Key takeaways

FDI competent authority

The Draft Law proposes the establishment of FDI Screening Commission (“Commission”), operating under the Ministry of Economy, whose activities will be regulated separately by the Cabinet of Ministers of Ukraine. The Commission will be composed of representatives of several state bodies and agencies, responsible, inter alia, for national security and foreign affairs. The Commission will be responsible for reviewing FDI filings, determining whether FDIs are subject to screening and deciding whether to approve, conditionally approve, or refuse to approve the investment.

Sectoral focus

FDIs will be subject to screening if they involve Ukrainian entities active in the following sectors (i.e., “Screening Entities”):

• Critical Infrastructure
• Strategic Minerals
• Defense and Dual-Use Products

Notifiable events

The Draft Law requires notification for approval of FDIs that result in a foreign investor (directly or indirectly):

• Acquiring more than 25% of voting rights in a Screening Entity
• Gaining the right to appoint the sole executive body, or more than 50% of a collegial executive body, or more than 25% of a supervisory board or another collegial management body of the Screening Entity
• Gaining the right to block management decisions
• Acquiring ownership or use of fixed assets valued at 10% or more of the Screening Entity’s total assets
• Making other investment transactions into a Screening Entity resulting in foreign direct investment (i.e., “catch-all” clause)

A Register of Foreign Investors will be established and FDI investors will be subject to annual reporting and monitoring. Access to such Register will be restricted and governed by law.

Timing, procedure and outcome of review

Initial review

Upon receiving an FDI filing, the Commission must determine whether the proposed investment falls within the scope of screening. Within 60 days, it must verify the sufficiency of the submitted information and documents. Its decision regarding screening of notified FDI, or that the investment is not subject to screening, must be notified to the investor within five working days of such decision being taken.

Screening review

The screening procedure must be completed within 90 days from the date the decision to initiate screening is made. Within the first 30 days, the Committee sends information requests to the state authorities that possess or may obtain information necessary for the screening, which must respond within 30 days. If no grounds for rejection of an FDI filing are identified, the Commission adopts a decision to approve the investment or to approve it with conditions.

The approval is not granted in cases where (i) the foreign investor submits false and/or incomplete information; (ii) the proposed transaction poses a threat to the security of critical infrastructure, essential functions and/or services; (iii) the transaction poses a threat to Ukraine’s national security or national interests.

Prohibited transactions

Some of the FDI transactions cannot be approved if, at the time of the application or within the preceding two years:

• The foreign investors had, in their share capital, investments with links to aggressor state or other sanctioned states.
• Such investors (their founders/shareholders or Ultimate Beneficial Owners (UBOs)) were sanctioned or affiliated with aggressor state.
• Such investors (their founders/shareholders or UBOs) held citizenship of the occupant-state or aggressor state
• Such investors had a direct or indirect property interest in such states

Merger control

Importantly, the Draft Law provides that merger control procedure cannot commence, and clearance cannot be granted by the Antimonopoly Committee of Ukraine without a prior FDI screening decision or confirmation that the investments is not subject to FDI screening. This, among other things, means that if adopted in its current form, the Draft Law may significantly extend the timeline for clearing transactions that require merger control clearance in Ukraine.

Liability and sanctions

Failure to comply with the FDI notification requirement may result in:

• Revocation of voting rights acquired through a transaction involving foreign investment
• Invalidation of the relevant transaction
• Loss of the right to receive a share of profits/dividends from the date the relevant transaction was executed
• Fines of up to 50% of the value of the FDI

Impact on M&A transactions

The Draft Law registration marks a significant step towards the establishment of a formal FDI screening regime in Ukraine. If approved, M&A transactions in strategic sectors involving foreign investors will require a more careful and thorough planning to account for timing needed to complete FDI screening and merger control processes and, once completed, be ready for annual monitoring and reporting.

Parties to M&A transactions will need to carry out own in-depth pre-transaction due diligence and “know-your-counterparty” procedures to proactively manage risks of unsuccessful regulatory FDI screening, as well as agree in the transaction documentation on adequate risk allocation mechanisms.

Next steps and preparations

The Draft Law is currently under parliamentary review and is expected to be a hot topic of MPs’ debate. Furthermore, an alternative, more comprehensive, draft law has already been submitted to the Ukrainian Parliament on 8 October 2025. The Draft Law will be adopted following consultations with public and private sectors’ stakeholders and has already stirred active debate amongst business and legal communities.

Needless to say that the review period for FDIs is significantly higher than that set by EU’s Foreign Direct Investment Regulation 2019/452 and the “catch-all” clause for notifiable FDIs needs to be further clarified.

While no immediate action is required, it is recommended to monitor legislative developments and already access potential impact on planned investment transactions in specified sectors. If you have any questions or would like to discuss how this proposal may affect your investment planning, please contact us.

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Bohdan Malyk, Trainee, has contributed to this legal update.