Anna Babych and Oksana Krasnokutskaya of Aequo assess the regulatory landscape for mergers and acquisitions in Ukraine


1.1 What legislation and regulatory bodies govern public M&A activity in your jurisdiction?

The key statutes regulating public M&A activity are: the Civil Code of Ukraine (2003); the Commercial Code of Ukraine (2003); the Law of Ukraine on Business Companies (1991); the Law of Ukraine on Joint Stock Companies (Law on JSCs) (2008); and, the Law of Ukraine on State Registration of Legal Entities and Individuals – Entrepreneurs (2003).

The main regulators relevant to public M&A activity are: the National Securities Commission of Ukraine (Securities Commission); the Anti-monopoly Committee of Ukraine (AMC); the National Commission for Financial Services Regulation (FSC); and, the National bank of Ukraine (NBU).

1.2 How, by whom, and by what measures, are takeover regulations (or equivalent) enforced?

There are no specific takeover regulations in Ukraine. The enforcement procedures are similar to those in the private M&A sector. The AMC enforces merger clearance and supervises transactions; the Securities Commission has control over public joint stock companies' (JSCs) activities; the NBU controls M&A transactions involving banks; and, the FSC supervises deals in financial services (such as insurance companies).


2.1 What are the basic structures for friendly and hostile acquisitions?

The law does not regulate this matter in Ukraine and generally there is no difference between friendly and hostile acquisitions.

The basic structures for friendly acquisitions are: (i) acquisition of shares under the respective share purchase agreements; (ii) asset deals – the acquisition of the target assets under the relevant assets sale and purchase agreements; (iii) secondary issues – issue of additional shares as a result of capital increases and acquisition of newly-issued shares by new shareholder (investor); and (iv) corporate mergers – mergers or joining of two or more companies into one surviving legal entity.

The concept of hostile acquisitions is not established by Ukrainian law. The approval of the acquirer's and bidder's relevant corporate bodies are normally required to proceed with M&A transactions as good practice, or when the company's articles of association specifically require it. No target's board consent or recommendation is requested for an M&A transaction to be further negotiated and contemplated by the parties.

2.2 What determines the choice of structure, including in the case of a cross-border deal?

Cross-border M&A deals are often structured as indirect acquisition of control of a Ukrainian target company by way of purchasing shares in its parent non-Ukrainian company. In such cases, the immediate shareholder in the Ukrainian target is not changed. Structuring of M&A transactions at the level of holding companies in foreign jurisdictions is a well-established practice in Ukraine for large and medium sized M&A deals.

The key reasons for this are: the flexibility of foreign jurisdiction (often, common law) as a governing law of the transaction documents; reliable arbitration courts to settle any potential dispute; avoidance of various mandatory notification procedures applicable in case of direct acquisition of shares in Ukrainian JSCs; the possibility to claim for breach of warranties and specific indemnities; and, various vendor protection tools.

2.3 How quickly can a bidder complete an acquisition? How long is the deal open to competing bids?

The standard timeline for M&A deal completion is three to six months. The term required for a transaction to be completed depends on the will of the parties and applicable regulatory requirements. The parties, at their own discretion, decide on the actual terms of due diligence, pre-sale restructuring (if any), and terms for fulfillment of the provided conditions.

2.4 Are there restrictions on the price offered or its form (cash or shares)?

There are no restrictions on the form of consideration the selling shareholders must obtain. Consideration combining both cash and shares is allowed, but cash consideration is most common.

There is no requirement to offer a certain minimum amount of cash consideration for the sale shares. However, in the case of mandatory buy-out of shares from JSCs' shareholders, the offered price should not be less than the market value of shares determined by the professional appraiser or at the stock exchange (if shares are traded at the stock exchange).

The triggers for mandatory buy-outs are: (i) merger, accessions, division, conversion, or spin-off of a JSC or its transformation from a public JSC into a private JSC or vice versa; (ii) any material transaction; or (iii) the change of its share capital.

2.5 What level of acceptance/ownership and other conditions determine whether the acquisition proceeds and can satisfactorily squeeze out or otherwise eliminate minority shareholders?

Squeeze-out procedures are not yet possible under Ukrainian law and shareholders are not bound to sell their shares to the majority shareholder demanding it.

However, there are sell-out rules applicable to both public and private JSCs. A person acquiring 50% shares or more in a JSC should offer all shareholders to acquire their shares. The potential sellers have 30 days to decide whether they will accept the offer or not. The applicable law is silent in regard to the rules of offering price determination.

2.6 Do minority shareholders enjoy protections against the payment of control premiums, other preferential pricing for selected shareholders, and partial acquisitions, for example by mandatory offer requirements, ownership disclosure obligations and a best price/all holders rule?

