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Before a Public Takeover Bid
3. Before a Public Takeover Bid

[Last updated: 1 January 2025, unless otherwise noted]

3.1 Shareholding rights and powers

The table below provides an overview of the different rights and powers that attach to different levels of shareholding within a JSC:

Shareholding Rights
One share
  • The right to be notified of the convening of the general shareholders' meetings and the right to attend and vote at general shareholders' meetings.
  • The right to receive dividends.
  • The pre-emption right to subscribe for additionally issued shares.
  • The right to receive a part of the property of the JSC in case of its liquidation.
  • The right to receive information on the business activity of the JSC (except documents confirming the JSC's property rights and accounting documents).
  • The right to have access to the documentation required for adoption of the decision at the general shareholders' meetings.
  • The right to receive information about the list of the JSC's affiliated entities and information concerning their shareholding in the JSC.
  • The right to provide suggestions regarding questions included into the agenda of a general shareholders' meeting, including in relation to candidates to be appointed to the governing bodies of the JSC.
  • The right to require mandatory buy-out of its shares at market value in case of voting against the following matters at the general shareholders' meeting:
    • merger, split-off, reorganization, spin-off, change of JSC's type from private to public and vice versa;
    • approval of the JSC entering into significant agreements;
    • approval of the interested party transaction;
    • change of the charter capital;
    • refusal to use the pre-emption right to purchase shares of additional allotment in the process of their placement; and
    • issue of convertible bonds.
  • The right to sell its shares to a shareholder who acquired a controlling stake (more than 50% of shares) in a public or private JSC or a significant controlling stake (75% or more of shares) in a public JSC.
  • The right to sell-out.
5% or more
  • Constitutes a "significant stake".
  • The right to propose additional items on the agenda of a general shareholders' meeting (the inclusion of which into the agenda of the general shareholders' meeting is mandatory).
  • The right to request the convening of an extraordinary general shareholders' meeting.
  • The right to appoint representatives to supervise registration of shareholders, holding of a general shareholders' meeting, voting and counting processes.
  • The right to receive full information on the business activity of the company.
  • The right to file a claim against JSC’s officers for compensation for losses caused to the JSC by a corporate officer(s).
  • The right to initiate an audit of the JSC's financial statements to be conducted by an independent auditor, but at their own expense and not more than twice per calendar year.
  • The right to initiate a special audit of financial and commercial activities of the JSC to be conducted by an independent auditor or internal audit commission (auditor) at their own expense.
  • The right to block amendments to the private JSC’s charter aimed at eliminating provisions on shareholders’ rights and obligations to file sell- and squeeze-out bids. 

25% (at a general shareholders’ meeting)

The ability at a general shareholders' meeting to block, among others:

  • changes to the charter, except for certain exceptions provided for by JSC Law, such as eliminating provisions of a private JSC’s charter establishing shareholders’ rights and obligations to file sell- and squeeze-out bids;
  • issue, sale and cancellation of treasury shares (shares bought back by the JSC);
  • change of type of the JSC (from public to private and vice versa);
  • change of corporate management structure;
  • placement of shares;
  • placement of securities that can be converted into shares and of the securities for the amount exceeding 25% of the JSC's total assets;
  • capital increases and capital decreases; and
  • spin-off and termination, including liquidation, merger, split-off, and reorganization.

50% and more

Constitutes a "controlling stake" in any type of JSC (both public and private).

More than 50%

Constitutes the quorum at a general shareholders' meeting

More than 50% (at a general shareholders’ meeting)

The ability at a general shareholders' meeting to decide on the following, among others:

  • determination of the main directions of the JSC's business;
  • approval of the share split or consolidation;
  • approval of the annual report of the JSC;
  • distribution of the JSC's profits or allocation of losses;
  • approval of the regulations of the general shareholders' meeting, the supervisory board, the board of directors, as well as amendments to such regulations;
  • approval of the amount of the annual dividends;
  • appointment of supervisory board members and members of the board of directors, approval of the terms and conditions of the civil-law agreements or employment agreements (contracts) to be entered into with each member of the supervisory board and board of directors, determination of their remuneration, and appointment of a person authorized to execute the civil-law agreements with the members of the supervisory board and board of directors;
  • approval of the regulation and reports on the remuneration of the members of the supervisory board and board of directors (sole executive body, if applicable) according to the requirements set out by the Securities Commission;
  • approval of removal (including before lapse of their term of office) of the members of the supervisory board and board of directors;
  • appointment of an independent auditor or internal audit commission (auditor), and approval of their removal (including before lapse of their term of office);
  • approval of reports of an independent auditor or internal audit commission (auditor);
  • consideration of conclusions of an independent auditor or internal audit commission (auditor) and approval of the resolution following such consideration;
  • approval of the reports of the supervisory board or board of directors, and approval of the resolution following consideration of the respective reports;
  • approval of the JSC's code of corporate governance;
  • appointment of the chairman and members of the counting commission of the general shareholders' meeting;
  • granting consent to the significant and interested party transactions (if required);
  • filing a claim in case of non-compliance with requirements regarding approval of significant transactions; and
  • any other decisions for which supermajority is not required and which do not fall under exclusive competence of the supervisory board. 
75% and more (only for a public JSC)

Constitutes a "significant controlling stake". 
 More than 75% (at a general shareholders' meeting)

