Ukraine has been warned that its companies will need improved disclosures and better monitoring of their compliance with the country’s corporate governance code when the government is able to lift martial law.

The warning comes from the OECD (Organisation for Economic Co-operation and Development) in a report on the sustainability of the country’s financial markets.

The OECD’s report says: “Ukraine’s corporate governance regulatory framework has improved substantially in recent years but outstanding issues must be addressed to promote more transparent and fair markets, and to align with international standards.”

Despite the war, Ukraine has been making efforts to reform many areas of its economy to meet international expectations.

Three years of war

The governance code was reformed in line with OECD guidelines. However, with the war soon to enter its fourth year, there is much talk of rebuilding the country’s economy and its deeper integration into international markets.

The OECD’s report highlights key issues that will need to change.

Listed Ukrainian companies were exempted from regular reporting during martial law and there are worries about transitioning to a new corporate governance code.

On corporate reporting, the OECD says that when mandatory reporting resumes, “raising awareness amongst companies will be crucial”.

But it adds that the country’s current financial regulator, the National Securities and Stock Market Commission (NSSMC) will need more resources.

“Ukraine’s 2020 Corporate Governance Code is outdated. Although the NSSMC plans to update the code, currently there is no aggregated report to assess companies’ compliance with the code, nor is there a designated body responsible for overseeing its implementation.”

Ukraine has been attempting to align with EU law, but regulators report it is a “challenge” because law passed in Brussels is “extensive” and detailed, “particularly on the green deal, sustainability and capital markets infrastructure”.

The OECD also says board structure and functioning can be improved. Independent directors are mandated to make up one third of board places, and boards should have three committees—audit, nominations and remuneration—but the country’s circumstances make it “challenging to implement in practice”.

Regulators could consider consulting with companies on “ways to provide greater flexibility” on committees and their composition,” the OECD adds.

The OECD also concludes that Ukraine’s financial system has shown “strong resilience”, though it too needs improvements to improve the “mobilisation” of private sector finance. Improvements are also needed to the public debt management function, consumer protections and literacy.

There is some way to go before martial law is lifted in Ukraine. And despite frequent mention of peace talks, these have yet to come about. Nevertheless, the OECD provides important insight on how the country will need to improve if it is play a full role in international markets and join the European Union.