Category: Ukraine

Sayenko Kharenko has advised Dobrobut on the acquisition of the Doctor Sam medical network, which operates three clinics in Kyiv.

According to Sayenko Kharenko, “following the acquisition of the medical center Boris in 2019, the deal represents another step by Dobrobut towards enhancing its presence on the Ukrainian healthcare services market. As a result, Doctor Sam will integrate into Dobrobut network, providing the patients of both operators with the high quality healthcare services and innovative approach.”

Sayenko Kharenko’s team was led by Associate Ilhar Hakhramanov and included Associates Yurii Dmytrenko and Igor Pomaz and Junior Associate Angelina Danyleiko. The deal was supervised by Partners Vladimir Sayenko and Oleksandr Nikolaichyk.

What is the procedure for dismissal of Chief Executive Officers in Ukrainian companies with foreign shareholders?

The sequence of actions typically comprises 4 key stages, namely:

1)   Preparatory stage

Where should a foreign shareholder start?

According to recent updates in Ukrainian AML legislation, there is a need to provide an extract from the commercial/trade register confirming good standing of each foreign shareholder in its country of origin along with the notarised copy of passport of each ultimate beneficial owner of a Ukrainian subsidiary. Thus, a foreign shareholder must receive these documents in its country of origin in advance.

Foreign shareholders can pass all decisions related to their Ukrainian subsidiaries in their country of origin. Alternatively, they can appoint local attorneys who will act on their behalf in Ukraine. Most companies we are aware of choose the latter option. For such purpose, each shareholder located outside Ukraine issues a respective notarised power of attorney.

In order to recognise these documents in Ukraine, each foreign shareholder also arranges for their legalisation or certification with an apostille. The latter requirement does not apply if there is a bilateral treaty on reciprocal recognition of documents between Ukraine and the country where the documents are issued.

2)   Passing a decision on replacement of the CEO

Next, depending on the governance structure of a Ukrainian subsidiary, its general shareholders’ meeting, sole shareholder or supervisory board (if any) passes the following decisions:

a) on termination of authorities of the current CEO;

b) on appointing the new one, and

c) on authorising a signatory to execute relevant HR documents.

As a result, the above decisions will be formalised by either:

a) minutes of the general shareholders’ meeting;

b) resolution of the sole shareholder; or

c) resolution of the supervisory board.

3)   Handling HR formalities

Afterwards, not later than on the last working day of the current CEO, the person authorised by the above decision must sign the relevant HR documents, namely:

a) order on the dismissal of the current CEO; and

b) release and termination agreement between the company and the current CEO.

Once these documents are signed, the Ukrainian subsidiary must wire all payments due to the current CEO, in particular: salary calculated up until his/her last working day, severance payment (if any), compensation for unused vacation and business trips, as well as other allowances established in the respective employment contract.

On the day following the dismissal of the current CEO, there is a need to sign documents related to hiring of the new CEO, in particular:

a) order on his/her employment; and

b) employment contract.

4)   State registration

Finally, a representative of the Ukrainian subsidiary must register the new CEO with the Ukrainian Companies Register.

The state registration itself takes one business day.

Once the state registration is completed, the new CEO can officially represent Ukrainian company before third parties. He/she must further undergo an identification procedure with the servicing bank, as well as receive an e-signature required for reporting purposes.

By Bogdana Parkhomchuk, Associate, Avellum

 

Orest Matviychuk, former Senior Legal Counsel at Engelhart Commodities Trading Partners, has joined CMS in Kyiv, where he will be working on the Banking & Finance team as a Senior Associate.

Matviychuk graduated from the National University of State Tax Service of Ukraine in 2010 and obtained an MSc in Law & Finance from the Queen Mary University of London in 2013. Prior to joining CMS, he spent a year and a half at BTG Pactual, almost eight years at Sayenko Kharenko, and three years at Engelhart Commodities Trading Partners.

