How Foreign Capital Legally and Securely Enters a Ukrainian Defense Deal

Capital almost never lands in the Ukrainian operating company. It is issued at the cross-border holding — the foreign parent an investor can legally own — in one of three instruments. The choice sets the valuation, the dilution and how quickly the paperwork closes.

A SAFE (Simple Agreement for Future Equity) is the fastest to sign — no interest, no maturity, it simply converts at the next priced round — but it was written for US-style companies, and whether it is clean and enforceable at a holding in a given jurisdiction is exactly the kind of thing to confirm before you rely on it. A convertible note does a similar job as debt, with interest and a maturity date. A priced round settles the valuation now. For a defense asset with a real contract pipeline, a priced round is often the cleaner instrument — but that is a deal judgment, made with counsel.

Those instruments assume the money lands at the foreign holding — which is where it almost always should, and one reason the holding exists. A SAFE and a convertible note are clean, familiar instruments at a US or EU parent. The distinction our legal partner draws is what changes if an investor instead wires directly into the Ukrainian operating company — rarer, usually a bridge taken before a foreign holding is in place, and mechanically different.

A SAFE does not work into a Ukrainian entity. Ukrainian company law has nowhere to slot it: bringing a new participant into a Ukrainian LLC means a defined contribution and a formal charter-capital procedure — a general-meeting decision, a charter amendment and state registration — so you cannot grant a Ukrainian share today against an undefined future valuation. The instrument that does the job is a convertible loan: the money enters as a loan and converts into a share through a charter-capital increase, with the conversion locked in an enforceable corporate agreement. It is usually written with an assignment clause, so that once a foreign holding appears the loan restructures to deliver the equity in the foreign jurisdiction rather than in Ukraine.

Money crossing into Ukraine also picks up a currency-control layer. A foreign loan no longer needs the old NBU registration — that was abolished in the 2019 currency reform and replaced by an automated notification handled by the servicing bank. But under martial law the National Bank limits cross-border servicing and repayment (the base rule is NBU Resolution No. 18 of February 2022, progressively liberalized since). Those limits are live and they move, so the timing of any repayment or conversion is a point to confirm with counsel and the bank, as of the day.

The investment usually goes into a foreign company — the UK, Estonia or the US — where classic instruments like a SAFE or a convertible note apply. Directly into Ukraine it is typically a convertible loan, written so that when a foreign structure appears the claim is assigned up to it. Either way the first move is the same: screen the investor, and confirm whether they will invest only through a foreign structure, or into Ukraine at all.

A private financing is not registered with a securities regulator — it closes under an exemption from registration. Which exemption is not a matter of taste: it follows from where the holding is incorporated and who the investors are. The two you will hear most, for a US-anchored holding, are Regulation D and Regulation S.

• Regulation D (US) exempts a private placement to US investors. The common path, Rule 506, lets an issuer raise an unlimited amount from accredited investors (broadly, an individual with over $1M net worth excluding the home, or $200k+ income; an entity with $5M+ in assets), with limits and a no-general-solicitation rule under 506(b).
• Regulation S is the offshore safe harbor: it exempts securities sold outside the United States to non-US persons, with no directed selling into the US and no SEC filing. For a European family office or fund buying into a non-US holding, this is frequently the frame.

The two are often used together — Reg D for any US accredited investors, Reg S for the offshore ones, in the same round. If the holding sits in the EU rather than the US, the analysis shifts to the relevant national private-placement and prospectus exemptionsinstead. For a Luxembourg or other EU investor, the practical question — Reg S offshore, a US nexus that pulls in Reg D, or an EU placement exemption — is a counsel call keyed to the holding's jurisdiction. The point here is only that an exemption is always chosen deliberately; a raise that closes without one is the problem you are paying counsel to prevent.

Signing a term sheet is not the moment money moves. Between signature and a funded company sits a closing, and the closing is engineered so neither side is exposed. The mechanism is escrow tied to conditions.

Before any of that, the receiving side runs KYC/AML — know-your-customer and anti-money-laundering — and a source-of-funds check. This is not optional friction: banks and escrow agents are legally required to verify who the investor is and where the money comes from, and a defense counterparty applies it strictly. The practical lesson for an investor is to expect it and prepare for it — clean, documented source-of-funds is what keeps a wire from stalling.

A defense asset narrows the field of eligible capital in ways an ordinary company does not. Three screens matter.

Sanctions and end-use — the hard line

Any connection to Russia, Belarus, or a sanctioned party is an absolute disqualifier, checked on the investor and its beneficial owners. This is the one screen with no grey zone: a Ukrainian defense company cannot take that capital, and a clean beneficial-ownership disclosure is a precondition, not a formality.

Ukrainian merger control

A large enough transaction needs clearance from the Antimonopoly Committee of Ukraine (AMCU) before it closes. As a rough gauge, there are two alternative tests. One is triggered when the combined worldwide assets or turnover of the parties exceeds about €30 million and at least two of them each have more than about €4 million in Ukraine. The other keys off the Ukrainian target on its own — about €8 millionof Ukrainian assets or turnover — together with one party's worldwide size of about €150 million. A foreign fund with no Ukrainian footprint usually fails the first test (only one party clears €4 million in Ukraine) and is caught, if at all, by the second. Below both, a financing usually does not need clearance; a controlling stake in a scaled company can. Confirm the current thresholds and their application with counsel.

Foreign-investment review

This is the part in motion, and the one to watch. Ukraine is introducing a foreign-direct-investment screening mechanismthat adds a national-security layer to a foreign investor's deal: under the reform, the AMCU would not clear certain foreign-investor concentrations without prior review by the Ministry of Economy. Combined with the sector's export-control and secrecy rules, that means a foreign parent taking control of a sensitive defense asset should assume a national-security review is in scope. As of 2026 the exact regime, its triggers and timing are still settling — which is precisely why this belongs with specialist counsel from day one, not at closing.

EU investor screening — new, and coming

There is a second review if the holding sits in the EU. In June 2026 the EU adopted a new Foreign Direct Investment Screening Regulation (Regulation (EU) 2026/1386, replacing the 2019 framework) that makes investment screening mandatory across all member states for sensitive sectors — expressly including dual-use goods and military technology — and reaches intra-EU investors that are ultimately foreign-controlled. Two things to keep straight: it applies from 17 January 2028, not yet, and it screens investment into the EU — so it bites a fund investing into your Estonian or other EU holding, not the Ukrainian company itself. Our legal partner flags it as the layer to design around now, while the structure is being set, rather than discover at closing.

The value an acquirer eventually pays for is company-held, cleanly-assigned intellectual property — and in defense that IP is export-controlled. What can be assigned or licensed from the Ukrainian operating company up to the holding, and how, is governed by export-control rules on both the Ukrainian and the investor side. It is a legal question, not corporate housekeeping: the structure has to move ownership of the paper without moving anything the rules do not allow to cross a border. Get it right and the IP is a value driver; get it wrong and it is where a return quietly gets trapped. The holding explainercovers where the IP sits; the licensing mechanics are counsel's.

Stripped to its spine, a compliant entry runs in the same order every time. The instruments differ; the sequence does not.