Supreme Court Clarifies the Consequences of the Commercial Code’s Abolition: What It Means for Business

On 28 August 2025, the Commercial Code of Ukraine finally ceased to be in force. This step is part of a broader reform introduced by Law No. 4196-IX, which sets out the framework for the activities of legal entities during a transitional period. In this context, the Commercial Cassation Court within the Supreme Court has published a detailed analysis explaining how the legal environment for companies and entrepreneurs will change once the Commercial Code is abolished.

The Court emphasises that abolishing the Commercial Code does not mean the disappearance of economic relations or business entities themselves. Their legal status will be governed by the Civil Code of Ukraine and special laws. Key notions such as “business entity” and “economic activity” will remain in force but will now be embedded within a new legal framework. Enterprises, entrepreneurs and other organisations will continue to operate as full participants in economic processes—only under updated rules.

Organisational and Legal Forms: Shift to Companies

One of the Court’s central conclusions is that the abolition of the Commercial Code also means the disappearance of a number of traditional organisational-legal forms. Private, subsidiary, foreign enterprises, as well as enterprises of citizens’ associations or consumer cooperatives, can no longer be established. All such entities must be transformed into companies—primarily limited liability companies (LLCs) or joint stock companies (JSCs).

The Court also recalled the position of the Grand Chamber of the Supreme Court from 2021: a private enterprise is not an independent legal form. Rather, it is a classification based on ownership, and each such entity should be treated as either a business company or a cooperative. The transitional period provided by Law No. 4196-IX confirms and codifies this approach.

State and Municipal Sector: Corporatisation and Usufruct

State-owned and municipal enterprises face separate rules. Over a three-year transitional period, they must undergo corporatisation—transforming into LLCs or JSCs. Municipal enterprises are given more flexibility: they may preserve their form or reorganise, at the discretion of local authorities.

A particularly significant novelty is the introduction of usufruct—the right of gratuitous possession and use of property. This mechanism replaces the long-standing rights of economic management and operational control. State and municipal property will now either be contributed to the share capital of new companies or transferred to them under usufruct. The Supreme Court interprets this as a shift towards a clearer, modern model of asset management that balances the state’s ownership rights with the business sector’s ability to use assets effectively.

Sanctions

Another important area concerns sanctions. The Supreme Court confirmed that the familiar list of measures remains in place: damages, penalties, confiscation of income, suspension of licences, etc. However, the grounds and procedures for applying them are now set out not in the Commercial Code but in Law No. 4196-IX and other specialised legislation, such as tax and customs laws. Thus, enforcement mechanisms persist but are integrated into a different regulatory system.

Changes in the Civil Code

The Court placed particular emphasis on amendments to the Civil Code, which now becomes the primary source of law for regulating entrepreneurial activity.

First, company governance is simplified in cases where there is only one participant—a natural person. That participant will now be able to manage the company directly without forming additional management bodies, unless expressly required by law. This will be especially valuable for small businesses, reducing bureaucratic burdens.

Second, a new article on company officers has been added to the Civil Code. The law now clearly defines who qualifies as an officer: the CEO, members of the executive body, supervisory board members, liquidators, chief accountant, corporate secretary, among others. Founding documents may expand this list.

Third, for the first time at the Civil Code level, the concept of fiduciary duties is introduced. Officers are obliged to act in good faith, reasonably, in the interests of the company, and within the scope of their authority. This development aligns Ukrainian corporate law more closely with European standards and introduces a new culture of responsible management.

In addition, for state-owned and municipal companies, governance will now be exercised through supervisory boards rather than directly by state authorities or local governments. This marks a step towards transparency and greater independence in corporate oversight.

Contracts and the Transitional Period

The Court also clarified the status of contracts concluded under the Commercial Code. These contracts remain valid until their expiry. References in them to provisions of the Code do not invalidate them, since laws do not have retroactive effect. However, businesses are encouraged to review and update such contracts in line with the Civil Code to avoid future inconsistencies.

What This Means in Practice

The Supreme Court’s guidance shows that abolishing the Commercial Code is not about eliminating regulation, but about consolidating it within a more unified legal system. Business will continue to operate, but its legal foundation will now rest on the Civil Code.

For lawyers, this means a shift in focus: instead of analysing two codes in parallel, the Civil Code—with its new provisions on officers, fiduciary duties, and corporate governance—becomes the centrepiece. For the state sector, corporatisation and new asset-management rules will be transformative. For private business, the changes promise more flexibility but also clearer expectations for transparency and accountability.