In the past, Ukrainian residents generally were required to obtain at least one license to acquire shares pursuant to an employee share plan:
- an investment license to acquire foreign shares in exchange for consideration (e.g., for shares purchased at exercise of a stock option or under an employee stock purchase plan); and
- a placement license to hold shares or cash in a foreign account (e.g., a bank or brokerage account).
The licenses were extremely difficult to obtain, making it practically impossible for foreign companies to grant share-based awards to Ukrainian residents.
On 23 February 2017, the National Bank of Ukraine (NBU) issued Decree No. 14 which amended two prior NBU decrees from March 1999 and October 2004 by clarifying the definition of "placement" for purposes of determining whether a placement license is required. Decree No. 14 provides that a placement license is required for any transfer of "currency valuables" (e.g., cash or shares) from Ukraine to a foreign account.
We believe this change can be interpreted to mean that Ukrainian residents (excluding private entrepreneurs) no longer must obtain a placement license merely to hold shares of a foreign company outside of Ukraine, provided that no consideration is paid from Ukraine to acquire the shares and that the shares are not otherwise “placed” by way of a transfer of currency valuables from Ukraine. Consequently, any foreign shares that are placed into a foreign account without the remittance of payment from Ukraine are no longer subject to the placement license. This means that companies may now grant restricted stock or restricted stock units to employees in Ukraine and issue the shares or an equivalent cash payment (at grant or at vesting) into a non-Ukrainian bank or brokerage account.
Although a placement license no longer is required for a Ukrainian resident to hold shares or cash in a foreign account absent an outbound transfer of currency valuables, both an investment license and a placement license still are required to acquire shares in exchange for consideration paid from Ukraine. Therefore, it remains problematic to offer an employee stock purchase plan or an option plan to employees in Ukraine, unless companies (or employees) can find ways to avoid the remittance of funds from Ukraine for the payment of the shares. For an option, for example, this can easily be achieved by exercising the option with a cashless method of exercise, which does not require the remittance of the exercise price by the employee.