9 e-points

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We at Evris value your time, so we have developed a unified monthly online newsletter 9 E-points.

9 E-points is monthly e-digest from Evris:

  • 9 legislative novels which business community should be aware of, to react in proper time
  • 9 business and legal events worth attending, to get new ideas
  • 9 points of interest from Evris lawyers who do their job in a talented and passionate way

The banks shall not submit scanned copies of the documents to National Bank of Ukraine for analysis of financial operations.

 

The matter of amendments

Resolution of National Bank of Ukraine No.98 dated 03.10.2017 introduces amendments into the Instruction on Procedure for Forming an Information File by the Authorized Banks and Regulations on a Procedure for Analysis and Audit of the Documents (Information) about Financial Operations and their Participants by the Banks. The Resolution came into force on October 05, 2017.

Whom it will affect

Legal entities and individuals – customers of the banks on purchase and transfer of the currency abroad

Consequences

Cancellation of a requirement to submit scanned copies of the documents will release significant material and technical resources of banking institutions and will encourage an effective, risk-oriented approach of the banks to the analysis of customers’ financial operations. National Bank of Ukraine has authorized banking institutions to find out risk financial operations of the customers independently and to manage risks effectively.

How to prepare / mechanism of the amendments introduction

A request in compliance with which the banks had to provide scanned copies of the documents, which were the grounds for them to perform financial operations of their customers, has been cancelled.

Particularly, it concerns the following documents:

– bank statements of the customers and scanned copies of the documents, which are the grounds to perform the operations except for a decision of the issuer about the payment of the dividends to a foreign investor (it is used to analyze the demand);

– conclusions under each agreement, customer questionnaires and other documents with regard to the measures taken by the bank while analyzing and auditing information about the financial operations and their participants.

 

Changes into pension accounting were made.

The matter of amendments

The Law “On Amendments to Certain Legislative Acts of Ukraine Regarding Pensions Increase” №2148-VIII was adopted by the Verkhovna Rada of Ukraine on 03.10.2017, entered into force on 11.10.2017.

Whom it will affect

Persons of retirement age, pre-retirement age, citizens, who intend to receive pensions in Ukraine.

Consequences

From October 1, the living wage for pensioners, who have a full insurance record, will amount to UAH 1 452, and not UAH 1 312 as it is now.

It is also stipulated the provision of guarantees for the persons disabled since childhood, disabled children, pensioners, who do not have the full record, and persons, who are not entitled for pension and now receive UAH 949.

Today the number of such citizens is about 1 million persons. The amount of pension for them will increase by 45% and will amount to UAH 1 373. In addition, for 5.6% of pensioners the pensions will increase on the average by UAH 692.

It is provided for the increase of the required insurance record for retirement to 25 years in 2018 and up to 35 years annually by 2028. The document proposes a revision of conditions for the appointment of pension at the age of 60 from January 1, 2018. At the same time, the insured person is entitled to determine their own retirement age.

It is determined that at the age of 60 those persons retire who, on January 1, 2018, will have 25 years of insurance record, and the range of requirements for insurance record will annually increase by 12 months until it reaches 35 years in 2028. In 63 those persons will retire who, on January 1, 2018 will have 15 years of insurance record, however, will not 25 years of it.

In 65 those persons will retire who, on January 1, 2019 will have 15 years of insurance record, however, will not have 16 years of it. In addition, it is stipulated that for a transitional period (3 years) in case of a job loss to grant a state social assistance if there is 15 years of insurance record. Besides, the Law provides for possibility to buy up to 2 years of absent insurance record using the additional factor: 2 – for the period of up to 12 months and 1.5 – for the period from 13 to 24 months.

How to prepare / mechanism of the amendments introduction

In order to provide adequate pension provision, persons shall clarify in detail their insurance record. In absence of the corresponding amount of insurance record, there is a possibility to buy such and submit documents for recalculation of pensions to the pension fund authority.

Legislative changes regarding statutory accounting and financial reporting. Increase in number of businesses that must be audited. Requirement to provide financial statements upon requests from interested persons.

