50% + – New Quorum Rules For Joint Stock Companies
On 31 January 2015, the amendments to the Joint Stock Companies Law reducing the quorum for the general shareholders' meeting (GSM) of a joint stock company entered into force. These amendments introduced by the Law No.91-VIII, dated 13 January 2015 (the Law), have an immediate effect on those joint stock companies where the State of Ukraine is the majority shareholder. All other joint stock companies will have to apply the reduced quorum under the Law beginning from 1 January 2016.
Historically, the quorum rule established by Article 41 of the Joint Stock Companies Law stated that "the GSM of a joint stock company has a quorum if shareholders owning no less than 60% of voting shares have registered to participate in the meeting". This provision was duplicated in the charters of joint stock companies since the quorum rule established by the Joint Stock Companies Law was (and still remains) mandatory. Therefore, the charters of joint stock companies will have to be amended to reflect the recent legislative developments.
The adoption of the Law is supposed to resolve one of the basic problems of Ukrainian corporate law, where a majority shareholder with less than 60% voting rights could not change the management of the company or adopt other important decisions that require a GSM. However, because the Law touches upon the interests of major businesses in Ukraine and its wording is not perfect, especially when it comes to indirect holdings by the State, there are already discussions among politicians about the need to amend it. One can also expect a new wave of disputes among shareholders of those companies where the new quorum requirement shifts the balance of powers within the currently existing corporate governance structures. Therefore, some shareholders will have to initiate corporate restructurings and may even have to amend shareholders agreements or develop alternative corporate governance mechanisms in order to protect their rights.