s shares shall correspond to the market value of this property determined in accordance with Article 8 of this Law. 3. Every JSC founder shall pay his subscription in full prior to the date of approval of the result of the first share placement. Failure to pay the founders subscription in full prior to the date of approval of the result of the first share placement shall be deemed as proof that the JSC has not been incorporated. JSC shall have no right to perform operations other than those related to its incorporation, until 50% of its statutory capital has been paid in. Prior to the registration of the share placement report, the founder shall have all the rights assigned by his shares, excepting the right to sell or encumber them. 4. The document certifying share ownership of a company founder shall be issued to him/her within 10 business days from the date of receipt by the company of a certificate of state registration of the securities issue. Article 12. Liability of Founders of a Joint Stock Company 1. Founders of a joint stock company shall bear joint and several liabilities under the obligations related to the company s incorporation that arose before its state registration. 2. A joint stock company shall be liable for the obligations of its founders related to its foundation only in case of approval of their actions by the general shareholder meeting. The general shareholder meeting which approves such obligations of the company founders shall be held within six months after state registration of the company. Information on such obligations of the company shall be reflected in the company charter. Article 13. Charter of a Joint Stock Company 1. Charter is a founding document of a joint stock company. 2. The charter a joint stock company shall contain information on: 1) full and short name of the company; 2) company type; 3) amount of the statutory capital; 8
9 4) amount of the reserve capital; 5) nominal value and the total number of shares, the number of each type of the company's shares placed of including the number of each class of preferred shares; 6) terms and procedure of conversion of preferred shares of a certain type into common shares of the company or into preferred shares of another class; 7) rights of shareholders owners of common shares of the company and the rights of shareholders owners of preferred shares of each class; 8) availability of the pre-emptive right of the private JSC to buy its shares offered by the owners to a third party, and the method of exercising this right; 9) the procedure of notifying the shareholders of payment of dividends; 10) the procedure of convening and holding a general meeting; 11) the competence of its general meeting; 12) the method of notifying shareholders of amendments in the agenda of a general meeting; 13) the composition of the company's management bodies and their competence, the method of the formation of these bodies, of electing and recalling their members, of passing their decisions, and the procedure of changing the composition of the company s bodies and their competence. 14) the procedure of amending the charter; 15) the procedure of terminating the company. 3. The Charter of a joint stock company may not stipulate giving additional rights or powers to founders of the company. 4. The charter of a joint stock company may contain other provisions that do not conflict with the legislation. CHAPTER III. STATUTORY CAPITAL OF A JOINT STOCK COMPANY Article 13. Statutory and Equity Capital of a Joint Stock Company 1. The minimal amount of a joint stock company s statutory capital as of the date of its state registration shall be 1,250 minimal wages. The statutory capital of a JSC shall determine the minimal amount of company assets guaranteeing the interests of its creditors. 2. The company s equity (net assets value) shall be the difference between the total value of its assets and the value of its obligations to other persons. 3. If, by the end of the second and every subsequent financial year, the company s net assets value proves less than its statutory capital, the JSC shall announce a decrease of its statutory capital and register the changes to the charter under a procedure established by the law. If the company s net assets value proves less than the minimal amount of the statutory capital set forth by this law, the JSC shall rectify this misalignment within 10 months from the date of the emergence of this misalignment or approve a liquidation decision. 9
