Good corporate governance helps companies to access financing, protect investors, and support the sustainability and resilience of companies - key factors that will play an important role in Ukraine’s economic recovery and development. This chapter maps Ukraine’s regulatory and institutional framework for corporate governance, focusing on companies trading on Ukraine’s stock exchanges. It discusses the enforcement of corporate governance rules, shareholder rights, disclosure and transparency, boards of directors, and corporate sustainability. It identifies key challenges relating to the fragmented capital markets, capacity constraints of the securities regulator, monitoring implementation of Ukraine’s Corporate Governance Code, management of conflicts of interest, and related issues. Finally, it proposes priority areas where the OECD can support Ukraine’s efforts to align with international best practices for corporate governance, particularly the G20/OECD Principles of Corporate Governance, as well as to integrate European Union standards.
Mapping Ukraine’s Financial Markets and Corporate Governance Framework for a Sustainable Recovery
Abstract
Over the last decade, Ukraine’s capital markets have suffered due to Russia’s aggression in Crimea and the Donbas region, the COVID-19 pandemic, and Russia’s recent full-scale invasion of Ukraine. Despite these challenges, the stock market has shown resilience. Additionally, Ukrainian policy makers have made significant efforts to establish a robust corporate governance framework for companies that publicly trade their shares on Ukrainian stock exchanges, aligned with international standards, and further regulatory reform is expected to be considered. However, what remains crucial is the effective implementation and enforcement of these rules to promote transparent and fair markets in the pathway of Ukraine’s post-war recovery. This chapter provides an overview of Ukraine’s corporate governance framework in the current context of martial law, which has amended corporate governance rules, such as disclosure obligations. This section also identifies key challenges facing policy makers and proposes priority areas where the OECD could assist Ukraine’s reform agenda in 2025.
This chapter identifies the following features and challenges in Ukraine’s corporate governance framework:
The corporate governance regulatory framework has improved substantially in recent years. Ukraine has introduced reforms to its legal framework, including the new Joint-Stock Company Law aimed at better aligning with EU and international standards.
However, strengthening the National Securities and Stock Market Commission (NSSMC)’s capacity is key for post-war financial recovery. The NSSMC faces significant challenges in retaining qualified staff and securing sufficient funding due to the full-scale invasion. While recent legislation seeks to increase the NSSMC’s budget and strengthen political and operational independence, the practical implementation of these rules will be essential.
Disclosure of information remains limited under martial law. Currently, while specific types of information are required to be disclosed, regular disclosure of information by companies that publicly trade their shares in Ukraine has been exempted. Few companies do so voluntarily. When mandatory compliance for companies publicly trading shares will resume after martial law, raising awareness amongst companies will be crucial together with the ability of the NSSMC to monitor corporate governance practices.
Monitoring implementation of the corporate governance code should also be enhanced. Ukraine’s 2020 Corporate Governance Code is outdated. Although the NSSMC plans to update the Code, currently there is no aggregated report to assess companies’ compliance with the Code, nor is there a designated body responsible for overseeing its implementation.
Addressing conflicts of interest should also be prioritised. Conflicts of interest are significant in Ukraine, where the ownership of publicly traded companies is highly concentrated. Although Ukraine has recently made progress in regulating these conflicts, some important legal gaps remain, along with weak enforcement practices, particularly concerning related party transactions and insider trading.
3.2.1. Ukraine’s capital markets
Ukraine’s economy has experienced significant fluctuations in recent years, including in the period since Russia’s full-scale invasion. In response to these extraordinary circumstances, Ukraine implemented martial law beginning in 2022, to enable businesses to continue operating during the war, and lifted certain regulatory requirements, notably in relation to corporate governance, for the duration of the martial law.
The unstable macroeconomic and political conditions have had a negative impact on Ukraine’s capital markets. In recent years, Ukrainian stock markets have witnessed a significant decline in the number of companies whose shares are traded on the market (hereafter “publicly traded companies”),1 dropping from 59 in 2019 to 22 in 2023. While this decline can be partially attributed to Russia’s full-scale invasion of Ukraine, it is important to note that a considerable portion of this decrease already began prior to the aggression. The total market capitalisation of these 22 companies whose shares traded on Ukrainian stock markets is currently around USD 1.6 billion (see also Chapter 2, section 2.2.1).
An initiative to support economic stability during wartime was launched in January 2024, by Ukraine’s Ministry of Economy with the London Stock Exchange and TheCityUK, the industry-led body representing UK-based financial and professional services. This partnership, in the form of a memorandum of understanding, aims to support the development of Ukraine’s financial and related professional services market, with a focus on improving access to long-term financing for Ukrainian businesses and strengthening the private sector. It will also involve corporate partnership programs, including support for small and medium-sized enterprises, while assisting the government and other authorities in attracting foreign direct investment and fostering the growth of Ukrainian businesses (Ministry of Economy of Ukraine, 2024[1]).
Currently, Ukraine has three operating stock exchanges. In July 2024, the NSSMC revoked the license of Ukrainian Exchange (UX) after detecting that individuals subject to Ukrainian sanctions held a significant ownership stake in the exchange (NSSMC, 2024[2]). However, UX appealed this decision and in September the license was restored, pending a final decision by the Supreme Court. UX has resumed its operations.2 The other two stock exchanges in Ukraine are the Perspectiva Stock Exchange (PrJSC) and the First Stock Trade System (PFTS). For one of them, the Commission reported having issued a settlement agreement concerning the lack of sufficient capital. This Exchange has until the end of February 2025 to raise capital, or its license will be revoked. Among the 22 companies traded on these exchanges, two are state-owned enterprises (SOEs), where the state of Ukraine holds more than 50% of the shares.
Since 2019, five companies have been de-listed from the stock exchange, while one company began publicly listing its shares in 2021, raising approximately USD 2 million. Since martial law began, no initial public offering (IPO) was registered. Although the number of IPOs in Ukraine over the past five years is similar to that of peer jurisdictions, the amount of capital raised differs significantly. Between 2019 and 2023, the number of IPOs in the Slovak Republic, Croatia, Bulgaria, and Czechia was one, two, six, and seven, respectively. However, the Slovak Republic raised USD 32 million, Croatia USD 57 million, Bulgaria USD 23 million, and Czechia USD 62 million through IPOs.
Notably, in 2023, one non-financial company in Ukraine raised additional equity capital through a secondary public offering (SPO), the only such instance in the country between 2019 and 2023. In contrast, while the Slovak Republic had no non-financial SPOs during this period, Croatia had one, Bulgaria six, and Czechia three. Despite the limited number of SPOs in Ukraine, the USD 60 million raised exceeds the amounts in Bulgaria (USD 34 million) and Croatia (USD 19 million), although it remains lower than the USD 340 million raised in Czechia (Table 3.1).
Source: OECD Capital Market Series Dataset.
In Ukraine, the total stock market trading volume in 2023 reached almost USD 37 billion, an increase of nearly USD 7 billion compared to 2019. However, the share of equity trading declined from around 5% in 2019 to 0.5% in 2023. During this period, bonds issued by the Ukrainian government emerged as the dominant financial instrument, accounting for over 80% of trades between 2019 and 2023.3 The trading volume for shares stood at USD 13 million in 2019 but fell sharply to USD 3 million by 2023, largely due to the decline in the number of companies whose shares are publicly traded. In 2019, the most traded shares primarily belonged to companies in the energy and financial industries with more than half of the total trading volume concentrated in two companies operating in these industries - over 33% for the top trader and nearly 19% for the second. By 2023, this concentration had shifted to two different companies in the chemical, pharmaceutical, and insurance industries, with the top company holding over 36% and the second over 13% of the total trading volume. In total, nearly 80% of the share trading volume in 2023 was concentrated in just five companies traded on Ukrainian stock exchanges.4
Corporate bond financing plays an important role in Ukraine’s financial markets. In 2019, 29 companies issued corporate bonds, resulting in a trading volume of nearly USD 338 million. By 2023, the number of companies issuing corporate bonds decreased to 13, causing a dramatic decline in their trading volume, which dropped to USD 243 million in 2023. Notably, the largest issuer of corporate bonds in 2023 was a non-financial institution, accounting for almost 75% of the total corporate bond volume in Ukraine. The company with the second-largest volume was in the postal and courier industry, holding around 12% of the total corporate bond volume in Ukraine for 2023. In addition, the NSSMC approved the Regulation on the Procedure for Issuing Corporate Bonds and Their Circulation (by its Resolution No. 28/21/1105/K03 of September 2024), providing the specifics of issuing certain categories of bonds, in particular, green bonds.
