Obtaining Permit for Concentration of the Antimonopoly Committee of Ukraine in case of Reorganization, Merger, Acquisition, Splitting, Spin-off, Transformation

This article describes in brief thresholds and requirements, list of documents, procedure and terms in order to get Permit for Concentration of the Antimonopoly Committee of Ukraine in case of Reorganization, Merger, Acquisition, Splitting, Spin-off and Transformation.

When Permit for Concentration is required?

Preliminary obtaining of a permit of the Committee or the Administrative Board of the Committee for concentration shall be obligatory when the total value of assets or total volume of sale of goods of participants of concentration, in view of relations of control in the last fiscal year, including abroad, exceeds the amount equivalent of EUR 12 million at the rate of the National Bank of Ukraine on the last day of a fiscal year, and thus:

- value (cumulative value) of assets or volume of total sales of goods, including abroad, not less than in two participants of concentration in view of relations of control, exceeds the amount equivalent to EUR 1 million at the rate of the National Bank of Ukraine on the last day of a fiscal year, and
- value (cumulative value) of assets or volume (total volume) of sales of goods in Ukraine of even one participant of concentration, in view of relations of control, exceeds the amount equivalent of EUR 1 million at the rate of the National Bank of Ukraine on the last day of a fiscal year, in a case of:
- Merge of two or more business entities;
- One business entity joining another;
- Direct acquisition or through other persons of the control by one or several business entities over one or several business entities or parts of business entities, in particular in the way:
- Direct or indirect (through other persons) purchase, acquisition into ownership in other ways of assets as a complete property complex or a structural division of a business entity, including purchases of assets of a business entity that is liquidated;
- Taking into administration, rent, leasing, concession or acquisition in other way of the right to use assets as a complete property complex or a structural division of a business entity, including purchases of assets of a business entity that is liquidated;
- Appointment or election to a position of a head, deputy head of the supervisory council, board, other supervising or executive body of a business entity of a person who already holds one or several of the mentioned positions in other business entities;
- Creation of a situation when more than a half of the positions of members of a supervisory council, board, or others supervising or executive bodies of two or more business entities are filled by the same persons;
- Establishment of a business entity by two or more business entities that for a long period will independently carry out economic activities, and thus the establishment does not result in coordination of competitive behavior between business entities that have created this business entity, or between them and a newly established business entity;
- Direct acquisition or through other persons of control by one or several business entities over one or several business entities or parts of business entities;
- Direct or indirect purchases, acquisition into ownership in another way or taking in administration of parts (shares, stock), that provides achievement or excess of 25 % or 50 % of votes in a higher management body of a corresponding business entity.

The following shall not be considered concentration and do not require a permit of bodies of the Committee for concentration:
- Creation of a business entity, the purpose of or due to creation of which, coordination of competitive behavior between business entities is carried out, which have created the specified business entity, or between them and a newly established business entity. Such creation, and also modification in foundation documents on the basis of which business entities are created associations are considered as coordinated actions.
- Purchase of parts {shares, stock) of a business entity by the person, whose main activity is carrying out financial transactions or transactions with securities if such purchase is carried out with the purpose of subsequent resale on condition that such person does not participate in voting in a higher body or other bodies of the business entity. In that case the subsequent resale should be carried out during one year from the date of purchase of parts (shares, stock). Upon petition of the specified persons with justification of impossibility of realization of the subsequent resale, bodies of the Committee can make a decision on continuation of this term;
- Actions that are carried out between the business entities connected by relations of control except for cases of acquisition of such control without a permit of the Antimonopoly Committee of Ukraine, if the need to receive such a permit is stipulated by law;
- Acquisition of the control over a business entity or its part, including due to the right of administration and management of its property by the arbitration administrator, or an official of state authorities.

