Practice Areas

Protective Reflex

The decline of business activity in certain areas cannot be called anything else than collapse. The high priority concern of clients is focused on restructuring, optimization, economizing, or simply maintaining their assets. Accordingly, there was little transactional work for lawyers this year


The vast majority of lawyers working in consulting practices characterize the current year as a significant reduction of transactions in the corporate, banking and financial sectors. Such an assessment is obviously based on the well-known events in Ukraine since the end of 2013.

Major changes in the country revealed the problems that exist in the economy, so the “old extensive development models that were actively used by the corporate sector finally crashed and have no right to further existence”, says Andriy Usenko, head of the Information and Analytical Department at ILF Integrites. He notes that “against the background of the changes that took place, the intention to conduct an IPO and place Eurobonds were replaced by restructuring proposals (soft version of what is happening – Metinvest Holding), defaults and forced restructuring (hard version – Mriya Agro Holding) and diligent search for financial resources for maintaining current operations that turned out to be difficult enough. Plans for business expansion and its extensive development were changed by processes of optimization, litigations and arbitrations on overdue debts”. In the banking sector the process of consolidation via M&A and purchase of loan portfolios exchanged for the withdrawal of banks from the system. “Eleven banks are in liquidation and 15 in interim administration are also likely to be liquidated”, says Andriy Usenko, noting the numbers. Maksym Lebedev, Senior Associate at Gvozdiy & Oberkovych Law Firm, notes that the number of requests for liquidation or sale of companies, even with existing debt, has increased several fold. 


The political situation in Ukraine and the lack of actual reforms discourage foreign investment. Moreover, foreign investors had, and partially still have, concerns for their resources that determined the most popular vectors of legal practice in the investment sphere: ensuring control over investment in an unstable situation, as well as moving such investments out to safe jurisdictions. Completion of the previously initiated investment projects remains relevant as many of them lack funding. At the same time, the intentions of investors are adjusted taking into account the position of the National Bank of Ukraine (NBU) forbidding inter alia withdrawal of foreign investments in the form of dividends or receipts from the sale of corporate investments. “Foreign investors are, to put it mildly, in a state of confusion, but in many cases have the possibility of recourse to payments for investments outside of Ukraine”, commented Anton Korobeynikov, counsel at Sayenko Kharenko.

Another significant step was the imposition by the NBU of an actual ban on early repayment of loans and borrowed funds granted by non-residents. Anton Korobeynikov said that a result of this “Ukrainian borrowers who had raised funds from foreign lenders under loan agreements on the basis of forms of the Loan Market Association are now in a state of technical default as the obligations on early redemption began to contradict Ukrainian legislation”.

“In general, after eight months of an early payment ban being in force, a conclusion can be drawn on its negative impact on the willingness of foreign creditors to finance Ukrainian companies and on intra-group capital circulation”, notes Gabriel Aslanian, counsel at Asters Law Firm. Maksym Lebedev also believes that “the NBU’s policy directed at regulating foreign currency circulation, and the overall situation in Ukraine, noticeably discouraged investors to begin new business projects”. However, despite the negative assessment of the actions of the National Bank of Ukraine in 2014, lawyers look forward with optimism and talk about the possible gradual easing of the NBU’s policy regarding international financing transactions.

Furthermore, redistribution of control over investment of assets in connection with the change of government became a powerful direction within investment practices. “It is no secret that although many representatives of the former government do not participate in political events and generally try to keep a low profile, they still largely retain control over their capital. Some of them restructured companies by transferring assets abroad, some tried to avoid EU sanctions by withdrawing assets from the most odious persons”, says Dmytro Shemelin, lawyer at Ilyashev & Partners Law Firm. 


The outgoing year also brought many legislative changes in corporate law, and more changes are expected in the coming year. Yuriy Nechayev, lawyer at Avellum Partners, notes a squeeze-out mechanism that allows a large majority shareholder (95% of shares and more) to buy out forcibly (at market prices) the shares of all minority shareholders, and the mechanism of a derivative lawsuit, which enables a company's shareholders to sue unscrupulous managers among the important changes to be introduced in the Law of Ukraine “On Joint Stock Companies”.

