08 May 2024
Notifiable events (concentrations) in Ukraine
Ukrainian competition law provides that the following transactions, which are recognised as ‘concentrations‘, require prior merger clearance if the jurisdictional thresholds are met:
- merger of independent undertakings or takeover of one independent undertaking by another;
[NB: under Ukrainian merger control rules, ‘mergers’ and ‘takeovers’ have the following meanings:
‘mergers’ – all merging entities cease to exist post-merger, and there is a new surviving entity created instead; and
‘takeovers’ – acquisition of shares/interests of an entity which ceases to exist post such acquisition.]
- acquisition of direct or indirect control over an undertaking (either through the acquisition of shares, or acquisition/lease of assets, or due to contractual arrangements or otherwise); and
[NB: acquisitions of shares/interests whereby the thresholds of 25% or 50% of voting rights in the highest governing body of a target are reached or exceeded require obtaining merger clearance if such transactions provide for acquisition of control/negative control rights; and
as a matter of practice, the competition authority tends to treat acquisition of more than 50% of shares (even non-voting shares without control rights) as the acquisition of control by default. As a result, if a shareholder holds 50% or less in a target and solely controls it, such shareholder would formally need to obtain a separate clearance for exceeding the 50% threshold.]
- establishment by two or several independent undertakings of a full-function joint venture (a newly formed business entity) which is going to perform its functions on a lasting basis.
At the same time, the following types of transactions do not qualify as ‘concentrations’ and are exempt from an obligation to notify, irrespective of whether they meet the financial thresholds:
- establishment by two or several independent undertakings of a non-full-function joint venture (a newly formed business entity) which is not going to perform its functions on a lasting basis;
[NB: such establishment may potentially require a concerted practices clearance, which is subject to assessment on a case-by-case basis.]
- acquisition of shares by a so-called ‘financial buyer’ for their resale within one year if the buyer does not exercise its voting rights in the highest governing body of an undertaking;
- intra-group transactions if control relations were established in compliance with Ukrainian competition law (i.e., relevant merger clearances for the historical transactions were duly obtained in Ukraine if they were required); and
- acquisition of control over an undertaking or a part of it by a trustee within insolvency or similar proceedings.
The statutory test with reference to which the presence of ‘control’ is established in Ukraine is the ability of one or several related business entities or individuals to directly or indirectly exercise decisive influence (including via veto rights) on business activity of an undertaking or its part, in particular, due to:
- right to own or use all assets or their considerable part;
- rights which confer decisive influence on the composition, voting results and decisions of management bodies of an undertaking;
- conclusion of agreements which allow the determination of conditions of business activities and issuance of binding instructions or exercise of the powers of a management body of an undertaking;
- occupation of the position of a chairman or deputy chairman of the supervisory board, management board or another supervisory or executive body of an undertaking by a person which already occupies one or several such positions in other undertakings;
- occupation of more than 50% of the members of the supervisory board, management board or other supervisory or executive bodies of an undertaking by persons who directly or indirectly already occupy one or several such positions in other business entities;
- right to receive at least 50% of profits which remain at disposal of an undertaking; and/or
- acquisition of more than 50% of an undertaking’s shares (voting or non-voting).
The notion of ‘control’ according to Ukrainian merger control rules is rather similar to that in the EU/UK. There is a distinction between:
- sole and joint control;
- negative and positive sole control; and
- de jure and de facto
In particular, changes in the quality of control occur if there is:
- a change from sole to joint control and vice versa; or
- a change in the number or in the identity of controlling shareholders.
A change from negative to positive sole control or changes in the level of shareholdings of the same controlling shareholders without changes of their powers do not constitute a change in the quality of control.
