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Creation and registration of a JSC

Stages of creation of a JSC
The foundation agreement
Offering for shares
Constituent assembly holding
Charter of a Joint-stock company
State Registration

The Law of Ukraine «On Joint Stock Companies» came into force on 30 of April 2009. Creation of a joint-stock company (JSC) should take place only under the law from that date.

General legal requirements to creation of a JSC established in the second section of the Law. It is necessary to decide which type of a joint-stock company will be created. The new law provides private and public JSC. Public joint-stock company can make public and private offering for shares. Private joint-stock company just can make a private offering for shares.

Stages of creation of a JSC

The create procedure of a JSC includes the following stages:

1) making a decision about creation of a JSC and a closed (private) offering for shares by the constituent assembly holding;

2) putting in an application and all necessary documents for the state registration of issuing shares to the State Commission on Securities and Stock Exchange (SEC);

3) making state registration of issuing shares and issuing a temporary certificate of the state registration of issuing shares;

4) assignment the international securities identification number of shares;

5) concluding a contract with the Securities Depository service of issuing shares or with the registrar of registered security on keeping the register of securities owners;

6) making closed (private) offering for shares among the founders;

7) founders’ payment of the full nominal value of shares;

8) approval of the constituent assembly holding the results of closed (private) offering for shares among the founders, approval of the Charter of the company, and taking other decisions established by law;

9) state registration of the company and Charter of the company in state registration;

10) giving a report about closed (private) offering for shares to SEC;

11) registration a report about closed (private) offering for shares by SEC;

12) getting a certificate of the state registration of issuing shares;

13) issuing the documents which confirm the ownership right of shares by the founders of company.

Provided procedure should be in accordance with law. If the procedure be violated, the SEC will decide to refuse to register a report about closed (private) offering for shares. In this case, the SEC shall be entitled to claim for the liquidation of the company.

The foundation agreement

JSC can be created and act on the basis of the foundation agreement. The foundation agreement must include:

The procedure for joint operation regarding incorporation of the JSC, conditions regarding the categories of stocks issued by the company, type and number of stocks, which are acquired by each of the founders;

The nominal value and cost of acquisition of shares;

The term and form of payment for shares;

The term of agreement.

It is necessary to say, that the law don’t stipulate the necessity of concluding of the foundation agreement, therefore it can be concluded on the request of the founders. However, it is not necessary to conclude the foundation agreement if the JSC is based on a one person.

The foundation agreement shall be concluded in writing. If natural persons incorporate a joint-stock company, their signatures on the foundation agreement shall be subject to notary witnessing.

Except that an agreement can be notarized on the request of one of the founders, even when all the founders are legal entities (according to provisions of Article 209 of the Civil Code of Ukraine)

The foundation agreement isn’t the charter of a joint-stock company and terminates on a date of the registration a report about closed (private) offering for shares by SEC.

Offering for shares

According to the new law during incorporation of a JSC all its shares shall be distributed only among its founders by the private offering for shares. Public offering of the shares of a JSC won’t be allowed before receiving a certificate of the state registration of first issuing shares.

The founders of a JSC must pay the full nominal value of shares.

This statement doesn’t fully correspond to the rules of the law on the possibility of concluding of the foundation agreement. As stated above, the foundation agreement can include a nominal value and cost of acquisition of shares. There is why, the requirement to pay only a nominal value of shares can contradict the requirements of the foundation agreement. According to part 3 art. 11 Law each of the founders must pay the full nominal value of the acquired shares until the date of approving the report of first issuing shares.

If each of the founders don’t pay the full nominal value of the acquired shares until the date of approving the report of first issuing shares the company will be considered not incorporated.

So, the founders must pay the full nominal value of the acquired shares which is provided by the foundation agreement. If there is no foundation agreement the nominal value of shares must be paid.

Until the date of registration a report about offering for shares the founder has all the rights that are certified by stocks, except the right to alienate it and burden by the obligations.

The founder receives the document which confirms the ownership of shares after the full payment for such shares within 10 days since a day when the company have received a certificate of the state registration of issuing shares.

It is important to note, that the company can’t make operations, which is not connected with its incorporation by the time of paying fifty per sent of the authorized capital.

Payment for shares may be made in cash, property, personal proprietary and non-proprietary rights, that evaluation, securities (except of the debt issued securities, which issuer is founder and bills).

Price of property, which is brought by shareholders such as payment for shares shall comply with the market value of the property, determined in accordance with Article 8 of the Lawt.

