Limited Liability Company in Ukraine (Ukraine Invest)

The recovery of Ukraine will require not only security guarantees but also guarantees of economic development and growth. Even now, various foreign companies are establishing joint funds with the intention of investing in the Ukrainian economy. The implementation of these investments will take the form of the creation of enterprises in Ukraine, both newly formed joint ventures and subsidiaries that will belong to foreign holding structures. The basic corporate structure in Ukraine is the Limited Liability Company (TOV). In the article below, we outline the main steps for establishing an LLC, the required documents, and important details for notation. For a better understanding we also provide a brief comparison between the German GmbH and the Ukrainian LLC, including their legal framework, requirements, and key differences. Whether you are a local entrepreneur or a foreign investor, understanding the advantages and drawbacks of these two structures will help you make an informed decision. Follow the link to learn more about the formation process, required documents, and practical insights.

 

Limited Liability Company in Ukraine (TOV)

Contents:

1. Legal Framework
2. Definition of a Limited Liability Company. Founder and Members of the Company
3. Documents Required for the Formation of an LLC
4. LLC Corporate Agreement
5. LLC Charter
6. Model LLC Charter
7. Comparison between Ukrainian LLC (TOV) and German (GmbH)

1. Legal Framework:

• Civil Code of Ukraine
• Commercial Code of Ukraine
• Law of Ukraine “On Limited and Additional Liability Companies”
• Resolution of the Cabinet of Ministers of Ukraine dated March 27, 2019, No. 367 “On Some Issues of Deregulating Business Activities”
• Law of Ukraine “On Amendments to the Commercial Code of Ukraine Regarding the Elimination of Legal Conflicts in the Requirements for the Charters of Limited and Additional Liability Companies”

2. Definition of a Limited Liability Company. Founder and Members of the Company

A limited liability company is a company established by one or more persons, whose charter capital is divided into shares. (Article 140 of the Civil Code of Ukraine). Anyone over the age of 14 can register an LLC, according to Article 32 of the Civil Code. The participants of a limited liability company can be both individuals and legal entities. Restrictions on participation in business companies may be established by law. A limited liability company can be established by one person, who becomes its sole member. (Article 114 of the Civil Code of Ukraine).

3. Documents Required for the Formation of an LLC

The formation of a company takes place by decision of its founders. If the company is established by several persons, they may enter into a written agreement on the establishment of the company to define their mutual relations concerning the formation of the company. The agreement on the formation of the company may determine the procedure for establishing the company, the conditions for joint activities, the size of the charter capital, the share of each participant, the deadlines and procedures for contributions, and other terms. The agreement is valid until the day of state registration, unless otherwise stipulated. The company acquires the rights of a legal entity from the day of its state registration. To register an LLC, you must submit the following documents to the Administrative Service Center (CNAP):

• Charter;
• Minutes of the founders’ meeting regarding the establishment of the company (original or notarized copy);
• Registration form (Form No. 2), where you can also specify the desired tax system;
• Information about the ownership structure, as defined by law;
• Copies of documents confirming the identity and citizenship of the ultimate beneficial owners of the legal entity (notarized or certified by an electronic signature);
• If the founder is a legal entity, minutes of the General Meeting of Participants of that legal entity;
• If the founder is a foreign legal entity, an extract from the foreign register confirming the existence of the legal entity, with an apostille.

Note: Documents submitted for state registration are processed within 24 hours after submission.

4. LLC Corporate Agreement

A corporate agreement is an agreement whereby the participants of a company agree to exercise their rights and powers in a certain manner or refrain from exercising them. It must be in writing. A corporate agreement may be paid or free. The company itself and third parties can also be additional parties to the agreement. Any agreement not meeting these requirements is void. According to Article 7 of the Law of Ukraine “On Limited and Additional Liability Companies,” it is possible to conclude a corporate agreement. This agreement may include provisions on:

1. Voting procedures at the General Meetings of Participants;
2. Special procedures for buying/selling shares;
3. Restricting certain individuals from joining the company;
4. Appointment and dismissal of the company’s director;
5. Distribution of dividends;
6. Preemptive rights to purchase another participant’s share;
7. Extending the statute of limitations for challenging General Meetings’ decisions;
8. Other provisions regulating relations between the parties.

It is mandatory to have a corporate agreement when there are two founders, each owning 50%. This is to avoid “deadlock” situations when one participant does not vote, preventing decisions from being made and blocking company operations. The content of the corporate agreement is confidential unless otherwise stipulated by law or the agreement. If the state, a local community, or a legal entity with at least 25% state or community ownership is a party, the corporate agreement must be made public within 10 days by posting it on the relevant government or local authority’s website. The corporate agreement is not subject to notarization and is confidential unless otherwise required.

5. LLC Charter

According to Article 82 of the Commercial Code of Ukraine, the list of information that must be included in the charters of limited liability companies is exclusively determined by the Law of Ukraine “On Limited and Additional Liability Companies.” The founding document of the company is the charter. The first edition of the company’s charter must be signed by all the participants and notarized. Changes to the charter and the first edition of the charter of a reorganized company must be signed by the participants who voted for the decision, or by a person authorized by the body that adopted the decision, if provided for by the charter. If a company is formed through reorganization, and the participants have fewer rights to alienate their shares or exit the company than those held by the predecessor company, the charter must be adopted unanimously. The charter must include:

1. The full and abbreviated name of the company (if applicable);
2. The company’s governing bodies, their powers, and decision-making procedures;
3. Procedures for joining or leaving the company;
4. Accounting of shares in the company, maintained by the Central Securities Depository.

The charter may include other provisions not contradicting the law.

