Kolos I., Yerysh L.

Donetsk National University of Economics and Trade

named after M. Tugan-Baranovsky

MODERN PROBLEMS OF INVESTING IN UKRAINE

Ukraine in the context of the global post-industrial transformation and the objective need for innovative models of development, requires major financial investment. In the first place for simple and expanded reproduction, structural reforms, maximize profits and, on this basis, the solution of social problems.

Despite some "revival" of the Ukrainian economy, the scope of investment is in a deeper crisis. There are several obstacles to the development of both domestic and foreign investment.

Foreign investors placing their funds in the country require a system of effective legal guarantees, as well as appropriate institutional arrangements, legal framework which was not formed in national legislation on the stock market and stock companies. Extremely high risk and unpredictability of the Ukrainian stock market makes foreign investors either to gradually withdraw from the investment and leave the Ukrainian market, or switch on the formation of private equity funds.

With regard to domestic investment, the opportunity to freely use the property and income of corporations, presented in the new Law "On Joint Stock Companies", hardly will promote investment in enterprises of this form of management. In addition, the lack of adequate regulation of relations between the manager and joint-stock company, the presence of "decorative" rules in the law that are not backed by determining the mechanisms of conflict of interest and attraction to the violators, further aggravate the suspicion and distrust of investors participating.

Another significant obstacle to the development of investment in Ukraine is the lack of an effective legal framework for the operation of a Ltd. company. Today there are about five hundred thousand Ltd. companies in Ukraine. Their number is constantly increasing due to the numerous joint-stock companies, changed its legal form in connection with the stricter requirements of the Law "On Joint Stock Companies", as well as by tens of thousands of entrepreneurs, whose own experience has convinced them unsuitable for real business needs artificial structures that are «subjects of management», due to the Commercial Code. This suggests that the main prospects for development and investment are concentrated in medium-sized businesses, which represent just a limited liability company. Significant investments may be made by the representatives of European medium-sized businesses that are willing to share technology with the Ukrainian partners in exchange for their share in future profits.

European companies usually prefer Ltd., regarding them as simple and understandable form of cooperation. But the primitive model of the Ukrainian legal company creates a very big risk for investors. In this model party which controls much of the capital, owns almost all the rights, both at the enterprise, and when it is closed. Such a party can unilaterally decide on appointment of the executive body of the company, and other participants will not be able to influence the assignment of controlling member revenues or seizure of company assets.

In this situation, other participants can only ask the Board. But in this case, the possibility of obtaining a fair price for their share of a party is very doubtful. This is caused by the manipulation of financial statements, non-transparent assessment of the property and an annual period allotted for the payment of share value. All this is conducive to mistrust and suspicion between the parties, which are supported by the majority and the existing mechanism of exclusion by the party's decision at a general meeting.