Vinnitska Str.

, 14/39
Kiyv, Ukraine, 03151
tel.: 380 63 986 7304
e-mail: info@v-corp.com.ua

MEMORANDUM

Dear Alex!

We would like to provide you with answers on the questions, mentioned during our meeting.

1) Military register of private entrepreneurs.

Under the provisions of the Law of Ukraine "On military duty and military service," each private
or public legal entity is obliged for the record the register of employees-military reservists. For
this proposes employers are obliged to check the military status of the employee before the
employment, keep the internal personnel military files and deliver reports to the military
recruitment office.
The Law of Ukraine “On State Registration of Legal Entities" defines a private entrepreneur as
the legal entity. It means that a private entrepreneur personally responsible for keeping of its
military register irrespective of the concluded agreements and provided activity.

2) Foreign entities profits taxation.

The Clause 141.2 of Article 141 of the Tax Code of Ukraine stipulates that a entity which makes
payout in favor of a non-resident or his authorized person (in particular dividend payment) is
obliged to withhold a profit tax at a rate of 15 percent of the payout amount and pay it to the
budget before such payment, unless otherwise stipulated by the rules of international agreements
that have entered into force.
The Code assigns the obligation to retain and pay tax to the budget from dividends received by a
non-resident investor to a resident who makes such payment.
So basically if the company, founded in Ukraine pays dividends to its foreign shareholder such
payment will be the subject of profit tax inside of Ukraine and at the country of the shareholder.

3) Model charter. General explanation

A Limited Liability Company (LLC) in Ukraine (in Ukrainian – Товариство з обмеженою
відповідальністю) is the most popular type of legal entity formation in Ukraine. Compared to
other, a LLC offers simpler registration and administration requirements while maintaining the
full protection of limited liability.
Effective 23rd of November, 2011, LLCs in Ukraine can be registered on the basis of a model
charter or an individually drafted charter at the discretion of its shareholders. According to
Ukrainian legislation, General Shareholders’ Meeting of a LLC (the highest management body
of LLC, hereinafter – the GSM) may at any time adopt a decision to continue its activity on the
basis of model charter or to stop working on the basis of model charter (subject to registration of
such decision with the Companies Registrar).
The current version of model charter for a Ukrainian LLC reflects general provisions of the
legislation regulating the activity of LLCs, in particular Law of Ukraine “On Business
Companies”, Civil Code of Ukraine and Commercial Code of Ukraine.
http://zakon3.rada.gov.ua/laws/show/1182-2011-%D0%BF – a web link to a model limited
liability company charter. The translated version is attached to this letter.
The key provisions contained in the model charter include:
- Main Provisions. The section contains information about the legal nature of the entity, the
laws governing the entity, and refers to resolution on creation of the company that
contains details about the company name, location, shareholders, directors, etc.
- Legal Status. This section contains information about the legal capacity of the company
including its independent nature, its ability to incorporate subsidiary entities, about its
limited liability nature, etc
- Shareholders. This section contains general rights and obligations of the company
shareholders.
- Share Capital. This section contains information about procedure for allotment and
changes to share capital of the capital.
- Company Assets. This section describes what types of assets can be treated as company
assets. Examples include kxed assets, working capital, paid-up capital, etc.
- Profits & Losses. The section deknes what comprises prokts of the company, reserve
capital requirements, losses and procedure for covering them, and payment of dividends.
- Company Management. This section deknes the management structure of the company,
types of statutory meetings, and powers of shareholders and directors.
- Labour Collective. This section states the rights of employees to form a labour collective
and refers to the relevant legislation for terms and conditions of labour agreements.
- Accounting and Reporting. This sections describes the accounting and reporting
standards to be used by the company.
- Procedure for Amending the Charter. This section states that when adopting the model
charter, the company agrees to conform to the future amendments to the model charter as
dictated by the Government of Ukraine.
 - Company Closing. This section outlines the procedure for closing the company.
When to Use Model Charter
You are incorporating a small one-person type Limited Liability Company with sole shareholder
or if all the shareholders are in the same group of companies (with the same Ultimate
Beneficiary Owner) and there is no need to include in the charter detailed regulation of powers
of management bodies, rights and obligations of shareholders etc.
When to Use a Customized Charter
Companies in Ukraine shall use a customized charter when there is a need to:
- include multiple shareholders and/or appoint company directors different from the
shareholders;
- introduce additional rights and/or obligations of shareholders;
- implement additional forms of supervision over the executive body’s activity; limit the
powers of the Executive Body of the LLC;
- describe the procedure of expulsion of shareholder from the LLC, withdrawal of a
shareholder from the Company, procedure of payment of compensation to shareholder
which withdraws from the LLC;
- order of execution of priority right in case of sale of share by the shareholder etc
In order to avoid making regulation of the LLC’s activity distributed among lots of various
internal documents (regulations) and necessity to provide such documents to company’s
counterparties for verifying company’s legal status and powers of its representatives, the LLC
should rather be registered on the basis of customized charter, approved by the GSM and
stipulating all the specific rules and procedures, regulating LLC’s activity, in one document.

4) As we already discussed you have three approaches to doing business in Ukraine:

a) Conclude contracts with your contractors with payment on Payoneer account basis. Under this
method, you will conclude agreements on the provision of service to your contractors on behalf
of the British company. The contractors work as individual persons. Taxes shall be paid only in
the UK. This approach is convenient if you:
- plan to hire middle and junior developers and QA engineers;
- will be working on a personal or quite easy project;
- are looking for a cheap solution;
This approach is not convenient if you are:
- planning to work on substantial projects where everyday meetings, discussions;
- going to have strict control over your contractors;
- hire senior developers and team leads (due to Payoneer payment limitations);

b) Conclude contracts with your contractors with payment on domestic bank account basis.
Under this approach, you will conclude contracts on the provision of service to your contractors
on behalf of the British company. The contractors work as private entrepreneurs. The taxes shall
be paid by the UK company and by the private entrepreneurs individually. This approach is
convenient if you:
- will be working on a personal or quite easy project;
- looking for a cheap solution;
This approach is not convenient if you are:
- planning to work on substantial projects where everyday meetings, discussions;
- going to have strict control over your contractors;
- hire senior developers and team leads (due to Payoneer payment limitations).

c) Incorporation of a company. Under this approach, you will have an incorporated company, on
that will conclude contracts with your contractors. The contractors work as private entrepreneurs.
Taxes shall be paid by the Ukrainian company and by the private entrepreneurs individually.
This approach is convenient if you are:
- going to build a big outsourcing company;
- planning to have more control over your contractors and have everyday scrum meetings;
- hire teams on a permanent basis;
- have own office and brand name;
- going to have official business in Ukraine;
- planning to use offshore zones for tax optimization;
This approach is the most expensive and risky.

Best regards,

Yaroslav Kyienko