Market value of property is determined on the basis of independent assessment conducted in accordance with the legislation on property valuation, personal proprietary and professional assessment activities. An assessment activities - An entity is involved in the process of incorporation by the decision of the Constituent assembly holding.

Market value of property is adopted by the Constituent assembly holding.

Constituent assembly holding

Founders should convene the constituent assembly holding of JSC  during three months from the date of full payment for shares.

The founder’s number of votes at the constituent assembly holding of JSC depends on the number of shares of JSC, which are acquired by this founder.

The following issues can be decided:

1) incorporation of the JSC;

2) approval of property valuation, which is paid as a payment for shares by the founders;

3) approval of the charter of the company;

4) creation of bodies of the joint-stock company;

5) to authorize a representative (representatives) to act on a further incorporation of the company;

6) election of members of the supervisory board, a chairman of the collective executive body of the company (the person who is authorized to act as a single executive body of the company), members of the Audit commission (Auditor);

7) to approve the results of offering for shares;

8) to act if it is necessary for the incorporation of the company.

Decisions of the incorporation of the company, approval of property valuation and approval of the charter of the company are considered to be made if it was voted by the shareholders of the company. Decisions on other issues can be adopted by a simple majority of votes of the shareholders, unless otherwise is provided by the foundation agreement.

Disapproval of the charter of the company is considered to be a founders’ failure of the incorporation of the joint-stock company. This is the reason for returning to founders the deposits made as a result of acquisition of shares.

All decisions of the constituent assembly holding are issued in the protocol.

If a JSC is incorporated by a one person, all of the decisions will be made individually and will be issued in the decision about the incorporation of the company. If the natural person is the only founder of the company, its signature on the decision should be subject to notary witnessing.

Charter of a Joint-stock company

Law consist the requirements for the charter of the JSC. It must contain the information about:

1) full and abbreviated name of the joint stock company in the Ukrainian language;

2) the type of the joint stock company;

3) the size of its authorized capital;

4) the size of its capital reserves;

5) the nominal value and the total number of shares, the number of each type of shares placed by the joint stock company, including the number of each class of privileged shares, as well as the consequences of the failure to fulfill the obligations to buy out shares;

6) terms and conditions of, as well as the procedure for converting privileged shares of a certain class into ordinary shares of the joint stock company or into privileged shares of a different class in the instance when the joint stock company provides for the issue of privileged shares;

7) rights of shareholders – holders of privileged shares of each class;

8) the availability of the preferential right of shareholders of a private joint stock company to purchase shares of this joint stock company that shall be offered by a shareholder for sale to a third individual or entity, and the procedure for its realization;

9) the procedure for notifying shareholders of the payment of dividends;

10) the procedure for convening and holding the General Meeting;

11) the competence of the General Meeting;

12) the way for notifying shareholders of changes in the agenda of the General Meeting;

13) the composition of the bodies of the joint stock company and their competence, the procedure for establishing them, electing and recalling their members, and for making decisions thereby, as well as the procedure for changing the composition of bodies of the joint stock company and their competence;

14) the procedure for introducing amendments to the Charter;

15) the procedure for terminating the joint stock company;

16) other issues not contradicting the law.

The charter is adopted by the Constituent assembly holding ( the general meeting of the shareholders in case of changes). The signatures on the charter according to the Law "On State Registration of Legal Entities and Natural Persons – Entrepreneurs» - must be subject to notary witnessing. Usually the charter is signed by the chairman of the Constituent assembly holding (general meeting).

State Registration

Joint Stock Company shall be deemed as created as from the date of its state registration. The procedure of state registration is determined by the Law «On state registration of legal entities and natural persons – entrepreneurs». State registration shall be conducted by state registar at location of legal entity.

For state registration the following documents should be submitted:

  • registration card (Form № 1);
  • copy original or a certified copy of minutes of the general meeting;
  • two copies of the constituent documents;
  • document proved making the founder (founders) deposit (deposits) to authorized capital (charter or total capital ) the prescribed fee;
  • document proved making the registration fee for state registration.
  • If a person submits documents by proxy, the additional copy of notarial proxy should be submit.

If the name reservation was conducted, the certificate from the state registry of the name reservation of legal entity would be additionally submitted.

In some cases it is necessary to submit the copy of the decision of the Antimonopoly Committee of Ukraine and the Cabinet of Ministers of Ukraine of permission for concerted action or concentration of economic entities.

If the founder (founders) is (are) a foreign legal entity, the document confirmed registration of a foreign entity in the country of its location, including an extract from the trade, bank or court Registry, legalized and translated into Ukrainian language will be additionally submit.

 
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