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Corporate legal relations in Ukraine: definition, elements and regulation

Written by Yulia Podkovko, 111i, KNEU


Corporate relations in Ukraine are developing quite quickly, thereby becoming more complicated, and accordingly require a proper settlement. The purpose of this essay is to get acquainted with the concept, the main elements of corporate legal relations, their development in the legal sphere in Ukraine.


Corporate legal relations are very complex and diverse in nature, which, on the one hand, literally forces to scientific research, and on the other, causes considerable difficulties in understanding and interpreting even the simplest concepts. Sustainable development of corporate relations is of considerable interest in legal literature. Only corporate relations give rise to such lively discussions , substantiation or improvement of individual scientific positions in relation to which a wide circle of scientists is engaged. Especially acute are the scientific disputes regarding the understanding of corporate legal relations and determining the list of public relations, whether they can be attributed to corporate.

Corporate relations are complex. In modern law, the urgent problem is that of corporate relations as a kind of coexistence of property, non-property and organizational relations. The definition of the concept of corporate relations is of exceptional practical importance for determining the exclusive jurisdiction of economic disputes related to the implementation and protection of corporate rights.

Main part

Corporate Rights

By corporate relations we mean relations that arise, change, and cease in relation to corporate rights. Ownership of corporate rights is not considered an enterprise. The law may establish restrictions on certain persons regarding the ownership of corporate rights and / or their exercise.

In the Commercial Code of Ukraine (hereinafter – the Civil Code of Ukraine), namely in Part 1 of Art. 167 [1], it is indicated that corporate rights are the rights of a person whose share is determined in the authorized capital (property) of an economic organization, including the right to participate in managing the economic organization, a certain part of the profit (dividends) of this organization and assets in in case of liquidation of the latter in accordance with the law, as well as other powers provided by law and statutory documents.

The list of corporate rights for business entities.

So, Art. 10 of the Law of Ukraine “On business entities” establishes a list of corporate rights that members of business entities must, namely:

a) the right to participate in managing the affairs of the company in the manner specified in the constituent documents, with the exception of cases provided for by this Law;

b) the right to participate in the distribution of the company’s profits and receive its share (dividends). The right to receive part of the profit (dividends) in proportion to the share of each of the participants is held by persons who are members of the company at the beginning of the dividend payment period;

c) the right to withdraw from the company in the established manner;

d) the right to receive information about the activities of the company. At the request of the participant, the company is obliged to provide him with annual balances, company reports on his activities, minutes of meetings for review;

e) the right to alienate shares in the authorized (joint-stock) capital of the company.

Limitations of corporate rights.

The law may establish restrictions on certain persons regarding the ownership of corporate rights and / or their exercise. Restrictions regarding ownership and / or exercise of corporate rights is that a person, usually would have the right to acquire or exercise corporate rights, cannot take this opportunity due to the existence of a circumstance that is expressly provided for by law or established by a court verdict.

The largest group of restrictions regarding the ownership of corporate rights and / or their implementation is related to the performance by a person of govern functions. In accordance with Art. 16 of the Law of Ukraine “On Public Service”, a public servant is prohibited from performing the actions provided for in Art. 1, 5 of the Law of Ukraine “On Combating Corruption” dated 10/05/95, in particular:

– engage in business directly or through intermediaries or dummies;

– to enter independently, through a representative or nominees, into the composition of the board or other executive bodies of enterprises, organizations engaged in entrepreneurial activity.

That is, public servants cannot be full participants in a limited company and full companies, since these participants must have the status of a business entity. In this regard, public servants cannot own corporate rights and, moreover, exercise them.

In addition, certain legislative acts establish a direct ban on doing business: the President of Ukraine, MPs, members of the CMU, police officers, prosecutors, SBU, judges, etc.

In addition to the law, the restriction of the right to own corporate rights and / or their exercise may be established by a court verdict. So, if a court verdict prohibits a person from engaging in entrepreneurial activity or a certain type of entrepreneurial activity, the right of a person to own the corporate rights of an economic organization (for example, partnership) that plans to engage in such activities is accordingly limited.

Corporate relations

According to Part 3 of Art. 167 GKU, corporate legal relations are relations that arise, change and cease in relation to corporate rights. In general, with the adoption of the Commercial Code, for the first time at the legislative level, a definition of corporate legal relations was given. But it is usually very difficult to dissociate corporate rights and obligations from related ones that arise in economic or civil circulation. It is worth noting that this is not the only definition of corporate rights – their concepts can be found in the Tax Code of Ukraine or the Law of Ukraine on Joint-Stock Companies. In turn, the Civil Code of Ukraine, on the contrary, does not operate with such a concept as corporate rights, for it terms such as “right to participate in society”, “share in the authorized capital” and others are more familiar.