According to CMS, Matviychuk “will focus on the agricultural and commodities trading sector, both in Ukraine and Central and Eastern Europe. With the land reform underway in Ukraine, acquisition, financing and other transactions concerning land will come to the forefront and will contribute to expanding Ukraine’s role as a leader in high-profile matters concerning the agriculture sector.” The firm describes him as “experienced in advising on international trade and the transportation of a wide range of commodities (with a focus on grains, oilseeds and vegetable oil), covering the Black Sea and Asia markets.”

“The agricultural sector in the multitude of its aspects is essential to Ukraine, CEE, and the Black Sea regions,” commented Orest Matviychuk. “I will contribute to achieving the ambitious goals of agricultural holdings, farmers, traders, banks and other financiers of agricultural exports and other projects. The CMS Finance practice has a great reputation, both locally and internationally, and I am delighted to be joining the team. I look forward to advising on both current and future challenges.”

Graham Conlon, Managing Partner of CMS in Kyiv commented on his new colleague: “With Orest’s arrival, we now have three English-qualified lawyers working full-time for our Kyiv office. With high-profile transactions often governed by English-law, Orest’s arrival further cements our reputation for being able to handle all aspects of high-profile transactions – under English and Ukrainian laws – from on the ground in Kyiv.”

Former Sayenko Kharenko Counsels Denis Krokhmalyov and Oleg Klymchuk have joined together to open a boutique intellectual property firm in Kyiv: Brandsfield Brand Care.

According to a Brandsfield Brand Care press release, the firm “specializes in brand protection and anti-counterfeiting, as well as IP and TMT matters for creative, innovative, and brand-driven businesses.”

Denis Krokhmalyov specializes in brand protection, anti-counterfeiting, and general legal support of different businesses, with consulting and 15 years’ in-house experience. According to the firm, “Denis has a unique background in implementing and managing brand protection strategies in 25 countries in Central and Eastern Europe, Central Asia, and the Caucasus region.”

Krokhmalyov has a Master’s degree in law from the Taras Shevchenko National University in Kyiv and an MBA from the Kyiv National Economics University. Prior to this, he spent two years in-house with URS, three years with TNK-BP, seven and a half years with Procter & Gamble, and a year with Sayenko Kharenko.

According to Brandsfield Brand Care, Oleg Klymchuk’s practice includes “advising, prosecution, portfolio management, and litigation in various fields of IP law (copyright, trademarks, appellations of origin) as well as advising, administrative enforcement and litigation in the field of protection against unfair competition.” According to the firm, “Oleg also focuses on enforcement of brands and designs against imitations and unfair exploitation. Oleg’s experience also includes advising IT & TMT suppliers on intellectual property, commercial/transactional, media, and advertising issues.”

Klymchuk holds an LL.M. from the Kyiv Intellectual Property Institute of National University Odesa Academy of Law. Prior to launching his new firm, he spent a year and a half with Alexandrov & Partners, almost six years with Noerr, a year with Asters, and six and a half years with Sayenko Kharenko.

Upon lifting of the quarantine rules, many companies start to resume their activity. All of them intend to renew activities with minimum expenses and maximum comfort for their employees. Many companies will look for optimisation options. Below the INTEGRITES team summarises the main solutions available under the effective laws of Ukraine.

1. PART-TIME WORK

When may the employer use this option?

The part-time work mode can be applicable when the employees’ workload has decreased after the quarantine, and the employer does not require the pre-quarantine number of staff but wishes to preserve the capacity of personnel without dismissals.

What are the types of part-time work mode?

There are such types of a part-time work mode as:

• a part-time day
• a part-time week
• a combination of a part-time day and a part-time week. This combined solution was specifically addressed in Letter of Ministry of Labour and Social Policy of Ukraine No. 713/19/71-07 dated 29 March 2007.

How may the employer introduce such option?

