What is the procedure for dismissal of Chief Executive Officers in Ukrainian companies with foreign shareholders?
The sequence of actions typically comprises 4 key stages, namely:
1) Preparatory stage
Where should a foreign shareholder start?
According to recent updates in Ukrainian AML legislation, there is a need to provide an extract from the commercial/trade register confirming good standing of each foreign shareholder in its country of origin along with the notarised copy of passport of each ultimate beneficial owner of a Ukrainian subsidiary. Thus, a foreign shareholder must receive these documents in its country of origin in advance.
Foreign shareholders can pass all decisions related to their Ukrainian subsidiaries in their country of origin. Alternatively, they can appoint local attorneys who will act on their behalf in Ukraine. Most companies we are aware of choose the latter option. For such purpose, each shareholder located outside Ukraine issues a respective notarised power of attorney.
In order to recognise these documents in Ukraine, each foreign shareholder also arranges for their legalisation or certification with an apostille. The latter requirement does not apply if there is a bilateral treaty on reciprocal recognition of documents between Ukraine and the country where the documents are issued.
2) Passing a decision on replacement of the CEO
Next, depending on the governance structure of a Ukrainian subsidiary, its general shareholders’ meeting, sole shareholder or supervisory board (if any) passes the following decisions:
a) on termination of authorities of the current CEO;
b) on appointing the new one, and
c) on authorising a signatory to execute relevant HR documents.
As a result, the above decisions will be formalised by either:
a) minutes of the general shareholders’ meeting;
b) resolution of the sole shareholder; or
c) resolution of the supervisory board.
3) Handling HR formalities
Afterwards, not later than on the last working day of the current CEO, the person authorised by the above decision must sign the relevant HR documents, namely:
a) order on the dismissal of the current CEO; and
b) release and termination agreement between the company and the current CEO.
Once these documents are signed, the Ukrainian subsidiary must wire all payments due to the current CEO, in particular: salary calculated up until his/her last working day, severance payment (if any), compensation for unused vacation and business trips, as well as other allowances established in the respective employment contract.
On the day following the dismissal of the current CEO, there is a need to sign documents related to hiring of the new CEO, in particular:
a) order on his/her employment; and
b) employment contract.
4) State registration
Finally, a representative of the Ukrainian subsidiary must register the new CEO with the Ukrainian Companies Register.
The state registration itself takes one business day.
Once the state registration is completed, the new CEO can officially represent Ukrainian company before third parties. He/she must further undergo an identification procedure with the servicing bank, as well as receive an e-signature required for reporting purposes.
By Bogdana Parkhomchuk, Associate, Avellum