US-Ukraine Business Council

MONDAY, MARCH 22, 2010
Kyiv, Ukraine

UKRAINE BUSINESS NEWS #15 - TEN ARTICLES
NBU Introduces New Legal Framework for Registration of Foreign Investments
DLA Piper, Baker & McKenzie, Asters, Visil Kisil & Partners, Squire Sanders
U.S.-Ukraine Business Council (USUBC), Mon, March 22, 2010

UKRAINE BUSINESS NEWS #15 - TEN ARTICLES
NBU Introduces New Legal Framework for Registration of Foreign Investments

INDEX OF ARTICLES ------
Clicking on the title of any article takes you directly to the article.
Return to Index by clicking on Return to Index at the end of each article

1.   UKRAINE : NBU INTRODUCES AN ENTIRELY NEW LEGAL FRAMEWORK FOR THE REGISTRATION OF FOREIGN INVESTMENTS
Financial Newsletter, DLA Piper, Kyiv, Ukraine, Fri, March 19, 2010

2.   UKRAINE: NBU AMENDS FOREIGN INVESTMENT RULES
Legal Alert: Baker & McKenzie, Tue, March 16, 2010

3.  NATIONAL BANK OF UKRAINE ESTABLISHES LONG-AWAITED
PROCEDURE FOR REGISTRATION OF FOREIGN INVESTMENTS
Asters law firm, Kyiv, Ukraine, Thu, March 11, 2010

4.  UKRAINE : REGARDING CHANGES OF THE PROCEDURE OF
REGISTRATION OF OWNERSHIP RIGHTS TO REAL ESTATE
DLA Piper Real Estate Newsletter, Kyiv, Ukraine, Wed, March 10, 2010

5. FIRST UKRAINIAN INTERNATIONAL BANK (FUIB), FIRST SUCCESSFUL RESTRUCTURING OF A UKRAINIAN BANK'S INTERNATIONAL LOAN PORTFOLIO
Baker & McKenzie, Kyiv/Munich, Feb 8, 2010

6. UKRAINE: CONFERENCE "INTERNATIONAL COMMERCIAL AGENCY, DISTRIBUTION AND FRANCHISING CONTRACTS: ISSUES OF MAJOR CONCERNS AND RECENT TRENDS
DLA Piper Ukraine, Kyiv, Ukraine, Wed, Mar 17, 2010

7. VISIL KISIL & PARTNERS OFFICIAL LEGAL PARTNER OF THE
ASSOCIATION OF UKRAINIAN-CHINESE COOPERATION (AUCC)
Vasil Kisil & Partners, Kyiv, Ukraine, Wed, March 10, 2010

8. TAXATION OF FOREIGN INDIVIDUALS IN UKRAINE - IMPORTANT NEW DEVELOPMENT
KPMG News Flash, Kyiv, Ukraine, Thu, March 11, 2010

9. UKRAINE: FINALIZING DRAFT LAW NO. 5507 'ON LIMITED LIABILITY COMPANIES'
Asters law firm, Kyiv, Ukraine, Thu, March 11, 2010

10.  ANOTHER BUSINESS SUPPORT LAW: REAL HELP, OR EMPTY PROMISES?
Ukraine Law Alert, Squire, Sanders, Kyiv, Ukraine, Fri, Jan 29, 2010
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1.  UKRAINE : NBU INTRODUCES AN ENTIRELY NEW LEGAL
FRAMEWORK FOR THE REGISTRATION OF FOREIGN INVESTMENTS

Financial Newsletter, DLA Piper, Kyiv, Ukraine, Fri, March 19, 2010

KYIV - As we have previously advised, from 24 November 2009 until 1 January 2011 foreign investments in Ukraine:

       [1] are subject to mandatory state registration; and
       [2] if are made in monetary form, must be made only through Ukrainian investment accounts and in Ukrainian currency.

Under the relevant law (1), it was the obligation of the National Bank of Ukraine ("NBU") to determine the procedure for the state registration of foreign investment made in monetary form - a procedure that did not previously exist.

On 23 December 2009 the NBU issued a long awaited Resolution "On Settling the Matters of Making of and Registration of Foreign Investments" No. 762 ("Resolution 762") effective from 15 March 2010, pursuant to which, inter alia:

       (1) The Regulation for the State Registration by the National Bank of Ukraine of Foreign Investments ("Regulation on FIR") was adopted;

       (2) amendments to the regulation governing trade in foreign currency were introduced; and

       (3) amendments to the regulation governing the procedure of making foreign investments were introduced.

Below we would like to address the most important provisions enacted by Resolution 762.

Registration of Foreign Investments

Under the Regulation on FIR, to register an investment the investor, or its representative, must submit an application to the relevant territorial department of the NBU within 30 calendar days from the date on which an investment is made. The following documents must be attached to the application (either originals or notarized copies):

       (1) documents showing that an applicant has due authorisation to make the application (if applicable);

       (2) the investment agreement(s);

       (3) statutory documents of the Ukrainian entity, which is the object of the investment(s) (if applicable).