As of 2024, ownership concentration remains relatively high in the Ukrainian market compared to the average in the 49 jurisdictions covered by the OECD Corporate Governance Factbook. More than 60% of companies whose shares traded on stock exchanges have a single owner holding more than 50% of the equity capital in Ukraine, whereas in the jurisdictions covered by the OECD Factbook, this figure was close to 32% in 2022 (OECD, 2023[3]). The government of Ukraine is the most dominant shareholder, holding nearly 50% of the total shares and bonds traded on Ukrainian stock exchanges, compared to an 11% average for state-owned public equity in the jurisdictions covered by the OECD Factbook in 2022 (OECD, 2023[3]). Additionally, foreign investors hold a significant portion of the total shares and bonds issued in Ukraine, accounting for more than 30%, followed by domestic investors with almost 18%.5 Data on company groups in Ukraine is not available, as the NSSMC has not carried out specific research or oversight on such company structures.
3.2.2. The regulatory framework for corporate governance
Russia’s full-scale invasion of Ukraine led to the imposition of martial law in 2022, which temporarily changed the corporate governance legal framework and practices in Ukraine. In recent years, Ukraine has introduced reforms to its legal framework, aiming to better align with EU standards, including company law matters. In 2023, the EU reported some progress in this area, particularly with the adoption of legislative amendments related to financial statements and audit. However, the EU also underlined the need for further alignment, especially regarding the disclosure of information on national business registers of companies and their foreign branches, cross-border operations (such as mergers, divisions, and conversions), long-term shareholder engagement, gender equality on boards, and the use of digital tools and processes (European Commission, 2023[4]). The NSSMC reported that the legislative alignment between Ukraine and the EU poses a challenge, as EU law is extensive and offers detailed regulations, particularly on the green deal, sustainability, and capital market infrastructure. However, as a candidate for accession, Ukraine is actively working to address legal gaps and align with EU legislation.
Ukraine’s corporate governance regulatory framework consists of binding and soft-law instruments. The primary source for companies publicly trading shares is the recently enacted Law on Joint Stock Companies (JSC Law) No. 2465-IX, which came into force in 2023. Other key laws governing these companies include the Amended Law of Ukraine on Capital Markets and Organized Commodity Markets No. 3480-IV of 2006, which regulates the issuance of securities, derivative contracts, and financial transactions in capital markets, as well as professional activities in capital and organised commodity markets. Additionally, the Law on Amendments to the Law “On State Regulation of Capital Markets and Organized Commodity Markets”, alongside legislative acts regarding the improvement of state regulation and supervision of capital markets and organized commodity markets No. 3585 of 2024 introduces measures to strengthen the independence and institutional capacity of the NSSMC. Importantly, the two recent reforms of the new JSC Law and concerning the institutional framework of the NSSMC have addressed some of the weaknesses of the Ukrainian corporate governance framework, which were also identified in the 2017 EBRD corporate governance review of Ukraine (EBRD, 2017[5]). The specific changes introduced will be discussed in detail in the sections below.
In addition to the laws adopted by the Verkhovna Rada of Ukraine (the Ukrainian parliament), regulatory legal acts, methodological recommendations, and corporate governance documents adopted by the NSSMC also play a crucial role in the corporate governance regulatory framework in Ukraine.
Furthermore, the Ukraine Code of Corporate Governance was updated by the NSSMC in 2020, and another update is currently under consideration. The Code recommends a set of corporate governance practices concerning the role of shareholders, boards, and the management in overseeing and managing the company’s operations. It also addresses the involvement of other stakeholders and highlights the company’s role in promoting sustainable development. The new JSC Law requires Ukrainian companies publicly trading shares to explain how they implement (comply-or-explain) the recommendations of the Code in their annual or corporate governance reports, unless they have adopted their own code.6 Companies must also identify any departures from the Code. However, during the period of martial law, they have been exempted from the requirement to disclose regular information, including their compliance with the Code. As a result, there is currently no information available on compliance with the 2020 Code. Moreover, there is currently no institution responsible for carrying out aggregate reporting about overall compliance with the 2020 Corporate Governance Code. This was already the case before the application of martial law. Therefore, information is limited about how widely the corporate governance recommendations of the Code are followed.
Additionally, all stock exchanges in Ukraine issued their own mandatory listing rules. The PFTS listing rules (updated in 2021), the UX listing rules (updated in 2021), and the PrJSC listing rules (updated in 2019), do not specify any substantial corporate governance requirements for issuers. However, all listing rules recommend issuers to adhere to Ukraine’s Code on Corporate Governance and comply with International Financial Reporting Standards (IFRS).7
With regards to the insolvency framework, the Bankruptcy Code of 2019 of Ukraine regulates the conditions and procedures for restoring solvency or declaring bankruptcy. The Code provides a comprehensive framework for dealing with financially distressed companies, including options for restructuring, liquidation, and debt settlement. The initiation of bankruptcy proceedings is considered special information and must be disclosed to the NSSMC under the disclosure requirements outlined in Regulation No. 608. However, no companies have initiated bankruptcy proceedings since the imposition of martial law in 2022. Additionally, legislation aimed at improving the insolvency regime in Ukraine is expected to be enacted by the end of 2024. The new measures would prioritise bankruptcy prevention and restore the solvency of debtors, focusing on the early detection of crisis signs within companies, identifying additional opportunities for financial recovery, and providing access to information on mechanisms for insolvency prevention and early warning (Cabinet of Ministers of Ukraine, 2024[6]).
3.2.3. Institutional framework of the NSSMC
The NSSMC was established by “Decree of the President of Ukraine on National Securities and Stock Market Commission” No. 1063/2011 in 2011. The NSSMC serves as the securities supervisory body in Ukraine, subordinate to the President of Ukraine and accountable to the Verkhovna Rada of Ukraine, which holds ultimate legislative power.
The NSSMC is funded exclusively by the State’s general budget. During the period of martial law, NSSMC’s budget faced reductions, with capital expenditures being the most significantly affected. Even prior to the full-scale invasion, funding for capital expenditures was constrained, and under martial law, it was completely eliminated. To respond to these budgeting constraints, there is an anticipated amendment to the Budget Code of Ukraine that would allow the NSSMC to receive funds from fees and contributions from supervised companies.8 However, no such draft law is currently under consideration by the Verkhovna Rada.
Decree No. 1063/2011 outlines the main responsibilities of the NSSMC. These include:
improving legislative acts regulating stock market development and corporate governance.
providing methodological support for the introduction and development of corporate governance principles.
setting requirements; developing and approving corporate governance standards; and supervising stock market participants.
requesting information from courts regarding any ongoing or past cases involving securities and corporate governance to evaluate and investigate the activities of issuers.
The NSSMC is a collegial body composed of a chair and six commissioners. According to the Law9 and Decree No. 1063/2011, the chair and commissioners are appointed and dismissed by the President of Ukraine.10 The term of the chair and commissioners is six years, with a limit of two terms in a row. The current chair of the commission was appointed in 2021, with a term lasting until 2027. Other commissioners also have terms expiring in 2027 together with the chair, except for one who was appointed in 2018.
Law No. 3585 of 2024, which aims to (i) ensure the independence of the Commission in the exercise of its powers, (ii) protect the Commission’s staff from undue influence, and (iii) establish procedures for financing and technical support to the NSSMC’s activities, only partially came into force in 2024. Specific provisions of this Law, including those related to the qualifications of the NSSMC Chair and Commissioners, prohibitions and restrictions for Commissioners, as well as procedures for conducting investigations and imposing financial sanctions in line with relevant EU regulations, are set to come into force in 2026.11 These forthcoming provisions also include stricter qualification requirements for commissioners, such as holding a higher education degree in finance, economics, or law, having at least five years of relevant work experience in management, and having no ties to any political party.12 Additionally, Commissioners are prohibited from serving as professional participants in capital markets and organized commodity markets during their tenure.13 There are, however, no cooling in or cooling off requirements in the new framework.
An amendment coming into force in 2026 will mandate an open competitive selection process, conducted by a dedicated committee, for the positions of the NSSMC chair and commissioners. The procedures and conditions for this competitive selection are approved by the committee and made available on the official website of the Presidency of Ukraine, as well as in national print media. The committee will consist of five members, and its composition would have to be approved by the President of Ukraine.
Law No. 3585 of 2024 also establishes the Advisory and Expert Council (AEC) to involve market participants in the early stages of legislative processes, ultimately increasing engagement with supervised companies.14 Although the AEC has not yet been established, its creation is planned following the reorganisation of the NSSMC – which is expected to start at the end of 2024. To enhance transparency and consultation in NSSMC’s regulatory processes, publication of draft regulatory acts after preliminary approval will be undertaken, to gather feedback from individuals, legal entities, and their associations. The NSSMC will be required to notify the AEC about a draft’s approval and publication on its official website, summarize all feedback received, and consider suggestions submitted. The results of this review will have to be published on the NSSMC's official website. Law No. 3585 establishes committees as collegial bodies of the NSSMC to draft normative legal acts. Moreover, the law allows market participants, experts, and other stakeholders to participate in committee meetings by invitation, as well as to cast an advisory vote in the legal drafting process.15
The President of Ukraine decides the maximum number of NSSMC employees, while the Chair approves its structure within the expenditures provided for in the State Budget. Since the start of the full-scale invasion, the NSSMC, like every public institution in Ukraine, experienced a significant decrease in its staff. The staffing level of NSSMC was 70% before the martial law (as of 1 January 2022), and recently (as of 1 June 2024), the staffing level decreased to 59%, which indicates the negative impact of martial law on human resources. The staff turnover rate at the NSSMC also increased from 8% in 2022 to 14% in 2023.16 In addition to the impact of the military aggression, low levels of staff remuneration have made it challenging for the NSSMC to retain current staff and recruit new qualified personnel.
