UKRAINE Law and Practice Contributed by: Illya Tkachuk, Igor Krasovskiy and Inna Kostrytska, INTEGRITES
At the same time, the Ukrainian part of the busi- ness continues to function in the form of a lim- ited liability company, as this is relatively easy to create and manage. 3. Initial Public Offering (IPO) as a Liquidity Event 3.1 IPO v Sale As the Ukrainian stock market is in the initial stages of development, it is rare for an IPO to be chosen as a liquidity event; as a rule, a sale or other transactions that eventually result in share transfers are chosen. Dual-track process- es (including an IPO) are not market practice in Ukraine. At the same time, it is worth noting that suc- cessful Ukrainian technology companies often choose to create a foreign holding company/ project company that then goes on to an IPO. 3.2 Choice of Listing The general practice for Ukrainian technol- ogy companies is to go on IPO at a foreign stock exchange rather than a Ukrainian stock exchange. The reason for this is the different level of stock market development and, thus, the level of access to funding. 3.3 Impact of the Choice of Listing on Future M&A Transactions Ukrainian legislation is quite liberal in terms of choice of listing, as a foreign listing does not – as a rule – directly affect stakeholders’ rights and responsibilities. The Ukrainian squeeze-out rules apply to all Ukrainian joint-stock compa- nies, both private and public, irrespective of any listing either in Ukraine or abroad. A squeeze-out mechanism does not apply to a limited liability company.
Also, it is more common for Ukrainian technol- ogy companies to go on IPO through a holding company or a special project company rather than directly by a Ukrainian company. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process If the sale of the privately held company is cho- sen as a liquidity event, the sale process is typi- cally run as a bilateral negotiation with the cho- sen buyer. As a rule, only state-owned or forcibly alienated shares are sold in an auction. However, this does not exclude a selection process that involves the participation of several bidders. 4.2 Liquidity Event: Transaction Structure Typically, the sale of a privately held technology company with several shareholders is usually structured as the sale of the entire share capital (or at least a controlling stake of more than 50%). The standard transaction structure includes a combination of the following steps: • preliminary negotiations with the venture cap- ital investors (if any) about the preferred terms and conditions of a contemplated transaction; • direct negotiations or a private bidding pro- cess; • notifications to the National Securities and Stock Market Commission in cases of joint- stock companies; and • signing of transaction documents with a standard conditions precedent, including – but not limited to – the merger clearance, corporate approvals, etc.
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