In addition, a reference given by a Ukrainian bank to confirm that the investment was made from the investment account must be attached.

A notarized translation of documents made in any language other than Ukrainian or Russian must be provided.

The NBU will have up to 10 business days upon submission of the above documents to register an investment. The NBU may also request additional documents from an applicant. In such a case, the deadline for the registration may be extended by up to 5 business days calculated form the date on which the NBU receives the requested documents.

If the registration is performed successfully, the NBU will issue a notice on the state registration of a foreign investment.

The NBU may reject an application for registration, if it believes that an incomplete set of documents has been submitted or if any false information is given. The NBU must notify the applicant about such a rejection within 5 business days from when the relevant resolution is made.

Please note that the Regulation on FIR is applicable to foreign investments made on or after 24 November 2009 and only in monetary form. Investments made between 24 November 2009 and 15 March 2010 must be registered by 14 April 2010 at latest.

Trade in Foreign Currency

The NBU has substantially modified the list of documents that are required for the purchasing of foreign currency under transactions related to the foreign investments such as:

       (1) repatriation of investments, including portfolio investments, and the proceeds from such investments;

       (2) transactions involving internal sovereign bonds of Ukraine;

       (3) repatriation of proceeds from any joint activity performed in Ukraine;

       (4) repatriation of funds placed in an investment deposit account with Ukrainian bank; and

       (5) repatriation of any amounts which were not used for making an investment, but were sold by the foreign investor in the interbank currency market of Ukraine.

Ukrainian banks will be entitled to purchase foreign currency for their clients to perform any of the above transactions no sooner than the fifth day from the date on which the relevant monies in local currency were credited to the special transit account of the bank.

To purchase foreign currency to repatriate a foreign investment the bank must be provided with, inter alia, the following documents:

       (1) an application;

       (2) an investment agreement and documentary evidence of its fulfilment;

       (3) documents confirming the amount payable to the foreign investor;

       (4) a document confirming the state of registration of the foreign investment and [X] number of copies;

       (5) confirmation the investment has been made (unless such investment was made more than 5 years prior to its repatriation);

       (6) statutory documents of Ukrainian recipient of the investment (if applicable);

       (7) a confirmation of the tax authority that Ukrainian withholding tax has been paid by the foreign investor (unless the servicing bank acts as a tax agent of such a foreign investor, or the sale price of the investment object equals the purchase price paid by such a foreign investor);

       (8) a copy of the agreement pursuant to which the object of the investment was transferred from one foreign investor to another without making settlements in Ukraine (if applicable).

Please note the following:

[1] the above regulation does not provide for any exceptions for investments made prior to 24 November 2009 - from one side such investments were not subject to mandatory registration, but form the other side such registration may not be performed now under the Regulation on FIR;

[2] item (8) above may be satisfied by an indirect approval by the NBU of transactions made by the foreign investors outside of Ukraine with respect to Ukrainian assets.

Foreign Investments Regime

Making foreign investments. From the date that Resolution 762 comes into force, all types of foreign investments in monetary form may only be made

       (1) by a money transfer in Ukrainian currency; and

       (2) via special investment accounts opened with Ukrainian banks, which will be used for the accumulation of foreign currency for further conversion into Ukrainian currency and for the purpose of investing. Only foreign currency belonging to the 1st group of the NBU classifier (i.e. hard currency) may be credited to such investment accounts.

The same procedure will apply to portfolio investments.

In other words, direct money transfers from abroad to the accounts of Ukrainian entities, including the accounts of securities traders, will no longer qualify as foreign investments.

Repatriation of foreign investments. Under Resolution 762 a foreign investor may repatriate its investments and any proceeds from such investments in one of the following ways:

       (1) a money transfer in foreign currency from a current account of a Ukrainian entity to a foreign account of the foreign investor;

       (2) a money transfer in Ukrainian currency from a current account of a Ukrainian entity to the investment account of the foreign investor;

       (3) a money transfer in foreign currency from the investment account of the investor to a foreign account of the foreign investor;

       (4) a money transfer in Ukrainian currency from the investment account of the investor to the investment account of another foreign investor;

       (5) a money transfer in Ukrainian currency from the investment deposit to the investment account of the foreign investor.

As from 24 November 2009 a monetary foreign investment may be made only through investment accounts, the earlier existing option of settlements via the accounts of securities traders was excluded.

Pursuant to Resolution 762 the term "direct investment" was abolished, and the term "portfolio investment" was modified to mean "purchasing of securities of Ukrainian issuers and their derivatives on the securities market (save for the purchasing of 10 per cent and more of the shares of a company)".
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(1) Law of Ukraine "On the Introduction of Amendments to Certain Laws of Ukraine Aimed at Overcoming the Negative Consequences of the Financial Crisis" No. 1533 dated 23 June 2009.