So, N. Kuznetsova claims that “… in the doctrine, two general approaches to the definition of corporate relations can be distinguished: wide and narrow. In a broad sense, corporate relations are understood as all legal relations, where one of the participants is the corporation as the legal form of a legal entity carrying out entrepreneurial activity. In a narrow (proper) sense, this is an obligation relationship between a corporation (its bodies) and participants regarding the management, conduct of business, provision of information, etc. [3]. “

The content of corporate legal relations.

When considering the nature of any legal relationship, it is advisable to consider its main elements, which include the subjects, the object and the content. So, the analysis of the content of the concept of “corporate rights” should begin with a consideration of the elements of the legal relationship of this group of public relations, namely the subjects, the object of regulation, the rights and obligations of participants in the corporate legal relationship and the legal fact on the basis of which it arises.

The subjects of corporate legal relations

Providing a description of the subjects of corporate relations, it should be noted that they are participants, primarily civil relations as carriers of the relevant rights and obligations. The subjects of corporate relations can be individuals, legal entities, territorial communities and the state. However, the range of their rights and obligations may be different depending on the place occupied by the relevant entities.

For example, each of these entities may be the owner of corporate rights for a particular company. A completely different legal status in these entities may be due to the exercise of their rights and obligations when they are participants in relations regulated by corporate law, but their participation is not associated with ownership of corporate rights. First of all, this can be seen in the activities of joint-stock companies, including the circulation of shares, state control over the activities of joint-stock companies, and the like.

Object of corporate legal relations

The object of corporate legal relations should recognize certain benefits, regarding which subjects enter into such legal relations. Such benefits can be both property and non-property. In general, there is no doubt as the commercial nature of the activities of subjects of corporate legal relations, and the fact that the purpose of their creation is to make a profit.

According to V. A. Vasilyeva, the subject of corporate relations is precisely subjective corporate law. Having arisen and existing between the participant and the legal entity itself, corporate law as an object of legal relationship simultaneously becomes the object of a new civil legal relationship, through which the transfer of corporate law from one subject to another is mediated [5, p. 44].

But in the legal literature there is no unity in what corporate rights are considered – the object or content of corporate relations. It is not possible to find a direct answer to this question in Ukrainian legislation. This situation became possible due to the fact that in the Civil Code of Ukraine, in the absence of the concept of corporate rights, it speaks of the rights of participants in business entities, next to which the concepts of “right to participate” and “right of a participant to a share in the authorized (share) capital” are used. In addition, in Ukrainian legislation there is the concept of a share (the right to which members of a cooperative have). So, in practice there is a misunderstanding as to how these rights relate and what place they occupy in corporate legal relations.

Therefore, the definition of the object and content of corporate relations at the moment very much depends on the approaches that this or that author adheres to. So, if he is inclined towards the civilistic nature of corporate relations, then his object will be a share in the authorized capital; if corporate relations are considered economic and legal, then corporate rights should be recognized as their object. It is worth noting that corporate rights and share in the authorized capital are different concepts, but they are inextricably linked with each other.

The emergence of corporate relations

According to Vasilyeva, at the time the corporate legal relationship arose, there is a special legal fact – registration of a legal entity. Based on the foregoing, she comes to the conclusion that the key to the emergence of corporate relations is the moment of incorporation of a legal entity. However, it should be borne in mind that this is a legal connection arising between the founders (participants of a legal entity) and the legal entity itself as a derivative entity. But it’s hard for me to agree that the only and uncontested moment of the emergence of corporate legal relations is precisely the registration of a legal entity, since corporate legal relations can arise and cease during the activities of a corporate type legal entity.

At the same time, in accordance with the Recommendations of the Presidium of the Supreme Economic Court of Ukraine “On the Practice of Application of Legislation in the Consideration of Cases Arising from Corporate Disputes” dated 12.28.2007, a person becomes a holder of corporate rights from the moment of acquiring ownership of shares in a joint stock company or joining other business companies [6]. Under such conditions, two reasons for the emergence of corporate relations can be distinguished: the introduction in a legal entity in a corporate type (including a business company) and the acquisition or acquisition of a share in the authorized capital (including shares or other corporate rights).

All the grounds for the emergence of corporate legal relations can be divided into two types:

– primary (related to the direct creation of a legal entity, confirmed by the fact of state registration, for example, the acceptance of participants or their contributions to the authorized capital)

– derivatives that reflect the dynamics of the development of corporate legal relations related to the exercise by individuals of corporate rights (sale of shares or shares in the authorized capital, assignment or inheritance of shares in the authorized capital).