 

The matter of amendments

The Law of Ukraine No.2164-VIII dated 05 October 2017 “On amending the Law of Ukraine ‘On statutory accounting and financial reporting in Ukraine’ regarding the improvement of certain provisions” (draft law (bill) No.4646-d of 16 June 2017) have been passed by the Ukrainian Parliament and signed by the President of Ukraine.

The legislative changes come into force on 01 January 2018.

Whom it will affect

All Ukrainian businesses are affected. Most changes relate to large businesses, but small and medium businesses are also affected.

Consequences

The Law No.2164-VIII dated 05 October 2017 introduces several changes to the statutory accounting and financial reporting rules, in particular:

  • new criteria to categorize businesses by size for the purposes of financial reporting;
  • large businesses and some other entities are designated as public-interest entities;
  • more businesses will be subject to audit of the annual financial statements and will have to release their financial statements to the public via corporate websites;
  • businesses will be required by law to provide copies of their financial statements upon requests from individuals and legal entities.

To calculate the criteria denominated in euro, the official hryvnia to foreign currency exchange rate (average rate for a period) shall apply.

Public-interest entities

A new definition, ‘public-interest entities’, is introduced. The following will belong to the public-interest entities:

  • large businesses;
  • issuers of securities that are listed on a stock exchange (listed companies);
  • banks;
  • insurance businesses;
  • non-state pension funds, other financial institutions (except for other financial institutions and non-state pension funds that are designated as either microbusinesses or small businesses).

Public-interest entities must apply the international standards for preparing financial statements and release the annual financial statements and the annual consolidated financial statements along with the audit report via corporate website.

In addition, public-interest entities must establish the ‘accounting service’ (department) managed by the chief accountant; such a department must consist of at least 2 persons. However, non-state pension funds and collective investment vehicles are not required to do that.

The chief accountant of a public-interest entity must meet these requirements:

New criteria to categorize businesses by size

For the purposes of financial reporting, businesses will be categorized as microbusinesses, small, medium, and large businesses. This will determine whether a business should prepare full or concise financial statements, whether a business must be audited, and whether a business must apply international standards to prepare financial statements.

To calculate the criteria denominated in euro, the official hryvnia to foreign currency exchange rate (average rate for a period) shall apply.

Public-interest entities

A new definition, ‘public-interest entities’, is introduced. The following will belong to the public-interest entities:

  • large businesses;
  • issuers of securities that are listed on a stock exchange (listed companies);
  • banks;
  • insurance businesses;
  • non-state pension funds, other financial institutions (except for other financial institutions and non-state pension funds that are designated as either microbusinesses or small businesses).

Public-interest entities must apply the international standards for preparing financial statements and release the annual financial statements and the annual consolidated financial statements along with the audit report via corporate website.

In addition, public-interest entities must establish the ‘accounting service’ (department) managed by the chief accountant; such a department must consist of at least 2 persons. However, non-state pension funds and collective investment vehicles are not required to do that.

The chief accountant of a public-interest entity must meet these requirements:

  • full higher economic education (e.g., a master’s degree);
  • at least 3 years of experience in finance, accounting, or tax;
  • no ‘not-canceled’ or ‘not-revoked’ criminal record for a crime against property or economic crimes.

Audit of the annual financial statements and release of the financial statements on the website

Due to the legislative changes, audit requirements will be extended to the following entities:

  • medium businesses;
  • large businesses and other public-interest entities;
  • natural monopoly operators on the state-wide market;
  • mining businesses that mine natural resources of state importance (such businesses must also apply IFRS for preparing financial statements).

The abovementioned entities must also release their annual financial statements along with the audit report via their websites.

Providing copies of financial statements upon requests from individuals and legal entities

Under the new law, financial statements of businesses may not be a commercial secret, or confidential information, or regarded as restricted information, except where otherwise provided by law.

Businesses must provide copies of their financial statements upon requests from individuals and legal entities under the rules set out by the Law of Ukraine “On access to public information”.

