New LLC Law: Articles of Association Requirements and the Model vs. Custom Choice

What changes are provided by the new law regarding issues related to the LLC charter

The Law of Ukraine “On Limited and Additional Liability Companies” No. 2275-VIII dated 06.02.2018, which came into force on 17.06.2018 (hereinafter – the Law), introduced numerous amendments to the procedure for the establishment and operation of companies.
In particular, among the provisions that have undergone significant changes are those concerning the LLC Charter.
First of all, the new Law provides for only a few mandatory requirements for the content of the Charter, namely:

1. Full and abbreviated (if any) name of the company.
2. Company management bodies, their competence, and the procedure for making decisions.
3. Procedure for joining and withdrawing from the company.

Other provisions that do not contradict current legislation may be defined in the Charter exclusively at the discretion and decision of the founders, as such information is fully contained in the Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Formations (State Register).
This means that in case of a change in the founder (information about the founder) of the company or data on the authorized capital, or other information, there is no need to rewrite the Charter and spend additional funds and time on its re-registration.

How to reflect changes in provisions regarding founders and authorized capital in the LLC charter

Therefore, to make changes regarding a legal entity, it is sufficient to fill out the Application for State Registration of a Legal Entity (excluding public formations) (Form 2, approved by Order of the Ministry of Justice of Ukraine dated November 18, 2016, No. 3268/5 (as amended by Order of the Ministry of Justice of Ukraine dated May 19, 2020, No. 1716/5)), download the application form from the Ministry of Justice website via the link and submit it to the Administrative Service Center (hereinafter – ASC) or to the executive body of the respective city council. The procedure can also be carried out with the help of a notary authorized to make such changes.
To register changes in information about a legal entity, the following documents must be provided:

• application (Form 2)
• decision of the general meeting of the Company's participants regarding the respective changes
• confirmation of payment of the administrative fee; in case of providing administrative services within reduced terms – a document confirming additional payment
• original or notarized copy of the applicant's identity document. If documents are submitted by a representative, an original or notarized copy of the document authorizing the representative must also be submitted.

Depending on the specific changes being made, the list of documents may be expanded.
The full list of required documents can be found on the ASC website via the link.
Given such a simplified list of requirements for the company's Charter, the registration of an LLC based on a model charter is gaining relevance. Some companies also express a desire to switch from their own charter to a model one.

What is a model charter and what makes it attractive for LLCs

A model charter is a standard constituent document, approved by Resolution of the Cabinet of Ministers of Ukraine No. 367 dated March 27, 2019, which regulates the company's activities.
You can familiarize yourself with the Resolution here.

According to legislation, a business entity can be established and operate on the basis of a model charter. Any LLC has the right to either adopt a model charter as the basis for its activities upon establishment or switch to it later during its operations.

An undeniable advantage of choosing a model charter is that when registering an LLC based on it, founders do not need to develop their own, as there is a universal charter template that includes all the main provisions for the company's activities.
A disadvantage of choosing it is the inability to customize its provisions.

How is an LLC registered based on a model charter?

An LLC can be registered based on a model charter through the traditional method – by submitting documents to the registrar, or on the official portal of the Ministry of Justice of Ukraine diia.gov.ua.

To register an LLC based on a model charter, when applying to the ASC or the respective city council, the following documents must be provided:

• application (our already familiar Form 2)
• original (notarized copy) of the founders' decision on the establishment of a legal entity
• applicant's passport and identification code (if the applicant is a foreigner or a stateless person – any document identifying that person). If documents are submitted by an authorized representative of the LLC, the original or a notarized copy of the document authorizing the representative must be attached to the application.

The procedure for obtaining the service online is much simpler; only a few simple steps are required:

1. Register/authorize on the diia.gov.ua portal using a qualified electronic signature.
2. Fill out the online service application form and answer questions about the company.
3. Choose the necessary provisions or agree to the 'default' version of the charter.

That's it! The application, charter, and minutes of the founders' meeting will be automatically generated based on the provided answers and sent to the state registrar.

Important!  When submitting an application to the ASC, it is not possible to select specific clauses of the model charter, as can be done online. The charter version will be 'default'.

And how does a company switch from its own charter to a model charter?

In the same way as in the previous case – directly, by submitting paper documents to the ASC (in person or by mail), or by obtaining the service online via diia.gov.ua.

Just as with the initial registration of an LLC based on a model charter, online you can choose the necessary provisions or agree to the 'default' version; when submitting an application to the ASC, the applicant agrees to the 'default' version of the charter.

So, which charter is better to choose: model or own?

The right to answer this question remains with the company owners.
Despite all the positive aspects of using a model charter, it may not suit everyone. Furthermore, it should be remembered that it is not possible to make changes to it.
However, the possibility of switching from a model charter to one's own and vice versa allows entrepreneurs to choose a suitable option for themselves.

Thus, as we can see, the Law on LLCs and ALCs has significantly simplified the operation of companies by eliminating the need to include frequently changing information in the charter, thereby relieving company owners of the burden of numerous re-registrations of constituent documents.

Olha Petrukhina Law Firm  will assist you with registration, re-registration of a company or its charter, and other issues related to its activities.

You might also be interested in other articles from our blog: New Law on LLCs and ALCs and New Law on LLCs: Corporate Agreement.