10 4. The procedure of increasing (decreasing) the joint stock company s statutory capital shall be established by the Securities and Stock Market State Commission. 5. The charter of a JSC may envision the formation of a special fund to pay dividends on preferred shares. The method this fund formation and utilization shall be established by the Securities and Stock Market State Commission. Article 15. Increase of Statutory Capital 1. The statutory capital of a joint stock company shall be increased through increasing the nominal value of shares or placing additional shares in accordance with the procedure established by the Securities and Stock Market State Commission. 2. A joint stock company shall have the right to increase its statutory capital after registration of its reports on the results of placement of all previous share issues. 3. An increase of the statutory capital involving additional contributions shall require placement of additional shares. The preemptive right of shareholders to purchase the shares placed additionally by the company shall exist only in the process of private placement of shares and shall be exercised in accordance with the procedure established by the legislation. 4. An increase of the statutory capital of a JSC without involving additional contributions shall be through increasing the nominal value of shares. A JSC shall not have the right to approve a decision to increase its statutory capital through public placement of shares, if its equity is less than its statutory capital. No increase of the statutory capital shall be permitted in the presence of treasury stocks. 5. Increasing the joint stock company s statutory capital to cover losses shall not be allowed. A mandatory condition of increasing the joint stock company s statutory capital is compliance of the amount of the statutory capital after its increase with the requirements envisaged by part 1 of Article 14 of this Law as of the date of registration of amendments to the company s charter. Article 16. Decrease of the Statutory Capital 1. A statutory capital of a joint stock company can be decreased in accordance with the procedure established by the Securities and Stock Market State Commission through reducing the nominal value of shares or by canceling part of the shares previously redeemed by the company and reducing their total amount. 2. Within 30 days from the date when a decision on a reduction in the joint stock company s statutory capital has been approved the executive body shall notify every creditor whose claims to the company are not secured with collateral, guarantee or pledge of this decision in writing. 3. Within 30 days after receipt of the notice mentioned in part 2 of this Article, the creditor whose claims to the joint stock company are not secured by a collateral or pledge agreement, may demand in writing that the company fulfill within 45 days one of the following actions of the company s choice: fulfillment of obligations by way of concluding collateral, guarantee or pledge agreements or early termination or fulfillment of obligations to the creditor. 10
11 If a creditor, within the period provided for by this part, has not applied to the company with a written request, it shall be believed that he/she does not demand from the company to carry out additional actions as for the obligations due. 4. Reduction of the statutory capital by a JSC below the amount established by law shall result in the company liquidation. Article 17. Cancellation of Shares 1. A joint stock company pursuant to the procedure established by the Securities and Stock Market State Commission shall have the right to cancel the shares redeemed by it and to decrease the statutory capital by the amount of the total nominal value of the shares cancelled. Article 18. Share Consolidation and Splitting 1. A joint stock company shall have the right to consolidate all shares placed by it resulting in conversion of two or more shares into one new share of the same type and class. An exchange of shares of an old nominal value for the integral number of the shares of a new nominal value for each of the shareholders shall be a mandatory condition of share consolidation. 2. A joint stock company shall have the right to split all the shares placed by it, it resulting in conversion of one share into two or more new shares of the same type and class. 3. Shares consolidation or splitting shall not result in a changing the amount of the joint stock company statutory capital. 4. In case of share consolidation or splitting corresponding changes shall be introduced in the company's charter with regard to the nominal value and the number of shares placed. 5. A procedure of consolidation and splitting of company shares shall be established by the Securities and Stock Market State Commission. Article 19. Reserve Capital 1. A joint stock company shall form a reserve capital in the amount of not less than 15 percent of its statutory capital. A reserve capital shall be formed at the expense of a retained income through annual deductions from the company s net profit. Until the amount of the reserve capital established by the charter has been reached, the amount of annual deductions shall be not less than 5 percent of the amount of the company net profit, if available, for a year. 2. A reserve capital shall be formed to cover unanticipated losses of the company as well as to pay dividends under preferred shares. The Law may provide for other directions of using the company s reserve capital. CHAPTER IV. SECURITIES OF A JOINT STOCK COMPANY Article 20. Company Shares 1. A share of a company shall certify shareholder s corporate rights as to this joint stock company. 2. All shares of a company shall be registered ones. Shares of a company exist exclusively in a nondocumentary form. 11