Please do not hesitate to contact us should you have any questions on the above. Oleksandr Kurdydyk, Partner, T +380 44 490 9570, E oleksandr.kurdydyk@dlapiper.com; Illya Muchnyk, Senior Associate, T +380 44 495 1780, E illya.muchnyk@dlapiper.com

DLA Piper Ukraine LLC is part of DLA Piper, an international legal practice. International Law Firm of the Year 2008 in Ukraine. DLA Piper ranked 3rd in Financial Times Law 50 Innovative Lawyers 2008. Kyiv switchboard: +380 44 490 9575

The matters covered in this newsletter are intended as a general overview. This newsletter is not intended, and should not be used, as a substitute for taking legal advice in any specific situation. DLA Piper Ukraine LLC will accept no responsibility for any actions taken or not taken on the basis of this newsletter. If you would like further advice, please contact Finance and Projects Team at +380 44 490 9575. www.dlapiper.com

NOTE: DLA Piper Ukraine is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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2. UKRAINE: NBU AMENDS FOREIGN INVESTMENT RULES

Legal Alert: Baker & McKenzie, Kyiv, Ukraine, Tue, Mar 16, 2010

KYIV - On 23 December 2009, the National Bank of Ukraine (the "NBU") adopted Resolution No. 762 "On Regulation of Issues Regarding the Making and Registration of Foreign Investments" (the "Regulation"), which became effective on 15 March 2010.

The Regulation was adopted to fulfill the requirements of Law of Ukraine No. 1533-VI, "On the Introduction of Amendments to Certain Laws of Ukraine for Overcoming the Negative Consequences of the Financial Crisis", dated 23 June 2009 (the "Law"), which came into effect on 24 November 2009 and introduced a number of important changes into the Ukrainian currency control regime in respect of the procedure for making foreign investments in Ukraine.

The following is a brief summary of the major changes introduced by the Regulation.

1. Registration of Foreign Investment

The Regulation outlines the procedure for the registration by the NBU of all foreign investments in monetary form. A foreign investor is now required to apply to the local NBU branch in the region of the investment for the registration of any such foreign investment within 30 calendar days after the making of the investment (or from the effective date of the Regulation in respect of those foreign investments made from 24 November 2009 through 15 March 2010).

The process of such registration should take up to 10 business days upon the submission of the application, and it may be extended by an additional 5 business days if the NBU requests additional documents from the applicant. The registration of the foreign investment is evidenced by a Registration Notice issued by the NBU.

On its face, the procedure for the registration of a foreign investment established by the Regulation is straightforward and compliance with it should not result in any significant complications. However, foreign investors should pay close attention to the documents required for such registration (especially those documents which are required to be legalized or apostilled before submission), because the NBU tends in practice to be formalistic in this respect.

2. New Rules for Making Foreign Investment

The Regulation introduces several important changes to NBU Regulation No. 280 "On Foreign Investment in Ukraine", dated 10 August 2005 (the "Foreign Investment Regulation"), which is the principal NBU regulation governing the process of making an investment in monetary form into Ukraine and a divestment from Ukraine.

In particular, the Regulation changes the following major rules of the Foreign Investment Regulation:

[1] the Regulation removes the term "direct investment" and unifies the rules for making and returning of all types of foreign investments in monetary form. As a general rule, all operations of a foreign investor related to making a foreign investment in monetary form may now be carried out only in Ukrainian Hryvnias through an investment account opened with a Ukrainian bank;

[2] foreign currency must be transferred to the investment account of the foreign investor, which have been opened with a Ukrainian bank for the purposes of its conversion into Hryvnias and making a cash investment in Ukraine;

[3] the return of the foreign investment may be made in foreign currency by means of the transfer of foreign currency funds from the investment or deposit account of the foreign investor with a Ukrainian bank, or by means of a foreign currency payment of a Ukrainian resident directly to the foreign bank account of the foreign investor; and

[4] the Regulation expressly provides that a foreign investor may place a deposit in a Ukrainian bank only in Hryvnias and such deposit must be placed from the foreign investor's investment account opened with a Ukrainian commercial bank. The Ukrainian commercial bank will be able to repay its existing foreign currency investment deposits to the foreign investor only if the placement of such deposit is duly registered by the foreign investor.

For more information: Ihor Olekhov, Partner, +380 44 590 0101, ihor.olekhov@bakermckenziecom; Oleksandr Svyryd, Associate, +380 590 0101
oleksandr.svyryd@bakermckenzie.com. Baker & McKenzie - CIS, Limited, Renaissance Business Center, 24 Vorovskoho St., Kyiv 01054, Ukraine. www.bakermckenzie.com.