The Law of Ukraine “On access to public information” requires providing a response to a request within 5 business days from the receipt of a request. The said law also allows to extend the deadline to 20 business days if a request implies providing or searching large volumes of information.

The Law No.2164-VIII of 05 October 2017 does not stipulate any rules for payment or reimbursement of expenses related to providing copies of financial statements upon requests. It is likely that current payment rules set out by the Law of Ukraine “On access to public information” could be extended to such cases.

It should also be noted that businesses will be required to provide access to their financial statements and consolidated financial statements at their place of business for individuals and legal entities.

How to prepare / mechanism of the amendments introduction

The legislative changes come into force on 01 January 2018. However, certain provisions come into force only on 01 January 2019; these delayed provisions relate to releasing annual financial statements (along with the audit report) on websites by large businesses that are not issuers of securities and by “other financial institutions” that are regarded as either microbusinesses or small businesses.

The first reporting period for which the entities, that must apply the international standards, file the financial statements based on the taxonomy under the international standards in the electronic format, is 2019.

Businesses may file the financial statements based on the taxonomy starting from 2018.

The Law No.2164-VIII of 05 October 2017 introduces numerous changes to the statutory accounting and financial reporting rules, and such changes could have an impact on any Ukrainian business. To comply with the law, Ukrainian businesses should identify and assess the changes that could affect a specific enterprise. For instance, medium businesses will have to engage auditors to audit the annual financial statements, and such businesses will have to create a website to publish their financial statements there. Large entities will also have to implement international financial reporting standards if they have not done that.

Besides, any enterprise may receive a request from any person to provide copies of the financial statements. Businesses should decide how to deal with such requests and related expenses, as well as the issue of providing “access to the financial statements and consolidated financial statements for individuals and legal entities at the place of business.

 

AMCU has issued clarifications on application of state aid laws, namely, as to the exceptions from the Law of Ukraine “On State Aid to Business Entities” 

 

The matter of amendments

Regulation of the AMCU No. 35-рр/dd as of 5 October 2017 “Clarifications on Application of State Aid Laws”

Whom it will affect

State aid grantors and receivers.

Consequences

AMCU has issued clarifications on application of state aid laws, namely, as to the exceptions from the Law of Ukraine “On State Aid to Business Entities” (hereinafter – the Law), such as: state support of business activities via investments into infrastructure objects, compensation of expenses related to rendering services of general economic interest, support of condominiums for the account of the state / local budget and state support of natural monopoly subjects.

The given clarifications shall prevent misunderstandings within the framework of granting and receiving of the state aid and eliminate the risks of consideration of the state aid as illegal.

How to prepare / mechanism of the amendments introduction

AMCU provides that the Law requirements shall not be applied to the state support of business activities via investments into infrastructure objects, however, only in case of application of the competitive procedures on selection of the respective business entity to be the state aid receiver.

Another exception from the Law shall be the compensation of the reasonable expenses related to rendering services of general economic interest. Currently, there is no approved list of such services. AMCU sets up the basic criteria for such compensation to be considered as the exception from the Law: performance of the defined and established duties of the business entity towards people with the fixed terms; selection of the business entity-service provider via competitive procedure of public sales or tender; preliminary and transparent definition of parameters for compensation calculation; compensation shall not be excessive and  not exceed the amount required to cover all or part of expenses, borne by the business entity within the framework of services rendering.

Additionally, AMCU clarifies that the condominium support at the account of the state or local budget shall not be considered as the state aid and shall not be covered by the Law, as far as the condominium is not a business entity within the framework of the applicable laws of Ukraine. State support of natural monopoly subjects shall be also not considered as the state aid, however, only in case of simultaneous observance of the certain requirements (if the rendered services are the natural monopoly subject; respective services do not compete with the other services; natural monopoly excludes not only competition at the market, but also provides for availability of the exclusive service provider at such market; if the services provider acts on the other market, opened for competition, the possibility of the cross-subsidy shall be excluded).

