Due Diligence of Large Privatisation Assets in Ukraine
Acquiring a large privatisation asset in Ukraine requires comprehensive legal due diligence. The review begins by confirming that the potential buyer is eligible to participate, assessing sanctions exposure and mapping the ownership structure. It then covers the legal status of the asset, corporate rights, real estate and land, permits, environmental risks, merger control, foreign-exchange rules and the sale and purchase agreement. The scope depends on what is being sold: a share package or interest, a unified property complex, or another large privatisation asset.
This overview is intended for Ukrainian and foreign investors, investment funds, international companies and legal teams considering participation in large privatisation in Ukraine.
1. Legal Framework for Large Privatisation
2. Large Privatisation Assets and Threshold
3. Buyer Eligibility
4. Sanctions and Aggressor State Restrictions
5. Foreign Investors and Required Documents
6. Large Privatisation Procedure
7. Information Package and Virtual Data Room
8. Corporate Due Diligence
9. Real Estate and Land
10. Environmental Risks
11. Permits and Sector Licences
12. AMCU Merger Control
13. Currency Controls
14. Financial, Tax and Labour Obligations
15. Sale and Purchase Agreement and Obligations After Closing
16. Practical Due Diligence Checklist
Frequently Asked Questions
How DLF Can Help
1. Legal Framework for Large Privatisation
The principal statute is the Law of Ukraine “On Privatisation of State and Municipal Property” No. 2269-VIII. It defines large privatisation assets, buyer eligibility, the sale procedure, payment rules, execution of the sale and purchase agreement and post-sale monitoring.
Auctions are conducted through the ProZorro.Sale electronic trading system. During martial law, the special rules in Section 5 of the Privatisation Law and the applicable Cabinet of Ministers regulations also apply.
Due diligence must therefore cover both the general statutory framework and the transaction-specific sale conditions, which may impose investment, employment, debt-repayment or other obligations on the buyer.
2. Large Privatisation Assets and Threshold
Under Article 5(3) of the Privatisation Law, large privatisation covers assets in state or municipal ownership, including unified property complexes of state enterprises, share packages or interests in undertakings in which the state holds more than 50%, and pools formed from several privatisation assets. The asset value shown in the financial statements for the most recent reporting year must exceed UAH 250 million; for a pool, the aggregate asset value of the assets forming the pool is used.
The list of state-owned large privatisation assets and the sale conditions for each asset are approved under the statutory procedure. Transaction structure matters for due diligence because an acquisition of shares or an interest and an acquisition of a unified property complex have different legal consequences.
Large-privatisation auctions resumed in electronic form in 2024. The Hotel Ukraina, for example, was sold at the first online large-privatisation auction for more than UAH 2.5 billion against a starting price of approximately UAH 1.05 billion.
3. Buyer Eligibility
Article 8(2) of the Privatisation Law currently contains 14 categories of persons and entities that may not act as privatisation buyers. They include:
- Ukrainian state authorities;
- state enterprises owned by the State of Ukraine;
- state economic associations, state holding companies, state joint-stock companies and their subsidiaries and enterprises;
- employees of state privatisation bodies;
- buyers registered in offshore jurisdictions with opaque ownership structures, and buyers originating from the aggressor state within the meaning of points 6–8 of Article 8(2) of the Privatisation Law;
- a state recognised by the Verkhovna Rada of Ukraine as an aggressor state, legal entities in which that state participates, and persons controlled by such legal entities;
- legal entities whose beneficial owners holding 10% or more of the shares or interests are residents of the aggressor state, subject to the statutory exception for certain publicly traded companies;
- individuals who are citizens and/or residents of the aggressor state;
- legal entities registered in jurisdictions included by FATF on the list of non-cooperating jurisdictions, and legal entities in which 50% or more of the share capital is directly or indirectly owned by such persons;
- legal entities that have failed to disclose ultimate beneficial ownership information in breach of the applicable legislation;
- natural and legal persons subject to sanctions under the Law of Ukraine “On Sanctions”, and related persons;
- persons that were parties to the sale of a privatisation asset in Ukraine whose sale and purchase agreement was terminated because of their breach, and related persons;
- persons included in the Register of persons with significant economic and political weight in public life (oligarchs) under Law No. 1780-IX;
- legal entities subject to the additional non-financial criminal-law measure provided for in Article 96-10-1(1)(3) of the Criminal Code of Ukraine, for the period specified in the court decision;
Before filing an application, the potential buyer itself and, depending on the relevant restriction, its ownership chain, controllers, UBOs and related persons should be screened.