NOTE: Baker & McKenzie is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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3. NATIONAL BANK OF UKRAINE ESTABLISHES LONG-AWAITED PROCEDURE FOR REGISTRATION OF FOREIGN INVESTMENTS

Asters law firm, Kyiv, Ukraine, Thu, March 11, 2010

KYIV - On 1 March 2010 the Ministry of Justice of Ukraine registered resolution of the National Bank of Ukraine ("NBU") approving the procedure for state registration of foreign monetary investments ("Registration Procedure").

The Registration Procedure was adopted by the NBU on 23 December 2009 to implement the requirement of mandatory state registration of foreign investments in Ukraine introduced by the Law on Amending Certain Laws of Ukraine to Overcome Adverse Consequences of the Financial Crisis No. 1533, which came into effect on 24 November 2009 ("Anti-Crisis Law"). The Registration Procedure will come into force on the date of its publication in the
official newspaper ("Effective Date") that is expected now any day.

The Registration Procedure contains the following key provisions:

[1] The Registration Procedure shall apply only to foreign investments in monetary form made on and after 24 November 2009;

[2] Foreign investors are obliged to register their investments in Ukraine within 30 days after making investments;

[3] Foreign investments made from 24 November 2009 to the Effective Date shall be registered within 30 days from the Effective Date;

[4] The obligation to register the foreign investments is vested with the foreign investor or its authorized representative;

[5] The applicant for registration of foreign investments must leave specified documents with the NBU which must review them within 10 working days. At the same time the NBU may discretionally request additional documents which must be reviewed within additional 5 working days. Such NBU's discretional authority allows subjective review and unfair treatment of the applicant, including multiple extensions of review periods and frivolous denials of registration;

[6] The documents led with the NBU for registration of foreign investments must include a statement of the investor's Ukrainian bank evidencing implementation of the investment from the investor's investment account. Under the Anti-Crisis Law, monetary investments must be made only in Hryvnya through an investment account opened by a foreign investor in a Ukrainian bank; and

[7] The documents led with the NBU for registration of foreign investments must include an investment agreement. This requirement is onerous with respect to an investment made without execution of a formal agreement (such as cash contributions to the charter capital of a limited liability company) and, consequently, may lead to a denial of registration of such investment.

Concurrently with adoption of the Registration Procedure, the NBU amended its regulations on the purchase of foreign currency for payment of dividends, repatriation of profits and divestments from Ukraine.

Under these regulations, the purchase of foreign currency may be conducted only after submission of the applicant, inter alia, of the statement of investor's Ukrainian bank evidencing the wire transfer of investor's funds to Ukraine and their use for the investment purpose.

The NBU will no longer require such statement of a Ukrainian bank if

(i) registration of the foreign investment is properly evidenced by the respective registration certificate or
(ii) five-years expired from the date of such foreign investment. The similar rule shall also apply to in-kind investments.

If you have questions or need legal assistance regarding this newsletter, please contact the following Asters’ attorneys: Svitlana Poroschuk, Partner, svitlana.poroschuk@asterslaw.com; Kostyantyn Solyar, Associate, kostyantyn.solyar@asterslaw.com. Asters, Inna Kotikova, Marketing Director,
Leonardo Business Center, 19-21 Bohdana Khmelnytskoho St., Kyiv 01030, Ukraine, Tel 380 44 230 6000, Fax 380 44 230 6001, www.asterslaw.com.

This publication is for general information only and does not contain comprehensive legal analysis. Readers should seek professional advice specific to their situation before taking action.

DLA Piper Real Estate Newsletter, Kyiv, Ukraine, Wed, March 10, 2010

KYIV, UKRAINE - Ministry of Justice of Ukraine by its Order No. 324/5 dated 17 February 2010 (the "Order 324") introduced changes into the procedure for registration of ownership rights to real estate, stipulated by the Order of the Ministry of Justice of Ukraine "On approval of Temporary Regulations on Procedure for State Registration of Ownership Rights to Real Estate" No. 7/5 dated 7 February 2002.

Please find below a brief overview of the major changes.

1. The recent changes provide for a possibility to a mortgage holder of real estate to register its ownership right to the mortgaged real estate based on mortgage agreement. In order to qualify for such registration the mortgage agreements should be concluded or amended after 14 January 2009 and should contain a reservation on a possibility to enforce the mortgage.

The changes stipulate a list of documents to be provided by the mortgage holder in order to register its ownership right to real estate based on the mortgage agreement as mentioned above, specifically:

       [1] A copy of a written request to remedy violation of obligations, sent by the mortgage holder to the mortgagor. Such request must contain
                    (i) brief description of violated obligations,
                    (ii) demand to fulfil the obligations within a period of not less than 30 days and
                    (iii) notification on mortgage enforcement in case of non-fulfilment of the demand.

       [2] A document evidencing expiration of a 30-day period from the moment of receipt of the written request of the mortgage holder by the mortgagor.

       [3] Appraisal report of mortgaged real estate.

       [4] Excerpt from the State Register of Mortgages.

       [5] Excerpt from the Unified Register of Prohibitions on Alienation of Real Estate.