12 3. A joint stock company may make an issue of shares of two types: common and preferred. A company s charter may envisage an issue of one or several classes of preferred shares granting different rights to their owners. The company s charter may not establish restrictions of the number of shares or the number of votes under the shares owned by one shareholder. 4. Common shares of a company shall not be subject to conversion into preferred shares or other securities of the joint stock company. 5. The portion of preferred shares in the company statutory capital may not exceed 25%. Article 21. Securities Issuance 1. A joint stock company may make a share issue only by a decision of its general meeting. A company may make an issue of other securities other than shares on a decision of the supervisory board unless otherwise envisaged by its charter. 2. A company may make an issue of bonds to convert the company s liabilities into securities in accordance with the procedure established by the Securities and Stock Market State Commission. Article 22. Price of Shares 1. A joint stock company shall place or sell each share redeemed by it at a price of not lower than its market value to be approved by the supervisory board except for the following cases: placement of shares during the company foundation a at a price set by the foundation agreement; placement of shares in the course of a merger, take-over, division, spin-off of a company; placement of shares with the participation of a securities trader with which an underwriting agreement has been concluded. In this case the price for share placement may be lower than their market value by the amount of this trader s fee which may not exceed 10 percent of the market value of such shares. 2. A joint stock company shall not place shares at a price of lower than their nominal value. Article 23. Payment of Securities 1. In case of placement of securities by a joint stock company their payment shall be made in cash or, by agreement between the company and the investor, by property rights, non-property rights that have a monetary value, in securities (except for bonds, debt issuable securities whose issuer is an investor, and promissory notes), with other property, or through offsetting claims to the company that arose before their placement. An investor shall not pay for securities by undertaking an obligation to perform works or render services to the company. A joint stock company s charter may establish other restrictions on the forms of payment of securities. A company shall not establish restrictions on payment of securities in cash or prohibit such payments. 2. Prior to approval of the results of the share placement by the issuer s body authorized to approve such a decision the shares placed shall be paid in full. 3. In case of public placement of shares of a joint stock company or if the property contributed as payment of securities, is in state or municipal ownership, a monetary value of such property shall be 12
13 equal to its market value. The value of the said property shall be determined by the subject of valuation activity and shall be subject to approval by the supervisory board, and in case such property is in state or municipal ownership also by the body authorized to manage the appropriate property. The approved value of the property may not differ by more than 10% from the value determined by the appraiser. Monetary valuation of claims to a company that originated prior to the placement of securities other than shares and by which the company s securities are paid shall be made according to the procedure established by paragraph one of this part for the valuation of property. 4. In the course of placement of securities their ownership shall originate within the terms and in accordance with the procedure established by the legislation on the depository system of Ukraine. 5. A joint stock company may not give loans or credits for acquisition of its securities, or to give a pledge or guarantee under the loans or credits given by a third person for acquisition of the company s shares. Article 24. Specifics of Circulation of Joint Stock Company Securities 1. Public companies shall complete the listing procedure and shall be listed at least on stock exchange. Contracts to buy or sell stocks of a listed public joint stock company shall be executed only on the stock exchange where it is listed, taking into account the content of clause 1 above of this article. 2. Private joint stock companies shall not be traded on an exchange, except for selling their stocks on a stock exchange through auction. 3. A joint stock company shall not have the right to take own stocks as pledge. 4. Transaction with securities shall be executed in writing. CHAPTER V. RIGHTS OF SHAREHOLDERS Article 25. Rights and Obligations of Shareholders - Owners of Common Shares 1. Each common share of a company shall give to its owner-shareholder the same collection of rights including the rights: 1) to participate in management of the joint stock company; 2) to collect dividends; 3) to receive a portion of the company's property in case of its liquidation. 4) to receive information; One common share of a company shall grant to a shareholder one vote for deciding each issue at a general meeting, except for the cases of a cumulative voting. Shareholders - owners of common shares of the company may have other rights envisaged by legislative acts and the charter of the joint stock company. Article 26. Shareholders Rights - Owners of Preferred Shares 1. Each preferred share of one class shall give the same collection of rights to its shareholder-owner. 13
