How to Obtain the Critical Enterprise Status?

Today, numerous companies can be designated as critical enterprises. How have the criteria for obtaining this status evolved since the onset of the full-scale invasion? 

Which companies are eligible for this status? To learn more, please refer to the material provided by BDO in Ukraine.

At the onset of the full-scale invasion, the legislation on mobilization stipulated that employees could be reserved only for mobilization tasks or for enterprises fulfilling a state defense contract.

However, following the adoption of several new regulations in the reservation field, the procedure was completely revised, the enterprises eligible for reserving employees were clearly established, and the reservation procedure itself was regulated.

What are the current legal grounds for reserving?

Employees are reserved primarily on the basis of Article 25 of the Law of Ukraine No. 3543-XII “On Mobilization Preparation and Mobilization” dated 21.10.1993 (1) (hereinafter — Law No. 3543), as well as the CMU Resolution No. 76 “Some Issues of Implementation of the Provisions of the Law of Ukraine “On Mobilization Preparation and Mobilization” on Reserving Persons Liable for Military Service for the Period of Mobilization and for Wartime” dated 27.01.2023 (2) (hereinafter — Procedure No. 76).

Procedure No. 76 approved two documents that are essential for an enterprise to obtain the status of a critical enterprise and for reserving employees, namely: 

1. The procedure for reserving persons liable for military service for the period of mobilization and wartime;
2. The criteria and procedure for determining enterprises, institutions and organizations that are critical to the functioning of the economy and the livelihood of the population during a special period, as well as those critical to meeting the needs of the Armed Forces and other military formations during a special period (hereinafter referred to as the Criteria).

As stipulated by Procedure No. 76, reservations can be made for persons liable for military service who are working:

• in public authorities or local governments
• at enterprises performing mobilization tasks
• at enterprises that fulfill government contracts in the defense sector
• at enterprises that are critical for the functioning of the economy and ensuring the livelihoods of the population during a special period.

Clause 2 of Procedure No. 76 defines a list of enterprises, institutions and organizations that are critical to the functioning of the economy and the livelihood of the population during a special period and may reserve employees:

• specialized UN agencies, foreign diplomatic missions in Ukraine, foreign diplomatic missions of Ukraine, and representative offices of international organizations according to the list approved by the MFA;
• representative offices of donor agencies, implementers of international technical assistance projects according to the list approved by the Secretariat of Cabinet of Ministers of Ukraine;
• the Research Service of the Verkhovna Rada of Ukraine, as well as enterprises, institutions and organizations that are managed by state property management bodies, which respectively support the activities of the President of Ukraine, the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine, according to the lists approved by the relevant management bodies;
• legal entities — religious organizations in accordance with the list and criteria approved by the DESS;
• mine action operators, which are determined by the Ministry of Economy to be critical for the functioning of the economy in a special period and carry out demining (humanitarian demining) in accordance with the law;
• enterprises, institutions and organizations that produce goods, perform works and provide services for the development, manufacture, repair, modernization and disposal of weapons, military and special equipment, ammunition, their components to meet the needs of the Armed Forces and other military formations, as well as authorized entities managing state-owned objects that regulate, control and coordinate the activities of such enterprises, institutions and organizations, are determined by the Ministry of Strategic Industries of Ukraine as critical for the functioning of the economy and ensuring the livelihoods of the population during a special period in case of compliance with the criterion set forth in subparagraph 4 of the Criteria;
• permanent establishments of non-residents (foreign companies, organizations) operating in Ukraine (representative offices of foreign business entities, non-governmental organizations of other states, international non-governmental organizations) that are defined by the Ministry of Economy as critical for the functioning of the economy and ensuring the livelihood of the population during a special period, if they meet the criteria set out in subparagraph 4 of the Criteria, have been operating for the last two calendar years and have been accredited (registered) according to the law, registered with regulatory authorities.

So, as we can see, the range of companies that can reserve their employees is quite broad and continues to grow.

