Financing is an important step in streamlining the operation of every Ukrainian limited liability company (LLC). LLC participants and third parties have various options to inject funds into the company. These options vary in terms of duration of involvement, complexity of funding and expected returns.
Financing options
The various ways to finance an LLC include those:
- reserved for LLC participants: paying initial contributions to the LLC's charter capital (CC), increasing CC with retained earnings, forming additional paid-in capital (share premium);
- available to both LLC participants and third parties: increasing the CC through equity contributions, concluding loan agreements with third-party investors, providing other financial assistance by participants, issuing debt securities; or
- requiring third parties: providing credit by financial institutions.
In this article, we will focus on options that enable LLC participants to quickly and effectively finance the company, including equity and share premium contributions, and loans.
Charter capital increase through equity contributions
Participants often choose equity contributions, as this approach is well-suited for long-term involvement in the LLC. After the increase, the LLC owns the contributed equity. Any change to the CC requires approval by the general meeting of participants (GMP). The process involves specific steps and deadlines, including state registration with the Ukrainian corporate register. Failure to comply with them may jeopardize participants' stake ownership and lead to legal disputes.
An LLC may increase its CC only after all initial contributions are paid, and other statutory requirements are met. Existing participants have a pre-emptive right to contribute in proportion to their ownership, but the GMP may allow contributions in different proportions. These measures prevent unfair dilution, although exceptions may be possible.
The CC can be increased through (a) monetary or (b) in-kind contributions.
Monetary contributions must be made in Ukrainian hryvnia (UAH). However, in some cases, payments can also be sent in foreign currency and recorded at a fixed exchange rate. Foreign investors should expect KYC checks and document requests from the servicing bank to allow the contribution to be credited to the LLC's bank account. The process has important nuances, and discrepancies may result in rejected transactions. Therefore, legal review and advanced coordination with the bank are recommended.
A participant may contribute to the CC securities or other assets that may be used in the LLC's business operations, such as equipment, machinery, vehicles, real estate, intellectual property, shares in another company, or even claims (via set-off against the CC increase). The value of any in-kind contribution must be approved unanimously by the GMP. In other words, all the participants must agree on how much the contributed asset is "worth", so that no one can inject an overpriced asset without everyone's consent.
The way ownership is transferred, and the necessary documents depend on the type of asset. Contribution of some assets may require state registration and other actions. For example, contribution of the LLC's stake includes changes of such LLC's participants, ultimate beneficial owners and ownership structure in the Ukrainian corporate register.
Investors should note that once the contributed asset becomes the company's property, it is not subject to division as joint spousal property, and generally will not be returned to the participant.
Share premium
Recent corporate rules allowed LLCs to form a share premium, provided relevant rules are included in the LLC's charter. This option is suitable when timing is critical, for instance, to quickly restore solvency, as it does not require state registration and maintains stake proportions and their nominal value.
Contributing a share premium does not grant additional corporate rights or a legal right to repayment by default. Therefore, it is essential to clearly define the rules for making and returning share premium contributions, such as through dividends, in the charter to prevent free-rider issues.
Loans
Loans are another common way to fund an LLC. They offer flexibility for those seeking earlier withdrawal or interest income, subject to applicable restrictions. Loans are governed by legal rules on both (a) provision and (b) repayment.
LLCs can borrow from their participant, whether Ukrainian or foreign. Before entering in the loan agreement, it is essential to review the LLC's charter and Ukrainian law for rules on significant or interested-party transactions requiring the prior GMP consent. Transactions concluded without such consent may be declared invalid or result in liability for the LLC's management.
Foreign investors may issue loans to a Ukrainian LLC in a foreign currency to mitigate the impact of inflation. Before the loan is sent, the company must provide the servicing bank with a copy of the loan agreement and, as the case may be, other documents, for preliminary review and approval.
In practice, many intra-group loans are interest-free, but this must be clearly stated in the agreement; otherwise, default rates apply. Interest-free loans are often referred to as repayable financial assistance under Ukrainian tax laws.
Repayment of loans to foreign lenders is temporarily restricted during wartime. As of mid-2025, the regulator introduced some easements to allow selected debt payments. In particular, Ukrainian borrowers may now repay cross-border loans obtained after 20 June 2023, subject to certain conditions. For example, loans cannot be repaid to foreign lenders ahead of schedule.
Special rules and relaxations may apply to loan repayments with specific parties, such as international financial institutions, and in other circumstances.
Summary
There are many practical ways to finance an LLC. Some of them may be exercised by LLC participants, while others are also available for third parties. In this article, we focused on the most popular options exercised by LLC participants, namely: contributions to the CC, share premium, and loans. Increasing CC by cash or assets is a long-term investment that provides the LLC participants with ownership rights to the equity and grants corporate rights. CC contributions require a GMP decision, pre-approval from banks, and other registrations. By contrast, share premium and loans are more flexible financing options that do not provide participants with additional rights or guaranteed returns. A key issue for share premium implementation is the necessity to implement detailed rules regarding making and returning contributions in the LLC's charter, while loan provision is subject to bank approval and compliance with cross-border transfer restrictions applicable during wartime.
