I. Registration of a Representative Office

A foreign legal entity engaged in business activities in Ukraine may register a permanent representative office and obtain a registration certificate through the Ukrainian Ministry of Economy. Obviously, one-shot import-export contracts do not require that a foreign investor open a representative office. A representative office, however, must be registered if, for example, such import-export contracts require a continual presence in Ukraine for installation or servicing by a foreign legal entity's employees or the hiring of local staff. Pursuant to the Ukrainian Law "On Foreign Economic Activities," a foreign entity must submit to the Ministry of Economy the following documents:

1. An application in the form of a letter addressed to the Minister of Economy with a request to register a representative office, and indicating: the applicant's proposed activities, purpose of opening a representative office, number of foreign employees, and the legal address (if known). This application must be on the applicant's official letterhead, signed by the applicant's representative (appointed pursuant to the power of attorney in point 4 below), and affixed with the applicant's company seal;

2. An extract from the government register of the country in which the parent company is registered, which evidences registration of the company;

3. A notarized bank letter of good standing in the bank where the parent company has accounts. This letter should state that the parent company has an account with the relevant bank and is a customer in good standing;

4. Resolution of the company's board of directors to register and open a representative office;

5. A notarized power of attorney empowering the parent company's representative in Ukraine "to act as the company's representative in Ukraine in registering a representative office in Kiev, and performing all other activities related thereto, including delegating such rights to third persons."

The last document, the power of attorney, must specifically state that the person appointed will be the company's "representative in Ukraine," otherwise the company may encounter problems with multiple entry visas and other related issues in the future. Further, the power of attorney should grant to the representative the right to sub-delegate certain functions, such as registration of the representative office and signature on banking operations, if the representative will not be present in Ukraine on a regular basis.

The aforementioned documents must be duly notarized, certified, authenticated with the appropriate government administration (i.e., the Ministry of Foreign Affairs or other authorized body depending on the specific country) and legalized in the Ukrainian Embassy located in the country where the parent company is registered. Thereafter, the documents must be translated into Ukrainian and the translation must be authenticated. Ukrainian legislation allows 60 work days for registration of a representative office, but representative offices are typically registered within two (2) weeks from the date of submitting the documents and proof of registration fee payment to the local authorities.

The Ukrainian Ministry of Economy's fee to establish a representative office is two-thousand five-hundred (2,500) US dollars or its equivalent in any other convertible foreign currency. The fee must be wired directly to the Ministry's account in the Ukrainian Import-Export Bank, and cannot be paid by a law firm or other agency carrying out registration on behalf of a foreign entity in Ukraine.

II. Registration of Joint Stock and Limited Liability Companies

Generally, foreign founders must prepare a series of background documents, which are described in greater detail below. Parallel to preparation of the background documents, the parties must also prepare a company charter (by-laws) and in case of joint stock company registrations, a shareholders' agreement. All of these documents will be submitted for registration with various local authorities, which can take up to 20 days after receipt of the duly prepared documents.

(A) Foreign Partner's Background Documents

In order to register a company with private ownership, a foreign legal entity will need to prepare for submission to the Ukrainian authorities the following documents:

1. A copy of the parent company's Certificate of Incorporation with the government's seal placed thereon or an extract from the Government Register of the country in which the parent company is registered, evidencing registration of the company, or an extract from the commercial registry in the state/country of incorporation;

2. A Power of Attorney bearing the parent company's seal to the individual appointed as the head representative of the representative office with the authorization to execute all documents on behalf of the parent company, open and operate local bank accounts, etc. It is quite common for foreign entities to issue an additional power of attorney to a local attorney to act as the local representative for registration purposes only (i.e., to execute all documents on behalf of the company related to registration, to register the company, to open the company's bank accounts, etc.). Preferably, the company's representative should be provided with the power to delegate his/her authorities;

3. The original resolution of the parent company's Directors to form a company in Ukraine (affixed with the company's seal);

4. A notarized letter from the parent company's bank indicating that it is in good standing. The following language is sufficient for such a letter: "This letter is to serve as verification that [name of your Company] has an account with [name of Bank]. This account was opened on [date], and has been handled satisfactorily in every way, according to our bank's policy.

5. A copy of the lease agreement or sale-purchase agreement evidencing the legal address (location) of the company in Ukraine or a guarantee letter from the owner of the premises to be leased/purchased by the company (this document can be obtained just prior to registration).

Note that documents 1, 2, 3, and 4 above must be:
1. properly executed and notarized;
2. translated into Ukrainian (officially attached to the original, not stapled);
3. authenticated in the appropriate ministry of the parent company's country;
4. legalized in the Ukrainian Embassy (of the parent company's country).

Once the foreign entity has duly prepared all of the registration documents, the foundation documents of the Ukrainian resident entity to be registered must be drafted and certified. If there is a physical entity (i.e., individual) amongst the founders, the foundation documents must be notarized by physically presenting the passport of such individual or a duly executed power of attorney issued thereby. If the founders of the Ukrainian entity are all legal entities, the foundation documents must be affixed with the official company seal of such legal entities. The contents of the foundation documents are discussed further below.