Thus, a recent decision of the National Security and Defense Council — which provides for immediate amendments to Procedure No. 76 on the reservation of employees of certain business entities — instructed the Cabinet of Ministers of Ukraine to improve the criteria for determining enterprises as critical to the needs of the Armed Forces of Ukraine and other military formations. This applies to enterprises authorized by the Ministry of Defense to perform the function of a state customer service in the field of defense for the purpose of defense procurement, as well as those that, on the basis of contracts concluded with military units of the Armed Forces of Ukraine, other military formations, and higher military educational institutions, produce (supply) goods, perform works and provide services according to the list of the Ministry of Defense.

In addition, the amendments provide for a special procedure for determining critical enterprises among the electricity and heat producers whose facilities were destroyed or damaged as a result of the armed aggression of the russian federation. In particular, such enterprises will not be subject to the criteria of absence of tax arrears to the state and local budgets and unified social contribution.

The possibility of reserving employees of utility companies that provide heat, water, sewage, and household waste management services in the amount up to a maximum of 75% of the total number of employees liable for military service in such companies has also been introduced.

The key point is that enterprises in different industries have the right to reserve employees if one of the relevant grounds is present. For example, an agricultural enterprise may receive a mobilization order and reserve employees on that basis. A commercial enterprise may also enter into a government contract in the defense sector, which will give it the opportunity to reserve workers. A manufacturing company may also receive a critical status and thus be eligible for reservation. There are many similar examples, but the main idea is that enterprises from any industry or sector of the economy have the opportunity to reserve employees. The main thing is to have a legal basis for it. So, let’s continue to identify who and how can attain this critical enterprise status.

The status of critical for the functioning of the economy and ensuring the livelihood of the population during a special period (hereinafter — the critical status) can be obtained by enterprises, institutions, organizations with the status of a legal entity, regardless of their industry or organizational and legal form (hereinafter — the enterprises) that meet the established criteria. 

According to current legislation, the critical status is not granted to individual entrepreneurs. 

It is also important to note that the enterprises whose activities are aimed at meeting the needs of the Armed Forces and other military formations are designated as critical by the decisions of the Ministry of Defense or the Ministry of Strategic Industries in accordance with the procedure established by law. 

What criteria must an enterprise meet today to receive the critical status? 

The government has established 8 criteria to determine the criticality of enterprises. However, to be designated as critical, an enterprise that is important for a sector of the national economy or for meeting the needs of a territorial municipality must meet Criterion 4, namely the regional criteria.

Update of industry criteria
By its Resolution No. 1332(3) dated 22.11.2024, the Government instructed ministries, state bodies and administrations to revise the criteria for determining critical enterprises. These criteria are to be aligned with the Ministry of Economy and the Ministry of Defense and are to be determined for each industry separately. In this regard, all critical enterprises must confirm their status by February 28, in accordance with the new criteria.

The updated criteria have already been approved by the Ministries and the RMA

It is important to note that the ministries and agencies are responsible for approving sectoral criteria that determine whether an enterprise is important for a sector of the national economy. The regional military administrations (hereinafter referred to as the RMA) approve criteria that determine enterprises that are important for meeting the needs of the territorial community during a special period. At present, most ministries and agencies have already approved the new criteria for reservation and coordinated them with the Ministry of Defense and the Ministry of Economy.

The updated criteria approved by the Cabinet of Ministers of Ukraine has increased the number of enterprises that can claim the critical infrastructure status. This status confers several advantages, in particular in securing employee reservations, which is a key concern in the current business environment. The following is a detailed look at the existing criteria for obtaining and maintaining the critical status, as well as the process for doing so, starting from December 1, 2024.

If the enterprise has not previously received the critical status, but meets the requirements specified in clause 2 of the Criteria, it should act in accordance with the algorithm set forth in clause 5 of Criteria No. 76.

The websites of the ministries and some RSAs/RMAs contain explanations regarding the reservation issues, sample applications, and lists of documents to be submitted to confirm the critical enterprise status. In addition, some RMAs publish step-by-step instructions on their websites for obtaining (confirming) the critical status. For example, on January 09, 2025, the Kyiv Regional Military Administration website published step-by-step instructions (4) and a Roadmap for obtaining the status of a critical enterprise (5) to ensure the functioning of the economy and the livelihoods of the population during a special period.