14 2. A joint stock company's charter shall establish the scope of rights given to a shareholder-owner of each class of preferred shares of the company including: 1) amount and priority of dividend payments; 2) liquidation value and priority of payments in case of the company s liquidation; 3) cases and terms of conversion of preferred shares of this class into common shares or preferred shares of other classes. 3. A joint stock company shall pay dividends on preferred shares in the amount established by its charter except for the cases envisaged by part 2 of Article 29 of this Law. 4. Shareholders - owners of preferred shares of a company shall have the right to vote only in the cases envisaged by part 5 of this Article. One preferred share of a company shall give to a shareholder one vote for deciding each issue. A joint stock company charter may provide for a special procedure of calculation of votes together with or separately from the votes under common and/or other classes of preferred shares. 5. Shareholders-owners of preferred shares of a particular class shall have the right to vote for deciding the following issues by a joint stock company general meeting: 1) termination of a company that envisages conversion of preferred shares of this class into common or preferred shares of another class; 2) introduction of changes in the company charter envisaging restrictions of the rights of the shareholders - owners of this class of preferred shares; 3) introduction of changes in the company charter envisaging placement of a new class of preferred shares whose owners will have a higher priority in collecting dividends or receiving payments in case of liquidation of the company, or increase in the measure of rights of shareholders - owners of other placed classes of preferred shares which have a higher priority in collecting dividends or receiving payments in case of liquidation of the company. The charter of a private company may provide to shareholders the voting rights on other matters. 6. A decision of a general meeting approved with the participation of shareholders-owners of preferred shares who have the voting right in accordance with part 5 of this Article shall be deemed approved if three quarters of the votes of shareholders-owners of common shares participating in the vote supported the matter put on a vote, unless the charter of a company with 25 person or fewer requires more votes of preferred shares owners to carry this matter; In accordance with part 5 of this Article, in the process of voting of shareholders-owners of several classes of preferred shares, their votes shall be calculated in total, unless otherwise stipulated by the company's charter. 7. In the event of a change of the company type from private to public, the assignment of rights that are not envisaged under this low for shareholders-owners preferred shares of such a company shall be terminated. Article 27. Pre-emptive Right of Shareholders in Case of an Additional Share Issue 14
15 1. The pre-emptive right of shareholders shall be: the right of a shareholder - owner of common shares to acquire common shares being placed by the company privately proportionately to the portion of common shares owned in the total amount of the company s common shares issued; the right of a shareholder-owner of preferred shares to acquire preferred shares of this or a new class being placed by the company privately if the shares of such a class give preference to their owners with respect to a priority in collecting dividends or receiving payment in case of the company liquidation proportionately to the portion of preferred shares of a certain class belonging to him in the total number of preferred shares of this class. 2. The pre-emptive right shall be granted to a shareholder - owner of common shares in the course of private placement in all cases in accordance with the procedure established by the legislation. The preemptive right shall be granted to a shareholder-owner of preferred shares, if it is envisaged by the joint stock company charter. No later than 30 days before the commencement date of placement of the shares with granting the preemptive rights to shareholders the joint stock company shall notify in writing every shareholder that enjoys such a right of a possibility to exercise it. The notice shall contain data on the total number of the shares being placed by the company, their placement price, the rules of determining the number of securities which a shareholder has the preemptive right to acquire, the period and procedure of exercising the right indicated. In case of placement of preferred shares the notice shall contain information on the rights granted to the owners of the securities indicated. 3. A shareholder who intends to exercise his/her preemptive right shall submit to the joint stock company at a set date a written application on acquisition of shares and shall transfer cash in the amount which equals the value of the securities to be acquired by him/her to a relevant account. A shareholder s application shall contain his/her name (title), place of residence (location), the number of securities which he/she will acquire. The application and cash transferred shall be accepted by the company not later than the day preceding the day of commencement of securities placement. The company shall issue to the shareholder a written obligation to sell a relevant amount of securities. 