6. Model LLC Charter

A model charter is a standard founding document approved by the Cabinet of Ministers of Ukraine, used to create and operate legal entities of a specific organizational form. The decision to create a company operating under a model charter must be signed by all the founders and notarized if not signed electronically. The company has the right to amend the model charter at any time. Note: The LLC formation process is free. If all conditions for automatic registration are met, a notification will be received within 10 minutes. If not, the registration will proceed with a state registrar within one working day.

7. Overview and comparison German GmbH and Ukrainian TOV  

1. Terms

• German GmbH: A GmbH is a private limited liability company, a popular legal structure for businesses in Germany. It protects shareholders by limiting their liability to the amount of their capital contribution.
• Ukrainian LLC (TOV): The Ukrainian LLC (TOV) is the equivalent of a GmbH in Ukraine. It also offers limited liability to its members, shielding them from personal financial risk beyond their contributions to the capital.

2. Main Similarities

• Legal Personality: Both entities are separate legal persons. Shareholders/members are not personally liable for the debts of the company.
• Limited Liability: In both the GmbH and TOV, liability is limited to the capital investment. Shareholders or members are only liable for the amount of capital they have contributed.
• Capital Requirements: Both entities have relatively low minimum capital requirements.
• Management: Both the GmbH and the TOV can be managed by one or more directors (Geschäftsführer in Germany and директор in Ukraine), who may be shareholders but do not have to be.
• Shareholder Rights: Shareholders/members in both entities have the right to participate in decision-making processes, including approving significant corporate actions.
• Profit Distribution: Both structures allow for profit distribution to shareholders in proportion to their capital contributions unless otherwise agreed in the statutory documents.

3. Main Differences

Aspect	German GmbH	Ukrainian LLC (TOV)
Minimum Share Capital	€25,000 (with at least 50% paid up at registration)	1 UAH (nominal capital can be symbolic)
Shareholder Disclosure	Public registry discloses names of shareholders	Public registry discloses names of shareholders
Taxation	Corporate income tax (15% + 5.5% solidarity surcharge); VAT at 19%	Corporate income tax (18%); VAT at 20%
Corporate Governance	At least one director; supervisory board optional	At least one director; supervisory board optional
Supervisory Body	Optional supervisory board for larger companies	Optional supervisory board
Registration Time	Typically, 1-2 weeks	1-5 business days
Filing Requirements	GmbH statutes, directors, shareholders register, capital account deposit proof	Statutes, founding documents, director appointment
Statutory Audits	Required if size thresholds are met	Generally required for large companies
Corporate Tax Filing	Quarterly and annual corporate filings, audited accounts	Annual tax filing
Shareholder Liability	Limited to capital contribution	Limited to capital contribution

4. Pros and Cons

German GmbH

• Pros:
  • Well-established legal structure with high international reputation.
  • Strong legal protections for shareholders and creditors.
  • Can be used for tax structuring in the EU.
  • Option to form a small capital GmbH (UG) with €1 starting capital.
• Cons:
  • Higher capital requirement (€25,000).
  • Longer registration process.
  • More stringent corporate governance requirements (e.g., audited accounts).
  • German bureaucracy can be complex for foreign owners.

Ukrainian LLC (TOV)

• Pros:
  • Very low minimum capital requirement (1 UAH).
  • Quick and straightforward registration process.
  • Flexibility in governance structures.
  • No mandatory audits unless the company meets certain criteria.
• Cons:
  • Perception of legal instability due to Ukrainian war context.
  • Less internationally recognized compared to German GmbH.
  • Foreign investors may find navigating Ukrainian law complex, particularly regarding tax compliance.

5. Registration Procedure

German GmbH:

1. Preparation of Articles of Association (Gesellschaftsvertrag): The founding document must include the company’s name, seat, business purpose, and details on managing directors.
2. Notarization: The articles of association must be notarized by a German notary.
3. Deposit of Share Capital: At least €12,500 must be deposited into a company bank account.
4. Commercial Register Application (Handelsregister): Submit the notarized documents to the local Commercial Register.
5. Tax Registration: The company must register with the tax authorities for corporate income tax, VAT, and other local taxes.
6. Trade Office Registration: The GmbH must register its business activities with the local trade office (Gewerbeamt).

Ukrainian LLC (TOV):

1. Preparation of Founding Documents: Includes the charter (статут), resolution to form the LLC, and information about shareholders and directors.
2. Registration with the State Registrar: Submit the founding documents and director information to the local state registrar. Registration can be done in person or online.
3. Tax Registration: The LLC must be registered with the tax authorities for corporate tax and VAT if applicable.
4. Open a Bank Account: After registration, open a company bank account in Ukraine to deposit share capital.
5. Obtain Permits/Licenses: Depending on the business activities, certain permits may be required.

6. Required Documents for Registration

German GmbH:

• Articles of Association (Gesellschaftsvertrag).
• Notarized incorporation documents.
• Proof of capital deposit (at least €12,500).
• Application to the Commercial Register.
• Identification documents of shareholders and directors.
• Trade office registration documents (Gewerbeanmeldung).

Ukrainian LLC (TOV):

• Charter (Статут).
• Resolution of shareholders to form the LLC.
• Identification documents of shareholders and directors.
• Tax registration application.
• Information on the registered office.

7. Conclusion and Recommendation

• GmbH is a more robust and internationally recognized structure, suitable for businesses that require a solid legal framework and are involved in significant international operations or have high capital demands.
• TOV offers more flexibility and lower barriers to entry in terms of registration and capital requirements, making it ideal for startups and smaller operations, particularly in Ukraine.