In this Issue:

1. On amendments to certain Ukrainian legislative acts with respect to settling relations between creditors and users of financial services
2. On the procedure for registering and granting licenses to banks, opening separate subdivisions and delivering information about ownership structure
3. On the formation and utilisation of a special fund for paying dividends on preference shares
4. On approval of the Procedure for preventing price manipulation during transactions with securities at stock exchange
5. On Uniform Database of enterprises being subject to bankruptcy proceedings
6. On acquisition of agricultural land by foreign banks under mortgage agreements
7. Website of the State Registration Service has been launched

On amendments to certain Ukrainian legislative acts with respect to settling relations between creditors and users of financial services

Law of Ukraine dated 22 September 2011 (the "Law")
The Law introduced a number of amendments to Ukraine’s legislation governing the matters related to bankruptcy proceedings, foreclosure over pledged assets, credit relations etc. The key amendments made in the legislation are as follows:

Bankruptcy proceedings

The possibility to use a company’s’ spin-off or separation to avoid discharge of debt commitments is limited;
It is designated that debts of any physical persons/entrepreneurs not related to business activities, in particular under consumer credits, may not be repaid through bankruptcy proceedings; in addition, the assets of such persons being subject of the pledge to secure the obligations not related to any business activities is not included into the liquidated estate.

Foreclosure over pledged assets

It is permitted to use a notarial writ to foreclose on the pledged movable property;
The price of mortgaged property sold in public sale may be decreased by 50% of the initial value (formerly such price could be decreased only by 25%);
Criminal responsibility was introduced for illegal actions (misappropriation, damaging, replacement etc.) done to pledged property by the person to whom such property was entrusted;
The procedure for evicting citizens from residential premises acquired by such citizens using bank loans and mortgaged to a bank was extended to the instances when the mortgagee bank makes a decision to foreclose on such residential premises under an out-of-court procedure;
Clarifications were made to the procedure for foreclosure over pledged assets under an out-of-court procedure (it is determined that the enforcement through out of court settlement under relevant agreement may commence upon expiration of the term set for the fulfillment of the obligation in the respective default notice).

Consumer loans

Consumer loans in foreign currency are prohibited;
Key mechanisms for restructuring debts under consumer loans have been adjusted (grace period for the repayment of the principal loan for a period of up to 3 years, loan rollover, change in the procedure of accrual of interest so that monthly payments under the loan do not exceed 35% of the aggregate monthly family income, etc.) and some tax benefits have been introduced for banks with respect to such restructured loans. At the same time, non-banking institutions may not enjoy such tax benefits.

Floating interest rate

The rules for applying a floating interest rate under financing have been adjusted, specifically: it is determined that the index applied to calculate the floating rate is to be published at least on a monthly basis; it is resolved that the index value of the floating rate is to be set by an independent institution recognised at the financial services market; if a floating rate is applied the relevant loan agreement is to specify the maximum amount of increase in the interest rate.

Disclosure of bank secrets

Banks are permitted to disclose bank secrets in connection with any assignment of right of claim towards its clients (in particular, in case of sale (transfer) of the rights of claim under overdue loans towards its borrowers to any third parties).

The Law came into force on 16 October 2011.

2. On the procedure for registering and granting licenses to banks, opening separate subdivisions and delivering information about ownership structure

Resolution of the NBU Board No. 306 dated 8 September 2011 (the "Resolution") approved the Regulations on the procedure for registering and granting licenses to banks, opening separate subdivisions (the "Registration Procedure Regulations") and the Regulations on the procedure for delivering information about ownership structure (the "Information Delivery Regulations"). In addition, some NBU Resolutions that governed the matters of banks’ registration and issue of bank licenses were terminated, and the Resolution brought the procedure for registration and licensing in compliance with the most recent changes made to banking legislation.
The Information Delivery Regulations govern the rules for calculating a person’s shareholding in a bank and stipulate optional forms of direct or indirect ownership of a shareholding in a bank. Persons having material interest in a bank must give notice to NBU about any change in the information about their material shareholding, and any bank must deliver to NBU annually a written confirmation about the existence of bank owners’ material interests and data on bank ownership structure.
The Resolution came into force on 7 November 2011.

