On March 23, 2017 the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on Corporate Agreements” (hereinafter Law # 1984-VIII) was adopted which amended a number of regulations governing corporate governance in order to increase the level of corporate governance in companies, protect the rights and interests of investors. Amendments were made to the Civil Code of Ukraine and the laws of Ukraine “On Companies”, “On Securities and Stock Market”, “On Joint Stock Companies”, “On Limited Liability Companies and Super-Added Liability Companies”.
This Law # 1984-VIII introduces such new concepts for domestic legislation as an irrevocable power of attorney for corporate rights, an agreement on the enforcement of the rights of participants (founders) of a limited liability company and an agreement between the company’s shareholders (corporate agreements). There are similar innovations in the Law of Ukraine “On Limited Liability Companies and Super-Added Liability Companies”.
The definition of an irrevocable power of attorney on corporate rights is contained in Article 51-2 of the Law of Ukraine “On Business Associations”: “In case a power of attorney is issued with aim to perform or inforcement of obligations by the participants of company object of which are rigts to shares or powers of participants grantor may mention in the power of attorney that before its expiration it cannot be revoked without the consent of the company’s representative or may be revoked only in cases provided for in the power of attorney (irrevocable power of attorney).” This wording is also used in the Law of Ukraine “On Joint Stock Companies”. The Law # 1984-VIII mainly deals with the use of such powers of attorney in relations arising from shares (rights to shares) and rights (powers) in terms of performance or ensuring the performance of obligations of participants (shareholders). However, the phrase “in case” hints at greater opportunities to use irrevocable powers of attorney in corporate relations.
A specific subject of an irrevocable power of attorney for corporate rights is the fulfillment or enforcement of obligations of members of the company the subject of which are the rights to shares or powers of participants. Such a power of attorney gives creditors or their authorized persons confidence in the performance by the participant (debtor) of its obligations.
An irrevocable power of attorney is terminated in the event of termination of the obligation for the performance or enforcement of which it was issued.
An irrevocable power of attorney is subject to notarization even if issued by a participant, a legal entity, and is not subject to subdelegation to third parties, unless otherwise provided by such power of attorney.
Adoption of the Law # 1984-VIII helps to increase the level of corporate governance in companies protection of the rights and interests of investors.