4. Sanctions and Aggressor State Restrictions
Buyer-eligibility screening includes sanctions restrictions. Sanctions should nevertheless be reviewed as a separate compliance workstream: Article 8 of the Privatisation Law excludes sanctioned persons and certain related persons from the buyer pool, while the Law of Ukraine “On Sanctions” separately provides for a prohibition on participation in privatisation as a possible sanction.
The current version of Cabinet of Ministers Resolution No. 187 of 3 March 2022 should also be reviewed. It imposes a moratorium on certain transactions involving persons connected with the Russian Federation, while providing exceptions and special rules. Its application should be assessed in light of the structure of the particular transaction rather than by reference to a single ownership interest.
In addition to Ukrainian sanctions, an international investor should review any applicable EU, US and UK sanctions regimes where this is required by the group structure, sources of financing, banking requirements or internal compliance policies.
5. Foreign Investors and Required Documents
Foreign individuals and legal entities may act as buyers on the same general basis as Ukrainian buyers if none of the Article 8 restrictions of the Privatisation Law applies. Article 14 of the Privatisation Law specifies the documents that a foreign legal entity must submit with its application for large privatisation. These include, in particular, a document evidencing the foreign legal entity’s registration (for example, an extract from a commercial, banking or court register), duly certified in accordance with the law of the issuing state and translated into Ukrainian; UBO information or an explanation of the absence of a UBO; the latest annual or quarterly financial statements; and evidence of payment of the guarantee deposit and registration fee. The applicant must also provide written consent to assume the obligations set out in the sale conditions.
UBO information must comply with the requirements of the Law of Ukraine “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations”. A bank or the conditions of a particular sale may require additional evidence concerning source of funds, sanctions status or the ownership structure.
Regulated sectors may also require separate change-of-control approvals or other sector-specific clearances. Ukraine currently has no single statutory cross-sector foreign investment screening regime that replaces those sector-specific checks.
6. Large Privatisation Procedure
The electronic-auction procedure for large privatisation is governed by the Privatisation Law and Cabinet of Ministers Resolution No. 183 of 21 February 2023. Once the sale conditions are approved, the privatisation authority must publish the information notice within 10 working days.
The first auction is held no earlier than 60 days and no later than 90 days after publication of the information notice. A potential buyer files its application and the documents required by Article 14 of the Privatisation Law and the transaction-specific sale conditions through the electronic system.
The guarantee deposit for a large privatisation asset is 5% of the starting price; a bank guarantee may be provided instead of a cash deposit. The registration fee is determined under the rules applicable to large privatisation.
The auction winner must pay the sale price within 30 working days from the date on which the auction results protocol is generated. After full payment, the sale and purchase agreement must be executed within 35 working days from that date. The starting price is set by the auction commission under Article 22 of the Privatisation Law and the special rules applicable during martial law.
7. Information Package and Virtual Data Room
The information package contains data on the enterprise or company, its financial condition and other information determined by the privatisation authority. For large privatisation, access to part of that information may be subject to confidentiality arrangements.
In practice, potential buyers may receive additional materials through a virtual data room (VDR). Its contents are transaction-specific, so a VDR should not be treated as a substitute for independent verification of public registers, litigation, tax data, real-estate rights, licences and permits.
8. Corporate Due Diligence
Corporate due diligence starts by identifying the structure of the asset being sold. If the asset is a share package or interest, the buyer acquires corporate rights in an existing legal entity, while the company continues with its assets, contracts, debts, disputes and other liabilities. A unified property complex is subject to the succession rules in the Privatisation Law and the sale agreement.
The review covers the constitutional documents, the size and composition of the share package or interest, encumbrances, corporate approvals, reorganisation history, the ownership structure and UBO information.
The Article 12 restrictions of the Privatisation Law during preparation for privatisation should be reviewed separately. Prior approval from the privatisation authority is required, among other things, for transactions and business commitments whose value exceeds 10% of the asset value of the enterprise and/or company, credit and loan agreements, encumbrances over property, certain corporate actions and workforce reductions. Transactions entered into without the required approval are invalid where Article 12 so provides.
