From 2025, the rules governing private enterprises in Ukraine have changed. This was prompted by the repeal of the Commercial Code of Ukraine and the entry into force of Law of Ukraine No. 4196-IX ‘On the Specifics of Regulating the Activities of Legal Entities of Certain Organisational and Legal Forms During the Transition Period and Associations of Legal Entities’, which was adopted on 9 January 2025, came into force on 28 February 2025, and implemented on 28 August 2025. It was from this date that the three-year transitional period began, which will last until 28 August 2028.
For owners of private enterprises, this is not a technical change or a mere formality. Following the launch of the new regime, the old approaches that have been applied to private enterprises for decades are gradually being phased out. In practice, this means that business owners should already be reviewing their corporate model, statutory documents and the way the company is managed. One of the most straightforward and practical solutions for such a transition is to convert a private enterprise into a limited liability company.
The legislator has provided a transition period precisely to allow businesses time to calmly restructure their documents and organisation without leading to disputes, deadlocks or corporate uncertainty.
If you need to reorganize a Private Enterprise into an LLC, contact our lawyers in Kyiv we will help you handle the process quickly, professionally, and without unnecessary risks.
What exactly has changed for private enterprises (hereinafter referred to as PEs)?
The key change is that the PE model no longer appears to be a stable and self-sufficient organisational and legal form for the future. In professional guidance for businesses, the transitional regime is interpreted as follows: during the period up to 28 August 2028, private sector enterprises must bring their articles of association and internal documents into line with the new regulations, and after this deadline, the provisions of Law of Ukraine No. 2275-VIII of 6 February 2018 ‘On Limited Liability and Additional Liability Companies’ (hereinafter referred to as the ‘Law on LLCs’) will apply to their activities, and any provisions of the articles of association that conflict with it will cease to apply. The LLC Law remains in force and has been in effect in its current version since 1 January 2026.
That is why, for many sole traders, the question is no longer: ‘Will anything change?’, but rather: which transition format to choose and when to do so without unnecessary losses.
If the business effectively operates as a traditional private company with one or more owners, conversion to an LLC is usually the most predictable option.
There are four dates in this context that are of practical significance, and it is important to remember them and not miss them:
- 09/01/2025 – Law No. 4196-IX was adopted;
- 28 February 2025 – the law came into force;
- 28 August 2025 – the law was implemented;
- 28 August 2028 – the end of the three-year transition period.
For businesses, this means one simple thing: there is no longer any point in putting things off ‘until later’. The closer we get to the end of the transition period, the greater the technical burden will be on registrars, notaries, banking services and the internal processes of the businesses themselves.
Who is this primarily relevant to?
This issue is relevant to all sole traders planning to continue their activities, enter into new contracts, undergo bank checks, participate in tenders, work with investors, or pass on the business to heirs or change the ownership structure.
This issue is particularly worth raising for companies where:
- the articles of association have not been updated for a long time;
- the management structure is described in a formal or outdated manner;
- there are several co-owners;
- there are plans to bring in a new partner;
- there are licences, significant contracts, leases, loan obligations or a large workforce.
In such cases, converting a sole proprietorship into a limited liability company (LLC) is not merely a ‘change in organisational and legal form’, but a comprehensive reorganisation of the corporate side of the business.
What does the step-by-step conversion of a sole proprietorship into a limited liability company look like?
Legally, conversion is one form of company reorganisation. The Civil Code of Ukraine expressly provides that a legal entity may be dissolved as a result of reorganisation, in particular through conversion, and that its assets, rights and obligations are transferred to the successor. Separately, Article 107 of the Civil Code of Ukraine stipulates that after the expiry of the period for creditors to lodge claims, the liquidation commission draws up a transfer deed, which must contain provisions on succession regarding all rights and obligations.
Below, we will examine how exactly the procedure for converting a private enterprise into a limited liability company takes place, what legal requirements need to be taken into account, and what consequences delaying the process may have.
- Analysis of existing documents and the business model
It is advisable to begin not with submitting documents to the registrar, but with an internal audit. You need to check the private enterprise’s articles of association, the composition of the founders, the director’s powers, the existence of corporate resolutions, the status of contracts, assets, liabilities, licences and employment relationships. It is at this stage that it becomes clear whether the procedure can proceed smoothly, or whether everything needs to be put in order first, and only then should the reorganisation take place.
