ArsLegem’s lawyers under the lead of the firm’s partners Oleksandr Petrov and Roman Kolos conducted legal due diligence of a large Ukrainian agricultural producer aimed at optimization of its corporate structure and compliance with competition law during the group’s formation and development. As a result the client was provided with the due diligence report and recommended action plan aimed to protect the client’s interests, minimize potential risks and bring the structure into compliance with competition law requirements.
Most of the large Ukrainian agricultural producers were established by way of active expansion of their land holdings and production facilities performed via acquisitions of new corporate rights or assets in the form of integral property complexes. Such processes of active expansion could have lasted for years. Thus the owners during such rapid growth were usually too busy pursuing their business goals and were paying little attention to the corporate structure of their businesses. Consequently, even today quite often you may find a large Ukrainian agricultural company, which structure looks more or less the following way: a few dozens of national and offshore companies that in a best case scenario own corporate rights or shares of each other in rather chaotic manner. Usually the beneficial owner of the business is one family or a group of partners. Business relations within such group are often based on verbal agreements. Moreover, such “corporate structure” is also typical in other areas of business outside agriculture sector. At some point of development it starts creating significant complications when it comes to the corporate governance and business management of such group. Administration of the decision making processes becomes unnecessary cumbersome and is likely to require involvement of excessive resources at all stages.
Such structure may work well as long as there are no disputes between the owners and there is no need in a significant external financing. However, as soon as relations between the owners begin to deteriorate or somebody wants to exit or a major external financing or a sale of the business is considered, the beneficial owners start realising that a major revision of the corporate structure becomes inevitable.