4. If a joint stock company fails to comply with the procedure of shareholders exercising their preemptive right, Securities and Stock Market State Commission may approve a decision recognizing this issue as not being good-faith and suspending the placement of shares of this issue. Article 28. Protection of Rights of Shareholders - Employees of a Company 1. Officers of a joint stock company and other persons employed by the company shall have no right to demand that a shareholder - employee of a company provide information on how he/she voted or intends to vote at a general meeting, or on alienation of his/her shares by a shareholder a company employee or on his/her intention to alienate them as well as to demand from a shareholder a company employee or force him/her in whatsoever way to give a power of attorney for participation at a company s general meeting. In case of noncompliance with the requirements specified in this Article such an official of the company shall be brought to administrative and disciplinary responsibility and a labor (civil) contract with him/her shall be cancelled pursuant to the law. Article 29. Shareholder Obligations 1. Shareholders shall: 15
16 - comply with the charter and other company article of incorporation; - carry out decision of general shareholder meetings and other company bodies; - perform their obligations to the company, including those relating to material participation; - keep commercial secrets and refrain from disclosing confidential information about the company operations. The company charter may permit compiling a shareholder agreement, imposing additional obligations on shareholders, including the obligation to participate in general meetings, and providing responsibility for failure to comply. 2. Shareholder may also have other obligations as set forth by this and other laws. CHAPTER VI. DIVIDENDS OF A JOINT STOCK COMPANY Article 30. Procedure of Payment of Dividends 1. A dividend is a share of a net profit of a joint stock company paid to a shareholder on the base of one share of a certain type or class belonging to him/her. The same amount of dividends shall be accrued on the shares of the same type and class. Dividends shall be paid by a company exclusively in cash or in shares of an additional issue. A procedure of payment of dividends in shares of an additional issue shall be established by the Securities and Stock Market State Commission. Dividends shall be paid on the shares the report of the results of placement thereof is registered in accordance with the procedure established by the legislation. 2. Payment of dividends shall be made from the net profit earned during a reporting year in the amount established by a decision of a general meeting of a joint stock company not later than two months from the date from approval of such a decision. In the event of absence or insufficiency of the net profit of the reporting year and the retained profit of the previous year, payment of dividends on preferred shares shall be made at the expense of the company reserve capital. 3. A decision to pay annual dividends and the amount of the dividends on common shares shall be approved by a general meeting of a joint stock company. 4. For each payment of dividends the joint stock company supervisory board shall establish the date of making a list of the persons entitled to collect dividends, the procedure and term of their payment. A list of the persons having the right to collect dividends shall be made as of the end of the working day preceding the date when payment of the dividends started. A company shall notify the persons entitled to collect dividends of the date, amount, procedure and term of their payment. Within 10 days after approval of the decision to pay dividends the company shall notify the stock exchange at which its shares have been listed on the date, amount, procedure and term of payment of dividends. 5. In accordance with the procedure established by the Ukrainian legislation on the depository system in Ukraine a company shall be entitled to pay dividends to the shareowners on its own or transfer them to a securities depository which secures their payment to the shareowners based on the agreement concluded with an appropriate securities custodian. 16