Participants of concentration include:
- Business entities concerning which a merge, joining can or is to be carried out;
- Business entities that acquire or are going to acquire control over a business entity, or business entities concerning which control is acquired or is going to be acquired;
- Business entities, whose assets (property), parts (shares, stock) are being acquired into ownership, taken into administration (use), rent, leasing, concession, or are to be acquired, and their buyers, purchasers;
- Business entities that are or are going to become founders (participants) of a newly established business entity.
- If one of the founders is a body of state executive power, local government, a body of administrative management and control, a business entity, whose assets (property), parts (shares, stock) are brought into the authorized capital of a newly established business entity is also considered a participant of concentration;
- Individuals and legal entities connected to participants of concentration, by relations of control that provides the ground to recognize persons as single business entity.

The order for filing an application for Concentration

When value indicators of participants of concentration exceed threshold values mentioned above, participants of concentration should file an application for granting a permit of the Committee for concentration, including rent, leasing, and concession.
Filing of the application shall be carried out by bodies of state authorities, institutions of local government, bodies of administrative management and control, lessor, lessee, concessionaire, business entities, individuals and legal entities, who within their powers make a decision on concentration or which carry out concentration. The application is filed with the Committee.
Participants of concentration, government bodies, institutions of local government, bodies of administrative management and control shall file a joint application. The application and attached documents should contain full and trustworthy information.
Restricted information necessary for consideration of the application can be filed with corresponding bodies of the Committee by such persons separately.
Powers of representatives shall be confirmed by power of attorney of the participant(s) of the declared action, made out in due order.
An application shall be filed in writing and contain:

- name of the body with which it is filed;
- reference to a corresponding legal regulatory act (item, part, Article) that envisages application to the Committee, a branch;
name, details of an applicant and its representative (body of the state authorities, institutions of local government, body of administrative management and control, a business entity, an individual, an office of a foreign business entity in Ukraine, etc.);
- content of the action a permit for which is requested by an applicant;
- name, details (address, fax, phone, etc.) of a participant(s) of concentration;
- list of documents and data that are attached to the application.

An application should include a document that confirms payment of a filing fee (payment order on transfer of the fee with a mark of a banking institution or a receipt), and also the following documents prepared according to the requirements of law:
In case of merge of business entities or one business entity joining another it is also filled:
- Properly executed foundation documents (constituent agreement, by-laws) of a business entity that emerges as a result of the merger, copies of foundation documents of merging, joining, and joined entities, copies of their certificates of registration, and also decisions on merging, and joining.
- Information about concentration of business entities that contains data on content of the declared action and calculation of total value indicators on volume, form, and content.
- Information about the main kinds of activity of each participant of concentration, share in the market (on volume, form, and content) which, in particular, contains information on the main kinds of activity of business entities, data about their shares in the nation wide and regional commodity markets for the last two years and for the accounting period of the current year, and also the information on the main kinds of activity of the emerging business entity, evaluation of its share in the nation wide and regional commodity markets.
- A draft contract on administration, rent, leasing, concession, acquisition into the property of assets in another way or a copy of the specified contract with condition and explanation thereto.
- Copies of decisions, agreements, documents, etc., and also drafts of other decisions, agreements, documents, realization of which will ensure acquisition of control.
- A copy of the balance sheet of the business entity, which acquires a part (shares, stock), as of the end of the last accounting quarter before the date of filing of application.
- An office of a foreign business entity in Ukraine shall submit also a copy of the document on registration, an extract from the trading (bank) register of the country, where the main management bodies of the foreign entity are registered, and the power of attorney for fulfillment of the representative functions, executed according to the law of the country, where the main body of the foreign business entity is registered.
- An extract from the register and the power of attorney shall be notarially certified at the place of issuance, legalized properly in consular establishments that represent the interests of Ukraine, if international agreements to which Ukraine is a party does not stipulate otherwise, and shall be supplemented with a translation into the Ukrainian language that is certified in the established order.
- The economic justification of concentration shall be submitted.
- Written confirmations of powers of representatives of participants of concentration (in the form of a contract-assignment or the power of attorney of a participant (s) of the declared action to a representative to represent interests of a participant (s) of the declared action with the bodies of the Committee).
In case of impossibility to present information concerning participants of concentration failure shall be substantiated.

