In a few days, the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine regarding Improvement of Corporate Governance in Joint Stock Companies” No. 2302а-д dated 23 March 2017 (the “Law”) will become effective.
Pursuant to the Law, the long-awaited techniques of squeeze-out (mandatory sale) and sell-out (mandatory purchase) related to the change of ownership in joint stock companies (“JSC”) will now form part of the Ukrainian legal framework.
Under the Squeeze-out, a shareholder controlling at least 95% of the ordinary shares has the right to purchase from the minority shareholders all their ordinary shares, subject to sending to the JSC a respective public irrevocable request. Under the corresponding Sell-out procedure, the minority shareholders have the right to request purchase of their shares by the majority shareholder, by sending a respective written request to the JSC.
For both cases, the purchase price should be determined based on the highest of (i) the price paid by the majority shareholder or its affiliates for the direct or indirect acquisition of the shares during the recent 12 months before the date when the major stake was acquired, or (ii) market price as determined by a licensed appraiser. Ukrainian market anticipates are that these new rules will help the majority shareholders to acquire complete control over the JSCs in a clear way whereas sell-out, in particular, will provide the minority shareholders with the possibility to obtain a fair price for their shares. In addition, it is expected that the long-standing issue of “dormant shareholders” will be ultimately resolved, and the Ukrainian investment climate will further improve.