UKRAINE Law and Practice Contributed by: Illya Tkachuk, Igor Krasovskiy and Inna Kostrytska, INTEGRITES
as proper arrangement of labour relations, founders’ agreements and holding companies in place. • IP rights issues are often not settled prop- erly, while the relevant regulation which has undergone significant changes over the past ten years must be taken into account. Among the key issues are the transferring of IP rights from developers to the company, as well as transferring the title to IP rights under the employment agreement and the service agreement. • Ukrainian data protection regulation remains less rigorous than the GDPR, which still may impact transactions where a Ukrainian entity deals with personal data of foreigners. • Diia City, the special regime for tech busi- nesses introduced by Ukraine’s government, keeps boosting the IT and tech in Ukraine by providing its residents with many benefits. 2. Establishing a New Company, Early-Stage Financing and Venture Capital Financing of a New Technology Company 2.1 Establishing a New Company Before the war, new technology companies in Ukraine were set up using one of the following two models: • the route typically used to establish a local start-up company (usually in the form of a limited liability company); or • the private entrepreneur model, in which a foreign company is created that then enters into direct services agreements with Ukrainian IT specialists.
A special legal and tax regime, known as Diia City, was launched in order to increase the appeal of the first model. Generally, Ukraine has been quite an attractive jurisdiction for start-ups, owing to: • the ease with which a limited liability compa- ny can be established (ie, up to three working days once all required documents have been submitted) and managed; • no minimum requirements to the share capital amount; • the dispositive nature of the Ukrainian corpo- rate law; and • a beneficial tax regime for Diia City residents. However, after the war began, the related risks forced some investors to reconsider the benefits of creating a holding company or operational company outside Ukraine. This tendency con- tinued in 2023 as well. 2.2 Type of Entity Entrepreneurs are typically advised to choose a limited liability company for the initial incor- poration. Joint stock companies – both private or public (listed) – have some advantages, such as squeeze-out procedures and how impossi- ble it is for participants to leave the company at any time. However, owing to the complexity and higher cost of their establishment and running, joint-stock companies are not often chosen. 2.3 Early-Stage Financing Both Ukrainian and foreign private equity and venture capital funds – as well as large Ukrain- ian IT companies with access to international financing – provided early-stage financing to start-ups throughout 2022–23. Various aggre- gators also became more active in providing
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