Ukraine Enacts Law to Enhance Corporate Governance in State-Owned Enterprises

by Cheplyk Roman
Friday, March 8, 2024
Ukraine Enacts Law to Enhance Corporate Governance in State-Owned Enterprises

On March 8, 2024, Ukraine implemented the “Law on Amendments to Certain Legislative Acts of Ukraine Regarding the Improvement of Corporate Governance in Legal Entities where the State is a Shareholder (Founder, Participant).”

This pivotal legislation propels corporate reform forward, aligning Ukraine more closely with international standards and expectations from investors and international financial institutions. Yulia Svyridenko, the First Deputy Prime Minister and Minister of Economy of Ukraine, emphasized its importance for signaling to investors Ukraine's commitment to operating under globally understood and systematic rules.

Key Aspects of the New Law:

  • Part of Ukraine's European integration and IMF program efforts.
  • Aims to adhere to OECD standards while considering wartime needs.
  • Mandates the development of a State Property Policy by the Government, outlining strategic enterprises and privatization targets.
  • Establishes profitability, liquidity, and solvency criteria for strategic companies.
  • Enhances the autonomy of supervisory boards in appointing and dismissing company managers.
  • Introduces effective internal control mechanisms including compliance, risk management, and internal audit.
  • Details procedures for evaluating the performance of supervisory boards and determining their remuneration.

Furthermore, the law specifies the appointment process for enterprise executives and delineates their fiduciary duties, reinforcing the principle of efficient and ethical management. It also clarifies the framework for engaging in internal and external credits, providing or acting as guarantors for such obligations, and mandates the verification of annual financial statements by audit entities.

This comprehensive reform is a significant step towards modernizing Ukraine's corporate governance landscape, making it more attractive for domestic and international investment while ensuring the efficient management of state-owned assets.

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