How to survive the abolition of the Civil Code without losses — advice from advocates at a round table
What will change for businesses after the Commercial Code is repealed? How will contracts be concluded now, who will be liable, how will interests be protected in disputes, and how will the loss of special regulation be compensated?
As part of Business Protection Week, the Ukrainian National Bar Association held a round table discussion on a topic that has already sparked widespread professional debate: «Challenges facing business and investors after the repeal of the Commercial Code of Ukraine».
The event was organized by the UNBA Committee on business and investor protection with the participation of colleagues from the Committee on commercial law and procedure.
Opening the meeting, Serhii Lysenko, deputy chairman of the Committee on business and investor protection noted that with this discussion, the legal community is beginning a kind of «requiem» for the Commercial Code, an act that has been controversial for many years among both practitioners and academics. According to him, from the very beginning, the Commercial Code has been in conflict with the Civil Code, giving rise to collisions, especially in the field of corporate regulation. That is why, despite its long existence, the document has rather complicated practice than created stable guidelines for business.
New obligations
Kirill Kuznetsov, the secretary of the same Committee, outlined the changes in the legal nature of commercial obligations after the abolition of the Commercial Code.
He pointed out that the key difference between such obligations was their economic focus, specialized subject composition (legal entities or individual entrepreneurs), as well as the application of operational and economic sanctions and shortened limitation periods.
With the repeal of the Civil Code, all these features lose their legal basis, and legal regulation is unified in accordance with the Civil Code. And this, according to the speaker, is not critical given that most contractual disputes are already resolved using the provisions of the Civil Code, in particular the general provisions on obligations. Instead of special regulation, clearly defined contract terms, court practice, and special regulations will play a key role.
At the same time, K. Kuznetsov acknowledged that the loss of operational sanctions and shortened limitation periods will create some legal uncertainty. To compensate for this, businesses will have to adapt their contractual practices by detailing obligations, specifying penalties, quality control mechanisms, and arbitration clauses.
Contract by court decision
The prospects for compulsory conclusion of a contract by court decision after the repeal of the Civil Code were discussed by Dmytro Velychko, the deputy chairman of the Committee on commercial law and procedure. Law No. 4196-IX «On the specifics of regulating the activities of legal entities of certain organizational and legal forms during the transition period and associations of legal entities» left only a procedural (procedural) possibility to apply to the court with such a claim (Article 16), However, it did not provide substantive legal grounds determining the legal content of the obligation to conclude a contract on the basis of the law, which were contained in parts 3-6 of Article 179 of the Civil Code.
This creates a gap, in particular in relations with suppliers of so-called «basic» services — electricity, water supply, transportation, etc. In such cases, the plaintiff may have a legal interest in obtaining this service through the conclusion of an appropriate contract, but there is no provision of law contained in the applicable codified act (after the repeal of the Civil Code, only the Civil Code remains such an act) that would determine the substantive legal basis for the mandatory conclusion of a contract, i.e., those specific cases and/or the circle of subjects in which and/or for which there was a direct indication in the law regarding the mandatory conclusion of a contract.
Thus, when considering the aforementioned pre-contractual disputes, the question will arise as to the determination by the court of the content of the specific substantive legal basis under the applicable law for the admissibility of compulsory conclusion of a contract by a court decision, which will create a significant risk of the inability to compel unscrupulous subjects to enter into a contract by court decision to protect the legitimate interests of the relevant subjects, in particular consumers of «basic» services or state customers for state, including defense, needs.
Who will be responsible
Oleksandr Kovalenko, member of the Committee on business and investor protection focused on changes in the standard of liability of company officials. According to him, the new version of the Civil Code (in particular, Article 99-1) details the cases in which such liability arises and significantly expands the circle of persons who may be held liable.
Whereas previously the main figures were managers and members of executive bodies, now they also include chief accountants, corporate secretaries, heads of internal audit and budgeting departments, as well as members of liquidation and reorganization commissions. This allows for a more precise delineation of areas of responsibility and avoids situations where all claims are directed solely at the director.
O. Kovalenko noted that the new law not only defines the list of persons, but also formulates specific grounds: abuse or exceeding of powers, submission of inaccurate information, inaction in cases where a person was obliged to act. According to the speaker, this allows participants and investors to better protect their rights and creates additional safeguards against abuse within the corporate structure.
At the same time, new problems arise in practice, primarily in proving the causal link between the actions of an official and the damage caused. This is where the quality of contracts, internal regulations, and the ability to clearly document management decisions will be crucial.
Pre-trial settlement
The issue of pre-trial enforcement of economic and legal liability and sanctions after the Civil Code expires was raised by Igor Feshchenko, member of the Committee on business and investor protection.