Law No. 3585 granted the NSSMC the authority to engage in international co-operation with international organizations, relevant regulators of capital markets and organized commodity markets of other jurisdictions, and organizations. This includes participation in the Multilateral Memorandum of Understanding (MoU) on Consultation and Co-operation and Exchange of Information under the International Organization of Securities Commissions (IOSCO). The MoU facilitates information exchange regarding capital markets participants, including their operations, ultimate beneficial owners, controllers, and other individuals or legal entities specified in requests from capital market regulators of other countries who are signatories to the IOSCO MoU. The NSSMC is currently working on developing relevant draft legislative and regulatory acts to align with the IOSCO Principles as part of Ukraine’s efforts to become a full signatory of the IOSCO MoU. These efforts could contribute to aligning Ukraine’s institutional framework more closely with the G20/OECD Principles of Corporate Governance.
The NSSMC has already signed several MoU agreements with capital market authorities of other jurisdictions, including the Arab Republic of Egypt, the People’s Republic of China, Croatia, Georgia, the Hashemite Kingdom of Jordan, Iran, Kazakhstan, Kyrgyz Republic, Malta, the Republic of Armenia, the Republic of Azerbaijan, the Republic of Moldova, Romania, Spain, Türkiye, the United Arab Emirates, and Vietnam.
3.2.4. Enforcement of corporate governance rules under martial law
The full-scale invasion has caused significant challenges to Ukraine’s judicial system. Several judicial staff members lost their lives, court buildings were damaged or destroyed, and many case files were lost. Despite these obstacles, Ukraine’s judiciary, prosecution, and other justice institutions demonstrated notable resilience by maintaining justice services for citizens and companies, while also advancing reforms. Legislative, organisational, and technical measures were promptly implemented to help courts adapt to martial law conditions and ensure the protection of court users. Notably, new legislation allowed for the reassignment of territorial jurisdiction and the transfer of court cases to other regions when justice could no longer be administered in certain areas, alongside the temporary reassignment of judges to different courts (European Commission, 2023[4]).
Corporate governance cases are overseen by commercial courts in accordance with the Economic Procedural Code of Ukraine.17 The court is empowered by the JSC Law to address matters such as appeals to prior decisions by the general meeting of shareholders or director independence, as well as to handle claims submitted by the NSSMC concerning liquidation of joint-stock companies. Likewise, shareholders must submit their claims to the commercial court at the company’s location in case of infringements of their rights.18 Court decisions from all jurisdictions and instances in Ukraine must be published on the dedicated online platform no later than the date the decision’s text is finalised.
In January 2024, the NSSMC adopted Resolution No. 98 on Disclosure of Regulated Information by Issuers of Securities, Persons Providing Security for Such Securities, and Corporate Rights Advisors During the Period of martial law in Ukraine. According to this Resolution, issuers of securities have been exempted from the obligation to disclose regulated information since 2022 for the whole duration of martial law, yet they are expected to report regular information after the termination of martial law. Nevertheless, disclosure of special information19 remains mandatory. Subsequently, annual information for the 2021-23 reporting years will have to be disclosed within 90 days after the termination of martial law. Interim information for the relevant quarters of 2022-24 will also have to be disclosed together with annual information for 2021-23, respectively.
Moreover, in June 2024, the NSSMC adopted Regulation No.28/21/728/КОЗ, which amends Resolution No. 98. Accordingly, during the period of martial law, public disclosure of other information,20 in addition to special information, is now mandated. However, enterprises of public interest engaged in specific economic activities identified by the Classification of Economic Activities (CEA) codes, including natural gas production, hard coal mining, and electric power generation, are required to submit special and other information directly to the NSSMC, without the obligation to publish it on their websites.21 These issuers are required to disclose special information and other information on their website and in the database of the persons providing collateral for these securities and corporate rights advisors within 90 days after the end of martial law (Figure 3.1).
Note: Companies of public interest exempted from public disclosure of other and special information are those whose Classification of Economic Activities (CEA) code as of the date of martial law or as of the date of state registration of the legal entity (provided that the state registration took place after the date of martial law) is specified in Table 1 of Resolution No. 28/21/728/КОЗ of 2024.
Under martial law, the NSSMC adopted Resolution No.139 in 2022, suspending procedural actions regarding the signing of acts of offenses and considering cases of violation of the law. This resolution was repealed in the same year by Resolution No. 328 on Peculiarities of Procedural Actions for Consideration of Cases on Violation of Legislative Requirements under Martial Law by the NSSMC. This enabled the NSSMC to initiate cases if there are grounds to believe that an entity engaged in professional activities in the capital markets and/or organized commodity markets has committed a violation of the current legislation of Ukraine, which may have a negative impact on the functioning of capital markets and organized commodity markets during martial law. Four Commissioners’ consent is needed for the initiation of offence cases during martial law in the above-mentioned situations.
3.2.5. Shareholder rights
Shareholder rights are overall provided for in the law, but information on their enforcement is limited. The new JSC Law stipulates that shareholders or groups of shareholders holding 5% or more of the voting shares can convene an extraordinary general meeting. They must submit a written request to the company, stating the agenda for the meeting. If the supervisory board fails to call the general meeting within 10 days after receiving the request, shareholders are entitled to convene the meeting by themselves.22
Shareholders also have the right to propose items for the agenda of the annual general meeting (AGM), according to the JSC Law. If the proposal is submitted by shareholders holding at least 5% of the voting shares, the company must include the proposed items. Further, the same article provides shareholders with the right to make proposals on the issues included in the draft agenda.23
The JSC Law allows companies to hold remote general shareholders meetings, with procedures established by the NSSMC.24 In 2023, the NSSMC adopted Resolution No.154 on the Particularities of Holding General Meetings of Shareholders of Joint Stock Companies and General Meetings of Participants of Corporate Investment Funds during the Period of Martial Law in Ukraine. Accordingly, during the period of martial law, joint stock companies can hold their AGMs remotely, regardless of the articles of association and other internal documents of the joint-stock company. While remote meetings (defined as those in which remote filling in of ballots by shareholders occurs through the depository system of Ukraine) must be conducted in accordance with NSSMC Resolution No. 236/2023 on the Procedure for Convening and Holding Remote General Meetings of Shareholders, electronic meetings (where remote participation occurs using an authorized electronic system) must follow the guidelines set by NSSMC Resolution No.595/2023. In 2024, the first electronic shareholders meeting was held in Ukraine through an electronic system authorised by the NSSMC (2024[7]).
Regarding protection of minority shareholders’ rights, insider trading is prohibited under the Law on Capital Markets and Organized Commodity Markets. The Law defines insider information and imposes restrictions on the use of such information for trading securities.25 The NSSMC has the authority to investigate insider trading cases and impose sanctions on those found guilty. However, the NSSMC has not initiated insider trading cases since 2019 due to current legislative gaps in Ukraine. With the full adoption of Law No. 3585 related to the NSSMC’s institutional framework in 2026, the NSSMC will be granted additional powers to investigate and sanction insider trading cases.
Additionally, Ukrainian law permits derivative suits. In 2022, the ownership threshold for shareholders to bring derivative claims was reduced from 10% to 5%. Under the Commercial Procedural Code, shareholders holding at least 5% of voting rights, either individually or collectively, may file a claim on behalf of the company to seek compensation for losses caused to the company by its management.26
3.2.6. Disclosure and transparency
The Amended Law of Ukraine on Capital Markets and Organized Commodity Markets No. 3480-IV, which came into force in 2021, introduced a revised set of corporate governance requirements. This Amended Law requires public disclosure of information on financial and economic activities by issuers through annual and interim reporting and lists the information to be disclosed in annual reports, including a management report.27 Further, the Law requires the inclusion of information on corporate governance and compliance with either the 2020 Corporate Governance Code or the issuer’s own corporate governance code in the management report.28 Notably, since 2022, companies publicly trading shares are mandated to disclose their beneficial ownership information.29
Additionally, Regulation No. 608 of 2023 on the Approval of the Regulation on Disclosure of Information by Issuers of Securities and Entities Providing Collateral for Such Securities, which came into effect in 2024, establishes the procedure and timelines for disclosing regulated information in the stock market. It also outlines the disclosure requirements for issuers of securities to be submitted to the NSSMC. Accordingly, the disclosed information must be accessible on the issuer’s website and must be submitted to the NSSMC.30 Furthermore, this information must be made available in the NSSMC's public database, known as the Stock Market Infrastructure Development Agency of Ukraine (SMIDA).31 SMIDA is a free-to-use platform where issuers can upload annual and quarterly reports, as well as regular, special, and other relevant information. SMIDA is actively operating in Ukraine, although reporting by companies is not up to date due to martial law.
