Publication date: 08.07.2024
Legal regulation of corporate governance
Corporate governance is an important component of the effective functioning of companies, providing control and management mechanisms that contribute to the achievement of strategic goals and protection of the rights of shareholders and other stakeholders. The legal regulation of corporate governance in Ukraine defines the principles, rules and procedures that ensure transparency, accountability and responsibility of companies to their shareholders and other stakeholders.
Key legal acts
- Civil Code of Ukraine - defines general provisions on legal entities, their governing bodies, rights and obligations of participants (shareholders).
- Commercial Code of Ukraine - regulates general issues of business activities, including the operation of business entities.
- TheLaw of Ukraine "On Joint Stock Companies " is the main law regulating the activities of joint stock companies, including the procedure for their establishment, management, rights and obligations of shareholders, procedures for holding general meetings and other aspects of corporate governance.
- Law of Ukraine "On Limited Liability Companies and Additional Li ability Companies" - regulates the activities of limited liability companies and additional liability companies, including the procedure for their establishment, management, rights and obligations of participants.
- TheLaw of Ukraine "On Securities and the Stock Market " - defines the procedure for issuing and circulating securities and regulates the activities of stock market participants.
- TheLaw of Ukraine "On Protection of Economic Competition " - regulates the protection of competition, prevention of monopolization and abuse of dominant position.
- Corporate Governance Code - contains recommendations and best practices in corporate governance developed by the National Securities and Stock Market Commission (NSSMC).
Principles of corporate governance
Transparency and disclosure of information
Transparency and disclosure of information are the main principles of corporate governance that ensure that shareholders and other stakeholders have access to information about the company's activities. This includes regular publication of financial statements, performance reports, information on ownership structure, governance and risks.
Accountability and responsibility
Accountability and responsibility imply a clear division of powers and responsibilities between the company's governing bodies, as well as responsibility for decisions made. This includes the creation of effective mechanisms for controlling and supervising the activities of executive bodies, ensuring liability for violations of corporate law and ethical standards.
Protection of shareholders' rights
Protection of shareholders' rights is a key principle of corporate governance, which implies equal treatment of all shareholders, regardless of their share in the authorized capital. This includes the right to participate in general meetings, receive dividends, access to information about the company's activities and the ability to appeal decisions of the management bodies.
Management efficiency
Management efficiency means creating conditions for making informed and timely decisions aimed at achieving the company's strategic goals. This includes the formation of a competent composition of management bodies, ensuring an appropriate level of qualifications and professional ethics.
The company's governing bodies
General Meeting of Shareholders
The general meeting of shareholders is the supreme governing body of a joint-stock company, where shareholders make decisions on the most important issues of the company's activities. This includes approving the charter, electing members of the supervisory board, approving financial statements, distributing profits, deciding on the company's liquidation, and other issues.
Supervisory Board
The Supervisory Board exercises general supervision over the activities of the company's executive bodies, protects the interests of shareholders and monitors the implementation of strategic objectives. The Supervisory Board is elected by the general meeting of shareholders and has the right to appoint and dismiss executive directors, approve budgets and strategic plans, perform internal audit and other functions.
Executive bodies
The company's executive bodies (the Management Board and the CEO) carry out day-to-day management of the company's activities, implement strategies and plans approved by the Supervisory Board, and are responsible for achieving financial and operational goals. Executive bodies are appointed by the supervisory board or the general meeting of shareholders.
Mechanisms for protecting shareholders' rights
The right to information
Shareholders have the right to receive information about the company's activities, financial condition, ownership structure, decisions of management bodies and other important issues. The law requires the company to provide shareholders with regular and reliable information, including the publication of financial statements and other documents.
Right to participate in general meetings
Shareholders have the right to participate in general meetings, vote on resolutions, nominate candidates for management bodies, make proposals on the agenda and appeal against the decisions of the meeting in court.
Right to dividends
Shareholders are entitled to receive dividends in accordance with their share in the company's authorized capital. The decision to pay dividends is made by the general meeting of shareholders based on the company's financial results.
The right to protect interests
Shareholders have the right to apply to the court or other competent authorities to protect their rights and interests in case of violation of the law or the company's charter. This includes the possibility of filing lawsuits to invalidate decisions of management bodies, seeking damages and other remedies.
Challenges and prospects for corporate governance development
Challenges
- Corporate conflicts - conflicts between shareholders, governing bodies and other stakeholders can have a negative impact on a company's operations and reputation.
- Non-transparency and insufficient disclosure - Lack of proper transparency and disclosure can lead to distrust on the part of shareholders and investors.
- Imperfect legislation - gaps and contradictions in legislation can complicate the process of corporate governance and shareholder rights protection.
- Low level of corporate culture - insufficient level of corporate culture and ethics may negatively affect the efficiency of management and the company's reputation.
Development prospects
- Improvement of legislation - adaptation of national legislation to international standards and recommendations, adoption of new laws and amendments to existing acts will help improve the quality of corporate governance.
- Development of control mechanisms - creation of effective mechanisms for control and supervision over the activities of management bodies, ensuring liability for violations of legislation and ethical standards.
- Improving thelevel of corporate culture - implementing training and professional development programs for members of governing bodies, shaping corporate values and ethical standards.
- Strengthening the role of independent directors - involvement of independent directors in supervisory boards will help to increase the objectivity and impartiality of decisions.
- Expanding shareholder rights - ensuring greater access to information for shareholders, providing them with additional rights and opportunities to participate in company management.
Conclusions.
The legal regulation of corporate governance in Ukraine is aimed at ensuring transparency, accountability and responsibility of companies to shareholders and other stakeholders. The main regulatory acts are the Civil Code, the Commercial Code, the Laws on Joint Stock Companies, on Limited Liability Companies and on Additional Liability Companies, among others. The main principles of corporate governance include transparency and disclosure, accountability and responsibility, protection of shareholder rights and management efficiency. Challenges, such as corporate conflicts, lack of transparency, imperfect legislation and a low level of corporate culture, can complicate the corporate governance process. Development prospects include improvement of legislation, development of control mechanisms, enhancement of corporate culture, strengthening the role of independent directors and expansion of shareholders' rights. Implementation of these measures will help to improve the quality of corporate governance and ensure the sustainable development of companies in Ukraine.
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