2. The changes set forth the procedure for state registration of construction in progress (unfinished construction). Specifically, in order to perform such registration the interested person should provide to the Bureau of Technical Inventory (i) application for registration, (ii) documents evidencing rights to the land plot underlying such real estate and (iii) construction permit (permit for performance of construction works).

3. According to the changes the ownership certificate as well as the Register of ownership rights to real estate shall indicate the owners of state and municipally owned real estate, ie the State of Ukraine represented by relevant state authority as an owner of state owned real estate and respective territorial community represented by a respective local authority as an owner of municipally owned real estate.

Should the real estate be in use of legal entities under the right of economic management (hospodarske vidannia) or operative management (operatyvne upravlinnia), the Register of ownership rights to real estate as well as ownership certificate shall indicate such rights.

4. According to the changes it will not be possible to register ownership rights to real estate based on decisions of an arbitration (tretejsky sud). Such amendments were introduced in order to bring the procedure for registration of ownership rights to real estate in line with recent changes in Ukrainian legislation, which excluded real estate related disputes from the competence of the arbitration (tretejsky sud).

The Order 324 is registered with the Ministry of Justice of Ukraine on 18 February 2010 and came into force 5 March 2010.

Please do not hesitate to contact us should you have any questions on the above. Natalia Kochergina, Partner, T +380 44 490 9563,
ET +380 44 490 9576 E -mail: natalia.kochergina@dlapiper.com; Anastasiya Bolkhovitinova, Senior Associate, anastasiya.bolkhovitinova@dlapiper.com.

DLA Piper Ukraine LLC is part of DLA Piper, an international legal practice. Global Real Estate Law Firm of the Year 2009 (Who's Who Legal Awards 2009). Real Estate Law Firm of the Year 2009 in Ukraine (Legal Awards 2009). Kyiv switchboard: +380 44 490 9575

The matters covered in this newsletter are intended as a general overview. This newsletter is not intended, and should not be used, as a substitute for taking legal advice in any specific situation. DLA Piper Ukraine LLC will accept no responsibility for any actions taken or not taken on the basis of this newsletter. If you would like further advice, please contact Real Estate Team at +380 44 490 9575. www.dlapiper.com

Baker & McKenzie, Kyiv/Munich, Feb 8, 2010

KYIV/MUNICH - Baker & McKenzie announced today that it acted as legal counsel to the Steering Committee of the international creditors of Public Joint Stock Company "First Ukrainian International Bank" ("FUIB"), the 14th largest bank in Ukraine, which utilised a new USD237 million master facility to refinance its existing facilities provided by international creditors.

This is the first successful restructuring of a Ukrainian bank's international loans portfolio since the financial crisis had an adverse impact on the Ukrainian banking sector. It is also relevant to both the German and London banking sectors as the majority lenders involved are either German or London-based banks.

Baker & McKenzie acted for the Steering Committee of international creditors, which was lead by Standard Bank Plc, VTB Deutschland GmbH (now VTB Capital), Landesbank Berlin, Raiffeisen Zentralbank Österreich AG and Black Sea Trade and Development Bank.

The English law team of Baker & McKenzie was led by Michael Foundethakis (Partner, Munich) and supported by Kathrin Schmid-Pfaehler and Catherina Haegele (Associates, Munich). The Ukrainian law team of Baker & McKenzie in Kiev was led by Serhiy Chorny (Partner, Kyiv) and supported by Victoria Ischenko and Maksym Hlotov (Associates, Kyiv).

FUIB was represented by Clifford Chance.

For More Information: Serhiy Chorny, Partner, +380 44 590 0101, serhiy.chorny@bakernet.com. Baker & McKenzie - CIS, Limited, Renaissance Business Center, 24 Vorovskoho St., Kyiv 01054, Ukraine, Tel: +380 44 5900101, Fax: +380 44 5900110, www.bakermckenzie.
NOTE: Baker & McKenzie is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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6. UKRAINE: CONFERENCE "INTERNATIONAL COMMERCIAL
AGENCY, DISTRIBUTION AND FRANCHISING CONTRACTS:
ISSUES OF MAJOR CONCERNS AND RECENT TRENDS

DLA Piper Ukraine, Kyiv, Ukraine, Wed, Mar 17, 2010

KYIV - DLA Piper Ukraine is glad to invite you to attend the International Conference "International Commercial Agency, Distribution and Franchising Contracts: Issues of Major Concerns and Recent Trends" which is supported by DLA Piper and is going to take place 22 April in Radisson SAS Hotel, Kyiv (Ukraine).

The event is held by the Ukrainian Bar Association (UBA) together with the International Distribution Institute (IDI).

