Promoting investment activity in Ukraine

It occurred on October 11, 2019, that the President of Ukraine signed the Law of Ukraine “On Amendments to Certain Legislative Acts of Ukraine on Encouraging Investment Activity in Ukraine” adopted by the Verkhovna Rada of Ukraine on September 20, 2019 (Bill No. 1059 of 29.08.2019).

The main objective of this Law is to overcome the unfavorable business climate in Ukraine and introduce incentives for active investment activities.

The law is complex and provides for introduction of innovative legal instruments into the legal system of Ukraine, with regard for the areas of protection of shareholders’ rights, justice, enforcement of contractual obligations, construction, land and corporate relations, namely:

In the field of shareholders’ rights protection

– inclusion of the issue of selection of an independent auditor of a public joint-stock company in the exclusive competence of the general shareholders meeting;

– extension of the regulation to  deal with mandatory redemption offer to shareholders who acquire 50% of the company’s shares;

– expanding the list of transactions that are considered to be related party transactions;

In the field of justice

– ensuring the possibility of demanding a group of identical evidence by the economic court (without specifying the individual features of each document required);

– implementation of the standard of “most likely” proof in economic matters;

In the field of securing contractual obligations

 – the obligation can be secured by transferring the property of the collateral object in trust to the creditor;

– the creditor is the owner of the property (as opposed to the pledge) and can sell the collateral object on his own behalf in case of default of the debtor;

– the collateral object does not belong to the debtor or creditor’s liquidation estate, and therefore, the bankruptcy proceedings will not prevent the foreclosure proceedings (unlike the pledge where the bankruptcy proceedings may block the foreclosure proceedings for several years);

– the debtors are provided with certain guarantees that reduce the risks of abuse of their rights by creditors (trust owners);

  • the creditor’s status as a trustee limits the ability of the debtor to withdraw the collateral object from encumbrance and to avoid performing the obligation;

In the field of civil construction

– the obligation to pay a share contribution to the development of the settlement’s infrastructure is partially cancelled from 2020 and completely from 2021;

In the field of land property matters

– the obligation to conduct expert monetary valuation of privately owned land plots, that are pledged, is cancelled;

In the field of corporate relations

– specifics of creation and activity of limited liability companies acting on the basis of model statute are determined.

Time will show how the above-mentioned innovations will help achieve the objective for which the Law was passed.  I voice a hope that these mechanisms will be really effective.

-Oleg Zheryobkin, attorney at Dynasty Law Firm.

Publications 5 November, 2019

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