Ukraine: Merger Regulation Update: Key Insights and Implications

Published on Feb 11, 2024

Following the recent competition law reform, the Antimonopoly Committee of Ukraine (the AMC) has made substantial efforts to adapt its internal regulations accordingly. Notably, the AMC has revised its Regulation on Concentration, which governs submission of merger filings and outlines the key rules regarding the local merger clearance regime. This updated Regulation on Concentration came into effect on 16 February 2024. It not only reaffirms and clarifies provisions of the recently revised competition legislation but also introduces several novel elements. Here are the main points and key takeaways:

  • New thresholds: The amended Regulation on Concentration restates and clarifies the thresholds and rules introduced with the amendments to the competition law on January 1, 2024. It is important for parties and their legal advisors to note that the updated rules expand the scope of the merger control regime. Now, even if the acquirer has assets or turnover of EUR 8 million in Ukraine alone, a merger must be filed if the target group (subject to group definition depending on Business Activity in Ukraine cited below) has a global turnover of at least EUR 150 million. New tests are as follows:

Test 1:

  • Assets or turnover in Ukraine of at least two parties exceed EUR 4 million, and
  • Combined global assets or turnover of all parties exceed EUR 30 million.

Test 2:

  • Assets or turnover in Ukraine of at least one party exceed EUR 8 million, and
  • Global turnover of at least one other party exceeds EUR 150 million.
  • Business Activity in Ukraine: The updated Regulation on Concentration confirms that when calculating the filing threshold, the seller’s turnover in Ukraine is disregarded if the target has no assets in Ukraine and has not conducted any business activities in Ukraine during the last two fiscal years and the current year. However, the term “business activities in Ukraine” is not explicitly defined, leaving room for broad interpretation. According to the Commercial Code of Ukraine, this term includes various activities beyond just economic activity, including purchases from Ukrainian businesses, production in Ukraine, and even non-commercial or non-profitable activities.

At this point it is clear that if the target entity sold or purchased any products or services (even a negligible one-off supply to/from only one customer/supplier in Ukraine) during the indicated period, the AMC will consider this as “business activity in Ukraine.”

  • Calculation of JV’s financial indices: When calculating the financial indices of a JV, the controlling partners must attribute an equal share of the turnover and assets for each controlling parent, regardless of the percentage of their shares or votes, held. For example, if there are four controlling JV partners holding 40%, 30%, 20%, and 10% of shares and votes respectively, 25% of the JV’s turnover and assets must be attributed to each of the controlling partners. However, when calculating the financial indices of the JV itself (e.g, when the JV is a direct acquirer), the turnover and assets of its controlling JV partners are still fully attributed to the JV.
  • Acquisition of non-controlling minority stakes: According to the updated Regulation on Concentration, acquiring non-controlling stakes, resulting in less than 50% of a target’s voting rights, will no longer be treated as a separate category of concentration and will not require a merger filing in Ukraine.

However, it is crucial to ensure that the transaction does not involve clauses like non-compete or exclusivity agreements affecting Ukraine, including temporarily occupied territories, as such arrangements require a separate AMC approval for concerted practices. Some deals may include separate acquisitions or leasing of assets that should be carefully reviewed. Also, it is wise to double-check if acquiring minority shareholdings does not actually result in gaining control under the new Ukrainian competition law.

  • Post-closing filings: For regular pre-merger filings, group of undertaking is still determined at the date of submission of merger application to the AMC. However, for post-closing filings, group of undertakings is now determined at the date of closing the reportable merger.

In conclusion, these updates to Ukraine’s merger regulation mark another significant shift in the country’s competition law landscape. It is important for businesses and their legal advisors to grasp the nuances of these changes to ensure compliance and navigate future transactions successfully. For further guidance or assistance in understanding how these updates may impact your transactions, do not hesitate to contact any of Valentyna Hvozd, Maksym Nazarenko, Vladimir Sayenko or Oleksandr Nagorny for expert counsel and support. Our experienced team is here to help you navigate the complexities of Ukrainian competition law and safeguard your and your client’s interests.