In practice, while the issuers of securities are currently exempted from disclosure information during martial law, except special and other information (as defined by in the enforcement section above), some companies keep voluntarily disclosing their annual financial statements. The NSSMC reported that, before the full-scale invasion, in 2021 almost all issuers of securities disclosed their annual financial statements for 2020. After the martial law resolution which granted a disclosure exemption, this number significantly and progressively decreased to around 60% of issuers of securities disclosing annual financial statements voluntarily in 2022 (for the year 2021), and 50% in 2023 (for the year 2022). Specifically for companies publicly trading shares, in 2023, only one company voluntarily disclosed its annual report for 2022 under martial law. This regular disclosure also covers compliance with the Corporate Governance Code of Ukraine.
Regarding related party transactions (RPTs), the JSC Law lists persons who can be considered related parties and further requires the board’s approval if the RPT value does not exceed 10% of the company’s value of the assets. Where the transaction exceeds 10%, a substantial majority of three-quarters of the shareholders who have registered to participate in the annual general meeting is required for its approval.32 In addition, the JSC Law excludes interested board members from voting on the approval of RPTs. Furthermore, it prohibits shareholders owning more than 25% of voting rights from voting on the approval of RPTs, if they are related parties.33 The law also requires any person with an interest in executing an RPT to notify the company in advance.34 If the interested person fails to disclose their interest, only the company may file a claim to have the transaction invalidated by the court. The Supreme Court has recently reaffirmed this interpretation of the provision, stating that shareholders do not have the right to bring derivative suits to court in such cases (Kibenko, 2023[8]). It is important to note that there is no external or independent review required or recommended either before or after the conclusion of an RPT based on the current framework. Notably, RPT disclosures are considered as special information according to Chapter IV of the Regulation No. 608. While under martial law issuers of securities, persons providing collateral for such securities and corporate rights advisors are exempted from the obligation to disclose regulated information, special information must be reported.
The Law of Ukraine On Audit of Financial Statements and Auditing Activities No. 2258/2018 (Law on Audit) mandates preparation of financial statements by companies in accordance with IFRS.35 Regarding external audit, the JSC Law mandates publicly traded companies’ financial statements to be audited by an external auditor,36 and Law No.3480-IV on capital markets and organized commodity markets requires audited financial statements as information to be disclosed.37 Further, the new 2023 JSC Law established shareholders’ right to appoint an external auditor. In practice, the NSSMC reported that less than 60% of securities issuers’ financial reports were audited by an external auditor in both 2022 and 2023.38
Furthermore, the Law on Audit requires rotation of the external auditor every seven years. However, the law also specifically clarifies that this rule only applies to individual auditors, not audit companies.39 Therefore, companies publicly trading shares are allowed to use the same audit company service without any rotation requirement.
Over the past five years, 13 publicly traded companies have been fined for concealing and/or misrepresenting financial or non-financial information in Ukraine. Between 2019-2022, before the war, nine companies were fined. After the war, this number has significantly decreased to four in 2023. In 2022, no penalties were imposed on companies for concealment and/or misrepresentation of financial or non-financial information.40 The main reason behind this decrease, considering also the NSSMC’s limited budget and staffing capacity, might be the adoption of NSSMC’s Resolution No. 139 which suspended procedural actions for the duration of martial law. Law No. 3585 lists the violations of the Law on State Regulation of Capital Markets and Organized Commodity Markets and the fine amount for any type of infringements.41 The current fines’ amounts had been set in 2024 and their update, required every two years, will next take place in 2026.
In addition, market participants whose location is in the settlements of territorial communities located in military operations or under temporary occupation are not subject to statutory measures of influence for failure to submit or late submission of reports, other information and/or documents. Furthermore, the disclosure obligations applicable within three months following the termination or cancellation of martial law would not apply to participants from these areas.42
3.2.7. Board of directors
The election, responsibilities, and powers of boards of directors are primarily governed by the JSC Law of Ukraine. The new JSC Law of 2023 introduced several requirements for public joint-stock companies, including provisions for the election process of the board chair, evaluation of independent directors to be included in annual reports, self-assessment of board members, the establishment of a corporate secretary role, and expanded fiduciary responsibilities of both the board of directors and senior management.43 Notably the JSC Law introduced the flexibility to choose between a two-tier corporate governance model (supervisory board and management board) or a one-tier corporate governance model (board of directors) for Ukrainian publicly traded companies. Banks, however, are mandated to adopt the two-tier corporate governance model.
The JSC Law allows for the combination of the Chair and CEO of the company.44 Also, according to the JSC Law, the establishment of audit, remuneration, and nomination committees (remuneration and nomination can be combined) is mandatory for companies publicly trading shares.45 In accordance with the Law on Audit, the audit committee chair is appointed from among the independent board members. Moreover, the same article mandates members of the audit committee to be competent in matters relating to the industry in which the company operates. At least one member of the audit committee must be competent in the field of accounting and/or auditing.46
Regarding the independence of board members, according to the JSC Law, at least one-third of the board of directors of a company publicly trading shares must consist of independent board members. Furthermore, the law specifies a list of persons who cannot be considered as an independent director.47
While there are also no specific requirements under the JSC law regarding qualifications, experience, or diversity of board members, the Corporate Governance Code of Ukraine recommends a quota of 40% for the less-represented gender on the board.48 In 2023, the NSSMC reported that women accounted for 25% of boards seats, according to information disclosed voluntarily by 11 companies in their annual reports.
Additionally, the JSC Law mandates the establishment of a corporate secretary position for publicly traded companies.49 The corporate secretary is responsible for the company’s ongoing interaction with shareholders and other investors, the coordination of the company’s actions to protect the rights and interests of shareholders, and maintaining the board’s effectiveness.
Notably, due to the disclosure exemption under martial law, currently the NSSMC is not able to monitor board practices, such as the preferences of board structures, number of companies where the functions of the Chair and CEO are separated, or number of independent directors in companies.
3.2.8. Corporate sustainability
Until 2024, there were no specific legal requirements for boards of directors to consider sustainability issues in their decision-making processes. However, with the adoption of Regulation No. 608/2023, companies will now be required to include corporate sustainability reports in their annual reports once martial law ends. These sustainability reports would have to cover environmental protection activities, risks related to sustainability, and the company’s strategies for managing these risks. The information will be disclosed on the company’s website and made available to shareholders and other stakeholders.50
The NSSMC has taken steps to promote corporate sustainability by publishing an ESG Annex to the Corporate Governance Code in 2021. The ESG Annex provides guidelines for companies to implement ESG (Environmental, Social, and Governance) practices, aligning with global standards. The NSSMC has also encouraged companies to voluntarily disclose corporate sustainability information.
In 2023, nine out of the eleven companies publicly trading shares that voluntarily disclosed annual information to the NSSMC included corporate sustainability information in their reports. This represents a positive trend towards increased transparency and accountability in corporate sustainability practices in Ukraine.
Moreover, the NSSMC plans to take measures to implement the provisions of Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June 2020 on the establishment of a framework to facilitate sustainable investment and amending Regulation (EU) 2019/2088 of the European Parliament and of the Council of 27 November 2019 on sustainability‐related disclosures in the financial services sector.
As noted above, Ukraine has made significant strides in improving the legal and regulatory framework with regards to corporate governance, notably through the revision of its JSC Law and ongoing strengthening of the NSSMC’s governance. What will be important going forward is to ensure effective implementation, including through monitoring mechanisms. At the same time, it is recognised that as long as martial law applies, meeting some of the key challenges highlighted below may not be possible at this time and could require a staggered approach, to be informed by regular consultations with publicly traded companies and other market participants. The key challenges outlined below are grounded in the recommendations and best practices set forth by the G20/OECD Principles of Corporate Governance (OECD, 2023[9]).
3.3.1. Capital market fragmentation and underdeveloped capital markets
As mentioned in Chapter 2, the establishment of a stable and developed stock market could serve as an important element in the foundation of Ukraine’s economic recovery and help mitigate the long-term impacts of the ongoing war. The stock market can also contribute to strengthening financial sector resilience, and improving access to finance for businesses, attract both domestic and foreign investors, In recent years, there has been some progress in the development of Ukrainian capital markets. For example, the number of stock exchanges in Ukraine decreased from eight in 2014 to four by 2021, which has helped reduce market fragmentation (Ganna, Darya and Myroshnychenko, 2022[10]). Currently, there are three stock exchanges operating in Ukraine, with a total of 22 companies whose shares are publicly traded. Remarkably, over the past five years, both before and during the full-scale invasion, only five companies delisted from these exchanges, while one company newly listed its shares, indicating a degree of resilience in Ukraine’s capital markets.
