Any counterparty entering into an agreement with a Ukrainian state-owned or state-controlled [1] legal entity, organization or agency (a "State Controlled Company") should be aware of a new procedure for approval of Joint Activity Agreements, Commission Agreements, Agency Agreements and Property Management Contracts that applies to such companies.

From 20 April 2012, State Controlled Companies must obtain the prior approval of the Cabinet of Ministers of Ukraine (the "CMU") for entering into Joint Activity Agreements, Commission Agreements, Agency Agreements and Property Management Contracts in accordance with the following procedure [2]:

(1)   a State Controlled Company, wishing to execute an agreement must submit an application, the draft of such agreement and supporting documents to the state authority managing the relevant State Controlled Company;

(2)   This  state authority, within a month of obtaining the documents from the State Controlled Company, will prepare a draft resolution on approval of the draft agreement for the approval of the Ministry of Economic Development and Trade, the Ministry of Finance, the State Property Fund and the Ministry of Justice of Ukraine.

The draft CMU resolution must contain all material terms of the proposed agreement, conditions on the effective use of the state property and protection of the property rights of the State, prohibition on the alienation of state property and, depending on the type of agreement, the sizes of shares of the participants, term of the agreement, terms of distribution of profits and losses, and the terms for making additional contributions.

The competent state authority managing the relevant State Controlled Company submits the draft CMU resolution and the supporting documents to the CMU.

(3)   The CMU reviews the documents and issues the final approval of the proposed draft agreement. Resolution No. 296 does not set a maximum term for the review and approval of the documents by the CMU.

Any changes to the material terms of agreements with the State Controlled Companies must be made in accordance with the procedure outlined above.

As a result, any counterparty of a State Controlled Company should ensure that the State Controlled Company has obtained the approval of the CMU for execution of Joint Activity Agreements, Commission Agreements, Agency Agreements and Property Management Contracts in accordance with Resolution No. 296 prior to the execution of any such agreement.  Failure to follow the approval procedure may result in a challenge to the validity of such agreement.

Additional notes

This LEGAL ALERT is issued to inform Baker & McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.

For More Information

Ihor Olekhov, Partner 
+380 44 590 0101
ihor.olekhov@bakermckenzie.com

Hanna Shtepa, Associate
+380 44 590 0101
hanna.shtepa@bakermckenzie.com

UKRAINIAN VERSION.pdf - 151.67 kb
RUSSIAN VERSION.pdf - 151.83 kb

[1] Legal entities in which the state shareholding is more than 50 per cent.

[2] Resolution of the Cabinet of Ministers of Ukraine No. 296 dated April 11, 2012   "On Setting out the Procedure for Execution of Joint Activity Agreements, Commission Agreements, Agency Agreements and Property Management Contracts Entered into by State-Owned Legal Entities, Organizations and Agencies as well as by Enterprises that are more than 50 per cent State-Controlled" ("Resolution No. 296").

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