There are the following possible solutions:

• part-time work mode under the agreement between the employee and the employer (in Ukrainian – за угодою між працівником і роботодавцем) which is effective only when the employee gives his/her application to work on a part-time basis, and the employer issues the relevant order; or
• part-time work mode due to the changes in the employer’s organisation (in Ukrainian – зміни в організації виробництва і праці) (the “Organisation Changes“) which the employer may implement on its own initiative (under the relevant order) only due to the above changes. The important nuances of this option are:

(a) to inform employees whose working hours have been changed about the new working schedule no later than two months before its establishing, and

(b) to agree the part-time work mode with a trade union / other authorised representative of the employees. The importance of these steps was highlighted by the Supreme Court in case No. 766/12431/18 dated 28 August 2019.

What is the remuneration for the part-time work?

The general rule implies the payment which is proportional to the employee’s time worked. An important clarification was provided by the Plenum of the Supreme Court in its Resolution “On Practice of Application by Courts of Legislation on Remuneration” No. 13 dated 24 December 1999 (“Resolution of Plenum No. 13“). According to the resolution, work performed over employee’s regular time, but within the full time specified by law, is not overtime and should be paid at a single rate.

What are the main benefits for the employee on a part-time mode?

The main benefits are as follows:

• an employee has a right to have a paid annual vacation (Letter of Ministry of Labour and Social Policy of Ukraine No. 472/13/84-09 dated 7 August 2009)
• generally, working hours before holidays are not reduced for one hour. However, if the employee is on a part-time week mode and works 8 hours on a pre-holiday day, the Ministry of Social Policy of Ukraine recommends to reduce his/her working hours for one hour (Letters No. 395/13/116-14 dated 28 August 2014 and No. 2960/0/107-17/284 dated 22 December 2017).

Is there any risk of inspection in case of introduction of a part-time work mode?

Yes. If the amount of the employees on a part-time mode is increased by 20 and more per cent within a month, this is a ground for the labour authorities to carry out the inspection of the relevant employer (Paragraph 5(6) of the Procedure on Execution of State Control over Compliance with Labour Legislation No. 823 dated 21 August 2019).

2. SALARY REDUCTION

When may the employer use this option?

Salary reduction can apply when the employees’ workload has not changed after the quarantine, but the employer lacks sufficient funds to pay salaries in full and does not plan a dismissal. Hence, the employer may introduce salary reduction as a temporary measure.

How may the employer undertake the salary reduction?

The options are the following:

• salary reduction on the employer’s initiative / due to the Organisation Changes under the relevant employer’s order. The employee should obtain a notice on such reduction (the “Notice on Reduction“) no later than two months before its implementation (the “Notice Term“). It is necessary for the employer to agree the reduction with a trade union / other authorised representative of the employees (Letter of State Inspection of Ukraine on Labour Issues No.1276/24/21/01/2216-15 dated 20 July 2015); or
• salary reduction agreed by the parties. In this case, the employer should not send the Notice on Reduction to an employee within the Notice Term which is re-confirmed by Letter of Ministry of Social Policy of Ukraine No. 413/06/186-15 dated 2 October 2015.

Salary reduction should be reflected in the collective bargaining agreement, other internal employer’s documents (for example, the Regulation on remuneration) and labour agreements with the employees whose salary is reduced. In addition, the employer should issue an order with new payment conditions of the employee.

Is there any liability for the violation of the Notice Term?

Yes. The violation of the Notice Term may be a ground for the satisfaction of the employee’s claims on the remuneration according to the previous conditions for the period of the reduction of the Notice Term (Paragraph 12 of Resolution of Plenum No. 13).

What is the possible minimum salary in case of the salary reduction?

In 2020 the amount of the full-time employee’s salary should be not less than UAH 4,723 per month or UAH 28,31 per hour (approximately EUR 160 and EUR 1).

Is it possible to pay the remuneration which is lower than the minimum salary?

