Ukrainian Business Law (Basic): Part I "ENTREPRENEURSHIP"

“Everyone shall have the right to entrepreneurial activity that is not prohibited by law” – art. 42 of Ukraine’s Constitution

What is entrepreneurship on Ukrainian legislation?

Entrepreneurship, to be understood as a separate, initiative, systematic, own-risk economic activity, carried out by business entities (entrepreneurs) with the purpose of achieving economic and social results, and generating profit. 

Freedom of Entrepreneurial Activity

1. Entrepreneurs shall have the right to perform independently without any limitations any such entrepreneurial activity that is not banned by the law.

2. Peculiarities of performing certain types of entrepreneurship shall be established by legislative acts.

3. The list of types of entrepreneurial activity subject to licensing, as well as the list of activities, wherein entrepreneurship is banned shall be established exclusively by the law.

4. State authorities and local governments may not carry out entrepreneurial activity.Entrepreneurial activity of officials of state authorities and local governments shall be restricted by the law in cases, provided by part two, Article 64 of the Constitution of Ukraine.

Principles of Entrepreneurial Activity

1. Entrepreneurship shall be conducted on the basis of:

free choice by the entrepreneur of a type of entrepreneurial activity;

independent development by the entrepreneur of his/her activity program, selection of suppliers and consumers of products manufactured, employment of material and technical, financial and other resources, the use of which is not limited by the law, fixing of prices for products and services in compliance with the law;

free employment of personnel by the entrepreneur;

commercial calculation and own commercial risk;

free disposal of retained profit, left after payment of taxes, fees and other payments, envisaged by the law;

independent performing by the entrepreneur of foreign economic activity; the use by the entrepreneur of an international currency share of proceeds at his/her own discretion.

Organizational Forms of Entrepreneurship

1. Entrepreneurship in Ukraine shall be conducted in any organizational forms, envisaged by the law, at entrepreneur’s discretion.

2. The procedure of setting up, state registration, reorganization and liquidation of subjects of entrepreneurship of certain organizational forms shall be determined by this Code and other laws.

3. As to individuals and legal persons, for which entrepreneurship is not their major activity, the provisions of this Code shall apply to the part of their activity, which is entrepreneurial in its nature.

The Right to Hire Employees and Social Guarantees of the Use of Their Labor

1. Entrepreneurs shall have the right to enter into labor contracts with individuals on using their labor. While entering into a labor contract (agreement) the entrepreneur shall be obligated to secure due and safe working conditions, labor remuneration not lower than that established by the law and its timely payment to the employee, as well as other guarantees, including social and medical insurance and social security as provided by Ukrainian legislation.

General Guarantees of Entrepreneurs’ Rights

1. The state shall guarantee to all entrepreneurs irrespective of their organizational forms of entrepreneurial activity, equal rights and opportunities for attraction and use of material and technical, financial, labor, informational, natural and other resources.

2. Providing the entrepreneur with material and technical, and other resources distributed by the state, shall be conducted for the purpose of carrying out by the entrepreneur of supplies, works or services for the state needs.

3. The state shall guarantee the inviolability of property and ensure protection of property rights of the entrepreneur. Withdrawal by the state or local governments of fixed and operating assets, as well as other property shall be allowed according to Article 41 of the Constitution of Ukraine on the grounds and in keeping with the procedure, established by the law.

4. Losses suffered by the entrepreneur in the result of violation by individuals or legal entities, state authorities or local governments of his/her property rights, shall be reimbursed to the entrepreneur pursuant to the present Code and other laws.

5. The entrepreneur or an individual employed by the former in cases envisaged by legislation may in working hours be attracted to fulfillment of state or public duties, with following compensation to the entrepreneur of relevant losses by the authority that takes such decision. Any such disputes as may arise on compensation of losses shall be resolved in the court.

Liability of Subjects of Entrepreneurship

1. Entrepreneurs shall be obligated not to cause damage to the environment, not to violate rights and lawful interests of individuals and their associations, other business entities, institutions, organizations, rights of local governments and the state.

2. The entrepreneur shall suffer property and other liability as established by the law for caused losses and damage.

Activity of Foreign Entrepreneurs in Ukraine

1. Peculiarities of carrying out entrepreneurial activity within the territory of Ukraine, on its continental shelf and in the exclusive (sea) economic zone by foreign legal entities and individuals shall be established by this Code and other laws of Ukraine.

2. Should a current international treaty, approved by the Verkhovna Rada of Ukraine provide for other rules of entrepreneurship, different to those established by Ukrainian legislation, the rules of the international treaty shall apply. The rules of international treaties of Ukraine, effective at the moment of adoption of the Constitution of Ukraine shall apply in accordance with the Constitution of Ukraine in keeping with the procedure established by these international treaties.

Termination of Entrepreneurial Activity

1. Entrepreneurial activity shall be terminated:

on entrepreneur’s own initiative;

in the event of expiry of the license;

in the event of discontinuance of existence of the entrepreneur;

on the ground of a court judgment in cases envisaged by the present Code and other laws.

2. The procedure of termination of entrepreneur’s activity shall be determined by the law in compliance with the present Code requirements.

All provisions are taken from chapter 4 of the Economic of Ukraine.

Related post: Ukrainian Business Law (Basic): Part II"BUSINESS ENTITIES