Here you may find a brief overview of the merger procedure, information about Merger (Accession) Agreement or Separation (Extraction, Transformation) Plan and overview of anti-monopoly regulations. For detailed information concerning M&A; transaction in Ukraine see Mergers, acquisitions and incorporation of a new company.
In general, the merger procedure contains following basic steps:
- The participating companies have to create a liquidation commission and elect members of this commission;
- The liquidation commission must draw up a transfer act, which includes the information about the transfer of rights and obligations of the participating companies to the newly formed legal successor;
- If the shareholders of the participating companies desire – they may use their right to the mandatory buyout of their shares;
- The participating companies must satisfy the claims of their creditors in order of precedence;
- The supervisory council of every participating company has to take a number of decisions, including the draft and explanations of the merger agreement, the transfer act prepared by the liquidation commissions, approval of the draft charter of the legal successor and the terms and conditions of share conversions (or annulment);
- The supervisory council must order an independent conclusion regarding the terms and conditions of the merger agreement;
- The general assembly of each participating company must approve the merger agreement, the transfer act, the charter of the legal successor, the election of officers charged with liquidation the affairs of the company;
- To register the issuance of shares of the legal successor an application along with all required documents must be submitted to the securities commission;
- The securities commission have to issue a temporary certificate of registration of new shares;
- The new shares will receive an international identification number by the securities commission;
- To service the new shares the legal successor must conclude a depository agreement with a custodian;
- The shares of the participating companies will be exchanged for shares of the legal successor or will be annulled;
- The participant companies must approve the results of the placement (exchange) of new shares;
- The report on the results of the placement (exchange) of new shares must be submitted to the securities commission;
- The securities commission must cancel the share issuances of the terminated merger participants and register the report on the results of the placement (exchange) of new shares;
- The participating companies must register the termination of their activities;
- The charter of the newly formed legal successor must be registered;
- A new certificate of state registration of a share issuance will be issued to the legal successor.
A merger is considered finished from the date of the introduction of an entry into the Unified State Register of Enterprises and Organizations of Ukraine (Unified State Register) concerning the liquidation of the merger participants and the registration of the newly created legal successor.
Merger (Accession) Agreement or Separation (Extraction, Transformation) Plan
The supervisory council of every company participating in an M&A; transaction must draw up the terms and conditions of either the merger (accession) agreement or separation (extraction, transformation) plan.
Without regard to the type of transaction, the agreement or plan must include, at a minimum, the following:
- the full name and requisites of each participating company;
- the procedure and coefficients of the conversion of shares and other securities, as well as the amount of possible cash payouts to shareholders;
- information on the rights that the legal successor(s) has to provide to the securities owners (other than the rights attached to their shares of stock) of the terminated participant(s) or, in the case of an extraction, the extraction target and/or the list of steps to be taken concerning such securities;
- information on the proposed parties, who will become officers in the legal successor(s) after finalization of the transaction and the proposed remuneration or compensation for such officers.
Besides aforesaid the supervisory council of each participant must prepare for its shareholders an explanation of the terms and conditions of the merger (accession) agreement or separation (extraction, transformation) plan. This explanation is required to include the appraisal value of the company’s assets and a calculation of the coefficient of the conversion of shares of stock and other securities, in other words – the economic substantiation of the transaction.
A conclusion of an independent expert (auditor, appraiser), concerning the terms and conditions of the proposed transaction, must be obtained by the supervisory council in case when a participating company has over 100 ordinary shareholders. This conclusion is required to include an evaluation of the substantiality and adequateness of the methods applied to the share conversion calculation and appraisal of property.
After preparing all necessary documents the supervisory council must send these materials to the shareholders. These documents must contain the draft merger (accession) agreement or separation (extraction, transformation) plan, if necessary – the conclusion of the independent expert, an explanation of the terms and conditions of the agreement or plan, and, in case of a merger or accession, the annual financial report of the other participating companies for the past three years.
According to Ukrainian legislation, mergers and acquisitions are considered a concentration and are subject to prior approval by the Anti-Monopoly Committee of Ukraine (AMC). The AMC is responsible for preventing monopolies from abusing their dominant position and/or restricting market competition.
Approval of the AMC may be required in respect of mergers, acquisitions of shares and incorporation of a new company, in the following cases:
- for mergers of business entities with a total book value (or total turnover) exceeding an equivalent of EUR 12 million for the last financial year;
- at least one party has assets or turnover in Ukraine exceeding EUR 1 million as at the last day of financial year (taking into account its control relations).
- if the value of the assets held in Ukraine or abroad by at least two concentration participants EUR 1 million as at the last day of financial year.
A merger or acquisition that is subject to approval by the Anti-Monopoly Committee of Ukraine cannot be concluded until such approval has been granted.
Also Ukraine’s legislation provides for specific rules to apply to M&As; in particular sectors of the economy. Especially, there are certain restrictions concerning companies recognized as monopolies, including natural monopolies.
Only Ukrainian citizens, Ukrainian legal entities, the President of Ukraine and the Verkhovna Rada have the right to establish radio and TV broadcasting companies in Ukraine. Foreign investment in domestic TV and radio broadcasters is limited to 30 % of the authorized capital of an existing company. Foreign investments in radio and TV broadcasters are subject to the approval of the National Radio and Television Council of Ukraine.
Print media can be established by Ukrainian as well as by foreign citizens and companies. But neither a company nor an individual citizen may establish or control more than 5 % of socio-political print media in Ukraine.
The activity of commercial banks in Ukraine is regulated by the National Bank of Ukraine. Any type of reorganization of commercial banks, including mergers and acquisitions is subject to approval of the NBU.