Business news from Ukraine


The PR Group (Lviv), implementing a project on construction of the Sigma Park Yarychiv industrial park in Lviv region, plans to build at least 10 industrial parks with a gross area of almost 2,000 ha in two years and enter the Frankfurt Stock Exchange and the Singapore Exchange (SGX). “In addition to the park in Yarychiv, there will be 10 more industrial parks. The largest project for 560 hectares is located on the border of Lviv region in Rivne region. In Yarychiv there will be the smallest one – 15.7 hectares. In general, the entire portfolio of industrial parks is designed for almost 2,000 ha. We are planning to start all projects in two years. We are trying to make a stake on the social component. One of the projects will be located near Chervonohrad, Sokal, where the mines are closed and new jobs need to be created,” Managing Partner and co-owner of PR Group Roman Protsak told reporters on the sidelines of the Industrial Development and Construction Forum in Kyiv.
He said that the development company PR Development, which is part of the group, accompanies development of industrial parks. All the facilities will be united under the Sigma Park joint brand with the prefix of the name of the settlement near which they are located. This year, the company plans to provide two industrial parks for registration at the Ministry of Economic Development and Trade, and in 2019 to launch Sigma Park Yarychiv.
“There are already participants interested in locating their production facilities. Negotiations are currently under way with 48 companies. We will attract them on competitive terms. Each of them will present a development plan for the next 10 years, including offering the best conditions for employees’ salaries, Protsak said.
According to him, in August-September, the company will announce a tender for occupying land parcels in Sigma Park Yarychiv, in which only the food industry will be represented. The implementation of this project (greenfield) is at the utilities design stage. In other parks, the automotive, pharmaceutical, and other industries are located.
“We are currently using our own funds. We are not attracting credit resources, but we plan to enter foreign markets to raise funds through the sale of bonds… There are plans for two platforms – Frankfurt, Singapore and possibly additionally Warsaw. We plan to enter them in 2019-2020. One of our investment funds that deals with real estate in Ukraine and abroad will enter [the exchanges],” the co-owner of PR Group said. He said that the company had previously specialized in the construction of residential real estate, but three years ago, the co-owners decided to switch to commercial and industrial real estate.

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Ukraine in January-March 2018 increased goods flow with the European Union (EU) countries by 17.7% year-over-year, to $8.581 billion, the National Bank of Ukraine (NBU) has said on its website. The central bank said that both exports grew by 26.5%, to $4.058 billion and imports rose by 10.7%, to $4.523 billion. The deficit of balance of trade with the EU narrowed to $465 million from $878 million.
In addition, goods flow with Russia grew by 14.9%, to $2.615 billion. Imports rose by 28.4%, to $1.906 billion, while exports fell by 10.1%, to $0.709 billion. The deficit of balance of trade with Russia grew to $1.197 billion from $692 million.
The share of goods flow between Ukraine and the EU of total Ukraine’s foreign trade in January-March 2018 grew to 37.7% from 35.3% and with Russia to 11.5% from 11%.
In general, exports of goods from Ukraine in January-March 2018 grew by 10.4%, to $22.782 billion, imports – by 11.9%, to $12.359 billion and exports – by 8.6%, to 410.423 billion.

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Ukrainian President Petro Poroshenko has signed a bill on the ratification of the Guarantee Agreement (a draft access to long term finance project) between Ukraine and the International Bank for Reconstruction and Development (IBRD) passed by the Verkhovna Rada on April 5. “The agreement creates a legal framework for the development of cooperation between the parties, involving long-term investment resources in the economy of Ukraine in the amount of $150 million under state guarantees. The document calls for Ukreximbank to receive loans from the International Bank for Reconstruction and Development to provide Ukrainian small and medium-sized enterprises (SME) with medium and long-term financing for production needs: investment lending and working capital financing,” the press service of the President of Ukraine said last week.
The implementation of the access to long term finance project will have a positive impact on the development of SME, expansion of production capacities of the real sector, preservation of existing and creation of new jobs.

