Joint venture in Ukraine’s defence sector
Before substantive technical negotiations with a foreign partner, the partnership model should be determined, a corporate agreement should be prepared, the possibility of Defence City residency should be checked and Brave1 programmes should be assessed. In parallel, it is necessary to check whether the product, documentation, software or technical consultation falls under the state export control regime. If so, demonstration, transfer of drawings or technical assistance to a foreign party will require a permit or conclusion from the State Service for Export Control of Ukraine.
This article is intended for foreign defence companies, investors, manufacturers, and legal and business teams considering partnerships with Ukrainian military-technical and defence-industrial companies. The information provided is general in nature and does not constitute legal advice on any specific transaction.
Introduction
Key tools for preparing a partnership
1. SSECU permit before technical negotiations
2. Corporate agreement in a joint venture
3. Partnership model: equity participation, new LLC, investment agreement or licence
4. Protection of foreign investment in Ukraine
5. Defence City, Brave1 and state support instruments
6. Practical steps for a MilTech founder
Frequently asked questions
How DLF can help
For a foreign partner, participation in a Ukrainian defence development means access to engineering expertise, technology and practical combat feedback. For a Ukrainian MilTech company, such a partnership requires careful legal preparation.
Technical information in the defence sector may be regulated even before an investment agreement is signed. A founder therefore needs to work with export control, corporate structure, intellectual property protection, tax regimes and state support programmes at the same time.
Key tools for preparing a partnership
| Tool | What it solves | Key point |
|---|---|---|
| SSECU permit or conclusion | Legality of technical exchange with a foreign party | The filing should precede disclosure of regulated technical information |
| Corporate agreement | Governance, voting, shares, exit and deadlock | It should be prepared before or in parallel with transaction structuring |
| Partnership model | Entry into capital, a new company, an investment agreement or a licence | The choice of model affects control, taxes, intellectual property and access to Defence City |
| Defence City | Tax incentives and a special regime for defence industry enterprises | A Ukrainian legal entity and compliance with residency criteria are required |
| Brave1 | Grants, cooperation, testing and access to the defence-tech ecosystem | Participation conditions depend on the specific programme or competition |
1. SSECU permit before technical negotiations
The first legal threshold is not the signing of the main agreement, but the moment technical information is disclosed. If a product, software, documentation or consultation relates to military or dual-use goods, the law on state control over international transfers applies.
The general law on technology transfer does not replace the export control regime for the defence sector. In practice, even a preliminary technical meeting with a foreign partner may require a separate assessment.
What may constitute a transfer
A transfer may involve more than the physical movement of an item across the border. Risk may also arise when technical data is transmitted, functionality is demonstrated, advice or training is provided, documentation is shared, repository access is granted or product parameters are discussed with a foreign person. A non-disclosure agreement or memorandum does not replace the permitting regime if the information itself is controlled.
| Type of permit / conclusion | When it applies | Typical term |
|---|---|---|
| Individual | One specific transaction or one defined technical exchange | Up to 1 year |
| General | Repeated transfers to defined recipients | Up to 3 years |
| Open | Multiple transfers within defined countries or categories of recipients | Up to 3 years |
The review period depends on the type of operation, completeness of the documents and the need for interagency approval. For this reason, the permitting block should be planned in parallel with commercial negotiations, not left until the signing stage.
Violation of the procedure for international transfers of goods subject to state export control may create a risk of criminal liability.
Practical takeaway: an SSECU permit or conclusion is a prerequisite for the first regulated technical exchange, not merely a condition for future export.
2. Corporate agreement in a joint venture
A memorandum of understanding or term sheet is useful for recording intentions, but it does not replace a corporate agreement. For a Ukrainian limited liability company, it is the corporate agreement that makes it possible to establish rules for governance, voting, financing, exit from the business and protection against dilution.