The accomplished legislative amendments affecting corporate relations and M&A can include novelties related to protection of investors rights that resolved conflicts of law regarding regulation of relations between the owner and top management of a company. Furthermore, amendments related to the definition of the final beneficiaries of legal entities and public figures were also introduced in October of the outgoing year.

“It is worth noting that the approach to international structuring has changed, and clients increasingly pay attention to European jurisdictions that do not have offshore status. These trends are also connected with the Ukrainian government’s policy on disclosure of the beneficiary (the final beneficial owner) of companies, global deoffshorization and exchange of tax information”, Maksym Lebedev says in his comments.

Oleksandr Vygovskyy, attorney at law at Ilyashev & Partners, notes the significantly widening powers and strengthening of the role of the board in a bank’s management. “According to the new principles of forming the board of a bank, not only a bank’s members (their representatives), but also independent members shall be elected to the composition of the bank, moreover, the latter must constitute at least a quarter of the total number of board members”, the expert says.

Although the amendments introduced envisage the criteria of independence of board members, Mr. Vygovskyy notes that “the lack of requirement that a decision at the board meeting shall be deemed approved if the majority of independent members cast affirmative votes. Setting out in the law the minimum number of board members is also a welcome development (considering the paucity of the current boards of many banks) but, in our opinion, five members are not enough for effective operation of the board”. 


“Over the past year the legal services market in the field of banking and finance was characterized by a reduction in the number of projects. The decrease in demand resulted, predictably, in increased competition between law firms. In addition, the nature of financial projects has changed: fund raising deals were replaced by debt restructuring projects”, says Anton Korobeynikov. Among financial transactions in 2014 he highlights VAB Bank restructuring its Eurobonds, which marked the beginning of a handful of bank restructuring transactions in the past year, and issue by Ukraine of US-guaranteed Eurobonds, which is unprecedented in its terms.

Among the successful financing transactions over the past year it is worth noting the financing of PJSC “Myronivsky Hliboproduct” by the International Financial Corporation to the tune of $250 million and financing of PJSC “Concern Galnaftogaz” by the European Bank for Reconstruction and Development together with both the International Financial Corporation and the Black Sea Trade and Development Bank for a total of $180 million. Both transactions were counseled by Asters Law Firm.

However, lawyers generally evaluate the futureof financial markets with a high degree of pessimism. Thus, Dmytro Shemelin says that “either collapse or its expectation has been observed in the financial markets”. In the coming year, total payments to be made by the state and enterprises to foreign lenders will reach $50 billion, and the country does not have this money. “With this state of economy and lack of active and effective reforms it is useless to expect long-term refinancing for both the state and for private borrowers. Therefore, Ukraine is now in a pre-default situation, as evidenced by its fully justified level of sovereign ratings. Accordingly, raising any long-term financing is almost impossible. Therefore, the most prudent debtors have already begun restructuring procedures, including from a position of strength, by lodging appeals against loan, mortgage and lease agreements. Banks, in turn, are eliminating legal inaccuracies in their relations with borrowers and are also preparing for restructuring and penalties”, Mr. Shemelin said. 


Making forecasts for the coming year, lawyers say that it will be a largely decisive one for Ukraine. It is assumed that significant work will be connected with settlement of debt repayment. Thus, Anton Korobeynikov expects further concentration of transactions on the restructuring of existing external debt of Ukrainian banks and large corporate borrowers. “It is highly improbable to have one or two transactions on raising new funds through structured financing that will minimize the country risks and raise their attractiveness to a level acceptable for investors. At present we are analyzing such instruments and the possibility of their use by some Ukrainian borrowers”, the counsel of Sayenko Kharenko Law Firm says in his comments. Andriy Usenko adds that “we cannot exclude either transactions in M&A (investors can take advantage of the situation) or new start-ups (diversification or moving to new sectors)”. There will also be much work to optimize the business of corporate clients and resolve disputes with public agencies.