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Corporate contracts are unlikely to become a mechanism for hiding the beneficial owners of limited liability companies (LLC) because of risks and legal uncertainty, experts polled by Interfax-Ukraine have stated, commenting on the provisions of the laws on corporate contracts and limited and additional liability companies. Partner of PRIME K.A.C. Group law firm Tetiana Kuzmich notes that “the institution of a corporate contract will allow real business owners to remain out of publicity on a legal basis.”
“The owners at the start largely ignored the law, adopted in 2014, which requires the disclosure of ultimate beneficial owners in the state register. Data transfer from the Ukrainian register to the global register of beneficial owners of companies within the OECD contributed to the process of reviewing approaches in this matter. And the norms of financial monitoring actively adopted in the past year, which block transactions on accounts in case of non-disclosure of information, confronted with an accomplished fact,” she said.
The lawyer drew attention to the fact that “every owner chose his own unique way.”
“It’s not a secret that the registers still often lack data, shares are fragmented according to the number of participants up to the hurdle, business is still registered for affiliated trusted individuals, offshore jurisdictions or Ukrainian companies with a chain of parent founders. Such a structure of working property contains risks of human factor,” she said. At the same time, Kuzmich stressed that the new law on limited liability companies gives a solution, providing as a tool a corporate contract protected by the secret of disclosure.
Serhiy Benedysiuk, the head of the corporate law and M&A practice at Evris law firm, agrees with the expert. “The law on limited liability companies in part that deals with corporate contracts really has drawbacks, primarily related to the privacy of corporate contracts, an undetermined list of potential parties to corporate contracts, as well as the consequences for third parties in case of transactions that are contrary to the corporate contract. We cannot rule out the theoretical possibility of using corporate contracts to conceal the beneficial owners of companies,” he told Interfax-Ukraine.
At the same time, the lawyer wonders how effective this concealment mechanism will be, because “unlike corporate contracts in Ukraine, trust declarations in foreign jurisdictions are used in conjunction with secretarial companies that are responsible for keeping the register of the company’s shareholders and enjoy a high level of confidence.”
“Another situation is in Ukraine, where participants in an LLC can be replaced a wide range of entities empowered to carry out functions in the sphere of public registration, who will replace the participants irrespective of the corporate agreement (which they do not know and must not know), if the participant of the LLC expresses the wish to sell of its stake to a third party,” he said, stressing that “the beneficiary may apply for protection of his or her rights to Ukrainian courts, but the process of returning shares in the company to him or her may be delayed for years if there is a series of subsequent resales and the new owner proves his or her good faith.”
The lawyer also pointed out a lack of confidence of the beneficial owner in the effective protection in the judicial system under a corporate contract. “We are clearly against the occurrence of additional tools for concealing the beneficial owner. We consider it expedient to remove additional tools from the law on limited liability companies, which can contribute to this. However, even if prior to the enactment of the law on LLCs the relevant provisions are not finalized, we hope that the beneficiaries would not be concealed with the help of corporate contracts widely,” he said.
In turn, Director for Corporate rights and Management at Smart-Holding Andriy Natrus believes that the use of corporate agreements as a tool for concealing beneficiary owners of LLCs is unlikely due to some risks which the agreement brings. The expert’s forecast is based on the fact that, in his opinion, the wording of the law on limited liability companies regarding the regulation of this obligation to third parties that are not participants in the company is blurred, which creates legal uncertainty.
“In the future this will lead to ambiguous judicial practice and the legislator will most likely be forced to settle this issue by introducing more precise language into the law,” he said.
In addition, Natrus said that the corporate agreement “will not be an effective mechanism for protecting the beneficiary from selling stakes in the company by a nominal participant in favor of other third parties because of the difficulty of recognizing the invalidity of a share disposal agreement.”
“Due to the confidentiality of the corporate contract and a lack of obligation to disclose information on the conclusion of this contract, it will be very difficult to prove that a party acting as the buyer of the stake in the company knew or could know that the selling of the stake is in violation of the provisions of the corporate contract. There would be a possibility of claiming compensation from the nominal participant in the judicial procedure for the damage suffered in theory, but this compensation may be incommensurable with the loss of the rights to the stake in the company,” he said.
According to the expert, Ukraine has a weak legal basis for the application of corporate contracts, “unlike some European countries, where the history of the application of these contracts is estimated for decades,” which generally threatens low effectiveness of protecting their rights by beneficiaries when using a corporate contract under Ukrainian law. “Most likely, these schemes will be used by government officials, as the requirements for disclosure of information on ultimate beneficiaries have toughened in traditional offshore zones, and in some cases, foreign lawyers routinely refuse to provide the nominal ownership service to this category of nominal owners because of their civil service. Officials are forced to seek new instruments to protect their rights to assets without disclosing information inside Ukraine,” the expert said.
He also said that “in a situation where the legislator thoughtlessly, or more likely, deliberately lays an ambiguous interpretation of the application of certain provisions in practice in the legislation in the interests of certain categories of citizens, it is difficult to come up with an effective mechanism to counteract the creation of schemes for concealing information.”