However, despite this resilience, the Ukrainian stock market remains underdeveloped as discussed in Chapter 2. Equity trading accounts for less than 1% of total market trading volume, while government-issued bonds dominate the market, representing approximately 90% of total trading activity in 2023. Although the Ukrainian capital markets show potential, they face several challenges that hinder their growth and efficiency. These challenges include an economic crisis unprecedented in Ukraine’s history, market opacity, low capitalisation and liquidity, a low level of financial services, and restrictions on participation in auctions for potential market participants (Ganna, Darya and Myroshnychenko, 2022[10]). Many Ukrainian companies opt to list on foreign stock exchanges, primarily the Warsaw Stock Exchange and the London Stock Exchange, to attract capital from a diverse pool of international investors (USM, 2024[11]).
For these reasons, to develop and strengthen its capital markets, Ukraine may consider the development of a wider capital market development strategy. This process would involve the collaboration of different government and supervisory authorities as well as private sector entities, notably the NSSMC but also stock exchanges and ministries. Developing such a strategy would therefore also help to create or foster synergies and enhance co-ordination amongst different authorities and ministries with responsibilities over capital markets. In that context, the development of a strategy and the identification of objectives and their timeline could include measures not only to strengthen the protection of shareholder rights and support further best practices in corporate governance, but also ensure the necessary flexibility to enable Ukraine to attract potential new issuers to the market, including smaller companies.
Stock markets can play a meaningful role in improving corporate governance through the quality and enforcement of their listing rules and governing of their trade facilities.51 By ensuring that listing requirements reflect the current business climate and that companies adhere to robust corporate governance standards, stock exchanges can significantly impact the governance landscape. At the same time, listing rules should aim to improve conditions for stock market listing and stock market liquidity. Ukraine may evaluate further, through dedicated market consultations, measures to support issuers, including smaller companies, to bring them closer to capital markets and promote the use of market-based financing amongst small and medium sized enterprises (SMEs).
In these efforts, continued consultation with companies and market participants is fundamental. Market consultations and co-ordination amongst authorities can help Ukraine identify objectives, measures, and targets to develop its capital markets. Ukraine’s stock exchanges, PrJSC, UX, and PFTS, may also be involved in these consultations, enhancing their collaboration. Consultations may also serve to determine which laws, regulations, stock market rules or a combination of these may be best placed to pursue identified objectives and measures as well as which authority should be responsible for each. Ukraine may also consider providing official translation of certain regulations and listing rules to encourage foreign issuers and investors to enter the Ukrainian capital markets.
3.3.2. Limited budget and staff capacity of the NSSMC
During the current period of martial law in Ukraine, the monitoring capabilities of the NSSMC and the disclosure practices of publicly traded companies are restricted. However, as Ukraine moves towards post-war recovery, the regulatory and enforcement functions of the NSSMC will become even more critical to restoring and strengthening its capital markets. Authorities like the NSSMC play a pivotal role in overseeing and regulating the smooth functioning of capital markets. As highlighted by Principle I.E.,52 to perform their role effectively, these authorities must be operationally independent and fully accountable for their decisions. Moreover, they should possess the necessary powers, resources, and expertise to carry out their duties.
In Ukraine, important progress has been made towards enhancing the political and operational independence of the NSSMC, particularly through the introduction of Amendment Law No. 3585 of 2024. This law includes several provisions related to the formation of the NSSMC, the operational independence of its staff, funding mechanisms, investigative powers, and the imposition of financial penalties. These provisions are set to take effect in 2026 and are also designed to protect the NSSMC staff from the personal liability of defending actions taken in good faith while performing their official duties.
The most significant challenge for the NSSMC has been staffing. Due to the ongoing war, the Commission has experienced a considerable reduction in personnel, coupled with a higher turnover rate, which means employees typically serve shorter tenures. This situation is exacerbated by the NSSMC’s budgetary constraints, making it difficult to maintain operations effectively in the capital markets. Furthermore, low salaries offered to staff make it even more difficult to retain experienced employees or attract new qualified talent to the Commission. As of November 2024, the average salary of NSSMC staff was approximately UAH 45 000, which is relatively low compared to the compensation of employees in other Ukrainian state bodies, such as the Ministry of Justice, where staff receive around UAH 100 000 (Ministry of Finance of Ukraine, 2024[12]).
Looking ahead, after the end of martial law, the NSSMC will likely face increased demands as the disclosure exemptions currently in place are lifted, and the volume of corporate events and disclosures increases. These circumstances will put further pressure on the NSSMC’s resources. As such, it will be crucial for the Commission to evaluate and find effective approaches to attract and employ fully qualified staff to manage heightened oversight and investigative responsibilities. With new laws (i.e. the JSC Law) and regulations in place, having adequate staffing may also allow the Commission to undertake campaigns to disseminate and raise awareness of new compliance requirements applicable to issuers.
To address these budgetary challenges, Law No. 3585 introduces the option of imposing levies on supervised entities, in addition to government funding. This could provide the NSSMC with greater financial independence from the government while ensuring transparency and maintaining the supervisory independence of the regulated entities. Currently, the NSSMC is fully reliant on state funding, which limits its political and operational autonomy. However, once the law is fully enacted in 2026, the NSSMC will have the authority to collect fees and contributions from the entities it oversees, creating a more sustainable and independent financial foundation for its operations. By using this additional revenue to offer competitive salaries and attract skilled professionals, the NSSMC would be better positioned to strengthen the quality and independence of its regulatory and enforcement functions. However, the NSSMC should ensure that fees are not considered burdensome for issuers. To this end, again, the Commission should carry out market research and consultations to set reasonable fees for issuers that do not deter companies from approaching and remaining on capital markets.
Concerning the independence of the Commission, Ukrainian law has already introduced greater transparency in the selection process for the Chair and Commissioners by requiring the implementation of an open and competitive selection process. However, in the longer term, once the NSSMC has undergone a selection process with the new criteria and procedure, and stabilised (or identified ways to stabilise) its resources and staffing issues, it may also consider whether other safeguards are warranted to foster the Commission’s independence. The annotations to Principle I.E. note how certain jurisdictions stagger appointments from the political calendar or reduce potential conflicts of interest by introducing policies to restrict post-employment movement to industry through mandatory time gaps or cooling-off periods. Ukraine currently lacks such additional safeguards, but when evaluating whether introducing staggered appointments and/or cooling-off periods in the future—the NSSMC should take into consideration the regulators’ ability to attract senior staff with relevant experience, as underlined by Principle I.E.’s annotations.
Another challenge for the NSSMC is the institutional framework that would arise from Ukraine’s potential accession to the EU. Currently, the NSSMC holds exclusive authority over capital markets in Ukraine, but upon accession, it would have to share some of its powers with the European Securities and Markets Authority (ESMA). The Commission should therefore be mindful that additional reforms and changes to its institutional framework and market structure may be required as EU accession moves forward, to refine the distribution of powers and responsibilities between ESMA and the NSSMC within Ukraine’s institutional framework.
3.3.3. Monitoring Corporate Governance Code implementation on an aggregate basis may inform future Code revisions
Corporate governance codes, as emphasised in Principle I.B. of the G20/OECD Principles of Corporate Governance (OECD, 2023[9]), are recognised as fundamental and complementary component of a jurisdiction’s corporate governance framework.53 The Principles also underscore that when codes are used to complement legal and regulatory provisions, market credibility requires that their status in terms of coverage, implementation, compliance, and sanctions is clearly specified.
In recent years, Ukraine has made progress in complementing its legal and regulatory framework with the Ukrainian Corporate Governance Code, which follows a comply-or-explain approach. The Code was first introduced in 2003, revised in 2008, and the most recent version was issued by the NSSMC in 2020. In 2021, the Code was further complemented with guidelines on ESG best practices, reflecting an increasing global focus on sustainability and responsible corporate behaviour. An important point to note is that Ukrainian law mandates that issuers disclose their compliance with either their own corporate governance code or the Ukrainian Corporate Governance Code on a comply-or-explain basis. This flexibility may allow companies to sidestep certain best practices outlined in the Ukrainian Code, potentially undermining efforts to reach a consensus on what constitute effective corporate governance practices.
The NSSMC’s plans to update the Ukrainian Corporate Governance Code to take into account recent legal and regulatory reforms also provides an opportunity to take into account the evolving business environment in Ukraine and benefit from the revised recommendations of the G20/OECD Principles (OECD, 2023[9]).54
Corporate governance code updates generally benefit also from information on how companies comply with a corporate governance code or equivalent soft law mechanism. Analysing implementation and compliance on an aggregate basis is key to carry out an informed update to the corporate governance code and understand which recommendations are well absorbed by companies and which ones are considered too burdensome or face difficulties in being implemented. Generally, national reports are used to evaluate the implementation and disclosure of compliance with corporate governance codes. This practice is widespread and implemented in more than two-thirds of jurisdictions examined by the 2023 OECD Corporate Governance Factbook (OECD, 2023[3]).
In Ukraine, however, no such national report or alternative mechanism currently exists to review publicly traded companies’ compliance with the Code, nor is there a designated body tasked with monitoring its implementation. As a result, it is difficult to assess how widespread the implementation of the Ukrainian Corporate Governance Code is by companies. Thus, the NSSMC may consider setting up a system (taking into consideration current constraints under martial law) and/or engage in discussions with issuers to monitor implementation with the current Code to better determine which practices should be re-assessed or revised in its effort to review and update the Code.
