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Expert in international corporate, IT, and crypto law. Has extensive experience in business setup and support in the USA, EU, LATAM, and the Middle East. Specializes in corporate structuring, compliance, KYC/AML, IP, GDPR, as well as regulation of crypto and fintech projects.
Case: Structuring family assets in Zaporizhzhia and protecting property in temporarily occupied territory
A Ukrainian entrepreneur approached us whose family owns real estate, corporate rights and operating assets in the Zaporizhzhia region.
Part of the property is located in Zaporizhzhia, while another part is situated in the temporarily occupied territory in the city of Enerhodar.
Family members also have foreign companies, accounts with European banks and different migration statuses in European countries.
Client’s objective
The client was considering consolidating the family assets into a single structure, eliminating nominee owners and creating a foreign holding company that could own Ukrainian assets.
It was expected that such a structure would simplify:
- remote management;
- the sale of assets;
- the transfer of property to the next generation;
- attracting investors;
- tax planning;
- protecting assets from operational risks.
A separate issue concerned the assets in Enerhodar, control over which had been lost as a result of the occupation.
Main risks
The initial idea of immediately creating a foreign HoldCo appeared logical, but it could have created additional legal and tax problems.
The main risks included:
- uncertain tax residence of family members;
- potential obligations under controlled foreign company (CFC) rules;
- existing foreign companies that had already been registered;
- bank accounts in different countries;
- the risk of double taxation;
- corporate and property encumbrances in Ukrainian companies;
- land, lease and registration risks;
- possible seizures, debts or corporate disputes;
- loss of access to property in the occupied territory;
- insufficient evidence for future compensation claims.
Creating a foreign company before completing the audit might not have protected the assets and could merely have transferred part of the risks to the international level.
What we did
We conducted a preliminary family and corporate audit and divided the project into several independent workstreams.
1. Tax residence map
For each family member, we identified the need for a separate review of:
- actual place of residence;
- centre of vital interests;
- migration status;
- business activities;
- accounts and companies abroad;
- CFC risks;
- potential obligations in Germany, Switzerland, Ukraine and other countries.
2. Ukrainian Asset Clean-up
We recommended cleaning up the Ukrainian part of the structure before creating the HoldCo:
- review corporate rights;
- analyse charters and the governance structure;
- review real estate, land plots and lease agreements;
- identify debts, seizures and encumbrances;
- discontinue the use of nominee owners;
- determine which assets should be consolidated and which should remain in separate SPVs.
For this stage, we recommended conducting Due Diligence of Ukrainian assets and separately assessing the asset protection model.
3. Enerhodar Evidence Pack
For the assets in Enerhodar, we proposed preparing a separate evidence package that should include:
- documents confirming ownership rights;
- technical and registration documentation;
- a valuation of the property;
- evidence of actual control prior to the occupation;
- financial information regarding income generated by the asset;
- evidence of the loss of access or control;
- photographic, video and satellite materials;
- information regarding damage, use or seizure of the property;
- documents for future compensation, court or international proceedings.
4. Analysis of a foreign HoldCo
Only after completion of the internal audit was it planned to compare potential jurisdictions for the holding structure, including with regard to:
- taxes on dividends and capital gains;
- CFC rules;
- banking infrastructure;
- protection of ownership rights;
- succession planning;
- substance requirements;
- maintenance costs;
- the ability to own Ukrainian companies and real estate.
Result
The client was advised not to create a foreign HoldCo until the tax and corporate audits had been completed.
Instead of prematurely registering a new company, we developed a phased plan:
- determining the tax residence of family members;
- a CFC audit of existing foreign companies;
- clean-up and consolidation of Ukrainian assets;
- preparation of an evidence base regarding property in Enerhodar;
- comparison of foreign holding jurisdictions;
- creation of the final structure for management, succession and sale of assets.
Value for the client
The client received not a formal recommendation to “open a holding company”, but a comprehensive architecture for protecting family assets.
This approach makes it possible to:
- avoid creating unnecessary CFCs and tax obligations;
- identify problems in Ukrainian assets before transferring them to a holding structure;
- prepare for future compensation procedures;
- ensure control and continuity of the family business;
- select a foreign structure based on actual risks rather than the marketing appeal of a jurisdiction.
Do you need to structure family assets in Ukraine and abroad, review CFC risks or prepare an evidence base regarding property in temporarily occupied territory? Contact the lawyers at Prikhodko & Partners for a comprehensive audit and the development of a secure asset ownership structure.
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