August 2011

Winner, “Restructuring & Insolvency Law Firm of the Year 2011 in Ukraine”, Corporate International

In this Issue:

1. On amendments to the Budgetary Code and certain other legislative acts
2. On amendments to the procedure for issuing individual licenses for transferring foreign currency outside Ukraine
3. On amendments to the Rules on maintaining, protecting, using and disclosing of bank secrecy
4. The Law prohibiting consumers’ foreign currency crediting was vetoed
5. On settlement of property rights registration procedure
6. On approval of Amendments to the Provision on peculiarities of bank reorganisation by the decision of its owners
7. On the legality of terminating introducing amendments to the registry system and systems of depository account
8. On evaluating operations with respect to sale of credits with payment delay

On amendments to the Budgetary Code and certain other legislative acts

The Law of Ukraine No.3614-VI dated 7 July 2011 (the “Law”)

According to amendments introduced to the Budgetary Code by Law, loans from foreign states, banks and international financial institutions for implementing investment projects are attracted by the State on the basis of Ukraine’s international agreements and belong to State foreign loans. The Ministry of Finance of Ukraine and a local finance body may engage business entities to provide agency, advisory, rating and other services necessary for the management of State (local) debt, at the expense of the State (local) budget within the limits of budgetary purposes for the servicing of State (local) debt.
The Ministry of Finance manifests an auction schedule on placement of State debt securities on the local market, which may be specified hereafter in connection with changes of terms of State borrowings or conjuncture of a financial market.
The Law also formalises a number of provisions which were earlier reflected in the laws on State budget. In particular, it is specified that State and local warranties are granted for remuneration, fixed-term and subject to the fulfilment of obligations. A compulsory term for providing State (local) warranty is the execution of an agreement between the Ministry of Finance (or a corresponding local finance body) and business entity on repayment of the debts of a business entity to State or local community for the fulfilment of warranty responsibilities.
The Law came into force on 7 August 2011 (with the exception of separate provisions, entering into force in 2012 and 2013).

On amendments to the procedure for issuing individual licenses for transferring foreign currency outside Ukraine

By Resolution No. 250 dated 25 July 2011 (the “Resolution”) the National Bank of Ukraine (NBU) introduced amendments to the Provision on the procedure for issuing individual licenses for transferring foreign currency outside Ukraine for the payment of banking metals and conducting currency operations.
Transfer of funds by a resident–guarantor (surety) to a non-resident–creditor, within the obligations of a resident–borrower secured by the guarantee (surety), as envisaged by a corresponding loan agreement (surety agreement) and terms on which it is registered with NBU, is excluded from the list of operations which are subject to licensing. Thus, the NBU reconsidered its position in this issue, set forth in the document dated 15 November 2010.
The Resolution came into force on 5 September 2011.

On amendments to the Rules on maintaining, protecting, using and disclosing of bank secrecy

Resolution of the NBU Management Board No.105 dated 13 April 2011 (the “Resolution”)
With the aim of bringing into compliance with the Law of Ukraine “On Executive Proceeding,” the Rules on maintaining, protecting, using and disclosing of bank secrecy were amplified by the Resolution. According to a new provision, banks are obligated to present information to the State Executive Service about clients’ accounts (about availability or closing of accounts, balance of accounts, seizure of funds on accounts, termination of debit operations in accounts, etc.), necessary in connection with executive proceedings, – within periods, established by a State executor.
The Resolution came into force on 15 July 2011.

The Law on prohibiting consumers’ foreign currency crediting was vetoed

The President of Ukraine vetoed the Law of Ukraine “On amendments to certain legislative acts of Ukraine regarding regulation of relationships between creditors and consumers of finance services” adopted by the Verkhovna Rada of Ukraine dated 8 July 2011 by which, in particular, prohibiting consumers’ foreign currency crediting was implemented. However, it is worth mentioning that the President’s comments mainly concern changes which were planned to be introduced to the procedures of bankruptcy and sale of debtors’ property by the above-mentioned law, but no comments were given concerning prohibiting consumers’ foreign currency crediting. Thus, the probability of prohibiting consumers’ foreign currency crediting still exists – after new adoption of the law taking into consideration the President’s comments.

On settlement of property rights registration procedure

For implementation of certain provisions of the Law of Ukraine “On State registration of non-monetary rights to real property and encumbrances over such rights” dated 1 July 2004, subordinate acts were adopted which regulate certain issues of registration of non-monetary rights not regulated by the above-mentioned law.
In particular, by the Resolution of the Cabinet of Ministers of Ukraine No. 703 dated 22 June 2011, the Procedure for State registration of property rights and encumbrances over such rights was approved. The Procedure in particular specified the procedure for conducting State registration of non-monetary rights to real property, encumbrances over such rights, a list of documents necessary for its conduction, and peculiarities of registration of rights to projects of incomplete buildings.
In addition, by the order of the Ministry of Justice of Ukraine No. 1936a/5 dated 2 August 2011, the Procedure for access of notaries to the State register of non-monetary rights to real property, according to which access to the registry is provided on a contractual reimbursable basis, was approved. It is envisaged that the use of information by a notary concerning the object, which is available in the registry of rights, is possible in connection with the performance of notary actions in regard to this object only.
The above-mentioned normative acts will come into force on 1 January 2012.

On approval of Amendments to the Provision on peculiarities of bank reorganisation by the decision of its owners

Resolution of the NBU Management Board No. 206 dated 23 June 2011 (the “Resolution”)

On the legality of terminating introducing amendments to the registry system and systems of depository account

In Clarification No. 11 dated 12 July 2011, the National Commission on Securities and the Stock Market (the “Commission”) explained the procedure for implementing provisions of the Law of Ukraine “On State Regulation of Securities Market in Ukraine,” which entitles the Commission to terminate introducing amendments to the registry system and system of depository account concerning certain securities. Thus, the Commission considers that its decision regarding the termination of introducing amendments to the registry system and system of depository account concerning securities of certain emitters considers only the termination of operations by registrars and depositary institutions, the execution of which will result in a change to the number (information about number) of securities on accounts in the corresponding registry systems and/or depositary account. The only exception to the rule is operations connected with termination of activity of a depositary of securities and with conversion of share issue from a documentary form to a non-documentary form.

On evaluating operations with respect to sale of credits with payment delay

By letter No. 40-511/2689-8768 dated 25 July 2011, the NBU explained the procedure for accounting of operations with respect to sale of credits (assignment of rights of demand) with delay of payment. In the opinion of a regulator, if a bank - according to the agreement - transfers contractual rights for obtaining money flows from a financial asset, the bank should estimate the limits within which it maintains all risks and remunerations from holding this financial asset. Thus, if the provisions of the agreement on assignment of rights of demand for a credit provide a possibility for reverse return (buy-back) of this demand to a bank – initial creditor, the bank – the initial creditor preserves almost all risks and remunerations from holding a financial asset (credit). Therefore, the bank must continue to account such credit as subject matter of an agreement on assignment of rights of demand on terms of their reverse return, as demand to the initial borrower.