The Commercial Code repealed: what it means for business and the state

On 28 August 2025, the Commercial Code of Ukraine will cease to be in effect. Its repeal is stipulated by the Law of Ukraine "On the Specifics of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms During the Transitional Period and Associations of Legal Entities" No. 4196-IX, which entered into force on 28 February 2025 (“Law No. 4196”).

The Commercial Code has been in force for over 20 years and is a legacy of the post-Soviet model of economic governance. It emerged as an attempt to reconcile market reforms with Soviet legal traditions. For years, it coexisted with the Civil Code, resulting in inconsistencies and contradictions in legal practice. This duality complicated the application of legal norms, creating uncertainty for businesses and investors. The Commercial Code was marked by excessive formality and a tendency to regulate both private and public sectors under the same, often market-inappropriate, rules. A key reason behind its repeal was its incompatibility with the legal standards of European Union Member States, which do not recognize a dual structure of civil and commercial regulation.

Law No. 4196 declares the Commercial Code invalid as of 28 August 2025 and introduces amendments to related legislative acts. It also establishes a three-year transitional period — until 28 August 2028 to facilitate a gradual shift from the current model to a new regulatory framework based on the Civil Code and sector-specific legislation.

This marks a major transformation for the public and municipal sectors. The European Union actively supports the corporatization of such entities as a key element of the broader reform of state asset management. Within the framework of the Ukraine Facility, the conversion of municipal enterprises into corporate entities is anticipated to be finalized by 2025–2026.

For the private sector, the repeal of the Commercial Code signifies a transition to a unified regulatory framework based on the Civil Code and special legislation. This shift is expected to reduce legal conflicts, lower regulatory burdens and improve predictability in law enforcement. However, businesses should be prepared for a period of legal and operational adaptation during the transition.

Five key changes that businesses should consider:

1. Abolition of Special Organizational and Legal Forms

Effective 28 August 2025, under Law No. 4196 Ukraine will abolish five legal forms, including, in particular, private, subsidiary and foreign enterprises. Registration of new legal entities in these legal forms will be prohibited. Further activity of such existing entities will be governed by the law on limited liability and additional liability companies. Existence of the entity in one of the obsolete legal forms may create legal and operational risks, for instance, in relations with banks, regulators and counterparties. The law provides for certain safeguards to simplify transformation of such entities into the legal forms, which continue existing. From the practical side, considering that transformation implies termination of a legal entity and transfer of all its rights and obligations to a new legal entity-successor, businesses are advised to consider the transformation process beforehand so as to ensure further compliance and mitigate the risk of potential unexpected disruptions.

2. Unification of the Contractual Regulation

The concept of the “commercial contract” will no longer apply. With the repeal of the Commercial Code on 28 August 2025, the legal basis for this concept disappears. Going forward, all contractual obligations between businesses will be governed by the Civil Code and relevant special legislation.

3. Updating Corporate Governance Standards

The Civil Code now includes clear definitions of the duties of officials of private legal entities. Provisions on the responsibility of the company management have been introduced, particularly for causing losses through dishonest or incompetent actions.

4. Penalty Thresholds for Breach of Contractual Deadlines

A ceiling has been introduced on penalties for delayed obligations: no more than twice the National bank of Ukraine’s base rate for the relevant period. This aims to prevent excessive financial pressure and reduce disputes over disproportionate penalties.

5. Review of Entities' Founding Documents and Contractual Language

Company charters referencing the Commercial Code may contain provisions that are now obsolete or in conflict with updated regulation. It is relevant to review the founding documents and contractual provisions to ensure that they are updated in a timely manner to comply with the applicable law.

Although the reform is primarily aimed at transforming the public sector, its impact on private business will be significant. The adoption of a unified civil law approach, modernization of contract law, and enhanced management accountability are expected to promote stability, transparency, and investor confidence. While the transitional period may present certain challenges, the repeal of the Commercial Code is widely seen as a positive and long-overdue reform.