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PhD, Counsel, EXPATPRO Law Firm
Tetiana Yashchenko specializes in corporate law and business administration.
Head of Corporate BA, Accountancy. Tetiana deals with most issues related to employment, work permits for foreigners in Ukraine. She specializes in legal consulting on mergers and acquisitions, business registration, reorganization and structuring (both internal and international) as well as providing legal support for the current business activity of clients in Ukraine (specifically for the Digital and IT sphere).
Tetiana Yashchenko graduated from Taras Shevchenko National University of Kyiv; Law department; Master of Law, Ph.D. in Law.
Business Relocation Process
Business growth is one of the key goals for a manager. Creating a cost-efficient structure and stable business environment is essential. Opening new branches and departments is a challenge for any business. However, moving the working structure from one country to another involves much more difficult issues.
2020 reshaped and greatly affected the way in which business structures and operations are organized. Due to the political situation in the Republic of Belarus, local companies decided not only to protect the assets of companies and investors but staff as well. Therefore, we faced a complex request, namely business relocation.
The business relocation process is unique as there is basically no time for consideration — it is already operating, there are employees, income, and costs that need to be placed into a different jurisdiction. And we need to take cognizance of the fact that the business is already in operation, and any delays can cause damages and losses.
EXPATRPO law firm is experienced in relocating foreign specialists to Ukraine for local IT, energy companies, etc. Our team of specialists in labor and migration law assisted in the process so that highly-qualified specialists had no worries about the process and could concentrate on their work.
However, business relocation is a challenge for managers, lawyers, accountants, who need to organize and complete the change in legal structure, operational routine in a way that will have a minimal impact on the work of employees, as one of the essential features of this form of moving the business is the goal of retaining the foreign specialist team and arrange their transfer to a new country.
Obtaining work permits, bank account opening, temporary residence permits for employees and their families — that is the part of the business relocation process that had to be transformed from an individual service into a huge project, where each case is unique.
It is obvious, that most business relocation requests were originated from the Republic of Belarus and there are many still in progress.
We divided the full relocation process into three stages:
1) establishing the legal grounds for relocation;
2) supporting staff relocation;
3) relocating assets.
The first stage requires that the team gets grounded research in corporate, tax, and civil legislation. Basically, lawyers thoroughly check whether the registered business can be easily transferred to Ukraine. There is no unified legal act on companies in Ukraine, therefore a number of legal acts will be checked: Laws of Ukraine On Joint Stock Companies, On Companies with Limited and Additional Liability, On Business Associations, Civil Code of Ukraine, Commercial Code of Ukraine, double taxation avoidance treaties.
It is also necessary to know whether there are any specific regulations in Ukraine regarding the types of activities that the foreign business entity plans to perform (such as the special requirement made of construction documents (On Collective Investment Institutions), to managers; regulation regarding requirements for obtaining special licenses or permits (On Financial Services and Financial Services Markets, Tax Code of Ukraine).
Full business relocation is easier for those structures which, in fact, provide services at a distance (designers, engineers), whose main asset is IP and the team. Moreover, Ukraine creates good terms for highly-qualified specialists: employers can obtain work permits (as well as residence permit) for IT specialists, for professionals in the arts, on special terms. Besides, Ukraine has recently provided special quotas for highly-qualified IT specialists, and they can get permanent residence permits in Ukraine.
Furthermore, it is easy enough for a foreign citizen to become an individual entrepreneur in Ukraine, which in some cases helps to save original contracts with foreign specialists, with only minor changes in details.
Each point makes Ukraine attractive as a new base for a business, particularly in IT.
It is worth noting that a local accountant has to be involved at the first stage as well — there are distinctive local features in bookkeeping and tax reporting.
Changes in the payment schedule (tax reporting and taxpaying terms) may affect the initial business plan. This should, therefore, be agreed upon before approving the final roadmap for relocation.
The second stage is to prepare the grounds for staff relocation. This involves deep knowledge of the Labor Code of Ukraine, the Law of Ukraine On Employment of the Population, On the Legal Status of Foreigners and Stateless Persons, and a number of resolutions of the Cabinet of Ministers of Ukraine.
Obtaining all the documents for employees requires strict adherence to a schedule and control of deadlines for preparing and filing the notifications to state authorities, payments of state fees, a timely application for visas, and legal paperwork.
Due to the peculiarities of this stage we advise splitting it into 2 parts:
A) obtaining work permits and employment (which is fully performed by employers and their authorized representatives);
B) obtaining documents on the legal status of employees (the immigration stage).
Part A requires actions from the employer’s side: all the applications, notifications, and state fees are completed by the legal entity.
Here it is extremely important to be attentive to the deadlines for each action — application, reply (in case the State Employment Center discovers a mistake or missing document), paying the state fee, signing the employment contract, and providing a copy of the signed contract to the relevant Employment Center. Each action and deadline is specified in the Law of Ukraine On the Employment of the Population. And failure to comply with the law leads to the work permit’s cancellation (irrespective of the stage at which the breach of the law occurred).
This is extremely important, as the work permit is the ground for the D-type visa (if applicable) and a temporary residence permit for the employee. The termination of the work permit leads to automatic revocation of all the subsequent documents received on its basis.
Part B requires the personal presence of the applicants — foreign employees. Thorough knowledge of the details of each foreign employee regarding their family status can save time in the future: some papers (i.e., birth, marriage certificates) will be requested in the middle of the process (usually, family members of the employee apply for the residence papers by virtue of the family’s reunification).
Hence, here it is necessary to plan and support each application individually.
The third stage covers changes in financing, modifications in contracts, and, if applicable/required, contracts for work performed or services rendered.
With IT companies, it is crucial to comply with data protection, non-compete policies, IP rights transfer.
The scope of work at this stage depends on the type of business the relocating company is expected to run in Ukraine, whether it will be a holding or operating company, what costs this company will have, what funding is required and its amount, what legal ties this local company will have with the previous company. Most certainly thorough work at the first stage enables speedy completion of changes here.
Recent requests for business relocation are mostly from the Republic of Belarus, and this has really influenced the process: we have pretty similar legal systems, many of the rules are quite similar and business models can be implemented in Ukraine with a few changes and losses. All this made the process of business relocation as easy as possible.
To sum up, the business relocation process is a complex legal service aimed at full changing the firm’s business jurisdiction, combined with resettlement of the team. This involves the work of lawyers with different specializations: corporate, tax, employment, migration, specialists in tax and financial planning, accountants. Extreme scrutiny of the existing business model and the possibility of integration into the Ukrainian legal system, timing, and personal care of each team member to be relocated are the key instruments to complete the task EXPATPRO law firm faces and handles successfully.