- Adoption of the decision on transformation
Next, the owner’s decision or the minutes of the general meeting are drawn up, if there are several founders. The decision usually specifies the method of reorganisation, the appointment of the reorganisation committee and its location, the procedure and deadlines for creditors to lodge claims, and the subsequent preparation of documents for the successor entity. State registration of actions relating to legal entities is subsequently carried out in accordance with the provisions of Law of Ukraine No. 755-IV of 15 May 2003 ‘On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations’.
Important. The decision to commence the reorganisation procedure must be submitted to the state registrar or notary within 3 days of its adoption.
- Dealing with creditors and the transfer deed
One of the key stages is the correct formalisation of succession. The transfer deed should not be viewed as a mere formality. It is a document linking the previous and new business models: it must reflect assets, contracts, accounts receivable and payable, employment obligations, disputed issues, as well as other rights and obligations that are subsequently transferred to the LLC. It is at this stage that errors most often arise if the reorganisation is commenced without a prior audit.
- Preparation of documents for the LLC
Following this, the successor’s documents are prepared: the LLC’s articles of association, ownership structure, management procedures, powers of the governing bodies, decision-making rules, provisions regarding a participant’s withdrawal, disposal of shares, significant transactions, and other corporate mechanisms. It is here that the business finally has the opportunity to establish the rules of the game in a way that genuinely suits its needs.
- State registration of changes
The final stage involves registration procedures for the dissolution of the sole proprietorship following the conversion and the formalisation of the successor entity. Here, it is not only legal logic that matters, but also the technical accuracy of the documentation package to avoid rejections, delays or the need for resubmission.
What will happen to contracts, employees, assets and day-to-day business operations?
Owners usually have the most questions not about the registration itself, but about the implications for current operations. Let’s look at this in more detail.
Assets, rights and obligations
The general rule under the Civil Code of Ukraine is as follows: upon reorganisation, assets, rights and obligations are transferred to the successor. This is precisely why a transformation is not the liquidation of a business and a fresh start from scratch, but a legally formalised transition to a new corporate form.
Employment relationships with employees
The Labour Code of Ukraine expressly provides that in the event of a reorganisation, an employee’s employment contract remains in force. Dismissal at the employer’s initiative is possible only in the event of a reduction in the workforce or staff numbers. This means that reorganisation in itself is not grounds for the mass termination of employment relationships with employees.
Contracts, banks, tax authorities, ECI
In practice, once the business reorganisation is complete, it is necessary not only to obtain a new extract from the Unified State Register but also to go through a whole series of updates: checking contracts, notifying key counterparties, updating bank details, the electronic digital signatures of the director and accountant, internal HR documents, contract templates, and sometimes – permits and licences. And it is precisely this aspect that is often underestimated. The registration process for changing the organisational and legal form takes one step, but getting the new limited liability company up and running requires several additional steps.
It is important to emphasise here: one should not automatically assume that any licence or permit will be transferred without further action. This issue must be checked separately according to the type of activity, the terms of the specific licence and the practice of the relevant authority.
What are the risks of doing nothing?
The biggest mistake is to think that 2028 is still a long way off. In reality, procrastination creates very real risks right now. Firstly, the old articles of association may not comply with the regulations that are already beginning to apply to the business. Secondly, owners themselves are postponing the moment when they can bring the corporate structure into a clear and modern form. Thirdly, problems often arise at the very moment when it is necessary to quickly sign an important contract, pass a bank audit, change the director, formalise the sale of a shareholding, or confirm powers of attorney to a counterparty.
Once the transition period ends, businesses will still have to adapt to the new model. The only difference is that now this can be done calmly and in a controlled manner, whereas later it will be done under pressure. Practical guidance for businesses clearly states that, once the transition period ends, the rules of the Limited Liability Companies Act will apply to sole traders, and any conflicting provisions in the articles of association will cease to have effect.
Why do you need a lawyer, an accountant and an HR specialist for such matters?
Converting a sole trader into a limited liability company only looks straightforward at the initial stage. In reality, it is a procedure where corporate law, registration, accounting, employment matters, contractual work and, in some cases, banking and licensing compliance intersect. Mistakes rarely become apparent straight away – they usually come to light once the business has already transitioned to its new form and begins working with a bank, an investor, a notary or a government body.
That is precisely why it is better to view the reorganisation not as a technical change of name, but as the legal structuring of the business for years to come. If done correctly, an LLC becomes not a problem for the owner, but a clear and predictable model for managing the company.
Law Company “First Legal” in Ukraine supports clients at every stage of the reorganisation: from preparing resolutions and documents to state registration and updating the articles of association. Qualified legal, accounting and HR support will help you not only navigate the process without unnecessary complications, but also lay a solid foundation for the company’s stable development within the new corporate environment in Ukraine.