Establishment of joint stock companies: problems and ways to solve them

Establishing a joint-stock company in Ukraine has always been a difficult task for lawyers and a headache for business owners. In particular, this is due to excessive bureaucracy and formalism in the registration of joint stock companies, which includes an unreasonably large number of stages of joint stock company registration, a complicated issue and sale of shares of a joint stock company, as well as the termination of the relevant legal entity. Despite the fact that the new version of the Law of Ukraine «On Joint Stock Companies» came into force on January 1, 2023, the procedure for registering a joint stock company itself remained as formalized and bureaucratic as ever. This, in turn, leads to the fact that foreign investors and startups that want to start operating in Ukraine refuse our jurisdiction. The reasons for this are simple: limited liability companies are not suitable for attracting investment in a company by including an investor as a shareholder, as they create a risk of dilution of the founders’ shares, and after the same founders receive information about the procedure and requirements for registering a joint­stock company, including the minimum amount of authorized capital, they cross Ukraine off the list of potential jurisdictions for their business. Thus, Ukraine is not realizing its full potential for attracting foreign investment due to excessive formalism and bureaucracy in the regulation of joint stock companies. A study of the shortcomings in the procedure for registering joint stock companies in Ukraine, its comparison with the procedure for registering similar legal forms of legal entities in foreign jurisdictions and, as a result, the development of clear steps to simplify it, is seen as necessary for Ukraine, including for proper integration into the European Union. Moreover, they will be the first steps to create a favorable environment in the domestic legislation for attracting foreign investment to Ukraine, which will increase the number of foreign startups and corporations that are used to operating in the legal form of joint stock companies with a clear corporate ownership structure.