Generally, no. An exception is made in case if the employee underperforms in view of the set workload standards, if products are manufactured with defects, and in other cases defined by the law when reasons relate to the fault of the employee (Paragraph 12 of Resolution of Plenum No. 13).

3. COMBINING POSITIONS (IN UKRAINIAN – СУМІЩЕННЯ ПРОФЕСІЙ (ПОСАД))

When the employer may use this option?

Combining positions (the “Combining“) is applicable when there is a vacant position, and the employee may carry out the obligations under this position (the “Additional Work“) jointly with his/her main work.

What are the main features of the Combining?

The main features are as follows:

• the employee performs the Additional Work for the same employer;
• the employee carries out the Additional Work within his/her working hours of the main position; and
• the employee performs the Additional Work under other position or undertakes the obligations of another, temporarily absent employee without the exemption from his/her main work.

How may the employer implement the Combining?

The options are the following:

• the Combining under the agreement between the employee and the employer. The employee submits the application on the Combining to the employer, and the latter issues the relevant order if agrees with a new work schedule of this employee. The order specifies a title of position of the Additional Work, conditions of the performance of the Additional Work and the amount of salary supplements for the Additional Work (he “Salary Supplements“) (Explanation of the Head Office of State Labour Authority in Kherson Region dated 21 April 2020); or
• the Combining due to the Organisation Changes under the employer’s order. In this case, the employer informs the employee on the Additional Work no later than two months before its implementation. If there is no collective bargaining agreement, the employer should agree the Additional Work and the Salary Supplements with a trade union / other authorised representative of the employees.

What is the amount of the Salary Supplements?

The law specifies this amount only for the employee who works at an enterprise in the public sector (for example, higher education institutions). This amount is up to 50% of the employee’s salary for the main work. Hence, the enterprises of other industries and private enterprises as employers may provide for other amount of the Salary Supplements. However, in practice, most private companies apply the same rules.

If there is a collective bargaining agreement, it may envisage specific rules for the Salary Supplements; however, such an amount should be within the salary for the Additional Work. In case of non-specification of the Salary Supplements, the court may specify them taking into account the complexity of the work, its nature, scope, the level of use of the working hours and the employee’s salary (Paragraph 15 of Resolution of Plenum No. 13).

In addition, recent court practice confirms the necessity of the payment for the Additional Work (Resolution of Supreme Court in case No. 824/238/19-а dated 24 October 2019).

What are the terms of the Additional Work?

There are two possible situations:

• the Additional Work with a specified term. The term is specified from the very beginning, and after its expiration the employee performs only his/her main work; or
• the Additional Work without a specified term. In this case, the employee and the employer should agree on termination of the Additional Work separately. If the employee intends to finish the Additional Work, he/she submits the relevant application to the employer. However, if the employer initiates termination of the Additional Work, it does this in the manner specified for the Organisation Changes.

If the employer did not issue the order on the Additional Work, would it be the Additional Work?

Yes. If the employee is admitted to the Additional Work without the issuance of the order, it will be considered as the Combining, and such an employee is eligible for the Salary Supplements.

There are different options to regulate the working hours of the employee and pay for them after the end of the quarantine. The choice depends primarily on the employee’s workload and the employer’s payroll. However, when the employer decides to establish a new work mode for an employee, it should carefully consider the rules and regulations in order to avoid negative consequences.

By Illya Tkachuk, Partner, and Olga Tersina, Associate, Integrites

“Ukraine is gradually returning to normal operations,” says Valentyn Gvozdiy, Managing Partner at Golaw in Kyiv, but he admits the preceding period has been difficult. “Most companies had to face many challenges of finding new ways to work in a short time span. Closing of industries and venues, self-isolations and lockdowns, strict bans on business activities, and public events were important measures needed to prevent and fight this virus. However, experienced managers understand the situation and fortunately knew how to cope with the issues that arose with the COVID-19 outbreak.”