Farther, the regulation provides for the additional list of state aid forms (granting of municipal property to business entities for free-of-charge use, release from the lease payments of business entities leasing municipal property in the city educational establishments and rendering services, related to educational process, financial support of the statutory activities etc.).

In addition, the document provides for clarification on certain issues related to drafting and filing of information by the state aid grantors, calculation of the state aid value etc.

 

A long-awaited Draft Law On Electronic Trust Services has been adopted.

 

The matter of amendments

The Chairman of Verkhovna Rada of Ukraine signed it on 20.10.2017 and forwarded for signature to the President of Ukraine.

Whom it will affect

Individuals and legal entities, banks, payment systems, persons involved in the electronic commerce, power entities.

Consequences

Adoption of the Law of Ukraine On Electronic Trust Services will provide a possibility for Ukraine to put into service a model and principles of providing electronic trust services of the European Union by harmonization with the provisions of the Regulations, taking into account national peculiarities, not destroying the system of cooperation between the entities in the area of electronic digital signature formed in Ukraine.

The Draft Law will allow full-featured performance of the electronic bank services with the participation of intermediaries, including with the use of such identification forms as BankID, MobilD.

How to prepare / mechanism of the amendments introduction

The notion of an electronic trust service provider, i.e. a person who will be an intermediary in provision of electronic services and will be responsible for the validity of electronic certificates, digital signatures etc.

The Draft Law introduces into legislation such new notions as an electronic stamp, open and personal keys, certificates of relevant keys, electronic timing mark, trust list etc.

It specifies the creation of the Trust List of Qualified Electronic Trust Service Providers and the information with regard to the services they provide. Moreover, National Bank of Ukraine will participate in recording the qualified electronic digital service providers in the bank system of Ukraine and during money transfer to the Trust List.

The List of Electronic Trust Services includes:

  • creation, verification and confirmation of an improved electronic signature or a stamp;
  • formation, verification and validity confirmation of the certificate of electronic signature or stamp;
  • formation, verification and validity confirmation of the website authentication certificate;
  • formation, verification and confirmation of the electronic timing mark;
  • registered electronic delivery;
  • storage of improved electronic signatures, stamps, electronic timing marks and certificates related to these services.

Final and transitional provisions of the Draft Law specify the effective date in a year after the publication day.

 

National Bank of Ukraine has eased the rules for serving the customers’ accounts in the banks and performance of bank transfers.

 

The matter of amendments

Resolution of National Bank of Ukraine No.106 came into force on October 31, 2017.

Whom it will affect 

Individuals and legal entities.

Consequences

The document regulates disputable issues, particularly:

  • the stamp imprint on the documents of enterprises is not obligatory;
  • it is allowed to sign agreements on opening a bank account and bank deposit in an electronic form, particularly, by connecting a customer to the public offer of agreement signature;
  • entitle the customers who already have accounts with the bank to open other accounts with this bank with no personal attendance;
  • it specifies an assignment of claims under a bank deposit agreement;
  • it specifies a procedure for serving the accounts of individuals whose civil capacity is limited;
  • it specifies a procedure for opening accounts of individual entrepreneurs to effect payments of some kinds of salaries.

How to prepare / mechanism of the amendments introduction

The banks should take measures to improve the procedure of opening, use, fundraising to the customers’ accounts of the banks and the performance of bank transfers, as well as to simplify the conduct of business.

Resolution No.106 has introduced amendments into:

Instruction on Opening, Use and Closing the Accounts in National and Foreign Currencies, approved by Resolution of Board of National Bank of Ukraine No. 492 dated November 12, 2003,

Regulation for Performance by the Banks of Ukraine of Deposit Operations with Legal Entities and Individuals, approved by Resolution of Board of National Bank of Ukraine No.516 dated December 03, 2003;

– Instruction on Bank Transfers in Ukraine in National Currency, approved by Resolution of Board of National Bank of Ukraine No.22 dated January 21, 2004.

 

Requirements for the banks intending to make an investment under the procedure of voluntary financial restructuring have been established.

