Acquisitions of businesses and companies are usually carried out through the acquisition of shares of a joint-stock company (JSC) or through the purchase of participatory interests of a limited liability company (LLC). Large transactions in relation to privately-owned businesses are frequently carried out at the level of holding vehicles outside Ukraine to ensure clear application of English law and smooth transfer of title to the shares. Asset acquisitions are rare, as they are technically burdensome, time consuming and subject to VAT.

Ukrainian law provides for two types of mergers: (i) merger by absorption, where one of the merging entities survives and the other disappears, and (ii) merger by consolidation, where all merging entities merge into one newly established entity. Except for internal corporate restructuring, merger structures are rarely used in Ukraine for the purpose of the acquisition of companies and businesses.

Merger by absorption: Under Ukrainian legislation, a merger by means of absorption entails a legal reorganization of the merging entity. Such merger leads to the dissolution of the merging company as a legal entity, while the company into which the merging company transfers its assets and liabilities continues to exist as the legal successor to the merging company. The merger is deemed complete upon the execution by the merging company of a "transfer balance sheet," effecting the transfer of its assets and liabilities to the surviving company, and the removal of the merging company from the State Register.

Merger by consolidation: Consolidation is implemented through the formation of a new legal entity, either a JSC or an LLC, into which two or more merging entities transfer all of their assets and liabilities in exchange for ownership rights in the new entity. As a rule, the allocation of shares (or participatory interests) in the new company should be proportionate to the number (or amount) of shares (or participatory interests) held by the shareholders (or participants) of the merging entities, taking into account the ratio between the amounts of the registered capitals of the merging entities and the amount of the registered capital of the new company.

M&A deals involving state-owned assets are carried out through the privatization process, which underwent significant changes in 2018. The privatization process is administered by the State Property Fund (SPF) and its regional branches. Despite the ongoing Russian invasion of Ukraine, the privatization process has been fully resumed since 2024.

The process varies depending on whether an asset qualifies as a "large privatization asset" (with a value exceeding UAH 250,000,000 (equivalent of approximately EUR 5,000,000)) or a "small privatization asset." The default scenario for large privatization assets is an open-bid auction sale, the type of which should be determined by the SPF. The main features of the acquisition of a mid- to large-sized state-owned enterprise may be summarized as follows:

• A potential buyer of a state-owned enterprise must meet certain statutory eligibility criteria, including domiciliation criteria.
• Due diligence in respect of a state-owned enterprise put up for sale is usually very limited in time.
• The SPF is not receptive to heavy negotiations of the relevant transactional documentation and tends to use a standard Ukraine-specific acquisition agreement.
• An acquisition agreement usually contains investment obligations of the buyer; such obligations may not necessarily require direct cash investments, but almost always oblige the buyer to maintain certain production and employment levels of the state-owned target.

The most common vehicle for conducting business activities in Ukraine is an LLC. Private and public JSCs are also very widespread and are targets for private M&A transactions. All of these companies embody the concept of limited liability for investors.

The legal nature of an LLC is similar to that of a German Gesellschaft mit beschränkter Haftung (GmbH) or a French Société à responsabilité limitée (SARL), while a JSC is, in broad terms, closer to a German Aktiengesellschaft (AG) or a French Société Anonyme (SA). An LLC's participants and a JSC's shareholders are liable for the company's commitments only to the extent of their contributions to its registered capital (reflected as a participatory interest or a share, respectively). In 2018, the legislation on LLCs in Ukraine was significantly improved by the adoption of a special law regulating their operation. As a result, participants of LLCs now have substantially greater flexibility to tailor the rules governing the operation of their companies.

Currently, no minimum registered capital is required to establish an LLC; however, it is implied that it should be of a positive value. The registered capital of a JSC should not be less than approximately UAH 1,730,000 (equivalent of approximately EUR 34,000). The registered capital of an LLC or a JSC may be increased in two ways: (1) by capitalizing its undistributed profit; or (2) by means of additional contributions of participants (or shareholders) into the capital. At the same time, an LLC may also increase its registered capital by means of additional contributions of third parties. Unlike LLCs, JSCs may issue shares of various classes, such as ordinary and preferred shares.

In both LLCs and JSCs, each participant (or shareholder) has a number of votes proportionate to the nominal value of its participatory interest (or number of shares) owned by such participant (or shareholder).