17 Article 31. Restrictions of Payment of Dividends 1. A joint stock company shall have no right to approve a decision on payment of dividends on common shares if: 1) the placement report has not been registered as set forth by the legislation; 2) the company equity capital is less than the amount of its statutory capital, reserve capital and the amount by which the liquidation value of preferred shares exceeds their nominal value. 2. A joint stock company shall not pay dividend on common shares if: 1) the company has an obligation to redeem shares in compliance with Article 68 of this Law; 2) dividends on preferred shares have not been paid in full. 3. A joint stock company shall have no right to approve a decision to pay dividends and to pay dividends on preferred shares if 1) the placement report has not been registered as set forth by the legislation; 2) the company equity is less than the amount of its statutory capital, reserve capital and the amount by which the liquidation value of preferred shares - whose owners have advantages in the priority of receipt of payments in case of liquidation - exceeds their nominal value. A company shall have no right to pay dividends on preferred shares of a certain class prior to payment of current dividends on preferred shares whose owners have a higher priority in collecting dividends. CHAPTER VII. GENERAL MEETING OF A JOINT STOCK COMPANY Article 32. General Meeting of a Joint Stock Company 1. General meeting shall be the highest body of a joint stock company. 2. A joint stock company shall be liable to convene a general meeting annually (annual general meeting). An annual general meeting shall be held no later than on the 30 th of April of the year following the reporting year. An agenda of an annual general meeting shall by all means contain the issues envisaged by items 11, 12, and 22 of part 2 of Article 33 of this law. All other general meetings, other than an annual one, shall be deemed an extraordinary general meeting. 3. A general meeting shall be held at the expense of funds of the joint stock company. In case a general meeting is held on the initiative of shareholders the expenses related to organization, preparation and holding of such a general meeting supported documentarily may be reimbursed from the company's funds if a general meeting held in the aforementioned case has approved a decision to reimburse such expenses. Article 33. Competence of the General Meeting 1. A general meeting may decide any issues of operation of a joint stock company except for those which fall within the exclusive competence of other bodies of the company by law. 2. The following shall belong to the exclusive competence of the general meeting: 17
18 1) identification of the main areas of the joint stock company operations; 2) introduction of changes in the company's charter; 3) approval of a decision to cancel bought out shares; 4) approval of a decision to change the company type; 5) approval of a decision on placement of shares; 6) approval of a decision to increase the company s statutory capital; 7) approval of a decision to decrease the company s statutory capital, 8) approval of a decision to split or consolidate shares; 9) approval of the by-laws on the company general meeting, its supervisory board, the executive body and the audit commission (auditor) of the company and also amending them; 10) approval of other company bylaws, unless specified otherwise by the company charter; 11) approval of an annual report of the company; 12 allocations of the company profit and loss; 13) approval of a decision on the buyout of the company s shares; 14) approval of a decision on the form of shares; 15) approval of the amount of annual dividends; 16) passing decisions on matters included in the agenda of the general meeting; 17) election of new members of the supervisory board, approval of the terms of civil contracts to be concluded with members of the supervisory board, establishment of the amount of their fee, election of the person authorized to sign civil contracts with the members of the supervisory board; 18) approve a decision on the termination of the powers of members of the supervisory board; 19) election of the chairman and members of the company's audit commission (auditor) and early termination of their powers; 20) approval of conclusions of the audit commission (auditor) based on the results of an inspection of the financial and economic activity of the company based on the results of the fiscal year; 21) approval of s decision on company separation and termination, excepting the event specified by p.4 of article 84 herein, on the company liquidation, the election of the liquidation commission, the approval of the liquidation method and timeline, the method of allocating among shareholders the property remaining after satisfying the creditor claims, and approval of the liquidation balance; approval of a decision on making major legal transactions in the cases envisaged by Article 72 of this Law and on preliminary approval of major legal transactions that may be made in the process of current business activity; 18
19 21) solution of the issue of inapplicability of the preemptive right of shareholders stipulated by Article 26 of this Law; 22) approval of a decision on termination of the company except for the case envisaged by part 4 of Article 86 of this Law, election of a liquidation commission, approval of the procedure and term of liquidation, procedure of division of the property remaining after satisfaction of creditors demands among shareholders, and approval of the liquidation balance sheet; 23) approval of the company corporate governance principles (code); on split-up of other joint stock companies from the company; 24) election of the company termination commission; 25) resolution of other matters within the exclusive powers of the general meeting in accordance with the charter or with the company general meeting bylaw. 