Jurisdiction of applications on issues of concentration.

The Committee shall have the jurisdiction on granting preliminary conclusions concerning concentration and issues of granting a permit for concentration:
- participant of which is the enterprise that has a strategic importance for the economy and state security.
- participant of which is a transnational corporation, a business entity, in the structure of which at least one legal entity (individual) has a permanent location outside Ukraine;
- participant of which is a business entity which, in line with the by results of concentration achieves an exclusive (dominating) position, supports, or strengthens such a position;
- which results in establishment of a business entity which under concentration achieves an exclusive (dominating) position, supports, or strengthens such a position, or to essential restriction of competition on all the market or in its significant part;
- on the basis of decisions of the Verkhovna Rada of Ukraine, the President of Ukraine, the Cabinet of Ministers of Ukraine;
- related to maintenance of national security, defense, public interests.
The Committee can also accept for consideration any issue of concentration.
The Chairman of the Committee shall have the right upon petition of the applicant, a body of the Committee, or at his own initiative to summon any application, case that is in consideration of the body, authorized to consider an application, a case, and to transfer it to another body of the Committee.

The order of consideration of an application

The term of consideration of applications for granting preliminary conclusions concerning concentration shall be one month. The term of consideration of a case about concentration should not exceed three months.
Preliminary conclusions of a corresponding body of the Committee shall be provided in a form of the letter which indicates the following:
- possibility of granting a permit for concentration;
- possibility of denial of a permit for concentration;
- necessity or absence of necessity of obtaining a permit for concentration;
- insufficiency of the information for any conclusion.

Denial of consideration of the application shall not deprive the applicant of the right to file the application with the Committee again.
The information concerning concentration can be published if such information has been published earlier or an applicant does not object to such publication.
When there are no grounds to ban concentration, the Committee or the Administrative Board of the Committee makes a decision on granting a permit for concentration. The beginning of the term shall start on the date of filing of the information in full by an applicant. If during the term of consideration of a case, bodies of the Committee fail to make a decision, a permit for concentration shall be deemed granted. The body of the Committee that considered the case can inform the applicant of this. In consideration of applications, third parties can participate if decisions of bodies of the Committee can essentially deal with their rights and interests that are protected by the Act.
Concentration should be carried out within one year from the date of the decision on granting a permit for concentration, if a longer term is not determined in the decision. If concentration in this term failed to be carried out, participants of concentration should submit a new application for obtaining a permit of bodies of the Committee for concentration.
Termination of consideration of a case does not deprive the applicant of the right to address the Committee with a new application for granting a permit for concentration.

Liability for violation of requirements of the Regulation

Fulfillment of concentration without a corresponding permit of bodies of the Antimonopoly Committee of Ukraine in case the availability of such permit is necessary, shall be a violation of the legislation on protection of economic competition and entail liability established by the law.
Concentration (Reorganization, Merger, Acquisition, Splitting, Spin-off, Transformation) without Obtaining Permit for Concentration of the Antimonopoly Committee of Ukraine shall result in imposition of fine in the amount of 5 % of annual profit of business entity for the previous year.
If concentration results or can result in monopolization or significant restriction of competition on all the market or in its significant part, a body of the Committee can apply to court, commercial court with an application (claim) to recognize void agreements, decisions, other instruments, a corresponding constituent agreement on creation of a business entity and cancellation of its state registration.
If a body of the Committee issues a permit for concentration on the basis of the submitted unreliable information, the decision on granting a permit can be reconsidered upon newly found circumstances within 5 years from the time of its approval. Resulting from such re-consideration, a decision can be approved on the following:
- confirmation of the previous decision concerning the carrying out of concentration;
- cancellation in full or in part of the decision on granting a permit for concentration and approval of a new decision;
- imposing a penalty in the order determined by legislation.