Ukrainian parliament takes steps to improve corporate governance

Ukraine

On 15 July 2021, the Ukrainian Parliament passed the first reading of the Draft Law “On Amendments to Certain Ukrainian Legislative Acts About Improving Corporate Governance of Legal Entities, for which the State is the Shareholder (Founder, Participant)”.

This Draft Law is part of a process of improving the corporate governance of state-owned companies.

The adoption of the Draft Law is expected to bring Ukrainian legislation in line with OECD Guidelines on the Corporate Governance of State-Owned Enterprises. The most significant amendments proposed in the Draft Law include the following:

  • the remuneration of the supervisory board and executive body members must be regulated by remuneration policies;

  • the CMU will have the authority to approve the remuneration policies for the top-management of state-owned companies;

  • the CMU will be empowered to determine the procedure for evaluating the performance of the supervisory boards of state-owned companies;

  • audit committees as authorised bodies in joint-stock companies will be abolished and their functions will be transferred to internal audit units;

  • the powers of supervisory boards will include the approval of strategic development plans and annual financial and investment plans, procuring independent annual audits of financial statements, and other issues;

  • independent annual audits of financial statements of the state enterprises will become mandatory;

  • the supervisory boards will have exclusive powers to appoint and dismiss the CEOs of state-owned companies. At the same time, the CMU will be empowered to approve these decisions in relation to state enterprises under its direct management;

  • the managing state authorities (i.e., the CMU or a respective ministry) will be required to approve state-owned companies’ dividends based on the proposals of supervisory boards developed in accordance with the state dividend policy;

  • the fiduciary duties of various stakeholders are clarified, including for members of executive bodies, supervisory boards, and state officials;

  • the procedure of terminating supervisory board members authorities is improved, and terminations must be based exclusively on the grounds provided under the law.

If parliament passes the Draft Law at the second reading, it must be signed by the President and published before it enters into law.

For more information on this Draft Law and corporate governance issues in Ukraine, contact your local CMS advisor or local CMS experts: Maria Orlyk or Ihor Olekhov

Legislation:

Draft Law No. 5593-д dated 06 July 2021 “On Amendments to Certain Ukrainian Legislative Acts About Improving Corporate Governance of Legal Entities, for which the State is the Shareholder (Founder, Participant)” (in Ukrainian).