To decide on the following, among others:

  • changes to the charter, except for certain exceptions provided for by JSC Law, such as eliminating provisions of a private JSC’s charter establishing shareholders’ rights and obligations to file sell- and squeeze-out bids;
  • issue, sale and cancellation of treasury shares (shares bought back by the JSC);
  • change of type of the JSC (from public to private and vice versa);
  • change of corporate management structure;
  • placement of shares;
  • placement of securities that can be converted into shares and of the securities for the amount exceeding 25% of the JSC's total assets;
  • capital increases and capital decreases; and
  • spin-off, and termination, including liquidation, merger, split-off, and reorganization. 
95% or more
  • Constitutes a "dominant controlling stake" in any JSC (both public and private).
  • The possibility to force all other shareholders to sell their shares through launching a squeeze-out bid (a "squeeze-out").
 95% or more (at a general shareholders' meeting of private JSC) To decide, among others, on changes to the charter of a private JSC aimed at eliminating provisions establishing shareholders’ rights and obligations to file sell- and squeeze out bids. 

3.2 Restrictions and careful planning

Ukrainian law contains a number of rules that already apply before an acquisition of a JSC's shares is announced. These rules impose restrictions and hurdles in relation to prior stake building by a bidder and announcements of a potential acquisition by a bidder or a target company. The main restrictions and hurdles are summarized below. Some careful planning is therefore necessary if a candidate bidder intends to start a process that is to lead toward an acquisition of shares in a JSC. When planning and structuring the deals, it is also crucial to take due account of the Ukrainian currency control restrictions, which may apply to cross-border share transfers and settlements.

3.3 Insider dealing and market abuse

Before, during and after an acquisition of shares, the general rules regarding insider dealing and market abuse remain applicable (see 6.3). The rules include, among other things, that manipulation of the target's stock price, e.g., by creating misleading rumors, is prohibited.

3.4 Disclosure of shareholdings and disclosure by the target company

The rules regarding the disclosure of shareholdings and transparency apply before, during and after an acquisition of a JSC's shares.

Ukrainian legislation currently has the following mandatory requirements regarding the disclosure of shareholdings or disclosures by the target company:

  • announcement of a bid to purchase 5% or more shares in the target company;
  • announcement of the conclusion of a share purchase agreement to acquire 50% of shares in a public or private JSC and 75% of the shares in a public JSC; and
  • announcement of an acquisition of 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% and 95% of the shares in a public JSC and 5%, 50%, 95% in a private JSC.

If a bidder starts building up a stake in the target company, it will be obliged to announce its stake if the voting rights attached to it have passed an applicable disclosure threshold. As illustrated above, the relevant disclosure thresholds in Ukraine are 5%, 10%, 15%, 20%, 25%, 30%, 50%, 75% and 95% for a public JSC and 5%, 50%, 95% for a private JSC. Similar rules apply to the holding of financial instruments relating to shares in target companies.

When determining whether a threshold has been passed, a bidder must also take into account the voting securities held by the parties with whom it acts in concert or may be deemed to act in concert (see 3.7 below), which includes affiliates. The parties could also include existing shareholders of the target company with whom the bidder has entered into specific arrangements, such as agreements on exercising their voting rights.

3.5 Announcement of a takeover bid

Although Ukrainian legislation implies that inside information, of which a takeover bid is a part, must be made public in accordance with legislation, currently there is no specific regulation regarding the announcement of a takeover bid. However, pre-acquisition announcements may be required for a JSC share deal.

If, after the acquisition of shares of a JSC, the shareholding of a person (or persons acting in concert), coupled with the existing shareholdings of its affiliated persons in such JSC, would constitute at least 5% of the voting shares of the JSC, then the proposed purchaser must make a notification of the acquisition at least 30 days prior to the contemplated acquisition, to:

  1. the JSC;
  2. the Securities Commission;
  3. the stock exchanges on which the JSC shares are listed; and
  4. to the information database of the Securities Commission or through legal entities providing information disclosure services on behalf of the stock market participants.

If the proposed purchaser already holds 5% of the voting shares of the JSC, such announcement is not required. The JSC whose shares are being so acquired, is prohibited from taking action to prevent such acquisition.

As currently drafted, this requirement applies only to the direct acquisition of shares of any type of a JSC, but it does not apply in the case of an indirect acquisition of the shares.

3.6 Due diligence

Ukrainian law does not regulate the due diligence process in the context of share acquisitions. Nonetheless, the concept of due diligence or pre-acquisition review by a bidder is very well known, and widely used, in Ukraine. The parties ordinarily implement the appropriate mechanisms to organize a due diligence or pre-acquisition review. These can include procuring the management's cooperation and disclosures, and the use of non-disclosure arrangements and data rooms.

3.7 Acting in concert

For the purposes of the Ukrainian takeover bid rules, persons "act in concert" if such individuals and/or legal entities act upon an agreement concluded between them and agree their actions in order to reach the common goal.

The definition of "persons acting in concert" is very broad, and the concept was only introduced into Ukrainian law in June 2017, when the Corporate Governance Law became effective (see 2.1). In practice, individuals and/or legal entities conclude the joint venture agreements, such as a joint venture agreement for the implementation of the squeeze-out procedure, which enables them to obtain the status of "persons acting in concert".

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