Starting in 2024, Ukraine implemented ashare registration system for limited liability companies (LLCs). This electronic registry enables transparent tracking of shareholders’ shares and opens up new opportunities for the legal formalization of corporate rights, including the pledging of shares.

Previously, this type of collateral had virtually no effective mechanism for enforcement, but it has now become a fully-fledged financial and legal instrument.

What is a share accounting system?

The Share Registration System is an electronic platform administered by the National Depository of Ukraine (NDU). It allows for the official recording of:

• shareholders and the size of their stakes;

• restrictions on the disposal of a share (e.g., a pledge);

• persons acting on behalf of the owner of a share (managers, pledgees);

• Basic information about the company.

Registering an LLC through the system

• The members of the association must adopt a unanimous resolution regarding the transition to record-keeping through the system.

• If the articles of incorporation do not provide for this possibility, they must first be amended.

• After the contract with the NDU is signed and the changes are made to the Unified State Register, the system begins to track the shares.

New Options for Particle Collateral

Until 2024, the pledge of a stake in an LLC was virtually unenforceable due to the lack of a transparent registration mechanism.

The share accounting system allows you to:

• officially register the encumbrance in the form of a pledge;

• ensure that the creditor retains control over the collateral;

• obtain financing against a stake without transferring ownership of that stake.

How is a pledge established?

1. Execution of a Pledge Agreement

The agreement is entered into between the participant acting as the pledgor, the pledgee, and the depository institution or the National Depository (depending on where the shareholder’s account is held).

2. Registration of an encumbrance

It is carried out by an authorized accounting entity. The share becomes restricted in circulation—it cannot be sold or transferred without the consent of the pledgee.

3. Release of the collateral

This occurs after the obligations have been settled and is also recorded in the system.

Foreclosure on a Share

In the event of a breach of obligations, an out-of-court transfer of the share to the pledgee is possible—if provided for in the contract.

The procedure is carried out through the accounting system and involves making changes to the account of the participant acting as the pledgor.

Required documents:

• an order from the pledgee;

• a tripartite agreement (between the pledgor, the pledgee, and the national depository or a depository institution);

• additional documents specified in the contract (notice of default, notice to the debtor, etc.).

This mechanism ensures a transparent and legally protected transfer of the share without the need to go to court.

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Legal Benefits

Pledging a stake in an LLC within the stake accounting system:

• is public and tamper-proof;

• specifies the exact date, the parties, and the terms of the pledge;

• ensures the priority of the pledgee and simplifies out-of-court enforcement;

• Eliminates double counting and reduces the risk of corporate conflicts.

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How does ARMADUM LAWYERS help businesses?

Our team provides comprehensive legal support, including:

• analysis of the corporate structure prior to establishing a pledge;

• drafting and notarizing contracts;

• custody through the National Depository or a depository institution;

• advising banks and investors on the pledging of equity interests;

• Protecting the rights of property owners and challenging unlawful encumbrances.

Conclusion

The introduction of a share registration system has made a share in LLC a fully-fledged tradable asset, similar to a security or real estate.

For businesses, this means:

• the ability to raise funds without losing control;

• a legally protected pledge of corporate rights;

• transparency and security in corporate relations.

If you are planning to pledge a stake in an LLC or obtain financing secured by that stake, ARMADUM LAWYERS will provide legal support and representation at every stage.

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