Among the contributors of the Conference there are leading Ukrainian professionals in the respective fields and also well-known European experts. among them the IDI President, Professor of Law Fabio Bortolotti, Buffa Bortolotti & Mathis (Italy); Margarita Karpenko, DLA Piper (Ukraine); Tetyana Slipachuk, Vasil Kisil & Partners (Ukraine); Gustav Breiter, Viehböck Breiter Schenk & Nau (Austria); Olga Sztejnert Drzewiecki, Tomaszek & Partners (Poland); Jaap Van Till, Van Till Advocaten, (the Netherlands); Marco Hero, Tigges Rechtsanwälte, (Monaco); and others.

The Conference agenda covers the following issues:

       [1] Various options of organizing international distribution contracts
       [2] The main issues to deal with when drafting and negotiating international agency agreements
       [3] Analyzing the critical clauses when drafting distributorship contracts
       [4] Organizing a franchising network: the main options
       [5] Choice of the applicable law and its effectiveness
       [6] Dispute resolution: choice of forum and arbitration clauses in contracts with Ukrainian counterparts
       [7] Regulatory aspects of distribution and franchising contracts (antimonopoly compliance requirements)
       [8] Dispute resolution: choice of forum and arbitration clauses in contracts with Ukrainian counterparts and other issues

To obtain a copy of the agenda as well as a registration form contact: Natalia Tkachenko, Marketing Manager, Nataliya.Tkachenko@dlapiper.com, DLA Piper Ukraine LLC, 77A Chervonoarmiyska Str., 4 floor, Kyiv 03150, Ukraine, +380 44 490 9575.

Vasil Kisil & Partners, Kyiv, Ukraine, Wed, March 10, 2010

KYIV - It has been almost a year since Vasil Kisil & Partners became a member of the Association of Ukrainian-Chinese Cooperation (AUCC) being one of its very first members. An official cooperation agreement was executed by the parties on March 10, 2010.

Over this period of time, a number of meetings were held with official Chinese delegations were held, including jointly with the Embassy and Trade and Economic Mission of the People’s Republic of China in Ukraine, during which priority areas were defined that are of the most interest to the Chinese party, obstacles to the efforts of the Chinese investors to pursue the Ukrainian market entry were identified, and joint action plans were developed to bring the Chinese and Ukrainian businesses closer.

“Considering that the Chinese economy proved to be the most resistant to global crisis and was one of the first to exhibit a positive growth dynamics, Chinese companies that have significant financial and production capacity increasingly active in winning foreign markets. Over the last one year and a half, a lot of Chinese companies operating in the field of telecommunications, finance, construction and infrastructure, agriculture, metallurgy and trade have entered the Ukrainian market and were confronted with the necessity to receive high-quality legal support.

"The experience of Vasil Kisil & Partners in international trade, competition, corporate, banking law and finance, taxation, intellectual property in a wide range of industries allows us to provide exhaustive advice to our Chinese partners on legal aspects of doing business in Ukraine and actively participate in the activities of the AUCC and reinforce its initiatives with our expertise in law,” - highlighted Mr. Oleg Makarov, the Managing Partner of Vasil Kisil & Partners.

The Association of Ukrainian-Chinese Cooperation was set up in 2008 to foster the development of a large-scale mutually beneficial cooperation between Ukraine and the People’s Republic of China in the field of economy and finance, education, science, culture, sports and arts, public, social and humanitarian spheres and other areas through further establishment of effective partnership of the specialized Ukrainian and Chinese structures.

Its members include leading successful enterprises, companies, and organizations operating in the field of construction, energy, finance, consulting, transport, advertising, and education.

LINK: http://www.kisilandpartners.com/publications/news/530/

NOTE: Visil Kisil & Partners is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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8. TAXATION OF FOREIGN INDIVIDUALS IN UKRAINE -
IMPORTANT NEW DEVELOPMENT

KPMG News Flash, Kyiv, Ukraine, Thu, March 11, 2010

KYIV - Taxation of Foreign Individuals in Ukraine - Important New Development:

[1] At the end of December 2009, the Ukrainian tax authorities released Letter No. 28593/7/17-0717 dated 23 December (the "Letter"), pursuant to which the tax authorities indicated their view that the 15% personal income tax rate should apply to salaries only starting from the month in which the foreign individual receives a tax residency certificate (the "Certificate") as issued by the Ukrainian tax authorities. (Please see our News Flash dated January 15, 2010, for a more detailed description of the Letter.)

[2] The Letter represented a sudden and significant change from prior practice, and was subject to a significant level of queries and challenges from the Ukrainian business community.

[3] We are now advised that on or about 5 March 2010 the State Tax Administration has cancelled the Letter. While the details of the cancellation order are not yet available, this appears to be a positive development. Most immediately, this implies that determination of Ukrainian tax residency is to be made solely by the Law of Ukraine "On Personal Income Tax."

