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U-turn on 50% state participation rule - International Law Office

International Law Office

Projects & Procurement - Ukraine

U-turn on 50% state participation rule

September 13 2011

On July 8 2011 Parliament passed Draft Law 8721, which is intended to abolish the mandatory minimum 50% shareholding for state-owned enterprises in contracts for joint activity. On May 12 2011 Parliament adopted the Law on Amendments to Certain Acts on Joint Activity (5328). Among other things, the law aims to protect public property and ensure maximum benefit to the state from public-private collaborations. It established the rule that the state's share in joint activities must exceed 50% of the participants' joint property. This law has been signed by the president and is now in force (for further details please see "Protecting state property in joint activities - but missing the bigger picture?").

The establishment of such a strict limit may prove counterproductive, as many projects in which the state might take a share of less than 50% may not be realised at all; many private companies are more likely to abandon the idea of a joint project than agree to terms which guarantee that the state owns most of the joint business. Thus, the abolition of the rule is a positive step. The law will take effect when it is signed by the president, on the day after publication.

For further information on this topic please contact Timur Bondaryev at Arzinger by telephone (+380 44 390 5533), fax (+380 44 390 5540) or email (timur.bondaryev@arzinger.ua).

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