Abolition of the Commercial Code: how will this affect individual entrepreneurs and legal entities?

There will be no more private enterprises — this is a key business reform in 2025. It is being implemented alongside the repeal of the Commercial Code of Ukraine.

How will such drastic changes affect Sole Proprietorships and legal entities, and what should entrepreneurs expect in the near future?

Why was the Commercial Code repealed?

At the beginning of 2025, the Verkhovna Rada adopted a draft law introducing new rules for conducting business activities. The document comes into force on August 28, 2025. From this date, all private enterprises will cease to exist. This form of ownership will no longer be available.

The main reasons for this reform are that many provisions of the Commercial Code duplicated the Civil Code of Ukraine. In practice, this often led to confusion, as it was unclear which norm should apply in specific cases.

The code also contained outdated provisions and terms dating back to the Soviet era. These do not align with the principles of modern business. Therefore, the government decided that it was time for radical changes.

What risks do entrepreneurs face after the repeal of the Commercial Code?

As a result of the repeal, the following risks may arise:

• legal uncertainty: the Commercial Code contains specific provisions absent in other laws. Its repeal may create legal gaps and problems for entrepreneurs;

• mandatory reorganization or consolidation: all private enterprises must reorganize into a Sole Proprietorship or LLC. This must be done within 5 years, starting from August 28, 2025;

• additional expenses due to change in ownership form: any reorganization involves costs such as legal services, liquidation procedures, drafting new charters, etc.;

• changes in taxation and reporting: reorganized businesses may face more complex tax reporting procedures.

What business forms are provided for by the new law?

The law allows only three forms of business:

• LLC — Limited Liability Company;

• JSC — Joint Stock Company (suitable for large companies and corporations);

• Sole Proprietorship — for small businesses and individual activities.

This means Sole Proprietorships are in a safer position and are not affected by the reform.

The new law primarily affects legal entities, which include the following types of enterprises:

State-owned:

• non-commercial state-owned,

• commercial state-owned,

• state-owned enterprises (kazenni).

Municipal:

• non-commercial municipal,

• commercial municipal,

• private,

• joint municipal,

• subsidiary,

• foreign.

Public associations:

• trade unions,

• religious organizations,

• consumer cooperative enterprises.

What will happen to municipal and state-owned enterprises?

Municipal and state-owned enterprises may be liquidated or converted into LLCs or JSCs.

Key reorganization points:

1. Joint municipal enterprises will be managed by the respective local communities.

2. Municipal enterprises will become LLCs, JSCs, or municipal non-commercial companies (MNCs).

3. State-owned enterprises (kazenni) and commercial state-owned enterprises will become JSCs or LLCs, with 100% state ownership.

Mergers of legal entities

Legal entities may merge into the following business forms:

• concern — each company remains financially independent, but core functions are centralized in the head office;

• association — the main company coordinates operations without interfering in members' internal affairs;

• consortium — temporary union of companies to implement joint projects;

• corporation — the union is contractual, with the head office taking over all management functions.

These mergers may result in the formation of large company alliances for innovation or more efficient cooperation.

Liquidation of enterprises and transitional period

Starting from August 28, 2025, all legal entities will enter a 5-year transitional period to comply with the new legal framework. Decisions on liquidation or reorganization are made by:

• local self-government bodies — for municipal enterprises;

• the Cabinet of Ministers — for state-owned enterprises.

Assets of such companies will be transferred to the charter capital of the new entity.

Before reorganization, an inventory of assets must be conducted.

Summary of key changes

1. If a business owner does not timely decide on a new ownership form, the charter will become invalid after the transitional period ends.

2. The new law will regulate penalties and sanctions, including license suspension.

3. The concept of "usufruct" is introduced — the right to use someone else's property and benefit from it. If property cannot be privatized, the state assumes control over its use.

4. Businesses may continue to operate without changes during the transitional period.

5. The law allows local communities to create legal entities to manage property and implement social projects.

Despite sharp legislative changes, entrepreneurs retain the right to determine their organizational structure, staff schedule, and number of employees.