Despite more than 70 years of soviet rule, even its final years of “perestroika,” in over 20, years of independent development, Ukraine has moved significantly toward a free market economy. Today, the country is an independent player at the international marketplace. To achieve this, Ukraine has had to radically modify its legal system—an effort that is far from over—in order to match modern conditions, (including requirements that have to be met as a WTO member).
As a result, Ukraine has quite a number of new and amended laws, which can complicate doing business.
One of the first new laws, the Law on Ownership, specifically recognizes private ownership and the right of both Ukrainian residents and foreign individuals and legal entities to own property in Ukraine, to use such property for commercial purposes, to lease property, and to keep the revenues, profits, and production derived from its use. In addition, a new Civil Code, a (Commercial) Code, a Land Code, laws on companies, laws on foreign economic activity, on entrepreneurship and more have been adopted. These laws effectively establish the basic framework for business activity in Ukraine.
The process of privatization or selling off state commercial and other assets started in 1992. This process is governed by the laws on privatization of state-owned property and a set of regulatory documents. Admittedly, the privatization process was not an easy one and there were undoubtedly a number of irregularities. In 2005, the Tymoshenko Government began to counter such irregularities. This led to the high-profile re-privatization of KryvorizhStal, the country’s largest steel plant and one of the largest in the world. The result was a six-fold increase in the original price and the arrival of a strong international investor, India’s Mittal Steel, in 2005. It sent out a signal to foreign investors that future privatization auctions would be held in a more honest, transparent manner that would not a priori exclude suitable buyers through the manipulation of tender conditions.
Business activities in Ukraine are often subject to licensing by different state agencies. Moreover, starting up a business usually means registering with the tax and pension authorities, among others, and getting numerous permits and approvals, such as fire safety, labor, sanitary, and so on. Since 2006, the state has been working to set up a network of “one-stop-shops” where entrepreneurs can register with all necessary entities in a single location and cut down the amount of time required to set up shop.
Before starting a project in Ukraine, an investor should obtain qualified local advice since Ukrainian laws tend to be vague, allowing for different interpretations, particularly tax laws, which can carry different implications.
In September 2008, Ukraine adopted the Law “On Joint Stock Companies,” which was a major step toward improving the investment climate in the country. The law introduces regulations to protect companies from illegal seizure. The law also provides for a procedure for voting at general shareholders’ meetings that excludes any shareholders who have tried to illegally take-over a company. All joint stock companies with over 100 shareholders must vote using ballot papers signed by each shareholder individually. It also institutes a special procedure for the alienation of shares.