Ukrainian law provides for neither rules for mandatory offers, nor undertakings to disclose securities ownership in the target or offeror. Best price rules are not available either. However, any shareholder may demand a mandatory buy-out of its entire shares in a target JSC, provided that the shareholder participated in a general meeting and voted against any of the matters as specified in section 2.4. The share price to be paid in case of such a mandatory buy-out should be not less than the market value of such shares, calculated on the day preceding the day of the general meeting notice.

2.7 To what extent can buyers make conditional offers, for example subject to financing, absence of material adverse changes or truth of representations? Are bank guarantees or certain funding of the purchase price required?

There is no rule forbidding the offeror from providing certain conditions to its offer. However, based on the general logic of the buy-out provisions mentioned in section 2.6, the said buy-out should be unconditional (except for the merger clearance, if applicable).

Bank guarantees or the confirmation of facility granted to the offeror may be required by the seller in case of deferred payment arrangements, although it is not mandatory.

Material adverse change clauses are often seen in public M&A transactions, especially where there is a substantial gap between SPA [sale and purchase agreement] execution and completion.


3.1 What are the basic tax considerations and trade-offs?

In the case of share deals, the sale of shares in a Ukrainian legal entity (regardless of its legal form) is VAT-exempt. The capital gain received in case of the sale of shares in a JSC is subject to 18% corporate profit tax for legal entities. In case of the sale of participation interests in a legal entity of other forms (a limited liability company, or LLC), the standard corporate profit tax at the rate of 18% applies.

The income received as a result of share sale by a Ukrainian individual is subject to personal income tax at the rate of 20%.

3.2 Are there special considerations in cross-border deals?

In cross-border deals, existing double tax treaties (DTTs) should be considered by the parties. If the relevant DTT applies, the parties to the M&A transaction enjoy the reduced rates of taxation provided in the DTT.

If no DTT is applicable, the consideration paid by the Ukrainian resident will be subject to withholding tax at the rate of 15%.


4.1 What are the most important forms of anti-takeover defences and are there any restrictions on their use?

Given that the concept of hostile acquisitions is not implemented by Ukrainian law, the anti-takeover defences are mostly not relevant for Ukraine.

However, based on general rules, the AMC may forbid the merger clearance of the transaction if it restricts or distorts the competition on the market concerned. As to the foreign ownership restrictions or security and protected industry restrictions, they are rarely relevant for Ukraine.

4.2 How do targets use anti-takeover defences?

Not applicable.

4.3 Is a target required to provide due diligence information to a potential bidder?

In the ordinary course of business, legal and financial due diligence take place in the view of the contemplated transaction, although there is no legal requirement to the target company to provide due diligence information to the purchaser. The provision of the due diligence information is supervised by the seller,

4.4 How do bidders overcome anti-takeover defences?

Not applicable.

4.5 Are there many examples of successful hostile acquisitions?

Not applicable.


5.1 What are the main ways for a friendly bidder and target to protect a friendly deal from a hostile interloper?

There is no specific way protect a deal from a hostile bidder. In terms of contractual protection, the exclusivity clause is commonly agreed by the parties.

5.2 To what extent are deal protections prevented, for example by restrictions on impediments to competing bidders, break fees or lock-up agreements?

Ukrainian legislation does not regulate deal protection issues.


6.1 What are the antitrust notification thresholds in your jurisdiction?

Public M&A transactions on direct or indirect acquisitions of 25% (or more), or 50% (or more) in the target company require merger clearance with the AMC if the following thresholds are met:

  • the aggregate worldwide value of assets or the volume of sales of the parties to the transaction over the last financial year exceeds €12 million ($13.6 million), the aggregate worldwide value of assets or the volume of sales of at least two parties to the transaction exceeds €1 million, and the aggregate value of assets or the volume of sales of one party in Ukraine exceeds €1 million;
  • either party to the transaction has a market share of more than 35%; or
  • the combined market share of the parties to the transaction exceeds 35%, and the transaction takes place in the same or in adjacent markets.

6.2 When will transactions falling below those thresholds be investigated?

Transactions below the thresholds specified in section 6.1 cannot be investigated by the AMC.

6.3 Is an antitrust notification filing mandatory or voluntary?

According to applicable Ukrainian legislation, filing of a notification to the AMC and obtaining AMC merger clearance is mandatory where the established thresholds are met.

6.4 What are the deadlines for filing, and what are the penalties for not filing?

There are no any specific deadlines for filing a notification. Generally, it should be done (and the AMC approval received) before the transaction is complete.

Failure to obtain the prior approval of the AMC for a transaction (when applicable) under Ukrainian law may be subject to penalties of up to five percent of the purchaser's turnover from its worldwide sales in the last financial year.

6.5 How long are the antitrust review periods?

Ukrainian merger clearance procedures take up to 45 calendar days (unless Phase II is initiated).

In practice, the AMC generally initiates Phase II if the transaction concerned may negatively affect the competition in Ukraine, for example when the parties to the concentration have relatively high market shares in the Ukrainian markets.