He pointed out that with the repeal of Article 222 of the Civil Code, the only detailed procedure for filing claims, in particular regarding the content, time limits for consideration, and form of notification, will disappear from national legislation. At the same time, pre-trial settlement of disputes is not abolished as a phenomenon — its possibility is preserved at the constitutional level (Article 124 of the Constitution) and in procedural legislation (Article 16 of the Code of Civil Procedure, Article 19 of the Code of Commercial Procedure).
The speaker emphasized that after August 28, the procedure for claims must be established by the parties themselves — through direct regulation in the contract. This applies to both the procedure for filing and the deadlines for responding and the consequences of failure to respond. In his opinion, the practice of concluding contracts needs to specify the pre-trial stage of a dispute, as this allows not only to assess the intentions of the counterparty, but also to record important documents, such as acts of work performed or invoices, which can be used as evidence in court.
Separately, the speaker called for attention to other extrajudicial instruments, in particular mediation, which allows for a more flexible mechanism for responding to conflicts. It should be provided for in contracts as a separate clause, with the possibility of fixing the rules and time limits for the procedure.
Energy on a new basis
Changes in the energy sector were analyzed by Yuriy Shulika, member of the Committee on business and investor protection, who emphasized that the provisions of the Civil Code played a systemic role in regulating the activities of business entities, in particular state-owned and municipal enterprises in this sector.
The Code defined the general principles of economic management, organizational and legal forms, management procedures, reporting, and liability—and it is precisely these issues that are most vulnerable after its repeal. Law No. 4196-IX, which is supposed to replace the regulatory function of the Civil Code during the transition period, primarily concerns issues related to the activities of state-owned enterprises, corporate governance, planning, reporting, and the use of state property.
The speaker warned that industry players have already faced a number of challenges, both legal and practical. Of particular concern is the addition of Article 11-8 to the Law on Management of State Property, which concerns the management of transmission system operators' assets. During the consideration of the draft law, the Energy Community Secretariat and the NEURC expressed their concerns, pointing to the risks for the certification of operators according to European standards.
In conclusion, the speaker emphasized that the most significant challenges for the energy sector will not be technical standards, but general issues such as the reorganization of enterprises, the renewal of the contractual framework, the regulation of corporate relations, and investor protection.
Corporate transformation
S. Lysenko focused his speech on changes in the field of corporate relations. He emphasized that the key provisions governing the activities of business entities have long been enshrined in special laws — «On limited liability companies» and «On joint stock companies» — and in the Civil Code. Therefore, the abolition of the Civil Code will not in itself have a significant impact on law enforcement practices in the field of corporate governance.
Instead, attention should be paid to the transition period during which state-owned and municipal enterprises must be reorganized into business entities. The deputy chairman of the relevant Committee pointed out that such a transformation would require not only a review of the founding documents, but also a comprehensive inventory of assets, updating of the contractual base, and proper support from advocates and accountants. Of particular concern is the technical and organizational capacity of thousands of public sector entities to implement these changes within the allotted time frame.
Contractual practice
Elkhan Veliev, member of the Committee on business and investor protection, spoke about the transformation of contractual relations.
The advocate is convinced that the disappearance of a special regime for a number of commercial contracts (in particular, contracting, barter, lease in the economic sphere, agency agreements) does not mean their complete disappearance — advocates can continue to reproduce the content of such contracts, relying on freedom of contract within the Civil Code and current court practice.
The speaker recalled the key positions of the Supreme Court on contracting, which define the difference between this type of contract and lease or sale and purchase, as well as the importance of fixing obligations regarding the production and acceptance of agricultural products. With regard to barter, he noted that the Civil Code does not provide for mandatory equivalence, and that operational and economic sanctions, although they appeared to be an effective tool, were rarely applied in practice.
With regard to leases, E. Veliev cited examples of the adaptation of judicial practice to new conditions, in particular with regard to the renewal of contracts, the right of first refusal, and the role of standard forms. In the area of agency contracts, he drew attention to the risks associated with unclear powers of agents and the need for detailed contractual regulation.
In conclusion, the repeal of the Commercial Code means not just a change in the source of norms, but a change in the approach to the legal regulation of business. New challenges cover various areas, from contractual practice and corporate governance to pre-trial dispute resolution, standards of liability of officials, and the specifics of the functioning of individual industries.
Participants agreed that the challenges ahead are significant, particularly in the areas of legal certainty, investor protection, and access to justice. However, with proper law enforcement and high-quality contracts, the new model may prove to be no less effective—and in some cases more flexible—than the old one.
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