The Law on Limited and Additional Liability Companies defines a corporate agreement as a written agreement under which participants exercise their rights in a certain way or refrain from exercising them. The company itself and third parties may also be additional parties. The law also allows the parties to choose the law governing the corporate agreement, subject to the rules of private international law.
In a joint venture with a foreign partner, the corporate agreement should usually cover the following blocks:
- composition of governing bodies, the procedure for appointing the director and the list of matters requiring investor consent;
- financing mechanism, additional contributions, options, anti-dilution protection and KPIs;
- procedure for transferring shares, pre-emptive rights and prohibition on uncontrolled entry of third parties;
- intellectual property regime, access to technical documentation and confidential information;
- deadlock, partner exit, buyout of a share, governing law and dispute resolution procedure.
Practical takeaway: the corporate agreement should be prepared before or in parallel with transaction structuring. If exit, control and technology rights are left “for later”, the joint venture may face a legal conflict even before the first financing round.
3. Partnership model: equity participation, new LLC, investment agreement or licence
Ukrainian law does not prescribe a single model for partnership with a foreign investor. Under the law on investment activity, the parties may determine the terms of their cooperation in an agreement, provided that the model complies with the law and special regulatory requirements.
For a MilTech company, several models are used in practice:
- entry of the foreign partner into an existing LLC — faster structuring, but due diligence, a corporate agreement and an assessment of the impact on the permitting regime are required;
- establishment of a new joint LLC — a separate operating platform with new governance, contributions and an intellectual property management regime;
- investment agreement without immediate entry into capital — financing may be linked to development, testing or codification milestones;
- venture model with phased entry — the share or option depends on the achievement of KPIs, delivery of prototypes or receipt of state decisions;
- licence or R&D agreement — appropriate where the partner needs access to technology, but this model is particularly sensitive from an export control perspective.
Jurisdiction should be assessed separately. If the joint venture is established abroad, the foreign legal entity itself will not be able to obtain Defence City resident status. A Ukrainian operating company may preserve this possibility if it meets the residency criteria. At the same time, export control requirements do not disappear merely because the agreement is signed with a foreign company or governed by foreign law.
Practical takeaway: the partnership model should be chosen not only based on tax or investment logic. In the defence sector, control over technology, the permitting regime, intellectual property, sanctions restrictions and future access to state programmes are decisive.
4. Protection of foreign investment in Ukraine
The Law on the Regime of Foreign Investment establishes basic guarantees for foreign investors, including protection against nationalisation, the right to compensation for losses in cases prescribed by law and the possibility to repatriate profits after payment of taxes.
Such guarantees are important for an investment presentation, but they do not resolve all practical issues. Under martial law, transfer of funds abroad may depend on the current currency regulation of the National Bank of Ukraine, the payment structure, the purpose of the transfer and documentary confirmation of the transaction.
Political risk insurance may be an additional instrument. MIGA and other international institutions are expanding guarantee instruments for Ukraine, but the applicability of such coverage to a specific defence investment should be checked separately.
Practical takeaway: investment guarantees are an important argument for a partner, but for a defence project they should be supplemented by the correct corporate structure, currency analysis, sanctions screening and contractual protection.
5. Defence City, Brave1 and state support instruments
A partnership with a foreign investor should be structured with state support instruments for the defence sector in mind. The two key areas are Defence City and Brave1.
Defence City
Defence City is a special legal framework for defence industry enterprises. It applies until 1 January 2036 or until Ukraine accedes to the EU, whichever occurs earlier. The basic rules were introduced by special amendments to tax and sectoral legislation.
The main advantages of the regime include exemption of profit from corporate income tax subject to targeted reinvestment, benefits for certain property and land taxes, restrictions on access to sensitive information in public registers, and special administrative mechanisms for residents.
The key residency condition is the share of qualifying income: at least 75% of total income, and at least 50% for aircraft manufacturers. Ukrainian company registration, ownership structure, absence of debt and other criteria established by law are also relevant.
