On March 15, 2013 Arzinger Law Office held a business breakfast on the topic “Currency legislation: last changes and current practice”. Lawyers from Arzinger: Oleksander Plotnikov, Counsel, and Oleksander Zadorozhnyy, Associate, spoke at this event.

At the beginning, Oleksander Zadorozhnyy spoke about the most important changes in the currency legislation in 2012 for Ukrainian companies, among which: approval of hryvnia settlements between residents and nonresidents within trade turnover without obtaining an individual license from the National bank of Ukraine (“the NBU”); no need to obtain conclusions of the special law enforcement authorities for issuance of individual licenses by the NBU on foreign currency transactions and no limits for the annual sum in currency to be placed by residents-individuals on foreign accounts based on an individual license issued by the NBU; expansion of NBU’s powers as to imposing requirements on mandatory sale of a part of currency revenues and temporary change of terms for settlements in foreign currency and introduction of such temporary changes; no need to obtain individual license from the NBU for security payments for procurement procedures etc.

Among main changes in the procedure for registration of credit agreement between residents and nonresidents the speaker highlighted the following:

• resident-borrower is not obliged to submit documents to the NBU anymore but to its servicing bank only;
• registration certificate in their previous form are not issued for residents-borrowers anymore (instead notification about an agreement with note of the NBU);
• the NBU does not check credit agreements which means that responsibility for reviewing agreements’ provisions is now transferred to servicing banks; and
• the provision that servicing bank do not check targeted use of credit funds has disappeared.

Credits from non-residents shall be received through authorized banks in Ukraine and in cashless form only. In order to register a credit given by a nonresident consent from the bank for servicing transactions under the credit agreement shall be obtained. A territorial department of the NBU at the location of the servicing bank registers credit agreements.

Oleksander Plotnikov spoke briefly about licensing of currency transaction. Thus, he noted that in each single case the situation with documents which are available/may be submitted shall be carefully analyzed. Sometimes it is necessary to obtain two individual licenses (for investment abroad and for opening a securities bank account abroad). Moreover, obtaining a license shall be planned beforehand as license issuance terms are quite long. It is also necessary to remember that all documents in foreign languages shall be translated with notarization, unless they are executed in a bilingual version (one of which is Russian or Ukrainian).

Then, Mr Plotnikov spoke in detail about currency control over trade transactions. Legislation governing trade transactions includes the Law of Ukraine “On the procedure for settlements in foreign currency”, Instruction of the NBU on the procedure for control over export and import transactions, the Procedure for determination of periods and terms for completion of an import transaction without import of commodities to Ukraine and the Resolution about transfer of funds in national and foreign currency for the benefit of nonresidents under some transactions.

According to the main requirements of the currency control over trade transactions, if a delivery or payment is made in several stages, the bank shall control the periods of settlements under export transaction for each actual delivery, and in case with import transaction – for each actual payment. At this, the bank may refuse the payment if the contract does not specify the currency of payments. Moreover, it is necessary to indicate the bank account where the payment shall be transferred to.

Another issue which interested the audience concerned the currency control in M&A deals. Thus, the Ukrainian legislation allows investment to be made in pecuniary form or in kind. Cash investments may be made only in hryvnia or foreign currency from the 1 group of the classifier. Foreign investment shall be made through Ukrainian bank but settlements abroad are possible as well. The state registration of foreign investment is not mandatory but advisable. Still, there are some problems as well. For instance, residents of Ukraine cannot use funds borrowed in foreign currency to repay foreign investment and transfer of foreign currency abroad as payment for hares requires obtaining of a respective individual license by the NBU.

During the event the participants asked many practical questions on currency legislation which were answered by Arzinger’s lawyers both from legal and practical point of view.