Then, the NSSMC or another entity could consider discussing – in consultation with companies and other market participants – how to best set up a mechanism to evaluate at an aggregate level companies’ compliance with the Code on a more permanent basis, as well as which entity could be best placed to take on the role of aggregate monitoring of compliance and issuing periodic national reports. The future revision and update of the Corporate Governance Code should therefore be informed by the results of monitoring the Code’s implementation. However, to adapt to the circumstances of martial law and consequent exceptions from disclosure, this could be initially done through targeted interviews and seminars with companies and by analysing reports voluntarily submitted during martial law.
3.3.4. Empowering shareholders by monitoring the framework for exercising shareholder rights and obtaining redress
As advocated by the G20/OECD Principles, corporate governance frameworks should safeguard and promote the exercise of shareholders’ rights while ensuring fair treatment for all shareholders, including minority and foreign shareholders.55 Ukraine has made progress in this area, particularly with the introduction of the new JSC Law. One of the significant advancements is the reduction of the ownership threshold required to call a shareholder meeting, from 10% to 5% of a company’s shares. This change has better empowered minority shareholders, offering them a more active role in influencing the governance of publicly traded companies. Another improvement is the granting of pre-emptive rights to shareholders in the event of a new share issuance, allowing them to maintain their proportional ownership.56 However, Ukraine could consider monitoring and discussing with market participants whether the imposition of a deadline by which companies must notify shareholders about their pre-emptive rights would be warranted, to provide shareholders with more time before new shares are issued.
Additionally, the JSC Law has reduced the ownership threshold for filing derivative claims from 10% to 5%, making it easier for shareholders to hold management accountable for corporate misconduct. The law also broadens the list of individuals who are authorised to file derivative suits on behalf of the company. However, despite these improvements, Ukrainian case law restricts shareholders from bringing derivative suits regarding RPTs, even if the shareholder holds 100% of the company’s shares. Instead, only company management has the legal standing to file such claims, which limits the ability of shareholders to seek redress in case of abusive and prejudicial RPTs. Ukraine may wish to analyse this exception and consult with investors and investor associations to evaluate its impact on the possibility to obtain effective redress in case of prejudicial RPTs.
Another development in line with the Principles is the support for remote shareholder meetings.57 The new JSC Law permits companies to conduct both in-person and remote meetings, a particularly important provision during Ukraine’s current martial law. This flexibility has allowed companies to meet their obligations while maintaining shareholder participation.
The Principles recommend that shareholders should have the opportunity to ask questions to the board, including questions related to the company’s annual external audit,58 Ukrainian legislation allows questioning by shareholders before shareholder meetings, but only states that shareholders can participate in the discussion of agenda items, without providing clear conditions for the exercise of this right during the general meeting. Poor clarity of the framework may hinder the exercise of shareholder rights and prevent active engagement and transparency on corporate matters between shareholders and the company, potentially reducing the level of trust and involvement that shareholders have in corporate governance. This is an area where Ukrainian policy makers may wish to better understand the view of investors and companies and evaluate ways that they can foster shareholder engagement going forward.
3.3.5. Fostering oversight of related party transactions
The Principles recognise the potential abuse of RPTs as an important policy concern and devotes particular attention to jurisdictions with concentrated ownership. In Ukraine, where more than 60% of publicly traded companies have a single shareholder holding over 50% of the equity capital, addressing the risks associated with RPTs is critical. Concentration of ownership increases the risk of conflicts of interest involving the potential for controlling shareholders to engage in transactions that could harm minority shareholders or the company itself.
Ukraine has made some progress in strengthening its framework for the oversight of RPTs. The new JSC Law includes provisions that prevent board members with conflicts of interest from voting on RPT approvals, a practice that aligns with the Principles.59 However, while this exclusion is a positive step, the Principles also emphasise a broader role for the board in overseeing internal control systems. Specifically, boards should monitor financial reporting and the use of corporate assets, safeguarding against the misuse of related party transactions. Typically, this is ensured by having an external ex ante check on significant RPTs by either the external auditor, an independent expert, or the audit committee to ensure the fairness of the terms and conditions of the transaction. There is currently no such legal requirement or recommendation for an independent ex ante review process for RPTs before the decision is subject to the board’s approval. Policy makers could therefore engage in discussions with issuers and investors to determine under what conditions an independent ex ante review of significant RPTs could be introduced and whether such a review would be better placed as a binding requirement or a comply and explain recommendation.
Disclosure of RPTs remains obligatory in Ukraine, even during martial law, which demonstrates a commitment to the transparency of these transactions. However, Ukrainian law does not specify the consequences for failing to disclose RPTs. The absence of clear penalties for non-disclosure may undermine the effectiveness of these requirements. The Principles recommend that there be significant sanctions for violating rules related to the disclosure of conflicts of interest, as strong enforcement mechanisms act as a deterrent against abusive practices. In practice, however, the enforcement of RPT violations in Ukraine has been insufficient. A forthcoming report by the EBRD highlighted that, over the last decade, only a limited number of penalties have been imposed by courts or regulators for cases involving the misuse of corporate assets or unauthorized or undisclosed RPTs. This lack of enforcement risks to diminish the protective value of the regulations that are in place and should be carefully monitored by Ukrainian policy makers.60
Moreover, the Principles stress the importance of boards applying high ethical standards, with company-wide codes of ethics serving as benchmarks for the behaviour of both board members and key executives.61 These codes should set clear guidelines for avoiding conflicts of interest, including rules about dealings in the company’s shares. However, in Ukraine, there is no requirement or recommendation to adopt company codes of conduct and for board members, key executives, or controlling shareholders to disclose transactions in their company’s shares. This gap in the regulatory framework presents a risk of insider trading or other unethical practices that could further harm trust in corporate governance and consequently capital markets.
3.3.6. Insider trading enforcement
Insider trading, which undermines public trust and the efficient operation of capital markets, is commonly prohibited by jurisdictions under securities regulations, company law, or criminal law, as emphasised by Principle III.E.62 However, the effectiveness of such prohibitions depends on strong enforcement. Without active monitoring and prosecution, these laws may lose their effectiveness and deterrent power, increasing the risk that insider trading occurs.
Until 2024, Ukrainian legislation on insider trading lacked several key provisions, including the obligation for companies to publish a list of ‘insiders’—individuals who have access to confidential, price-sensitive information. However, significant progress was made with Law No. 3585 in 2024. This law introduced important measures to close these legislative gaps, such as requiring companies to maintain and regularly update a list of the insiders and those who work for or alongside them.63 This brings Ukrainian legislation closer to international standards and EU legislation by ensuring greater transparency around who has access to sensitive information.
In terms of enforcement, Ukraine made efforts to strengthen penalties for insider trading by increasing fines in 2020.64 Additionally, the law provides alternative penalties, including imprisonment for up to three years, with or without the loss of the right to hold certain positions or engage in specific activities for the same period.65 However, despite these legislative changes, the increased fines may still be too low to effectively deter illegal insider trading and continued monitoring of their effectiveness should be considered.
The key issue for insider trading remains enforcement. Due to previous legal gaps in Ukraine’s insider trading framework, the NSSMC has been limited in its ability to detect, investigate, and prosecute insider trading cases until recently. This has resulted in minimal enforcement action. In fact, as mentioned above, over the past five years, the NSSMC has not initiated any insider trading cases. The amended law (Law No. 3585) set to come into force in 2026 aims to give the NSSMC the necessary authority to enforce insider trading regulations more effectively. However, the mere existence of laws is not enough to prevent illegal insider trading. The NSSMC may consider active monitoring and strong enforcement as essential to ensure that insider trading is both detected and prosecuted, preventing market abuse, and fostering trust in the Ukrainian capital markets.
3.3.7. Continued monitoring of the disclosure and audit framework and capacity of the Board of the Audit Chamber of Ukraine
The Principles suggest that the corporate governance framework should ensure timely and accurate disclosure of all material matters concerning the corporation, including its financial condition, performance, sustainability, ownership, and governance.66 As noted above, the legal and regulatory framework for disclosure of financial and non-financial information in Ukraine has been strengthened. In case of sanctions for non-disclosure of information or publication of incomplete/inaccurate information to the NSSMC, the fine ranges from one thousand to five thousand times the minimum income level. More proportional fines could have a stronger influence on deterring behaviour and could be an issue to be further studied and monitored by the NSSMC.
Notably, the board is responsible for monitoring the integrity of disclosures made by senior management regarding both financial and non-financial information, as recommended in the Principles.67 The board must also ensure that senior management provides adequate oversight, which typically includes the establishment of an internal audit function. This internal audit function plays a crucial role in supporting the audit committee or a similar body in maintaining comprehensive oversight of the company’s internal controls and operations. Ukrainian law empowers, but does not mandate, boards to establish an internal audit function, to support the audit committee. If this function is created, the law mandates that the board appoints the internal auditor and reports to the chair of the audit committee. Indeed, the Ukrainian Corporate Governance Code recommends establishing an internal audit function. As part of the efforts to monitor compliance with the Corporate Governance Code, Ukraine may analyse whether publicly traded companies generally comply with the recommendation to set up an internal audit function.