In summary, if an entity meets the specified criteria, they must submit an application to the relevant authorized body to confirm the status of a critical enterprise (as appropriate):

• to the central executive body, other state body, public administration body, the jurisdiction of which extends over the entire territory of Ukraine (by the sphere of management or sector of the national economy), or
• to the regional, Kyiv and Sevastopol city state administrations in whose jurisdiction the enterprise is located, or
• to the regional, Kyiv and Sevastopol city military / military-civilian administrations (if established), in the territory of which the enterprise is located.

After reviewing the updated Procedure No. 76, it is clear that the government has maintained the original eight criteria for identifying critical enterprises. Additionally, new criteria of significant importance have been incorporated. Concurrently, the sectoral and regional criticality criteria were finalized and approved by the Ministry of Defense and the Ministry of Economy. 

The new (additional) criteria for obtaining the status of a critical enterprise include:

• the accrued average salary of the insured persons - employees for the last calendar quarter must be no lower than the minimum wage in the country multiplied by a coefficient of 2.5 (currently UAH 20,000 thousand);
• no arrears in paying taxes to the state and local budgets and the Unified Social Contribution.

In order to obtain the critical status, each enterprise must meet three or more criteria set by the CMU, in addition to sectoral criteria. The following two criteria are mandatory for privately owned enterprises:

1. No tax and Unified Social Contribution arrears.
2. The accrued average salary of employees for the last quarter must be at least UAH 20,000 (for non-state enterprises).

These criteria are basic for all non-state enterprises, regardless of the industry. 

At the same time, certain categories of enterprises need to meet only two criteria to be designated as critical. Such enterprises include:

1. fuel and energy complex enterprises;
2. managers of apartment buildings — legal entities (business entities);
3. state-owned assay control enterprises;
4. enterprises that provide services and perform works on the operation and comprehensive maintenance of public authorities’ property;
5. enterprises operating in the field of healthcare, veterinary medicine, education and science, physical culture and sports, social protection (with inclusion in the Register of Providers and Recipients of Social Services) and belonging to the state or municipal form of ownership with inclusion in the Register of Non-Profit Institutions and Organizations or those maintained at the expense of the state or local budget, or provide the population with free services necessary to ensure the vital activity of the population on a regular basis;
6. linear audiovisual media that carry out terrestrial multichannel (digital) television broadcasting using a radio frequency resource, the program content of which consists mainly of information and/or information and analytical programs, or that are involved in the alert system, and their affiliates;
7. state and municipal cultural institutions;
8. enterprises engaged in international transportation of passengers and/or cargo, enterprises engaged in transportation of passengers on public bus routes and/or cargo, carriers of urban electric transport.

1. Check compliance with the two mandatory criteria of the CMU and industry or regional criteria. First, the enterprise should determine the criteria by which it can obtain the critical status. After all, the reservation procedure should not be started if the company does not meet the necessary criteria. In this case, measures should be taken to bring the company in line with these criteria.
2. Analyze industry / regional criteria. An enterprise should carefully examine the industry and regional criteria relevant to its type of activity or location and place of operations and determine which ones are the most appropriate for it.
3. Prepare a package of documents, submit an application to the relevant ministry or agency along with supporting documents.
4. Wait for consideration and receive a response regarding inclusion in the list of critical enterprises and obtaining the status of a critical enterprise.

The copies of supporting documents, as well as the information on the company’s tax reporting for the last calendar quarter, are attached to the request:

• a copy of the tax return with the marks (stamps) of the controlling authority that received the tax return, indicating the date of its receipt, or
• a receipt of acceptance of the tax return if it was submitted by means of electronic communication, or
• a receipt from the controlling authority responsible for the results of the audit and acceptance of the taxpayers' reporting documents, or
• by mail with a notice of delivery to the supervisory authority if the tax return is sent by mail.

On the basis of the documents received, the relevant authorized body deciding  on the granting of critical status shall include the enterprise or institution in the Unified List of state authorities, other state bodies, local self-government bodies, enterprises for the reservation of persons liable for military service (clause 14 of Procedure No. 76).

