What corporate governance requirements apply to each type of corporate vehicle used to invest in real estate?
On 6 February 2018 the Ukrainian parliament adopted the Law of Ukraine ‘On Limited Liability and Additional Liability Companies’ (LLC and ALC Law), which became effective on 17 June 2018. This law makes the corporate governance in limited and additional liability companies more liberal and progressive, and extend a number of issues that may be regulated by the charter.
The highest governing body of a limited liability company or an additional liability company is the general meeting of participants. This can resolve any issues relating to the company's activities and certain issues must be decided exclusively by the general meeting of participants. The participants, at their own discretion, may additionally determine in the charter other issues, which must be decided exclusively by the general meeting of participants. There is no requirement related to a minimal number of votes to be present for the general meeting of participants be quorate. At the same time, certain issues must be decided by the participants only unanimously. For the other issues, the participants may establish in the charter any other quantity of votes needed for adoption of a decision (in any way not less than a simple majority).
The participants may decide to establish a supervisory board for controlling and regulating the activity of a company’s executive body. Upon discretion of the participants the supervisory board may have the authorities to elect an executive body of the company and terminate its powers. The powers of the general meeting of participants, except for its exclusive competence, may also be vested in the supervisory board. Please note that according to Ukrainian law, a managing company may perform functions of the executive body of the company subject to limitations envisaged by law.
The executive body which carries out the company's day to day business operations and implements the resolutions of the general meeting of participants can be either a board of directors headed by a general director or an individual director. The board of directors/director is elected by the general meeting of participants or the supervisory board (if it is established and has respective authorities). The company's charter may limit the authority of the board of directors/director.
The company's finances are subject to review by an independent auditor (audit firm) upon request of a participant or participants holding not less than 10% of votes in the charter capital of the company.
LLC and ALC Law also provided for a possibility to conclude a corporate agreement (shareholders’ agreement), where the participants may stipulate the framework for effecting their corporate rights and powers (eg terms upon which a participant may/is obliged to sell or buy-out a participatory share). In addition, the participants may issue the irrevocable powers-of-attorney for effecting the obligations under the corporate agreement.
The governing body of a joint-stock company is the shareholders' general meeting. This body can resolve any issues relating to the company's activities except for certain issues, which are exclusive competence of the supervisory board. At the same time, certain issues can only be decided on by the shareholders' meeting. The number of votes of a shareholder is equal to the number of shares held.
Decisions of the shareholders' general meeting are adopted by a simple majority vote of the shareholders present, although there are some issues which require a qualified majority of not less than three quarters of the votes of shareholders present at the meeting.
The shareholders' general meeting is quorate if shareholders holding more than 50% of the total number of votes are present.
Other governing and controlling body of a joint-stock company is the supervisory board. The establishment of a supervisory board is compulsory for public joint-stock companies and banks irrespective of a number of shareholders, and for private joint-stock companies, where the number of shareholders is 10 or more, unless all these shareholders are affiliated to each other. Otherwise it is optional. The members of the supervisory board are elected for the period not more than 3 years by the shareholders' general meeting and must be only individuals.
The executive body, which carries out the company's day to day business operations and implements the resolutions of the general meeting and supervisory board, can be either a board of directors or an individual director. The board of directors/director is appointed by the supervisory board or, if a supervisory board has not been formed, by the shareholders' general meeting. The company's charter may limit the authority of the board of directors/director.
The company's finances are subject to review by an audit committee or an independent auditor (audit firm) in case of review of annual financial reporting of a public joint-stock company. The members of the audit committee are elected by the shareholders' general meeting and must be individuals. The members of the supervisory body, the executive body and other bodies of the joint-stock company as well as persons who have no legal capacity are all barred from being members of the audit committee.
The corporate governance of a partnership is set out in the partnership agreement.
A partnership may be managed collectively by all the partners or by one or more partners who are authorized by the others.
Only general partners may manage the partnership. Limited partners may not interfere with the general partners' management decisions.