9. Real Estate and Land
Real estate rights and encumbrances should be reviewed under the Law of Ukraine “On State Registration of Real Rights to Immovable Property and Their Encumbrances” and the State Register of Real Rights. For each property, the buyer should verify ownership, registered real rights, mortgages, attachments, prohibitions on disposal and other encumbrances. Rights arising before the current registration system was introduced require separate analysis.
Land plots should be reviewed separately from buildings. The buyer should verify cadastral data, land category, the type of land right and its term. The Land Code of Ukraine imposes special restrictions on agricultural land and on corporate rights in legal entities that own such land.
10. Environmental Risks
Environmental due diligence depends on the transaction structure. In a share acquisition, environmental obligations remain with the same legal entity. In an acquisition of a unified property complex, succession and the allocation of liabilities must be assessed separately under the law and the sale agreement.
The general framework is set by the Law of Ukraine “On Environmental Protection”. Industrial assets may also fall within the integrated industrial pollution prevention and control regime, so the review should cover any integrated environmental permit, air-emission permits, special water-use permits, waste-management requirements and subsoil-use rights.
The practical review should also address enforcement history, fines, possible soil or groundwater contamination, outstanding remediation measures and the costs that may arise after acquisition.
11. Permits and Sector Licences
A target may hold licences and permits in energy, banking, defence, media, telecommunications, subsoil use or other regulated sectors. There is no single rule governing the effect of privatisation on all licences.
In a share acquisition, the licence holder will usually remain the same legal entity, although a change of control or UBO may trigger notification or prior-approval requirements. An acquisition of a unified property complex may require permits to be reissued or new permits to be obtained. Each licence should therefore be reviewed under the relevant sector legislation.
12. AMCU Merger Control
An acquisition of control over a privatisation asset may constitute a concentration under the Law of Ukraine “On Protection of Economic Competition”. The UAH 250 million large-privatisation threshold does not itself determine whether prior AMCU clearance is required; the merger-control rules must be assessed separately.
Article 24 of the Law of Ukraine “On Protection of Economic Competition” sets two principal financial thresholds. The first is met where the combined worldwide asset value or turnover of all concentration participants, taking control relationships into account, exceeds EUR 30 million and the asset value or turnover in Ukraine of at least two participants, also taking control relationships into account, exceeds EUR 4 million for each. The second is met where the asset value or turnover in Ukraine of at least one concentration participant, taking control relationships into account, exceeds EUR 8 million and the worldwide turnover of at least one other participant, also taking control relationships into account, exceeds EUR 150 million. Separately, Article 20 of the Privatisation Law provides that AMCU clearance is not required where the value of the privatisation target’s assets, taking control relationships into account, its turnover in Ukraine and the sale price each do not exceed EUR 4 million. Exceeding that EUR 4 million level does not by itself trigger a filing; the general Article 24 thresholds must still be met.
Where AMCU clearance is required, it must be obtained before the concentration is implemented. The financial thresholds should therefore be assessed before bidding so that the AMCU filing can be integrated into the auction and closing timetable.
13. Currency Controls
A non-resident may pay the privatisation price in hryvnia or freely convertible currency under the Law of Ukraine “On Currency and Currency Operations” and Article 23 of the Privatisation Law. If payment is made in foreign currency, the amount is calculated using the NBU official exchange rate on the date the sale and purchase agreement is executed.
At the same time, wartime foreign-exchange restrictions remain in force, with NBU Board Resolution No. 18 of 24 February 2022 as the core instrument. The resolution has been amended repeatedly, so the acquisition funding structure, payment arrangements with the servicing bank and any subsequent outbound transfers should be checked immediately before the relevant transaction.
14. Financial, Tax and Labour Obligations
Financial and tax due diligence should go beyond the information package. The buyer should review financial statements, tax debt, trade payables, intercompany transactions, tax audits, enforcement proceedings and potential off-balance-sheet liabilities.
Employment obligations may be included in the sale conditions for a particular asset. In addition, the Privatisation Law generally prohibits dismissals of employees of the privatised enterprise at the initiative of the new owner or its authorised body for six months after title passes, except where the asset is privatised through a sale without conditions.