In particular, the Unified List indicates the reasons for reserving the employees liable for military service in a critical enterprise or critical institution, i.e. the date and number of the relevant decision to designate the enterprise as critical (clause 18 of Procedure No. 76). The enterprise or institution will be notified of its inclusion in the list through the Diia portal in accordance with clause 22 of Procedure No. 76:

“A public authority shall submit through the Diia Portal by connecting to workstations a notification of changes to the Unified List in the event of:
    

•    confirmation of the status of a critical enterprise or critical institution as critical for meeting the needs of the Armed Forces, other military formations or the functioning of the economy and ensuring the livelihood of the population during a special period;
•    change the reservation limit”.

The deadline for reviewing applications from companies to be recognized as critical is 10 business days from the date of receipt. However, as practice shows that the deadlines for reviewing applications are not met, companies that need to have their criticality status reconfirmed must submit an application to the relevant authority or RMA in advance to be able to re-reserve employees after 28.02.2025.

Companies are required to confirm their critical importance status at least once a year. To re-register the status of a critical enterprise, it is necessary to submit an application directly to the body that previously designated the enterprise as critical.

Most ministries and RMAs recommend that companies submit a package of documents to confirm this status. These documents should be submitted no earlier than 45 days before the expiration of the current order.

It is essential to emphasize that enterprises that have not formally confirmed their critical importance status in accordance with the established procedure will forfeit their right to reserve employees subject to military service after one year from the date of the decision to designate such enterprises as critical. 
 

Continuous monitoring and control system

All decisions regarding the designation of enterprises as critical will be subject to monitoring, with the possibility of canceling the reservation. This feature will be available in the Diia app.

Every month, companies will be subject to compliance checks to ensure adherence to established requirements, including the average salary, tax payments, and the number of persons liable for military service.
In the event of non-compliance, the enterprise will receive a request for explanations. If the monitoring shows a negative result, the company will lose its critical status.

Therefore, it is imperative that enterprises meet the criteria for being designated as critical throughout the entire period for which they are granted critical status.

We would like to emphasize that if a private enterprise (with the exception of Diia City residents) is deprived of the critical status due to non-compliance with the requirements for accruing a monthly salary to each employee during the period of deferral, amounting to at least UAH 20 thousand, the enterprise may regain critical status no earlier than 6 months after the decision to deprive it of critical status is made. 

Conclusions

1. An enterprise wishing to reserve employees must meet the criteria outlined in Procedure No. 76, and, in particular, obtain the critical status, including an average salary of at least UAH 20 thousand.
2. In determining whether an enterprise is critical, the law permits the use of industry or regional criteria that have been approved by the relevant authorities.
3. The authority that has decided to designate an enterprise or institution as critical will continuously monitor their activities for the reporting tax period and verify compliance with the established criteria, in particular, monthly monitoring of compliance will be carried out through the Diia application.
4. In the event of a violation of the requirements, the company may lose its critical status, with the possibility of restoration no earlier than six months later.

The specialists of BDO in Ukraine are constantly monitoring changes in legislation and are ready to provide advice on all issues related to keeping military records and obtaining the critical enterprise status. Please, contact us to receive assistance with this crucial process!


* Disclaimer: Please note that this information is correct as of the date of publication (17.02.2025). This publication is for informational purposes only and should not be considered as legal, tax or financial advice. Please consult a professional advisor for individualised advice.

The material was prepared at the request of Liga.Zakon

References:
(1)    The Law of Ukraine of 21.10.1993 No. 3543-XII “On mobilization training and mobilization 
(2)    Resolution of the Cabinet of Ministers of Ukraine No. 76 dated 27.01.2023 “Some Issues of Implementation of the Law of Ukraine “On Mobilization Preparation and Mobilization”
(3)    Government Resolution No. 1332 of 22.11.2024
(4)    Step-by-step instructions for obtaining (confirming) the critical enterprise status
(5)    Roadmap for obtaining the critical enterprise status