There are no quorum requirements for an LLC's meetings of participants. Certain key decisions require a unanimous vote of all participants, including the determination of procedures for entering into related-party transactions, the valuation of in-kind contributions into the LLC's capital, the establishment of requirements to obtain the consent of other participants for the alienation or pledge of participatory interests, as well as the determination of procedures for exercising the participants' pre-emptive rights and for increasing the registered capital through additional contributions other than those expressly prescribed by law. A qualified majority of three-quarters of the total number of votes is required for adopting decisions on amendments to the LLC's articles of association (unless a higher threshold is established by law or the articles), changes to the amount of the registered capital, and the LLC's reorganization (including by way of merger) or termination. An LLC's articles may provide for different voting thresholds for adopting its decisions, except for matters requiring a unanimous or three-quarters vote.

The quorum for shareholders' meetings of JSCs is 50%+1 of the total votes, except where a higher threshold applies. Most decisions are considered adopted when the majority of shareholders who are present at the meetings and hold an eligible class of shares vote in their favor. However, certain decisions require a qualified majority of three-quarters of such shareholders' votes, including amendments to the JSC's articles of association and changes to the amount of the registered capital. In addition, some decisions require the approval of 95% of such shareholders' votes (e.g., the waiver by shareholders of their preemptive rights to acquire shares of an additional issue). A JSC's articles may provide for higher thresholds for adopting its decisions, subject to a few exceptions, including: (i) decisions to terminate the JSC's officials; (ii) decisions to file a claim for damages against the JSC's officials; and (iii) decisions to file a claim for violating the procedure of approving significant transactions (i.e., transactions where the market value of the underlying assets equals or exceeds 10% of the company's assets, based on its latest annual financial statements).

Unlike a JSC's shareholder, a participant of an LLC has a preemptive right to acquire the participatory interest of a selling participant, unless otherwise established by the LLC's articles or a shareholders' agreement to which the remaining participant is a party.

Prior to 2018, most public JSCs operated under essentially the same corporate rules as private JSCs. Before the 2018 legislative reform in Ukraine, public JSCs effectively existed only on paper, as compliance with a simple formality to register the shares with a local stock exchange was sufficient to obtain public status. However, a JSC may now qualify for public company status only if its shares are publicly offered or listed on a stock exchange, and it complies with the applicable minimum stock exchange listing requirements, including, among other things, the free float, revenue and profit requirements.

No, there are no restrictions on shareholder numbers.

By law, most of the share acquisition deals involve a licensed securities broker acting on behalf of one of the parties. The transfer of shares is effected based on instructions from both parties submitted to the depository institution of the seller and the depository institution of the buyer.

Unlike shares, the acquisition of participatory interests in an LLC does not require the involvement of a securities broker. However, the transfer of a participatory interest is effected pursuant to the act of transfer and acceptance certified by a notary and subsequently submitted for registration of the transfer with the State Register.

The transfer of title to an LLC's participatory interest is subject to the parties' agreement. The transfer of title to a JSC's shares is dependent upon updating the relevant records in the Ukrainian depository system. However, in M&A transactions involving Ukrainian targets, it is common for the parties to opt for the laws of England and Wales as the governing law and agree to an arbitration forum seated outside of Ukraine, except where there is no nexus to a foreign jurisdiction.

An asset acquisition may be structured either as the acquisition of the "total gross assets" of the target or the acquisition of only a portion of the target's assets.

Acquisition of the "total gross assets" of the target: A sale of the target company's total gross assets is a sale of a business as a going concern, including all of its rights and obligations.

Acquisition of selected assets of the target: In this type of asset sale, the buyer is free to select the assets it is willing to acquire (including accounts receivable and contractual rights of the target). Except where the acquired assets are subject to any encumbrance, the buyer will only be liable for those obligations of the target company that it expressly assumes, subject to approval of the respective creditor(s). Hence, a sale of assets is preferable in situations where the target has significant liabilities that the buyer does not wish to assume, provided that such sale does not lead to bankruptcy of the company, in which case the officers and/or participants (or shareholders) of the company may be found liable.

Where the business is subject to licensing, an asset acquisition becomes less attractive, as all the licenses and permits issued to the target are not automatically transferable. Where a transaction involves a transfer of the target's rights to certain types of assets (e.g., an interest in land), an analysis is required to determine the correct transfer regime which may differ depending on the country of the buyer's origin, specific type of the asset, etc.

An important tax consideration here is the applicability of VAT (20%) to the asset deal to be paid by the seller, which increases the transaction value.