This in turn should mean that, if an individual receives employment income from a Ukrainian payroll and such individual satisfies and is prepared to substantiate (e.g., pursuant to maintaining appropriate documentary support) the criteria for claiming Ukrainian tax residency (e.g., pursuant to the number of days of the calendar year spent in Ukraine, their "center of vital interests," etc.), then such individual should be eligible for the 15% resident (as opposed to the 30% non-resident) tax rate without the necessity of obtaining a Certificate.

[4] Notwithstanding the above, it currently is not clear what the tax authorities' approach regarding the requirements and implications for obtaining Certificates will be on a go-forward basis. We look forward to providing further updates as the details of the cancellation order become available and/or there are further clarifications or developments.

In the meantime, should your organization have concerns or questions regarding these or other tax or legal issues, we are available to assist and would welcome being contacted.

CONTACT: Rob Shantz, Partner, Tax and Legal, Tel. +38(044) 490 55 07, Fax. +38(044) 492 82 98, RShantz@kpmg.ua; Sergey Popov, Partner, Tax and Legal, Tel. +38(044) 490 55 07, Fax. +38(044) 492 96 81; SPopov@kpmg.ua; Lena Sapko, Manager, Tax and Legal, Tel. +38(044) 490 55 07
Fax. +38(044) 492 82 98, LSapko@kpmg.ua.

NOTE: KPMG-Ukraine Ltd., is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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9. UKRAINE: FINALIZING DRAFT LAW NO. 5507 'ON LIMITED LIABILITY COMPANIES'

Asters law firm, Kyiv, Ukraine, Thu, March 11, 2010

KYIV - In 2010, Asters Law Firm continues implementing its legislative leadership program. Along this line, partner Vadym Samoilenko is part of the workgroup set up under the guidance of the State Agency of Ukraine for Investments and Innovation and concerned with finalizing draft law No. 5507 "On Limited Liability Companies".

The workgroup also comprises people representing international organizations, law firms, institutional investors, specialized agencies, and international counsels. Regardless of certain drawbacks of the draft, the workgroup members consider it to be bound for the future.

They further note that the enactment of a special corporate law to govern the existence of limited liability companies would become an ultimately progressive and important step towards improvement of the investment climate in Ukraine and further development of the national business law. The workgroup aims to submit the finalized draft to the Verkhovna Rada coming summer and believes it to be made into law by the end of the year.

One of the important components of Asters social program is providing support to law-making activities in Ukraine and promotion of the efforts aimed at building up a jural state. The firm lawyers extensively contribute to the drafting of a number of legal and normative acts.

LINK: http://www.asterslaw.com/index.php?lang_id=1&content_id=221

NOTE: Asters law firm is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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10.  ANOTHER BUSINESS SUPPORT LAW: REAL HELP, OR EMPTY PROMISES?

Ukraine Law Alert, Squire, Sanders, Kyiv, Ukraine, Fri, Jan 29, 2010

KYIV - The end of 2009 marked another step in the Ukraine government’s efforts to support businesses during difficult times. Effective December 30, 2009, a law amending and revising existing laws to facilitate entrepreneurship (the "Business Support Law") went into effect.

The Business Support Law was created to remove the bureaucratic obstacles businesses face, stimulate economic activity and minimize governmental control over entrepreneurship. The law addresses establishing a business, licensing procedures and obtaining state or municipal approvals for activities, as well as specific matters such as the leasing of state or municipal property, or the licensing of seed sales.

Some of the more important changes introduced by the Business Support Law are described below.

1. Requirements for Limited Liability Companies in Ukraine

The Business Support Law reduces the required minimum charter capital for limited liability companies (LLCs). To establish LLCs, the charter capital required must now at least equal the amount of one minimal salary (869 UAH [1], or about US$108).

Such a small threshold will not only facilitate incorporation of LLCs. Under certain circumstances, the lower minimum may help prevent an LLC’s forced liquidation. Under Ukrainian law, a company is subject to liquidation if its net assets at the end of the second and each following fiscal year are less than the required minimum charter capital.

2. Licensing Procedures and Rules for Obtaining State or Municipal Approvals

The Business Support Law introduces certain "business-friendly" regulatory changes including:
       (i) Allowing an unlimited term for licenses;
       (ii) Making it more difficult to have a license annulled; and
       (iii) Introducing the concept of "silent consent" for obtaining state or municipal approvals or permits.

According to the previous version of the Law of Ukraine "On Licensing of Certain Activities," the validity terms of most licenses had to be established by the Cabinet of Ministers of Ukraine. Pursuant to the "Regulation of the Terms of Licenses for Certain Activities and Amounts of Licenses Fees," approved by Decree of the Cabinet of Ministers of Ukraine No. 1755, dated November 29, 2000 (Licensing Decree), such terms were limited to five years.

The Business Support Law now dictates that licenses must be issued for an unlimited period of time. The terms of certain licenses may be limited by the Cabinet of Ministers of Ukraine, but those terms may not be less than five years.