In Ukraine, the shareholders decide on the appointment of the external auditor, while the board approves the audit report and assesses auditor independence.68 The law also requires the establishment of an audit committee, and regulates duties of such committee, including assessing independence of external audit. (Art. 79 of JSC Law). According to the EBRD’s assessment, 6 of the 10 largest publicly traded companies in the sample confirmed being audited by independent auditors in 2022, whereas before martial law in 2020 it was all 10 companies. Ukraine may wish to monitor whether these companies continue being audited by independent external auditors during martial law and, if this is the case, what are the challenges faced or reasons for departing from this requirement.
Furthermore, external auditors may provide non-audit services as long as this does not lead to the risk of them lacking independence. When this is the case, this information is required to be disclosed in the audit report. The annotations to Principle IV.C. include several examples of practices that can be implemented to deal with potential threats to their independence arising from the provision of non-audit services. For example, jurisdictions can require the disclosure of payments to external auditors for non-audit services; include a ban or severe limitation on the nature of non-audit work which can be undertaken by an auditor for their audit client; provide periodic communications to the audit committee discussing the nature, timing and fees of the non-audit work (including the approval of such work) as well as relationships that may threaten auditor independence, among other possible safeguards. Some jurisdictions take a more direct regulatory approach and limit the percentage of non-audit income that the auditor can receive from a particular client or limit the total percentage of auditor income that can come from one client. Ukraine may wish to evaluate whether similar safeguards are warranted.
The annotations or Principle IV.C. also highlight the importance of ensuring the competence of the audit profession, ongoing training as well as a system of audit oversight and audit regulation. In Ukraine, this role is assigned to the Board of the Audit Chamber of Ukraine per the Audit Law, which provides this entity with the authority to impose disciplinary sanctions and carry out ongoing trainings. However, the Chamber’s website provides limited updated information, with the last posted progress report dated 2018. Policy makers should therefore monitor the Board of the Audit Chamber of Ukraine’s capacity and ability to fulfil its mandate, particularly since and during martial law.
3.3.8. Board structure and functioning can be improved
The Principles recommend that the board should be able to exercise objective and independent judgment on corporate matters. This can be achieved by having a sufficient number of independent board members, particularly in key committees. While defining board member independence, it is helpful to complement “negative” criteria, which specify when a person is not considered independent, with “positive” examples of qualities that enhance the probability of effective independence, as emphasised by the Principles.69 The new JSC law in Ukraine defines independence of a board member with a detailed list of non-affiliation criteria. Also, the annual report of the board is supposed to contain an evaluation of independence of each independent board member. If a shareholder considers that an independent director does not meet the legal requirements, they may go to court. The Corporate Governance Code also provides criteria for board independence, recommending that board members act based on independent thinking, impartially and in the common interest of the company and all its shareholders. It further elaborates that any member of the board that has a conflict of interest should resign and not participate in the decision-making process of the subject matter. The Code also recommends that board training cover issues related to independence and acting based on independent thinking as well as that candidates to the board inform the company of all interests, positions, affiliations, and relationships that affect their independence.
With regards to what is disclosed, the forthcoming EBRD assessment highlights the progress that has been made since 2017 with a higher percentage of independent directors in the ten largest publicly traded companies. 70 At the same time, given the requirement that a minimum of 1/3 of board members must be independent together with the need to have at least three committees on audit, nomination and remuneration containing independent directors can make it challenging to implement in practice. This is especially so given that independent directors need to be qualified according to their functions and responsibilities of the committee. For example, someone qualified for the nomination or remuneration committee may not necessarily meet requirements for accounting expertise required for at least one member of the audit committee. The Principles also stress that board members should be able to commit effectively to their responsibilities. To prevent instances of overburdening independent directors with excessive duties and undermining their capacity to exercise qualified and independent judgement, policy makers and regulatory authorities may consider consulting companies to understand whether the current framework is well balanced, or ways to provide for greater flexibility regarding the establishment of remuneration and nomination committees and their composition could be introduced. Another common approach adopted in certain jurisdictions is for some functions to be combined or taken up by the board, for example for smaller companies under determined thresholds.
The Ukrainian legal framework grants the board with the exclusive authority to appoint and dismiss management, to set as well as oversee remuneration, and to approve related party transactions. Furthermore, the Corporate Governance Code recommends that the board define strategic goals, determine risk appetite, and oversee management. Based on the current framework, supervisory authorities could evaluate company practices about key board responsibilities, for example monitoring whether approving the corporate strategy and annual budget, or determining the company’s risk profile, are generally responsibilities undertaken by boards. Depending on a review and better understanding of common company practices, Ukraine may evaluate whether recommendations on these issues should be included in the Corporate Governance Code.
Ukraine has adopted several reforms aimed at strengthening the corporate governance and resilience of its corporate sector. The new JSC Law and other reforms seeking to strengthen the institutional setting of the NSSMC show Ukraine’s significant commitment in this effort. However, martial law is currently constraining the possibility to put the new framework fully in place, and publicly traded companies as well as relevant institutions will be facing unprecedented challenges when the new framework will take effect without current exceptions.
Therefore, Ukraine’s success in implementing reforms to strengthen the corporate governance framework and its implementation by Ukrainian companies can only be achieved in the context of wider reforms and initiatives to enhance Ukraine’s institutional and legal framework as well as effective implementation, monitoring and enforcement of corporate governance practices. Corporate governance education programmes and dedicated initiatives to raise awareness will be a fundamental component.
Recalling the priorities of the OECD Ukraine Country Programme,71 this section provides suggestions on priority actions that the authorities could consider, and how the OECD could provide analysis and advice in 2025. The following priorities could be considered:
Supporting Ukraine’s continued efforts to align with international best practices for corporate governance, and in particular, alignment with the G20/OECD Principles of Corporate Governance with a view to closer co-operation between Ukraine and the OECD.
Supporting Ukraine’s work to integrate European Union standards, in line with the recently approved Ukraine Plan under the EU’s Ukraine Facility, building on past reforms and in view of Ukraine’s accession to the EU.
Focusing on areas where the OECD Secretariat and OECD Member countries are well-placed to share experiences, best practices, and advice to Ukraine.
Complementing other initiatives and reforms already underway in Ukraine with the support of international partners.
Considering the key challenges outlined in section 3 of this chapter, the OECD could provide analysis, advice, and experience-sharing to help Ukraine address these issues. Particular focus would be given to helping Ukraine both while martial law still permits exemptions to corporate governance rules, and after its expiration by preparing publicly traded companies as well as relevant authorities and policy makers to ramp up implementation, monitoring, and enforcement.
The OECD could provide analysis, advice, and experience-sharing on the adoption of legal, regulatory, and other changes to the corporate governance framework, including implementing regulations, with a focus on strengthening shareholder rights and management of conflicts of interest as well as the oversight of companies.
The OECD could provide support and analysis during the revision process of the Corporate Governance Code, also helping Ukrainian authorities in setting up a framework for aggregate monitoring of the implementation of the Corporate Governance Code. This could involve advice on revisions to the Code as well as capacity building and experience sharing, including by experts from OECD jurisdictions that have implemented similar measures. This priority could be included as a topic for discussion in a workshop or seminar involving issuers and market participants to raise awareness of corporate governance monitoring as well as to gather their feedback as part of the process to update the Code.
The OECD could also share experiences and provide support to understand the benefits of adopting a national capital market strategy and the actors which could be involved in this initiative and in pursuing identified objectives. This support may be framed also as part of or following a more in-depth Ukraine Capital Market review in the future.72
The OECD could support in advising and building capacity within the NSSMC through experience sharing by other OECD countries to foster the capacity, autonomy, and independence of the authority. Possible measures to retain and attract staff would also be considered, with a view of strengthening the NSSMC’s monitoring and enforcement capacities, particularly once martial law ends.
The OECD could also provide advice and organise one or more thematic workshops with the NSSMC, Ukrainian agencies and experts to raise awareness among market participants of the revised corporate governance framework, providing guidance on implementation and disclosure best practices as well as implications once martial law will be lifted. This initiative could be part and/or complement corporate governance education programs.
References
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[5] EBRD (2017), Corporate Governance Sector Assessment Ukraine, https://www.ebrd.com/what-we-do/sectors/legal-reform/corporate-governance/sector-assessment.html.
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[1] Ministry of Economy of Ukraine (2024), У співпраці з London Stock Exchange та TheCityUK Україна планує створити сприятливу фінансову екосистему для доступу українських компаній до фінансування та залучення продуктивних інвестицій в Україну, - Юлія Свириденко, https://me.gov.ua/News/Detail?lang=uk-UA&id=2765ca44-0a7b-4435-9461-50220d86914f&title=MemorandumLSE-Thecityuk.
[12] Ministry of Finance of Ukraine (2024), Remuneration of employees of state bodies in the context of institutions, https://mof.gov.ua/uk/governance-649.