15. Sale and Purchase Agreement and Obligations After Closing
The sale and purchase agreement must reflect the transaction-specific sale conditions. For large privatisation, it may include seller warranties concerning disclosed information on the privatisation asset and/or the undertaking whose shares or interests are being privatised, as well as existing or potential encumbrances over the asset or the undertaking’s property. The agreement may also provide for liability for the completeness and accuracy of that disclosure.
As a general rule, the period for performance of contractual obligations may not exceed five years unless the Privatisation Law permits another period. Until the sale conditions are fully performed, disposal of the privatised asset or part of it and, where the asset is a share package or interest, disposal of the relevant company’s real estate is permitted only with the consent of the privatisation authority responsible for monitoring performance of the agreement. Outstanding obligations pass to a subsequent acquirer in the cases provided by the Privatisation Law.
The buyer should also take account of the one-year restriction on opening bankruptcy proceedings on grounds that arose before completion of privatisation. During martial law, a special three-month limitation period from execution of the agreement applies to a claim seeking invalidation of a privatisation sale agreement. Article 30 of the Privatisation Law provides a three-year limitation period for a claim seeking invalidation of the results of large privatisation.
16. Practical Due Diligence Checklist
Before Bidding
- screen buyer eligibility against all current restrictions in Article 8 of the Privatisation Law;
- check sanctions and the applicability of CMU Resolution No. 187;
- map the ownership chain to the UBOs and identify control relationships;
- assess whether AMCU merger clearance is required;
- review the transaction-specific sale conditions, information package and VDR access;
- confirm the acquisition funding structure and banking arrangements for the payments;
Before Signing the Sale and Purchase Agreement
- verify the corporate rights or the composition of the unified property complex depending on the sale structure;
- review real estate, land and encumbrances;
- complete a licence and permit inventory;
- review environmental, tax, employment and litigation risks;
- check compliance with Article 12 of the Privatisation Law during preparation for privatisation;
- compare the draft agreement with the sale conditions, seller warranties and performance periods;
After Closing
- implement internal monitoring of investment and other contractual obligations;
- comply with any AMCU conditions attached to the merger-control decision;
- monitor permits, environmental and employment requirements;
- retain the records required for SPFU monitoring of the sale agreement;
- check current foreign-exchange rules before any cross-border payment;
Frequently Asked Questions
What is a large privatisation asset in Ukraine
Large privatisation covers the assets specified in Article 5 of the Privatisation Law where the asset value shown in the latest annual financial statements exceeds UAH 250 million. The category may include unified property complexes, share packages or interests, and pools.
Can foreign investors participate in large privatisation
Yes. Foreign individuals and legal entities may act as buyers if none of the restrictions in Article 8 of the Privatisation Law applies and they submit the documents required by the Privatisation Law and by the conditions of the particular auction.
Does the buyer acquire an asset free from pre-existing risks
No. In a share acquisition, the legal entity continues with its debts, litigation, environmental exposure and regulatory risks. For a unified property complex, succession under Article 28 of the Privatisation Law and the sale agreement must be analysed separately.
Is AMCU clearance always required
No. Clearance is required only where the transaction constitutes a concentration and the applicable criteria are met. The UAH 250 million large-privatisation threshold does not itself create a merger-control filing obligation.
What are the payment and contract deadlines
For a large privatisation asset, the sale price is payable within 30 working days from the date on which the auction results protocol is generated. After full payment, the sale and purchase agreement must be executed within 35 working days from that date.
What obligations can continue after closing
The agreement may contain investment, employment, debt-repayment and other transaction-specific conditions. The privatisation authority monitors compliance, and any subsequent disposal before full performance is permitted only with its consent.
How DLF Can Help
DLF attorneys-at-law advises foreign investors, investment funds and international companies at every stage of large privatisation in Ukraine, from buyer-eligibility and sanctions checks and preparation of the participation package to legal due diligence, SPA negotiations and monitoring the performance of obligations after closing.
For related matters, DLF also advises on corporate structuring and M&A, AMCU merger control and privatisation.
Igor Dykunskyy, LL.M., Partner, Attorney at DLF attorneys-at-law
Contacts: +380 44 384 24 54, info@dlf.ua.
This material is intended for general information. The application of the approaches described depends on the circumstances of the particular transaction and requires a separate legal assessment.