The Commercial Code has been abolished: lawyers reveal what entrepreneurs in Ukraine should prepare for

In 2024, thanks to legislative innovations in our country, Ukrainians closed a record number of FOPs over the past five years – almost 210,000. In the first half of the year alone, more than 1,500 enterprises ceased operations. In addition, conducting economic activities is complicated by mobilization with the conscription of specialists, tax increases against the background of rising prices for raw materials and energy, as well as mined and occupied agricultural lands. In such difficult conditions, legislators adopted a high-profile document – on January 9, 2025, the Verkhovna Rada of Ukraine adopted the law “On the peculiarities of the regulation of entrepreneurial activity of certain types of legal entities and their associations in the transition period.”

The main news was that this law revokes the validity of the Economic Code of Ukraine. IA “FAKT” asked the lawyers of the “Repeshko and Partners” bar association for comments on this matter, who told about what changes await entrepreneurs, what should be taken into account to avoid legal conflicts, and whether this decision will be a catalyst for modernization legal framework in Ukraine.

With another legislative innovation, not everything is as clear as it seems at first glance. The Commercial Code, despite its shortcomings, performed an important regulatory function, and its abolition could create a number of problems for businesses in the transition period.

We will remind that the Economic Code was adopted in 2003 and entered into force on January 1, 2024 together with the new Civil Code of Ukraine. That is, the Economic Code existed for 20 years. It defined the basic principles of business in Ukraine and regulates business relations that arise in the process of organizing and carrying out business activities between business entities, as well as between these entities and other participants in business relations. Participants in relations in the field of business are business entities, consumers, state authorities and local self-government bodies, endowed with economic competence, as well as citizens, public and other organizations that act as founders of business entities or exercise organizational and economic powers in relation to them based on property relations. The Economic Code regulated the activities of these entities.

With the adoption of the Economic Code and the Civil Code, a reform of the current legislation was carried out, so to speak. The fact is that since Ukraine gained independence, there was a need for laws that would regulate emerging new legal relations, including the market economy that replaced Soviet enterprises with their planned economy. This is how such laws as “On property”, “On business associations” and many others appeared. At the same time, the Civil Code of the Ukrainian SSR, which was adopted back in 1963 and whose norms only partially corresponded to real time, continued to operate in the country. With the adoption in 2003 of the new Civil and Economic Codes, all the mentioned laws lost their validity.

It should be noted that in some places the norms of the Civil and Economic Codes overlapped, but the Economic Code was more highly specialized in relation to the activities of legal entities and sole proprietorships.

What exactly does the Law of Ukraine “On Peculiarities of Regulation of Entrepreneurial Activities of Certain Types of Legal Entities and Their Associations in the Transition Period” regulate and why was it adopted? The Law itself is quite small – it has only 23 articles and transitional provisions. In addition, this law makes appropriate changes to some other laws and the Civil Code of Ukraine, synchronizing them with the newly adopted law.

The new law states that the transitional period is the period starting from the date of entry into force of this Law and ending seven years after the date of entry into force of this Law.

Business entities, depending on the number of employees and income from any activity per year, may belong to micro-business entities, small business entities, medium-sized or large business entities.

Subjects of micro-enterprise are defined as:

• natural persons registered in accordance with the procedure established by law as natural persons – entrepreneurs, in which the average number of employees (if any) for the reporting period (calendar year) does not exceed 10 people and the annual income from any activity does not exceed an amount equivalent to 2 million euros, determined according to the average annual exchange rate of the National Bank of Ukraine;
• legal entities formed in any organizational and legal form, in which the average number of employees for the reporting period (calendar year) does not exceed 10 people and the annual income from any activity does not exceed the amount equivalent to 2 million euros, determined by the average annual rate of the National Bank of Ukraine.

At the same time, the following are defined as small business entities:

• natural persons registered in accordance with the procedure established by law as natural persons – entrepreneurs, in which the average number of employees for the reporting period (calendar year) does not exceed 50 people and the annual income from any activity does not exceed the amount equivalent to 10 million euros, determined by the average annual the rate of the National Bank of Ukraine;
• legal entities formed in any organizational and legal form, in which the average number of employees for the reporting period (calendar year) does not exceed 50 people and the annual income from any activity does not exceed the amount equivalent to 10 million euros, determined by the average annual rate of the National Bank of Ukraine.

At the same time, subjects of large entrepreneurship are legal entities formed in any organizational and legal form, in which the average number of employees for the reporting period (calendar year) exceeds 250 people and the annual income from any activity exceeds the amount equivalent to 50 million euros, determined at the average annual exchange rate of the National Bank of Ukraine. Other legal entities belong to medium-sized enterprises.

