On 12 June 2023, with the support of the Corporate Governance Professional Association (CGPA) and the Ukrainian Bar Association (UBA), the National Depository of Ukraine held a roundtable discussion on “Novelties of the Law on Joint Stock Companies: Accounting of Companies’ Shares in the NDU, Holding General Meetings Using the NDU Electronic System”.
Two CGPA Board of Directors members spoke at the event: Volodymyr Igonin, Partner at Vasil Kisil & Partners, and Yevhen Petryk, Director at Emcon LLC. In addition to them, Maksym Libanov, a member of the National Securities and Stock Market Commission of Ukraine, Maryna Adamovska and Oleksiy Tarasenko, members of the NDU Board, Natalia Shevchenko, Head of the NDU Methodology and Corporate Relations Department, and Shadi Saad, Managing Partner of SAAD Legal, shared their views.
Yevgen Petryk shared his experience of cooperation and consultations with joint-stock companies and limited liability companies, and noted that he expects positive changes in the market as a result of innovations.
Volodymyr Igonin outlined five theses on which he based his positive answer to the question of whether depository accounting of shares is needed and what it will bring to the market:
“Firstly, Ukraine is a great country, but we still have room to grow regarding property rights protection. By 2022, the Anti-Raider Commission under the Ministry of Justice will have considered about a thousand complaints about corporate rights per year.
Secondly, the registration of LLC shares in the depository system will provide protection at the level of shares in JSCs. And this level is much more reliable, as the shares will be kept on account of a specific depository institution (e.g. a bank) chosen by the shareholder. This is a safer alternative to the “inclusive” single register, where your share can be re-registered by the second best local registrar/notary.
Thirdly, such a share registration will increase its liquidity. This will primarily benefit the owner of the share, who is a member of the LLC, as they will be able to pledge the share as collateral and obtain financing. It will be possible to secure obligations between partners, etc.
Fourthly, the accounting of shares in the depository system paves the way for effective escrow – when a share is sold, it is transferred to the buyer at the same time as payment. This eliminates the transactional risk of transferring your share and not receiving compensation for it (and vice versa).
And finally, joint-stock companies will be able to shed excessive “administrative weight” by reorganising into LLCs. And already in the form of an LLC, transfer shares to the depository system. This will combine the advantages of both states – LLC and JSC. This is the idea of the Regulator.”
It is important to note that all of the above opportunities are exclusively voluntary.
More than 400 people have registered for the event. A video will be released soon, so everyone will be able to watch the recording of the roundtable. The organisers note that this is only the first event.