Termination of Corporate Relations

The grounds for termination of corporate relations may be such legal facts as the reorganization and liquidation of a business company, the withdrawal of a participant (founder) from a business company, the transfer of all its shares by a shareholder to another shareholder or a third party in a joint stock company (in this case, corporate relations are terminated only in relation to him ), the transformation of a business company into a company with one participant as a result of the withdrawal of all the rest from its composition, the transformation of such a company into a private company acceptance of that [7].

The main features of corporate legal relations.

1. Corporate relations are complex, heterogeneous in content and can be regulated by various branches of law (economic, civil, financial, etc.).

2. Corporate legal relations along with other legal relations consist of three main elements: subjects, object and content.

3. Corporate legal relations arise on the basis of a combination of individuals and capitals regarding the exercise of corporate rights (occurrence, change or termination of them).

4. Corporate relations are regulated both by the norms of the current legislation and by local regulatory acts.

Differentiation of corporate legal relations

Internal Corporate Relations

Internal corporate relations are defined as relations arising from participation in the capital of an economic organization. Internal corporate relations are divided into the following groups:

1) relations between participants (founders, members, shareholders) of an economic organization. These relations, as a rule, are civil in nature (their participants are equal, autonomous), based on the agreement on the establishment of an economic organization, which is called constituent or constituent;

2) the relationship between the business organization and its participants. Such legal relations do not arise from an agreement between equal entities, but from the fact of founding an economic organization as a legal entity and endowing it with property. They are based not on the principles of autonomy of the will and equality of parties, but on the principles of control, dependence, the will of the majority;

3) relations between various bodies of an economic organization. This group refers to relations of power-management nature.

N.S. Glus focuses on the internal nature of corporate legal relations, according to which corporate law in the objective sense is a set of legal norms that establish, regulate and protect civil relations arising between a shareholder, a participant and the corporation itself, as well as between the participants and shareholders regarding the exercise of their ownership of a share or ownership of a share in the authorized capital [4, p. 10].

External corporate relations

External corporate relations arise between participants or the corporation and other entities regarding corporate rights or the activities of the corporation. The degree of participation of participants or a corporation in foreign corporate relations varies, depending on the legal form of the legal entity and other factors. The most complicated is the corporate governance mechanism in joint-stock companies, since in the course of its activity it enters into relations with the National Commission for Securities and Stock Market, stock market participants (Central Securities Depository, depository institutions), bodies of the State Registration Service of Ukraine, etc. In a private enterprise, external corporate relations are significantly narrower, given that in external relations regarding corporate rights, the relevant entities enter with state registration authorities.

Founders of the corporation

The beginning of the corporation is its foundation (creation). If we analyze the essence of the relationship in which the founders enter into a relationship with each other through the prism of the norms of objective law, we can determine some features of the legal status of the “founder” of the corporation. National legislation, although it does not provide a definition of the concept of a founder, nevertheless establishes a special characteristic of the subject of civil relations, its rights and obligations, which are aimed at creating a legal entity.

In particular, the founders of a corporation, including a business company, conclude an agreement between themselves that determines their joint activities to create a company, responsibility to third parties.

The founders are jointly and severally liable for obligations arising prior to the registration of a particular legal entity, including the company. In this case, the object of legal regulation is a group of public relations, which arises in connection with the implementation of subjective civil right to create a legal entity and further manage the corporation. First of all, participants (founders) must determine the legal form of the created legal entity. In a broader sense, the legal form of organization is a form of organization of a certain activity provided for by legislation (law). According to Kucherenko IM, the legal form of a legal entity is an aggregate defined by the rules of law, of interconnected elements (features), which gives grounds in the external manifestation to distinguish one type of legal entity from another [1].

Company members

Article 100 of the Civil Code of Ukraine determines that the right to participate in the company is a personal non-property right and cannot be separately transferred to another person. Thus, it should be determined that the right to participate in the company is a personal non-property right, does not have an economic sense, this is only guaranteed by the legislator the ability of a person to be a member of a society. Determining the status of a company in the Civil Code of Ukraine does not specify the purpose of the activities of this company (entrepreneurial or non-entrepreneurial society), and does not specify the status of such persons. The legislator emphasizes that the corresponding personal non-property right cannot be separately transferred to another person. This, in particular, provides for the impossibility of restricting the right to participate in society as a specific element of a person’s legal capacity. So, Art. 26 of the Civil Code of Ukraine establishes the equality of individuals in their ability to have civil rights and obligations. Legal capacity includes property and personal non-property rights established by the Constitution of Ukraine, Civil Code of Ukraine and other laws, if they do not contradict the law and moral principles of society. In 1 Article. 100 Civil Code refers to the abstract common right of an individual to participate in societies, which can be realized by a person or not. The relevant rights may be exercised by other legal entities, territorial communities and the state.

