08 May 2024
Notifiable events (concentrations) in Ukraine
Pursuant to the Ukrainian competition law, the following transactions, which are recognised as a ‘concentration‘, require a prior merger clearance if the jurisdictional thresholds are met:
- the merger of independent undertakings or the takeover of one independent by another;
[NB: under the Ukrainian merger control rules, “mergers” and “takeovers” have the following meaning:
“mergers” – all merging entities cease to exist post-merger, and there is a new surviving entity created instead;
“takeovers” – acquisition of shares/interests of an entity which ceases to exist post such acquisition.]
- the 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);
[NB: the 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 a merger clearance, if such transactions provide for acquisition of control / negative control rights;
as a matter of practice, the competition authority tends to treat the acquisition of more than 50% of shares (even non-voting shares without control rights attached thereto) as the acquisition of control by default. To this end, if a shareholder which holds 50% or less shares in a target and solely controls it, will most likely need to obtain a separate clearance for exceeding the 50% threshold.]
- the establishment by two or several independent undertakings of a full-function joint venture (a newly formed business entity) which would perform its functions on a lasting basis.
In particular, the following types of transactions do not qualify as a ‘concentration’ and are exempted from the obligation to notify, irrespective of whether they meet the financial thresholds:
- the establishment by two or several independent undertakings of a non-full-function joint venture (a newly formed business entity) which would not 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.]
- the acquisition of shares by a financial buyer for resale within one year from the day of the acquisition, if the buyer does not exercise its voting rights in the highest governing body of an undertaking;
- intra-group transactions, if respective control relations were established in compliance with the Ukrainian competition law (i.e., respective merger clearances were duly obtained in Ukraine or were not required);
- the acquisition of control over an undertaking or a part of it by a trustee within insolvency proceedings or the like.
The statutory test against which the control is assessed in Ukraine is the ability of one or several related business entities and/or individuals to directly and/or indirectly exercise a decisive influence (including via veto rights) on business activity of an undertaking or a part thereof, in particular, owing to:
- the right to own or use all assets or a considerable part thereof;
- rights which confer decisive influence on the composition, voting results and decisions of management bodies of an undertaking;
- conclusion of contracts and agreements which allow to determine conditions of business activities and issue binding instructions or exercise powers of a management body of an undertaking;
- the occupation of the position of a chairman or a deputy chairman of the supervisory board, management board or another supervising or executive body of an undertaking by a person who already occupies one or several such positions in other undertakings;
- the 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;
- the right to receive at least 50% of profit which remains at disposal of an undertaking; and/or
- the acquisition of more than 50% of an undertaking’s (even non-voting) shares.
The notion of ‘control’ under the Ukrainian merger control rules is rather similar to those in the EU/UK. There is a distinction between:
- sole and joint control;
- negative and positive sole control;
- de jure and de facto control.
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 (participants).
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.