6.6 At what level does your antitrust authority have jurisdiction to review and impose penalties for failure to notify deals that do not have local competition effect?

Ukrainian merger control rules are applicable to any transaction which affects or could affect economic competition in Ukraine. However, there is no specific legal doctrine or guidance as to how the effect test should be applied by the AMC. In fact, according to the existing practice and AMC approach, if the parties technically meet the thresholds envisaged by law (see section 6.1), receipt of AMC approval is required (it is assumed that the transaction could affect economic competition in Ukraine) even in cases of a pure foreign-to-foreign transaction with minimal (or no) effect on the Ukrainian competition.

6.7 What other regulatory or related obstacles do bidders face, including national security or protected industry review, foreign ownership restrictions, employment regulation and other governmental regulation?

There are only few restrictions on foreign investments in Ukraine, in particular the ban for foreign investors to direct acquisition of ownership title to farmland in Ukraine.

The Ukrainian legislation provides guarantees for foreign investors, such as prohibition of nationalisation of foreign investments, protection from subsequent changes in statute regulation, the right to claim damages suffered as a result of acts or omissions of the state bodies and guarantees of repatriation for foreign investments.


7.1 What is the applicable anti-corruption legislation in your jurisdiction?

The Ukrainian legislation regulating corruption issues are: the Criminal Code and the Criminal Procedure Codes of Ukraine; the Law of Ukraine on Preventing the Corruption and Counteractions (2011); the Law of Ukraine on Amendments to the Statutes regarding the Fulfillment by EU of Visa System Liberalisation Plan for Ukraine in respect of Liability of Legal Entities (2013) implementing criminal liability of legal entities; the Law of Ukraine on Prevention of Corruption (2014); and, the Law of Ukraine on Principles of Anti-Corruption Policy in Ukraine (Anti-Corruption Strategy) for 2014-2017 (2014).

7.2 What are the potential sanctions and how stringently have they been enforced?

According to the Criminal Code of Ukraine, anyone who is guilty of bribing persons related to private companies is subject to a fine of up to $245.

If the officer of a private company receives a bribe, they may be subject to a fine of up to $455 and prohibited from occupying certain positions for up to two years.

According to the Criminal Code of Ukraine, offering a bribe to an officer of a state authority or state enterprise may be penalised by a fine of up to $455 or imprisonment of up to four years.

If the officer of a state authority or state enterprise receives a bribe, they may be subject to a fine of up to $910 or imprisoned for up to five years.

The legal entity is criminally liable if the bribery is committed by an executive officer or other authorised representative of a legal entity while acting on behalf or in the interest of the legal entity. Ukrainian law provides for a penalty in the region of $15,180.


8.1 Are there any other material issues in your jurisdiction that might affect a public M&A transaction?

Ukrainian legislation provides for certain restrictions or a ban on foreign investors directly acquiring the ownership title to farmlands in Ukraine. However, structuring the deal indirectly may circumvent such a limitation.

8.2 What are the key recent M&A developments in your jurisdiction?

There is a draft law amending the JSCs Law registered with the Ukrainian parliament that will make squeeze-outs possible where the majority shareholder holds at least 95% of voting shares.

In January 2015, a new quorum for the general shareholders' meetings was established for joint-stock companies with substantial (more than 50%) stake of the state. From January 13 2015, in such joint-stock companies, the quorum at their general shareholders' meetings is present if shareholders holding more than 50% are present. From January 1 2016, the new quorum will be applicable to all joint stock companies regardless their shareholders' composition.


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Anna Babych

About the author

Anna Babych is a partner at Aequo. Regarded by industry experts as one of Ukraine's leading transactional lawyers, she focuses on international and domestic M&A, equity capital markets and general corporate commercial advice to private and public companies. Her transactional experience includes work on a number of the most complex, high-value deals in recent Ukrainian history. She also represents clients in a broad range of matters related to setting up optimal structures for businesses in Ukraine.

Babych is a well-known practitioner in corporate governance. In addition, she regularly advises national and international clients on labour and employment issues arising out of mergers and acquisitions, corporate restructurings, and transfers of undertaking. Her client base includes large national and international corporations, financial institutions and private equity firms operating in the CIS region.

Babych has been consistently recognised as a leading expert in corporate and M&A according to international and local legal directories, such as Chambers, Legal 500, IFLR1000, and Best Lawyers.


Oksana Krasnokutskaya

About the author

Oksana Krasnokutskaya is a senior associate at Aequo. She primarily focuses on M&A, and general corporate and commercial advice. She has extensive experience of structuring, negotiating and implementing domestic and cross-border transactions, as well as complex due diligence in various industry sectors. Her practice includes greenfield projects and corporate restructuring matters, labour and employment issues, and foreign holding company administration.