But the main thing! According to ch. 1 Art. 22 of the Law “within five years from the date of entry into force of this Law, the owner (subject performing the functions of the owner of the enterprise) is obliged to make a decision on the reorganization of the enterprise (merger with a business partnership, joining a business partnership, transformation into a business partnership) or its liquidation”.

At the same time, according to part 1 Art. 20 of the Law “it is prohibited to create legal entities in the organizational and legal forms of a private enterprise, a collective enterprise, a state enterprise, a state-owned enterprise, a utility enterprise, a joint utility enterprise, a subsidiary enterprise, a foreign enterprise, an enterprise of an association of citizens (a religious organization, a trade union), an enterprise consumer cooperative, rental enterprise, individual enterprise, family enterprise, joint enterprise, enterprise with foreign investments, farm, collective agricultural enterprise, small enterprise, collective enterprise”. Thus, it follows from the content of the Law that 5 years after this Law enters into force, all enterprises of the specified organizational and legal forms must be reorganized into business associations.

In order for entrepreneurs and other subjects not to delay the transformation, the Law provides for sanctions.  “For violation of the rules of entrepreneurial activity established by legislative acts, administrative and economic sanctions – measures of an organizational, legal or property nature, aimed at stopping the offense of the entrepreneurial entity and liquidating it – may be applied by authorized state authorities or local self-government bodies to entrepreneurial entities consequences

State authorities and local self-government bodies, in accordance with their powers and in accordance with the procedure established by law, may apply the following administrative and economic sanctions to business entities:

1) withdrawal of profit (income);

2) administrative and economic fine;

3) collection of fees (mandatory payments);

4) application of anti-dumping measures;

5) termination of export-import operations;

6) suspension of the validity of a license (patent), permit, certificate or other authorization document for the implementation by a legal entity or an individual entrepreneur of certain types of business activity;

7) annulment of a license (patent) for a legal entity to carry out certain types of business activity;

8) restriction or suspension of the activity of a legal entity;

9) liquidation of a legal entity;

10) other administrative and economic sanctions established by other laws.”

Another interesting innovation lies in the fact that enterprises are required to have their own website, on which, in accordance with the procedure and terms established by the Cabinet of Ministers of Ukraine, information subject to publication in accordance with this Law is posted. State and communal enterprises shall also publish the information specified by this Law on the official website of the State Property Fund of Ukraine and on the official websites of subjects performing the functions of the owner of the enterprise.

According to the new law, enterprises are obliged to disclose:

• the charter of the enterprise in the current edition, as well as in the editions that have been in effect for the past five years;
• regulations on the management bodies of enterprises and agreements (contracts) with company officials in the current edition, as well as in the editions that have been in effect for the past five years;
• all decisions of the supervisory board and the owner (the entity performing the functions of the owner of the enterprise) regarding the enterprise for the past five years; annual financial statements for the last three years;
• reporting documents submitted to relevant state bodies;
• annual reports of the supervisory board and the head of the enterprise;
• list of affiliated (related) persons.

This norm enters into force 2 years after the entry into force of the law.

On the one hand, the Law of Ukraine “On the Peculiarities of Regulation of Entrepreneurial Activities of Certain Types of Legal Entities and Their Associations in the Transitional Period” contains quite positive changes, but on the other hand, in a country in which there is a war and which, even after its end, will have enough many problems, including a weakened economy, changing the legal status of existing enterprises is quite a significant problem, because many enterprises have many licenses, patents, permits and other documentation that also needs to be reissued together with the status enterprises.

The adopted law contains other points that may lead to problems in the future. Thus, according to the new law, state and state-owned enterprises must become business associations. In addition, in the amendments to the Law of Ukraine “On Local Self-Government in Ukraine”, the term “enterprises, institutions, organizations under communal ownership” is replaced by the term “legal entities under communal ownership”.

The specified change regarding state and communal enterprises is debatable, because it does not take into account the fact that these enterprises are mentioned in the Constitution of Ukraine. In particular, it should be noted that, according to part 3 Art. 37 of the Constitution of Ukraine “it is not allowed to create and operate organizational structures of political parties … at state-owned enterprises.”; according to part 2 Art. 142 of the Constitution of Ukraine “territorial communities of villages, towns and cities may combine communal property objects, as well as budget funds for the implementation of joint projects or for joint financing (maintenance) of communal enterprises, organizations and institutions on a contractual basis…”.

It should also be noted that according to part 2 Art. 46 of the Constitution of Ukraine, the right to social protection is guaranteed, in particular, by mandatory state social insurance at the expense of insurance contributions of citizens, enterprises, institutions and organizations. Based on this, it can be seen that the refusal to use these concepts proposed in the law does not contain a constitutional basis and may lead to distortion of the actual content of legislative norms.

Indeed, the current legislation needs to be reformed, but we always do everything according to the principle – “we wanted the best, but it turned out – as always.”  And the adopted changes have not yet started to take effect…