3. On forming and utilising a special fund for the payment of dividends on preference shares

With its Decision dated 29 September 2011 No. 1376 (the "Decision") the State Commission for Securities and the Stock Market approved the Procedure for forming and utilising a special fund for payment of dividends on preference shares. The above Procedure stipulates that the payment of dividends on preference of shares of any class shall be made from the net profit for the accounting year or from undistributed profit. Should such profit be insufficient or absent, the payment of dividends on preference shares shall be made from the reserve capital of a joint stock company or from a special fund. The latter shall be established under the decision of a general shareholders’ meeting and formed at the expense of annual deductions from company’s net profit or at the expense of undistributed profit. The moneys in a dividend fund shall be used only to pay dividends on preference shares.
The Decision came into force on 4 November 2011.

4. On approval of the Procedure for preventing price manipulation during transactions in securities at the stock exchange

Decision of the State Commission for Securities and the Stock Market dated 14 June 2011 No. 716 (the "Decision")
The Decision (adopted in order to implement the Law of Ukraine "On amendment of certain legislative acts of Ukraine with respect to prevention of legalisation (laundering) of income obtained as a result of illegal activities" dated 21 April 2011) contains the list of actions qualified as manipulation as well as the measures to be taken by a stock exchange to prevent the manipulation.
It is contemplated that a stock exchange identifying characteristics of manipulation in actions of a participant of exchange trading or its client may suspend the exchange trading in relevant security or suspend access for such participant and is obligated to give notice thereof to the State Commission for Securities and the Stock Market within one day.
The decision came into force as at 19 September 2011.

5. On Uniform Database of enterprises being subject to bankruptcy proceedings

With its Order №318/5 dated 15 September 2011 (the "Order") the Ministry of Justice of Ukraine approved the Regulations on Uniform Database of enterprises being subject to bankruptcy proceedings. It is stipulated that the database will, inter alia, contain information about debtors (legal entities and physical persons-entrepreneurs), status of bankruptcy proceedings, financial and business indicators of debtor’s activities, approved register of creditors’ claims and the composition of creditors’ committee. After termination of a bankruptcy case, the relevant debtor’s data will be stored in the database for 5 years. The Ministry of Justice of Ukraine will operate the Uniform Database.
Presently the monitoring of initiated bankruptcy cases is carried out by the State Enterprise "State Centre for Restoration of Solvency and Bankruptcy".
As is stated in the Order, it will become effective after completion of the measures necessary in order for the Ministry of Justice of Ukraine to exercise the powers of a government authority for bankruptcy.

6. On acquisition of agricultural land by foreign banks under mortgage agreements

In the letter dated 5 July 2011 No.10130/17/11-11 the State Agency of Land Resources of Ukraine set forth its position according to which banks with foreign capital may not acquire title to agricultural land plots in the course of foreclosure under mortgage agreement. The State Agency of Land Resources of Ukraine grounds its position that pursuant to the Land Code of Ukraine, agricultural land plots may not be transferred into ownership to foreign citizens, stateless persons, foreign legal entities and foreign countries.

7. Website of the State Registration Service has been launched

State Registration Service of Ukraine (Ukrderzhreyestr) has opened access to its own official website where information regarding the main activities of the service is placed – in particular, State registration of proprietary rights to immovable property, State registration of legal entities and physical persons/entrepreneurs, legalisation of associations of citizens etc. The official address of the website is www.drsu.gov.ua.
Please note that recently an access to the on-line version of the Uniform State Register of Legal Entities and Physical Persons-Entrepreneurs has been opened – http://irc.gov.ua/ua/Poshuk-v-YeDR.html).