26) approval of a decision based on the results of consideration of a report of the supervisory board, a report of the executive body, a report of the audit commission (auditor); 3. The powers to decide on matters within the exclusive competence of the general meeting shall not be delegated to other bodies of the company. 4. The company charter and the law may include other matters in the exclusive competence of the general meeting. A list of the shareholders having the right to participate in the general meeting shall be compiled in accordance with the procedure established by the legislation on the depository system of Ukraine. On demand of a shareholder the company or the person that keeps records of the company ownership rights shall be obliged to provide information about putting him/her in the list of the shareholders having the right to participate in the general meeting. 2. Changes in the list of the shareholders having the right to participate in the public company general meeting after the list has been compiled may be introduced by the person or the company body provided for by the Charter or by-law on the public company general meeting. Limitation on the shareholder s right to take part in the general meeting shall be established by law. Article 35. Notice of Holding a General Meeting 1. A written notice of holding a public company general meeting and its agenda shall be sent to each shareholder recorded on the shareholders list compiled pursuant to the legislation on the depository system of Ukraine as of the date fixed by the supervisory board, and in the event of convening an extraordinary general meeting on the shareholders demand in the cases envisaged by Article 47 of this Law by the shareholders that demand it. The date fixed shall not precede the date of approval of the decision on holding the general meeting and shall not be fixed earlier than 60 days before the date of holding the general meeting. 19
20 A written notice of holding the general meeting and its agenda shall be sent to the shareholders personally (taking into account part 2 of this Article) by the person who convenes the general meeting in the way envisaged by the public company's charter not later than 30 days before the date of its holding. Notices shall be sent by the person who convenes the general meeting or the person who keeps records of the company ownership rights in case of convening a general meeting by the shareholders. A company with the number of the shareholders owners of common shares exceeding 1,000 persons not later than 30 days before the date of holding a general meeting shall also publish a notice of holding the general meeting in an official press edition. The public company shall additionally send a notice of holding the general meeting and its agenda to the stock exchange on which this company has been listed. 2. In case of registration of the shares in the name of a nominal holder a notice of holding a general meeting and its agenda shall be sent to the nominal holder who shall ensure personal notification of the shareholders he/she serves. 3. A notice of holding a public company general meeting shall contain: 1) full name and location of the company; 2) date, time and venue (with an indication of the room, office or hall number where the shareholders shall arrive at) of holding the general meeting; 3) time of the beginning and end of registration of the shareholders for participation in the general meeting; 4) date of compiling a list of the shareholders having the right to participate in the general meeting; 5) list of the issues put to vote; 6) procedure of familiarizing the shareholders with the materials they may review during their preparation for the general meeting; The general shareholder meeting shall be held on the territory of Ukraine within the inhabited locality in which the company is located, except for the cases when on the day of convening a general meeting 100 per cent of the company shares are owned by foreigners, persons without citizenship, foreign legal entities and international organizations too. Article 36. Documents Provided to Shareholders and Documents which Shareholders may Review during Preparation for General Meeting 1. In a period from the date of sending a notice of holding a general meeting to the date of holding a general meeting a public company shall provide the shareholders with an opportunity to review the documents required for taking decisions on the agenda issues at the location of the company in business days, working hours and in an accessible place, and on the day of holding the general meeting also in the place of its holding. A notice of holding the general meeting shall indicate a concretely defined place for familiarization with the documents (the room, office, etc., number), and the company officer responsible for the procedure of reviewing the documents by the shareholders. 2. The charter of the public company that has more than 100 shareholders owners of common shares may stipulate another procedure of providing the shareholders with the documents they may 20
CIS Model Law On Joint-Stock Companies *
Review of Central and East European Law 36 (2011) 157-195 CIS Model Law On Joint-Stock Companies * CHAPTER I. GENERAL Article 1. Scope 1. The present Law regulates the terms and conditions as well as the