From "director manages and controls" to the European model: an inevitable transformation

Corporate governance in Ukraine is a field in a state of constant evolution. Over the past 10–15 years, legislation has changed significantly: standards for joint-stock companies, transparency requirements, the institution of independent directors for state-owned companies, and norms on conflicts of interest and information disclosure have appeared.

However, despite the progress, the corporate governance of most Ukrainian businesses is still based on a rather simple model: owner – director – company. And this has certain risks and disadvantages.

How it works in Ukraine

The legal framework defines two main corporate governance bodies:

· the highest body – general meeting of participants/shareholders;

· executive body – a sole director or a collegial body (the board).

The establishment of an additional body – a supervisory board – in Ukraine is mandatory only for public joint-stock companies and state-owned enterprises. For small and medium-sized businesses, it is mostly an optional tool.

Because of this, many companies actually operate in a simplified model: the owner appoints the director, the director makes operational decisions and – often – simultaneously controls themselves. Which, of course, sounds a bit ridiculous. The system of checks and balances is formed only formally.

Fintech Sector: Realities and Limitations

The financial sector requires more sophisticated control mechanisms. The National Bank of Ukraine sets certain requirements for internal control, compliance functions, risk management, and anti-money laundering (AML). However, compared to European standards, our system still remains quite flexible, and sometimes even too flexible.