It is important to distinguish between the physical export of goods and technology transfers. The law provides that developers and manufacturers of military goods with Defence City resident status may export such goods without obtaining the authorisation provided for in Article 13 of the export control law. However, this does not mean an automatic exemption from control over the transfer of technical data, software, documentation, consultations or technical assistance to foreign persons.
Related article: Defence City: legal framework for the defence industry in Ukraine
Brave1
Brave1 is a state defence technology platform through which Ukrainian teams can receive grants, submit developments, participate in technology competitions and interact with partners. For an international partnership, not only grants matter, but also the opportunity to enter a defence-tech ecosystem that is understandable to a foreign partner.
Relevant international instruments include:
- UNITE – Brave NATO — a programme with EUR 10 million in contract awards for teams of Ukrainian and allied companies;
- EU4UA Defence Tech — a EUR 3.3 million EU grant programme implemented by BRDO in partnership with Brave1 from September 2025 to February 2027.
Practical takeaway: Brave1 is useful for technology cooperation and grant opportunities, while Defence City is intended for a mature manufacturer that needs a tax and administrative regime. Both instruments make sense only after the eligibility of the specific company has been checked.
6. Practical steps for a MilTech founder
Legal preparation for a partnership should proceed in parallel with commercial negotiations. The sequence of steps may be as follows:
- Check the product and technical information for coverage by the export control regime. It is necessary to understand whether the item itself, software, drawings, technical data or consultations are controlled.
- Determine whether an SSECU permit or conclusion is required. Until a legal position is obtained, technical materials that may be controlled should not be transferred to the foreign party.
- Prepare the transaction structure. It is worth comparing entry into an existing LLC, establishment of a new joint LLC, an investment agreement, a venture model and a licence agreement.
- Develop the corporate agreement. It should cover governance, financing, shares, intellectual property, exit, deadlock and restrictions on transfer of rights.
- Assess Defence City. If the company has a sufficient share of qualifying defence income, the regime may significantly affect the tax and corporate structure.
- Assess Brave1 and international grants. This may be a separate track for cooperation with the partner, product testing or grant financing.
- Conduct sanctions, KYC and intellectual property checks on the partner. In the defence sector, this should be not a formal check, but a condition for starting substantive negotiations.
Frequently asked questions
Can a technical demonstration for a foreign partner be considered a transfer?
Yes, if the demonstration discloses controlled technical information, parameters, documentation, software or other data necessary for the development, production or use of military or dual-use goods. In that case, a prior assessment of the export control regime and, where necessary, an SSECU permit or conclusion are required.
Is a non-disclosure agreement sufficient before a technical meeting?
No. A non-disclosure agreement protects confidentiality between the parties, but it does not replace state export control requirements. If the information is controlled, its transfer to a foreign person may require a permit regardless of whether a non-disclosure agreement exists.
How does a corporate agreement differ from a memorandum?
A memorandum usually records the parties’ intentions and the negotiation framework. A corporate agreement establishes binding rules for the exercise of corporate rights: voting, governance, transfer of shares, options, exit, deadlock and confidentiality.
Who can obtain Defence City resident status?
The status may be obtained by a Ukrainian legal entity that meets the statutory criteria, including the share of qualifying defence income, ownership structure, tax discipline and other requirements. A foreign company as such cannot obtain Ukrainian Defence City residency.
Does Defence City exempt all technology transfers from permits?
No. The regime provides a separate simplification for the export of military goods, but it does not cancel the need to analyse the transfer of technical data, software, documentation, consultations or technical assistance to foreign persons.
Which grants may be relevant through Brave1?
As at the date of this version, relevant instruments include UNITE – Brave NATO and EU4UA Defence Tech. Participation conditions, technology areas and submission deadlines should be checked against the current rules of the specific competition.
How DLF can help
DLF attorneys-at-law advises Ukrainian MilTech companies and defence industry enterprises on structuring investment partnerships, export control, corporate agreements, Defence City, Brave1, intellectual property and legal support from term sheet to transaction closing.