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LLC Digest: General Meeting

As the highest management body of LLC, the general meeting could not not have been subject to scrutiny and changes following the introduction of the Law of Ukraine On Limited Liability Companies and Additional Liability (further the “Law”). We have described below the most significant and relevant of those changes.

1. Competence. Although the Law provides a rather detailed list of matters under the exclusive competence of LLC general meeting, it also sets out that other matters may be assigned by LLC charter to the exclusive competence of LLC general meeting. We cannot therefore talk about radical changes in the regulation of competence of general meeting although the updated list differs from the previous list. The procedure for adopting a certain type of decisions under the exclusive competence of LLC general meeting has significantly changed. Now, the following decisions:

  • approval of the monetary value of the in-kind contribution made by a shareholder;
  • redistribution of shares among LLC shareholders;
  • establishment of other LLC bodies and procedure of their activity;
  • LLC share acquisition;

must be adopted unanimously by all LLC shareholders with right to vote on these matters. The decisions for introduction of amendments to LLC charter, change of share capital, as well as for spin-off, acquisition, partition, merger, liquidation and transformation, election of liquidation committee, approval of the procedure for company termination, procedure for distribution among shareholders of the assets left after satisfaction of creditors’ claims upon liquidation, approval of LLC liquidation balance sheet must be adopted by ¾ of the shareholders entitled to vote on these matters.

Decisions on all other matters must be adopted by a majority of the votes of all the shareholders entitled to vote on the relevant issues.

2. Format and execution. The Law takes into account the interests of foreign investors and business owners by allowing to hold general meetings via videoconferencing as long as it is possible to see and hear all the shareholders attending meetings at the same time. As previously, the meeting venue is the location of LLC unless otherwise provided in LLC charter. General meetings may also be held outside Ukraine but only with the unanimous written consent of all LLC shareholders. The rules for execution of decisions in LLC with only one shareholder have changed. Now, decisions on matters under the competence of the general meeting of shareholders are adopted by sole shareholders at their own discretion in writing without drawing up minutes of general meeting and with no other formalities. A number of requirements for convening and holding general meetings do not need to be fulfilled by LLC with a sole shareholder. The Law has introduced a simplified procedure for adoption of decisions in sole shareholder LLC similar to that provided by the Law of Ukraine On Joint Stock Companies. The purpose of this procedure is to simplify corporate management in sole shareholder LLC.

3. New grounds to convene meetings. The Law provides that general meetings of shareholders are convened by LLC executive body, at the request of LLC supervisory board as well as at the request of one or several shareholders together owning 10% or more of LLC share capital. A new rule has also been introduced to provide for the annual calling of the annual general meeting of shareholders within 6 months of the reporting year unless another period is set by law. Net profit distribution, payment of dividends and their amount are all items that must be included in the agenda of annual general meetings of shareholders. We described in our previous LLC Digest article the requirements for mandatory convening of general meetings in case of decrease in the value of LLC net assets by more than 50% compared to the previous year. Such mandatory convening should be made within 60 days of such decrease.

4. Voting. In view of the increasing number of technical opportunities available to hold general meetings, the Law has introduced new voting solutions such as, for example, absentee ballot. This means that LLC shareholders may vote at general meetings by submitting their voting intention on agenda items in writing. The signature of shareholders on such documents must be certified by a notary. A shareholder’s vote counts towards the voting results for each individual agenda item if the text of the document sent for voting allows determining unconditionally a vote for or against a decision on a particular agenda item. Such document is then attached to and kept with the minutes of the meeting of shareholders. The Law has also updated another decision-making mechanism known as shareholder survey. The new rules provide for a clear set of questions that can be used to conduct surveys as well as for the deadlines and procedures for conducting surveys. We are curious to see what state registrars think of these documents and whether or not they will make the submission of registration documents more difficult.

Based on the above, we can conclude that the Law has “radically” changed the existing rules by adapting them to modern requirements. It has also attempted to liberalize the requirements for holding LLC general meetings. And, as usual, practice will show what these changes amount to.

This article is the next installment in a series of brief informative items – so-called LLC Digest – dedicated to certain changes and new developments introduced by the Law. Our lawyers are always willing and happy to provide any advice on LLC activities in light of these new legislative changes.

Please feel free to contact us. We are always pleased to share our experience and recommendations with you.