In order to implement the Business Support Law, the Cabinet of Ministers of Ukraine has already amended the Licensing Decree. As of January 19, 2010 a five-year term was established for licenses for:
       (i) Extraction of natural resources from deposits of state importance;
       (ii) Transportation of oil and gas via pipelines;
       (iii) Supply of natural gas and gas from coal deposits;
       (iv) Storing natural gas and gas from coal deposits in amounts that exceed levels established by the licensing conditions;
       (v) Development, production, testing, export and import of holographic safety elements; and
       (vi) Other activities.

The terms of licenses issued under the old rules will not be extended; therefore, after a license expires, companies must renew their licenses according to the new rules.

The Business Support Law also changes the rules for annulment of licenses and further limits valid reasons for their annulment. For example, a licensing authority may not annul a license due to a company’s failure to notify the licensing authority about changes to documents that had been attached to a license application, such as the company’s address. In addition, any decision on license annulment will take effect after 30 days, instead of the previous 10 days.

That gives a license holder more time to appeal a decision on license annulment.

Other regulatory changes include:
       (i) The establishment of a 10-day term for obtaining the permits necessary for business activities (unless a different term is specified by law); and
       (ii) The introduction to the Law "On Regulatory Approval System in the Sphere of Commercial Activity" (Approval System Law) of a principle of "silent consent" that under certain circumstances allows companies that had failed to obtain certain municipal or state approvals or permits to operate without such approvals or permits. A company has the right to invoke silent consent once it has filed the required documents for obtaining or extending an approval or permit with an authorized state body and that body has not informed the applicant by the end of the required term that the approval or permit has been approved or denied. Effective 10 working days after the end of the time allowed for either issuing the approval or deciding to refuse the request, silent consent goes into effect and the applicant has the right to conduct the actions that would normally be contingent upon an approval or permit.

3.   Change of Municipal and State Property Lease Rules

The Business Support Law makes it easier to lease municipal or state property by establishing a minimum lease term of five years, unless the lessee wants to lease for a shorter term.

4.   Elimination of Licensing Requirements for Certain Types of Activities

The Business Support Law eliminates the need for licenses pertaining to certain types of activities, including those for certain "social services" including medical, legal, psychological and other services for people who find themselves in difficult situations (e.g. the disabled, disaster victims or the homeless); those involved in the sale of art, collectables and antiques or who organize auctions); and the design, construction and reconstruction, or reclamation of objects of cultural heritage. The new law also eliminates the requirement to conduct archeological or geological research prior to the design, construction, reconstruction or repair of objects of cultural heritage.

The Business Support Law also abolishes the licensing requirement for seed sales. This change may be quite important for agricultural traders who previously had had to obtain such licenses.

5. Support to Small Enterprises

The Business Support Law establishes certain benefits for so called "small enterprises," which Ukrainian law defines as entrepreneurs/individuals or entities with up to 50 employees and an annual income of not more than 70 million UAH (about US$8 million). Most of these benefits relate to the lease of state or municipal property. In particular, the Business Support Law:

       (i) Prohibits, until January 1, 2011, the State Property Fund from increasing lease payments from small enterprises for state property under lease;
       (ii) Recommends that the Supreme Council of Autonomous Republic of Crimea and municipal authorities not increase lease payments from small enterprises for municipal property and property of the autonomous Republic of Crimea until January 1, 2011; and
       (iii) Establishes that lease agreements for municipal or state property entered into with small enterprises before December 30, 2009 will be extended for up to five years from the effective date of the agreements.

The Business Support Law also places a moratorium, until January 1, 2011, on inspections and other reviews of small enterprises by municipal or state authorities, except for:
       (i) Inspections of high-risk enterprises, for example, heat or power generating companies. (The risk level of an enterprise is determined according to criteria approved by the Ukrainian Cabinet of ministers);
       (ii) Scheduled and unscheduled field inspections by the State Tax Service of Ukraine (with certain exceptions);
       (iii) Scheduled or unscheduled inspections of high-or-middle risk enterprises by the Pension Fund of Ukraine; and
       (iv) Unscheduled inspections by consumers’ rights agencies which were initiated pursuant to consumer complaints.

If you have any questions regarding the Business Support Law, please contact your principal Squire Sanders lawyer or one of the lawyers listed in this Alert.

FOOTNOTE: [1] As of January 1, 2010.

Founded in 1890, Squire, Sanders & Dempsey L.L.P. has lawyers in 32 offices and 15 countries around the world. With one of the strongest integrated global platforms and our longstanding one-firm philosophy, Squire Sanders provides seamless legal counsel worldwide. Contacts: Peter Z. Teluk, +380.44.220.1414; Dmytro V. Sakharuk, +380.44.220.1407; Volodymyr B. Smelik, +380.44.220.1413. Squire, Sanders & Dempsey L.L.P., Leonardo Business Center, 19-21 Bohdan Khmelnytsky St., 16th Floor, Kyiv 01030, Ukraine.

USUBC NOTE: Squire, Sanders & Dempsey is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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