In addition, the founders must hold an initial Founders' Meeting and execute a protocol (i.e., resolution) expressing the intention to create a Ukrainian legal entity. If the founders are legal entities, the minutes of the Founders' Meeting must express the intention to become a co-founder in the Ukrainian enterprise. In all cases, the minutes of the Founders' Meeting must indicate who has the right to sign the foundation documents of the created company. Accordingly, the power of attorney for such authorized signatories must also include a provision to this effect.

(B) Drafting Shareholders Agreement and Company Charter

The registration procedure in Ukraine, as long and tedious as it is, simply consists of registration of a company charter. If the company consists of two or more founders, however, they must also draft a shareholders agreement. This document is an ordinary contract that is notarized but not registered. Although similar, both foundation documents of the company serve different purposes.

The primary purpose of the charter is to present the rights and obligations of the company and its founders and/or members. Much like by-laws of a U.S. corporation, the Ukrainian company's charter contains the goals, rights and activities of the company, its structure and administrative organs, internal procedures and the structure of the initial capitalization and contributions.

The charter also contains capitalization currency exchange rates, liquidation procedures, the method for dividing profits, and the name, address and type of company being formed. The charter must contain certain mandatory provisions listed in the laws, such as the creation of a 25% reserve fund, but can also be rather flexible in other matters. The charter serves as the company's blueprint and contains information which the Ukrainian authorities need to see before they issue a certificate of registration.

The shareholders agreement, on the other hand, secures the rights and obligations of the shareholders and/or founders amongst each other. A detailed description of the company's structure is not necessary. What is important, however, is a detailed agreement that outlines issues vital to the shareholders; namely, divisions of profits, ownership rights, transferability of shares and assignability, confidentiality, division of assets upon liquidation and, of course, dispute resolution and arbitration procedures.

The shareholders agreement often serves as the rules of procedure in case of a conflict between founders. The registration authorities, much like Ukrainian partners, quite frankly do not care about many of these issues unless the provisions blatantly contradict applicable legislation. A carefully drafted Agreement, however, is vital to the foreign investor if dispute resolution takes place in a foreign forum. This is so particularly in cases of joint ventures with state-owned enterprises where the Ukrainian State Property Fund is a legal founder.

To draft the foundation documents for a resident company, the following information is required:

1. The name of the parent company (full and abbreviation), company structure (i.e., joint stock company, limited liability company, etc.), city/country of registration, registration number (when available), registration date, the representative (i.e., the person for whom the power of attorney to sign and register the company is drafted), citizenship of founders, the issuer of each founder's passport, residence of the founders, passport validation dates, etc.;

2. The name of the company (in Ukrainian and English: full name and abbreviated name);

3. The company's Ukrainian legal address. For an address you must either own the premises or have the right to lease the premises in the rayon where the company is registered;

4. The company's purposes. Ukrainian law does not permit "catch-all" purpose clauses such as "any legal activity under Ukrainian law." Thus, the foundation documents must broadly detail all of the company's current and potential activities;

5. Amount of founder's investment/authorized fund, which may consist of cash and/or in-kind contributions (if equipment will be provided, a list of such equipment must be included as an annex to the charter);

6. Administrative bodies, management structures;

7. To whom should notices be sent and at what address;

8. Definitions of any words that need to be defined in the foundation documents (i.e. industry specific terms).

On the basis of the answers to the above questions, a draft of the charter is prepared for the company's review and approval. Thereafter, the charter is translated into Ukrainian and the registration procedure is commenced.

(C) Pre-Registration Capital Contributions

Under the Ukrainian Law "On Economic Associations," all stock companies and companies limited must make certain good-faith pre-registration deposits before they can be officially registered. In the event of closed joint stock companies, the founders must contribute no less than 50% of the nominal value of their respective shares of stock prior to the convening of the founders' assembly. Before registration of a limited liability company, the founders must make at least 30% of their contributions set forth the foundation documents prior to registration. Proof of payment must be presented to the registering authority along with the registration documents.

The minimum capitalization requirement of a joint stock company is equivalent to 1,250 minimum salaries, based on the rate of minimum salaries effective at the time of the creation of the company. In turn, the minimum capitalization requirement of a limited liability company is much less: 100 minimum salaries.

Note a peculiar exemption: the aforementioned "advance deposit" requirements apply only to companies with two or more founders (the company is then registered in accordance with the law "On Economic Associations"). If there is only one founder, such as in a 100% subsidiary, the law does not require any pre-registration deposit because such a company is registered in accordance with the law "On Enterprises," which does not provide for such advance deposits for company formation.

For purposes of making the initially required portion of the founders' contributions, a temporary bank account must be opened in the bank which will service the newly formed company. The representative of the company must present an application to open such account, along with his/her power of attorney evidencing the right to representation and a notarized copy of the founding or shareholders' agreement. If the contributions will be made in-kind, an act of appraisal and transfer of such property must also be presented.

Regardless of the level of pre-registration deposit, however, a newly formed enterprise has up to a year from the date of registration to contribute the full amount of its statutory capital, be it in-kind or cash contributions. The following discussion addresses cash contribution and in-kind contribution procedures.