Gvozdiy reports that, even though there were many challenges to face and little time to organize, successful solutions were found to help conditions return to normal as fast as possible. The Ukrainian Parliament approved anti-crisis measures in light of the COVID-19 outbreak to stabilize the economy. During the last few months, Ukrainian state authorities adopted and implemented specific laws and decrees aiming to prove benefits both for businesses and individuals, involving such areas as taxes and fees, tax audits, сorporate management, court proceedings, and leases.

“The current high-priority goal for the Government is to enforce a regulatory framework that provides meaningful social and economic support to people and businesses to recover from the crisis,” Gvozdiy says. “The measures already taken by the Government include an increase of income limits for single taxpayers, VAT exemption from the importation into and supply within Ukraine of medicines, medical devices, and equipment necessary to fight COVID-19. The list of tax audits, which may be carried out during quarantine, was expanded regarding such activities as accounting, licensing, production, storage, transportation of fuel, etc.”

Gvozdiy is enthusiastic about some of the technological tools that have appeared during this period. “Adjustments were also made to corporate governance,” he says. “Corporate management in the future will mostly be carried out using electronic systems, which will allow companies to continue providing business as usual. The National Securities and Stock Market Commission developed and introduced a temporary procedure for convening remote general meetings of joint-stock companies and corporate investment funds. Convening and holding remote meetings is to be carried out using electronic services and the depository system based on an agreement to be concluded between the issuer and the National Depository. This technological platform ensures the appropriate level of security of information transmitted through the depository system, as well as confirmation of the credentials of the shareholders in the process of holding remote meetings with an electronic signature.”

According to Gvozdiy, “holding general meetings remotely is a right, not an obligation, of joint-stock companies and corporate investment funds. Companies may refrain from holding a general meeting during quarantine and hold it till the quarantine ends up. The platform meets international standards and a high level of team competencies, as well as creates a new service for remote voting to ensure a high level of continuous corporate governance while at the same time data protection.”

Even so, sighing, Gvozdiy says that the crisis has proved to be a tough test for local companies, which have struggled to keep up. Still, he is confident that the Government has taken swift steps to provide necessary solutions with minimal harmful effects on the Ukrainian economy. “The most important thing for the Ukrainian economy nowadays,” he says, “is to continue cooperation with the International Monetary Fund and other international partners to have an opportunity to finance the budget deficit and refinance current debt.”

“The reduction of costs is one of the ways the Government is rescuing the economy from high inflation and not to lose the investors,” he says. “I think this mechanism will eventually work. It’s always hard to find investors in such conditions, but we are happy to see that many companies from the EU – especially from Germany— are still able to work and that their managers can combat challenges successfully.

The Prime Minister of Ukraine, Denys Shmyhal, recently announced that Ukraine is on its way out of the crisis, but extending the quarantine until June 22nd, 2020. According to Gvozdiy, the way out of the quarantine has been divided into five stages. “Two of stages have already begun,” says Gvozdiy, “but the next three are not set specifically in terms of dates. Anyway, the Government has allowed shops, shopping centers, and community services to start working again.” Gvozdiy adds that “we still need to speed up the recovery process and search for new opportunities within the market. The most important thing, as always, is to continue attracting new investors, anybody who’s willing to finance Ukrainian industries.”

Gvozdiy concludes, optimistically, that “at the end of the day, the situation won’t be as catastrophic as we once thought. The strongest businesses will survive, and because the state authorities took everything into account, I think that eventually we will recover the economy in a normal way.”

Asters has advised the EBRD on financing provided to Lantmannen Axa, a producer of breakfast cereals in Ukraine that is owned by Sweden’s agribusiness cooperative Lantmannen.

According to Asters, “The EBRD funds will secure the company’s financial stability, allowing Lantmannen Axa to implement an investment program to diversify its product range, which currently includes muesli, granola and cereal bars, to introduce energy efficiency measures and eventually to expand production. Technical assistance within this project is provided by the Japan-EBRD Cooperation Fund.”