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[2] NSSMC (2024), NSSMC revoked the licenses of JSC «UKRAINIAN EXCHANGE», https://www.nssmc.gov.ua/en/nktspfr-anuliuvala-litsenzii-at-ukrainska-birzha/.
[9] OECD (2023), G20/OECD Principles of Corporate Governance 2023, OECD Publishing, Paris, https://doi.org/10.1787/ed750b30-en.
[3] OECD (2023), OECD Corporate Governance Factbook, OECD Publishing, Paris, https://doi.org/10.1787/6d912314-en.
[11] USM (2024), Logistics companies and the stock market: investment prospects in Ukrainian business, https://en.usm.media/logistics-companies-and-the-stock-market-investment-prospects-in-ukrainian-business/.
← 1. Article 2 of the JSC Law defines a public joint-stock company as a company whose shares have been publicly offered and/or are listed for trading on an organised capital market. The term also covers companies whose share transactions are executed on stock exchanges. Therefore, the term does not exclusively refer to listed companies but includes them as well.
← 2. Data provided by the NSSMC to the Secretariat, as of 2024.
← 3. Data provided by the NSSMC to the Secretariat, as of 2024.
← 4. Data provided by the NSSMC to the Secretariat, as of 2024.
← 5. Data provided by the NSSMC to the Secretariat, as of 2024.
← 6. Article 109 of the JSC Law mandates that joint-stock companies publish annual information, referencing Article 126 of the Capital Markets Law (No. 3480-IV). According to Article 126, the annual information disclosure must include a management report. Article 127 of the Capital Markets Law further specifies the contents of this management report, including disclosure on compliance with either the 2020 Ukraine Corporate Governance Code or companies’ own corporate governance code.
← 7. Section 5.3 of the PFTS Listing Rules, Annex 6 of the UX Listing Rules, and Section 6.8.8 of the PrJSC Listing Rules.
← 8. Data provided by the NSSMC to the Secretariat, as of 2024.
← 9. Article 6 of the Law of Ukraine on State Regulation of Capital Markets and Organized Commodity Markets of 2024.
← 10. Article 9 of Decree No. 1063/2011.
← 11. Paragraph 2 of the Section II of the Law on Amendments to the Law "On State Regulation of Capital Markets and Organized Commodity Markets" and other legislative acts regarding the improvement of state regulation and supervision of capital markets and organized commodity markets No.3585.
← 12. Article 6-1 of the Law No.3585.
← 13. Article 12 of the Law No.3585.
← 14. Article 17 of the Law No.3585.
← 15. Article 13 of the Law No.3585.
← 16. Data provided by the NSSMC to the Secretariat, as of 2024.
← 17. Article 20 of the Economic Procedural Code of Ukraine.
← 18. Article 27 of the Economic Procedural Code of Ukraine.
← 19. Chapter IV of Regulation No. 608 outlines specific information classified as special. This includes, but is not limited to, the issuer's decision to issue securities exceeding 25% of its authorised capital, decisions regarding the repurchase of its own shares, changes in the composition of the issuer's board of directors, related party transactions, and decisions by the board to reduce the authorised capital.
← 20. Chapter VII of Regulation No.608 outlines specific information classified as other information. This includes: the calendar plan for posting regular information, the plan for holding of the general meeting, and acquisition of shares of a joint-stock company as a result of the acquisition of a controlling stake, or a significant controlling stake, or a dominant controlling stake.
← 21. NSSMC Regulation No.28/21/728/КОЗ dated 10.06.2024.
← 22. Article 42 of the JSC Law.
← 23. Article 49 of the JSC Law.
← 24. Article 38 of the JSC Law.
← 25. Article 146 of the Law on Capital Markets and Organized Commodity Markets.
← 26. Article 54(1) of the Commercial Procedural Code of 1992.
← 27. Article 126 of the Amended Law of Ukraine on Capital Markets and Organized Commodity Markets No.3480-IV.
← 28. Article 127 of the Law No.3480-IV.
← 29. Article 9 of the Law on Prevention and Counteraction to Legalisation (Laundering) of Criminal Proceeds, Terrorist Financing and Financing of Proliferation of Weapons of Mass Destruction No. 361-IX.
← 30. Chapter II of the Regulation No.608.
← 31. SMIDA is the authorized entity responsible for disclosing regulated information on behalf of participants in the capital markets and/or professional organized commodity markets. Available at https://www.smida.gov.ua/.
← 32. Article 53(6) of the JSC Law.
← 33. Article 107 of the JSC Law.
← 34. Article 107(8) of the JSC Law.
← 35. Article 14 of the Law of Ukraine On Audit of Financial Statements and Auditing Activities No.2258.
← 36. Article 110 of the JSC Law.
← 37. Article 126 of the Law No.3480-IV.
← 38. Data provided by the NSSMC to the Secretariat.
← 39. Article 30 of the Law No.2258.
← 40. Data provided by the NSSMC to the Secretariat, as of 2024.
← 41. Article 50 of the Law No.3585.
← 42. Article 7(6) of the Law of Ukraine On Protection of the Interests of Subjects of Submission of Reports and Other Documents during Martial Law or a State of War.
← 43. Article 89 of the JSC Law outlines fiduciary duties for the board of directors and senior management. It requires them to act in the company's best interest, in good faith, reasonably, and within the scope of authority granted by the articles of association and relevant laws. Additionally, the article mandates that they work toward the company's success, make independent decisions, avoid conflicts of interest, refrain from accepting benefits or goods from third parties, and disclose any personal interest in transactions.
← 44. Article 65 of the JSC Law.
← 45. Article 76 of the JSC Law.
← 46. Article 34 of the Law No.2258.
← 47. Article 72 and Article 73 of the JSC Law.
← 48. Section 3.4 of the Corporate Governance Code of Ukraine.
← 49. Article 85 of the JSC Law.
← 50. Section VII (6) (123) of the Regulation on Approval of the Regulation on Disclosure of Information by Issuers of Securities and Persons Providing Security for Such Securities No.608.
← 51. Principle I.D.: Stock market regulation should support effective corporate governance.
← 52. Principle I.E.: Supervisory, regulatory and enforcement authorities should have the authority, autonomy, integrity, resources and capacity to fulfil their duties in a professional and objective manner. Moreover, their rulings should be timely, transparent and fully explained.
← 53. Principle I.B.: The legal and regulatory requirements that affect corporate governance practices should be consistent with the rule of law, transparent and enforceable. Corporate governance codes may offer a complementary mechanism to support the development and evolution of companies’ best practices, provided that their status is duly defined.
← 54. Notably, there are new and revised recommendations on corporate sustainability, board responsibilities, the impact of digital technologies, the role of institutional investors, governance, and oversight of company groups, amongst others.
← 55. Principle II.: The corporate governance framework should protect and facilitate the exercise of shareholders’ rights and ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights at a reasonable cost and without excessive delay.
← 56. Article 31 of the JSC Law.
← 57. Sub-Principle II.C.3.: General shareholder meetings allowing for remote shareholder participation should be permitted by jurisdictions as a means to facilitate and reduce the costs to shareholders of participation and engagement. Such meetings should be conducted in a manner that ensures equal access to information and opportunities for participation of all shareholders.
← 58. Sub-Principle II.C.4.: Shareholders should have the opportunity to ask questions to the board, including on the annual external audit, to place items on the agenda of general meetings, and to propose resolutions, subject to reasonable limitations.
← 59. Sub-Principle II.F.1.: Conflicts of interest inherent in related party transactions should be addressed.
← 60. Data provided by the EBRD to the Secretariat, as of November 2024.
← 61. Principle V.C.: The board should apply high ethical standards.
← 62. Principle III.E.: Insider trading and market manipulation should be prohibited, and the applicable rules enforced.
← 63. Article 148 of the Law No.3585.
← 64. Law No.738-IX of 2020 ‘’On making changes to some legislative acts of Ukraine regarding the simplification of investment attraction and the introduction of new financial instruments’’.
← 65. Law No. 3306-IV of 2011 ‘’On making changes to some legislative acts of Ukraine regarding insider information’’.
← 66. Principle IV.: The corporate governance framework should ensure that timely and accurate disclosure is made on all material matters regarding the corporation, including the financial situation, performance, sustainability, ownership, and governance of the company.
← 67. Sub-Principle V.D.8.: Ensuring the integrity of the corporation’s accounting and reporting systems for disclosure, including the independent external audit, and that appropriate control systems are in place, in compliance with the law and relevant standards.
← 68. Principle IV.D.: External auditors should be accountable to the shareholders and owe a duty to the company to exercise due professional care in the conduct of the audit in the public interest.
← 69. Principle V.E.: The board should be able to exercise objective independent judgement on corporate affairs.
← 70. Data provided by the EBRD to the Secretariat, as of November 2024.
← 71. Namely: Supporting domestic priorities under the National Recovery and Development Plan; Supporting alignment with OECD legal instruments; and promoting further cooperation with OECD bodies.
← 72. Subject to donor funding.