Company management

From the category of “right to participate in society” should distinguish the category of “right to participate in managing the affairs of the company.” In particular, the Constitutional Court of Ukraine pointed out the differences in these concepts in the Decree on the refusal to open a constitutional proceeding in the case of constitutional appeal of gr. Adamchuk V.M. regarding the official interpretation of the provisions of Part 1 of Art. 100 of the Civil Code of Ukraine in conjunction with paragraph 1 of Part 1 of Art. 268 of this code dated February 20, 2013 No. sixth / 2013 in case No. 2-6 / 2013. In my opinion, the right to manage the affairs of the company should be considered as one of the competencies of a person who has acquired corporate rights in the prescribed manner, the volume of which is determined by the Civil Code of Ukraine , Civil Code of Ukraine and other legislative acts.

Other participants in corporate relations

In addition to participants in the company, participants in corporate relations can be a wide range of individuals. According to Kravchuk V.M. these should include:

1) the legal entity in respect of which corporate rights arise;

2) governing bodies of a legal entity. They do not have their own civil legal capacity, but the law provides them with certain rights and provides for obligations in the field of corporate governance as subjects of internal corporate relations;

3) government bodies that are not direct participants in corporate relations, but their participation involves the exercise of certain control powers or such bodies manage state corporate rights (National Securities and Stock Market Commission, State Property Fund of Ukraine, State Registration Service of Ukraine and other) [2].

Directions of legal regulation

When determining the legal nature of corporate relations, it is necessary to indicate that they cover the areas of legal regulation and comprise the following relations:

• relations on the creation of legal entities;

• relations between founders (participants) regarding a corporation, for example, a limited liability company;

• relations between founders (participants) and the legal entity itself;

• relations between corporate bodies;

• relations between members of governing bodies and the corporation;

• relations on the management of the company, including management actions of a property nature;

• relations on the acquisition or termination of corporate rights for a particular corporation;

• relations on the termination of legal entities;

• relations with state bodies regarding the legitimization of legal entities, amendments to constituent documents and termination of corporations.


So, corporate legal relations – a rather complicated legal concept in content, that is not equally interpreted by scientists. The issue of clarifying corporate rights and corporate relations has been the subject of numerous works by Ukrainian scientists. The most profound of them is the study of such jurists as V. A. Vasilieva, N. Kuznetsov, V. M. Kravchuk and others. However, some aspects remain not completely defined and understandable, despite the fact that studies on the proposed topics have a constant and steady tendency to increase, which theoretically should lead to the development of a concept or even a doctrine of corporate legal relations.

The correct definition of corporate legal relations is not only of theoretical, but also practical importance for resolving issues of jurisdiction of corporate disputes. It is advisable to carry out the division of corporate relations into internal and external (in a wide and narrow sense) precisely with the subjects, paying attention to the fact that all relations are relations of participation in society. So, other relations by legal entity or with its participation is not corporate.

To summarize, it is worth noting that Ukrainian legislation introduces certain effective mechanisms for regulating corporate relations both at the stage of creating an enterprise and at an existing enterprise. However, to resolve this situation, considerable time and professional assistance will be required in order to draw up and maintain corporate agreements.


[1] Kucherenko I.M. Organizational and legal forms of legal entities of private law: monograph / I.N. Kucherenko. – M.: Institute of State and Law named. V.M. Koretsky NAS of Ukraine, 2004 .– S. 19.

[2] Kravchuk V.M. Corporate Law: Scientific and Practical. commentary on legislation and judicial practice / V.N. Kravchuk. – M.: True, 2005 .– S. 13.

[3] Kononov V. S. Corporate Legal Relations: Concept, Features, Essence / V. S. Kononov // Actual Problems of Civil Law: Sat. articles. Vol. 9 / ed. O. Yu. Pintail. – M .: Norma, 2005 .– S. 99-104.

[4] Glus N. S. Corporations and corporate law: concepts, basic signs and features of protection: abstract. dis … cand. legal Sciences: special. 12.00.03 “Civil law and civil process family law, international private law” / N. S. Gnus. – M., 2000 .– 23 p.

[5] Vasilieva V. A. Corporate law as an object of civil legal relations / V. A. Vasilieva // Corporate law in Ukraine: Formation and development: a collection of scientific papers. – M., 2004 .– S. 44-46.

[6] On the practice of applying legislation in the consideration of cases arising from corporate relations: Recommendations of the Presidium of the Supreme Economic Court of Ukraine dated 12.28.2007 [Electronic resource]. – Access mode: cgi?page=1&nreg=v5_14600-07.

[7] Kravchuk V. M. Termination of corporate legal relations in business companies / V. Kravchuk // – Lviv: land, 2009. – 464 p.

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