Asters’s team consisted of Partner Iryna Pokanay, Counsel Gabriel Aslanian, and Associates Inna Bondarenko and Viktoria Zagreba.

Ilyashev & Partners has successfully protected the interests of Ukrainian Match Factory LLC in an anti-dumping investigation on the importation of matches originating in the Republic of Belarus and the Russian Federation into Ukraine.

According to Ilyashev & Partners, on May 22, 2020, following a ten-month investigation, the Interagency Commission for International Trade “upheld a decision on the application of a final anti-dumping duty of 31.32% on imports of matches originating from Belarus and of 45.79% on imports originating from Russia.” According to the firm, “in addition, the Interagency Commission for International Trade dismissed the written commitments lodged by the Belarusian Forest Company OJSC on the reconsideration of their prices or termination of exports under the dumped prices to the customs territory of Ukraine. The final anti-dumping duty will be charged throughout a five-year period. The customs authorities will charge the anti-dumping duty regardless of the settlement of other taxes and duties. The application of the final anti-dumping measures will not create obstacles to the customs clearance of products.”

The Ilyashev & Partners’ team was led by Partner Olena Omelchenko.

Peter Teluk, the former Managing Partner of Squire Patton Boggs’ Kyiv office, has joined Sayenko Kharenko.

Sayenko Kharenko describes Teluk as “a renowned, extremely skilled international practitioner with particular expertise in corporate, M&A, finance, government affairs, and international arbitration.” According to the firm, “his 25 years of experience include senior and executive managerial roles with some of the largest international law firms and multinational corporations, including Philip Morris International, Squire Patton Boggs, Baker McKenzie, and Covington & Burlington.” He spent the last year as Senior Advisor on Investment, Privatization and Governance to the Minister of Development of Economy, Trade and Agriculture of Ukraine.

“Over recent years, we have clearly demonstrated our commitment to a long-term investment in our stellar team that can cope well with the rapidly changing world,” said Partner Vladimir Sayenko. “Peter is a timely addition who will strengthen the practice leadership. He will boost our efforts as we support our clients facing the challenges of the global economic downturn and legal framework continuously altered due the pandemic. Peter has the right combination of a strong commercial sense and business acumen, as well as broad legal and management experience.”

“I am excited to join one of the premier law practices in Ukraine – grounded in providing top quality, ethical, commercially oriented legal services,” commented Teluk. “Sayenko Kharenko is a dynamic firm focused on providing commercial solutions to its clients. I look forward to bringing my broad experience representing foreign and Ukrainian clients to Sayenko Kharenko and to assisting in its future growth.”

Former CMS Cameron McKenna Ukraine Managing Partner Daniel Bilak has joined Kinstellar as Senior Counsel to the firm’s regional management team.

According to Kinstellar Bilak, who is based in Kyiv, “will be working closely with Kinstellar’s regional and local management and business development teams regarding strategic and business development initiatives across the region for the firm as a whole.”

Bilak, who is Canadian-qualified, spent from 2007-2017 at CMS Kyiv, becoming Managing Partner in 2012. Most recently, he was Chief Investment Adviser to the Prime Minister of Ukraine and headed UkraineInvest, the Ukrainian government’s investment promotion agency created to engage with the international investor community and attract foreign direct investment to the country.

He hasalso acted as Counsel to the Business Ombudsman Institution in Ukraine and served as a senior United Nations Development Programme governance expert to the governments of Bulgaria and Lithuania, as well as Ukraine.

’We are thrilled to welcome Daniel to the team!” commented Kinstellar Managing Partner Patrik Bolf. “With his experience as a law firm managing partner and corporate and government advisor, he brings a new dimension to our current capabilities. Daniel’s impressive track record and unique understanding of the CEE region will be a tremendous asset to our clients. We look forward to his contribution to the firm.”

An extensive interview with Bilak can be found in the June, 2020 issue of the CEE Legal Matters magazine, available to subscribers on June 3, 2020.