Effective 28 August 2025, Ukraine will abolish the following legal entity types (collectively, the Abolished Entity Types):

• Private enterprise
• Subsidiary enterprise
• Foreign enterprise
• Citizens' associations enterprise
• Consumer cooperative enterprise

These changes are introduced by Law of Ukraine No. 4196-IX (Law No. 4196), which repeals the Commercial Code of Ukraine. The reform represents yet another step in aligning Ukraine's corporate legal framework with international standards. Law No. 4196, titled "On the Specifics of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms During the Transitional Period and Associations of Legal Entities," was adopted on 9 January 2025, and is scheduled to enter into force on 28 August 2025.

The Abolished Entity Types, which were originally introduced under the Commercial Code, have historically coexisted with more regulated and widely used entity forms, such as limited liability companies (LLCs) and joint-stock companies (JSCs). Despite the major prevalence of LLCs as the preferred vehicle for business in Ukraine, certain businesses, including those founded by foreign investors, historically opted to use the Abolished Entity Types and have continued to do so up to the present.

Law No. 4196 carries immediate implications for businesses still operating under the Abolished Entity Types. Starting from 28 August 2025:

• Businesses will not be able to set up a company as one of the Abolished Entity Types.
• The Law of Ukraine On Limited and Additional Liability Companies (Law on LLCs) will apply to existing companies organized under the Abolished Entity Types (unless otherwise governed by their charters or specific legislation).
• A three-year transition period will apply and, from 28 August 2028, companies organized as one of the Abolished Entity Types will be fully governed by the Law on LLCs and any conflicting provisions in their charters will be rendered invalid.

Impact on business

Although the new changes will primarily affect state-owned entities, private businesses could also be significantly affected, because the transformation implies termination of an existing entity and transferring all its property, rights and obligations to a legal successor.

Although Law No. 4196 does not explicitly prohibit the continued existence of companies operating under the Abolished Entity Types (even after the end of the transition period), there are compelling reasons for businesses to take these changes seriously and act proactively.

In practice, as of 28 August 2025, a company operating under one of the Abolished Entity Types is likely to face legal and operational challenges. For example:

• Legal uncertainty regarding the Abolished Entity Types could undermine relations with business counterparties and banks, which could be reluctant to enter into long-term engagements with entities no longer recognized under the current legal framework.
• Corporate governance of Abolished-Entity-Type entities may become more complex, as their charters may be rendered partially invalid under the new legal framework, creating legal ambiguity in governing the company.
• Updating a company's registration records, especially statutory documents, may be problematic from a practical standpoint; it remains unclear how state registrars will approach such entities, adding further uncertainty.

The process of transforming into an LLC or another permitted legal entity type requires careful preparation and sufficient implementation time. It is best to consider the potential impact proactively, while the matter is not business sensitive. Otherwise, completing the process under time constraints may prove difficult and disruptive.

Transformation procedure

Law No. 4196 does not provide for an automatic transformation procedure. Nonetheless, it introduces specific provisions designed to ease the reorganization process for businesses of the Abolished Entity Types.

Generally, the transformation of a company involves changing its legal form, which results in the legal termination of the existing company and the transfer of all its rights and obligations, including assets, liabilities and registered rights, to a newly established entity, such as an LLC.

Although the process may appear complex, the safeguards set out in Law No. 4196 are intended to streamline the transformation and minimize disruption to ongoing business operations. In particular, the Law provides the following facilitative measures:

• The assets, rights and obligations of a company undergoing transformation are transferred to its legal successor.
• Permits, licenses, certificates, approvals, other authorizations and results of public services granted to the transforming company remain valid for its legal successor for their original term.
• The presence of registration bans, tax or social insurance debts and overdue payments does not preclude registration of the company's transformation from one of the Abolished Entity Types into a new one.
• Restrictions such as enforcement seizures, absence of creditor or mortgagee consent or tax authority approval for property under a tax lien do not prevent inclusion of that property in the charter capital of a transformed entity. These encumbrances remain in force for the company's legal successor.

Despite these measures, Law No. 4196 leaves some potential gaps unaddressed, such as whether the restriction on repatriating dividends abroad in foreign currency would apply within the first 12 months following an entity's transformation, as is currently the case for newly registered entities.

Implications

In light of the changes introduced by Law No. 4196, businesses currently operating under any of the Abolished Entity Types may want to consider their transformation in advance of the statutory deadline. Taking early steps could help mitigate potential legal ambiguity, reduce the risk of complications in dealings with financial institutions and partners, and support continued operational stability.

Affected entities should consult with qualified legal advisors to assess the implications for their specific corporate structure and to support a timely, orderly transition to another legal form, such as an LLC.