New Ukrainian securities legislation entitled About Securities and Fund Market came into force effective as from May 12, 2006. The Law provides new terminology and clarifies many legal matters related to the issuance and circulation of securities.
It is now the law that all joint-stock companies can place only nominal shares. Earlier, this stricture applied only to closed joint-stock companies, and open corporations enjoyed the right to create bearer shares in document form.
According to the new legislation, effective as from April 12, 2008, any issuer will be able to place corporate bonds up to a value which does not exceed triple the size of owned capital (together with guarantees from third parties).
A clear delimitation of professional and non-professional activity on fund markets has been established, delineating the types of professional activity to be subject to obligatory licensing.
Unhappily, the new legislation also creates ambiguity in the matter of share capital formation at the initial stage of the creation of an open corporation. Earlier, when the founders of an open corporation established a charter fund for the new corporation, the situation was regulated as follows: on one hand, Article 155 of the Civil Code obliged the founders to establish the share capital of corporation at the time of its creation. On the other hand, certain provisions of the Economic Code and Ukrainian legislation entitled, About Economic Societies contemplated the right of third parties to participate by their subscription of shares in a new enterprise. In cases of conflict, decisions as to the registration of shares in open corporations and bonds of enterprises were determined by the State Commission of Securities and Fund Market. For now, this area of law remains unsettled.
One important innovation centers on the concept of insider information. Article 44 makes clear what information about an issuer, his securities or competences about them is to be regarded as confidential. All persons in possession of insider information (the shareholders, officials, employees and partners, civil servants) must not distribute and or otherwise personally use or benefit from such information. This rule are now enforceable under the newly enacted Article 232-1 of the Criminal Code of Ukraine and stipulates imprisonment of up to three years, with deprivation of rights to hold certain positions or to carry on certain activities within the said term.
According to the Final Provisions of the Law of Ukraine "On Securities and Stock Market" (hereinafter – the Law), the force of the Law shall be applied to the securities issues, decisions on which were adopted by issuers after coming into force of this Law.
Securities issues, decisions on which were adopted by issuers before coming into force of the Law of Ukraine "On Securities and Stock Market", will now be regulated according to the requirements of the Law and statutory legal acts of the Securities and Stock Market Commission which were in force as of the date of adoption of the decision on securities issue.