“There are fears of mass defaults”, Dmytro Shemelin believes. He suggests that banks are likely to negotiate with borrowers on some form of restructuring, possibly, with the entry of capital. “It is also possible to expect investment in distressed assets, the buying up of businesses on the cheap because of major changes in the political and, therefore, business elite”, the Ilyashev & Partners Law Firm lawyer adds.

If there is no default at state level, it can be assumed that the individual objects will be put up for privatization, and the government will try to attract foreign investors for their privatization. In this case, investors will want extra guarantees for their rights to assets. Re-privatization is also possible. It can also be a field for the active work of lawyers.

The overall situation will be influenced by the course of events with the Crimea peninsula, especially relations between official Kyiv and the peninsula, the status of the Ukrainian property on Crimean territory.

The investment attractiveness of particular objects and the entire industries will be influenced significantly by inevitable reorientation from Russian markets to EU markets and, possibly, markets of third countries as a result of hostile trade restrictions by the Russian Federation. This relates to many spheres of the domestic economy and, in this connection, in the opinion of Dmytro Shemelin, we should expect an inflow of investments to those industries not requiring cheap gas or market outlets in Russia.

However, lawyers do not exclude more optimistic scenarios for the coming year. After the new parliament was elected new hope emerged for positive changes in legislation and reforms that so far have only been announced. Andriy Usenko says “we will see implementation of a limited range of reforms. For example, reduction of decentralization while maintaining a sufficient set of levers in the center, implementation of tax reform aimed at simplifying administration with a moderate reduction in the tax burden”. The ILF Integrites analyst believes that we should not expect rapid growth of the corporate sector in the coming year. In fact, halting the decline in industrial production and stabilization of the financial system would be sufficient. He also recommends not to expect the arrival of foreign investors until full stabilization appears and strongly emphasizes that the high level of uncertainty will be decisive in the adoption of investment decisions.

Practice Leaders. Corporate

Leading FIRMS
1 Asters
2 Sayenko Kharenko
3 Baker & McKenzie
4 Vasil Kisil & Partners
5 Arzinger
1 1. Vladimir SAYENKO
(Sayenko Kharenko)
2 2. Viacheslav YAKYMCHUK
(Baker & McKenzie)
4 4. Mykola STETSENKO
(Avellum Partners)
5 5. Anna BABYCH
Yaroslav ABRAMOV
(Silver seal advisers)
(Sayenko Kharenko)
(Clifford Chance)
(Baker & McKenzie-CIS, Limited)
(Gramatskiy & Partners)
(Egorov Puginsky Afanasiev & Partners)
Margarita KARPENKO
(DLA Piper Ukraine)
(Kibenko, Onika & Partners)
Alexey KOT
(ANTIKA Law Firm)
(AstapovLawyers International Law Group)
(CMS Cameron McKenna)

* — Listed in alphabetical order.

Practice Leaders (by Ukrainian Law Firms 2014)

Practice Leaders.Banking & Finance

Leading FIRMS
1 Sayenko Kharenko
2 Avellum Partners
3 Asters
4 Clifford Chance
5 Dentons
1 1. Michael KHARENKO
(Sayenko Kharenko)
2 2. Glib BONDAR
(Avellum Partners)
3 3. Serhiy CHORNY
(Baker & McKenzie)
(Sayenko Kharenko)
(Sayenko Kharenko)
Oleksandr KURDYDYK
(DLA Piper Ukraine)
(Gryphon Investment Consulting Group)
(Lavrynovych & Partners)
(Chadbourne & Parke LLP)
(Baker & McKenzie-CIS, Limited)
(Clifford Chance)
(Egorov Puginsky Afanasiev & Partners)

* — Listed in alphabetical order.

Practice Leaders (by Ukrainian Law Firms 2014)