 

The matter of amendments

Resolution of the National Bank of Ukraine No.104 dated 20.10.2017 introduced amendments into the Instruction on Procedure of Regulating the Banks’ Activity in Ukraine that came into force on October 24, 2017.

Whom it will affect

Banks and legal entities-debtors.

Consequences

Activity of the banks under the procedure of financial restructuring has been regulated.

How to prepare / mechanism of the amendments introduction

A bank is entitled to make an investment under procedure of financial restructuring as a set of measures on indebtedness restructuring of a debtor during a procedure of voluntary financial restructuring or a procedure of pre-judicial recovery provided simultaneous adherence to the following special requirements:

1) the period of banking activity is not less than 3 years;

2) the amount of the regulatory capital of the bank meets the requirements specified by the Instruction, or the bank is performing a program of capitalization and the investment will not lead to the violation by the bank of the Instruction or to a failure to perform the capitalization program within the period it specifies.

3) the bank is not an object for applying the retaliation  (regarding the restriction, termination or cessation of performing particular types of operations).

 

Enhancement of the statutory regulation regarding the right to use another’s land parcel for agricultural needs (emphyteusis) and for real estate development (superficies).

 

The matter of amendments

Verkhovna Rada received a relevant Draft Law in the end of October only. The term to take it as a basis will depend on how fast the relevant committees approve it and when the Draft Law is submitted for voting to the debating chamber.

Whom it will affect

Ukrainian business, particularly, the agricultural and industrial holdings that want to legalize relations with the land parcels owners by concluding emphyteusis and superficies.

Consequences

The adoption of the Draft Law will enhance the provisions of the Civil and Land Laws of Ukraine with regard to the right to use emphyteusis and superficies.

How to prepare / mechanism of the amendments introduction

It is offered to:

  • determine terms for leasing the land lots for agricultural needs or construction, as well as the form and material conditions of the relevant agreements;
  • determine in the terms of legislation a payment procedure for the land and to extend the list of reasons for termination of the emphyteusis and superficies agreements;
  • entitle an emphyteuta and a superficiarius legislatively to demand a relevant decrease in payment under the agreement if the condition of the land parcel leased out has deteriorated not due to their fault.

 

Amendments to the Law of Ukraine “On Accounting and Financial Reporting in Ukraine”  

The matter of amendments

Law of Ukraine No. 2164-VIII On Introduction of Amendments to the Law of Ukraine On Accounting and Financial Reporting in Ukraine (Regarding the Improvement of Some Provisions) shall come into force on January 01, 2018 except the sixth and the seventh paragraphs of clause 12 section I, which shall come into force on January 01, 2019.

Whom it will affect 

All legal entities created in conformity with the legislation of Ukraine with no regard to their forms of incorporation and forms of ownership; representative offices of foreign business entities that are obliged to keep accounting and submit financial reports, as well as the operations for administration of the state and local budgets targets and preparation of financial reports on budgetary compliance taking into account the budget legislation.

Consequences

It changes previous accounting terms and introduces new ones. It specifies that slight defects found in the primary documents shall not be a ground for non-recognition of a business transaction. It establishes the criteria for the classification of enterprises as micro-enterprises, small, medium-size and big enterprises for the purposes of accounting in compliance with the provisions of EU Directive No. 2013/34/EU.  It specifies a period for preparation of an interim financial report to assure the unambiguousness in a determination of the period for which it is made. Small groups that meet the criteria specified by this Draft Law are allowed not to make up consolidated financial statements. It improves a procedure for submitting and divulgating the financial reports by having specified their submission in a uniform electronic format for the enterprises that use IFRS, as well as having made the enterprises obliged to provide the copies of financial reports under the requests from legal entities and individuals in conformity with the Law of Ukraine On Access to Public Information. Micro- and small enterprises are released from an obligation to submit the report on management. It also specifies non-provision of so-called non-financial information in the report on management for medium-size enterprises.

How to prepare / mechanism of the amendments introduction

First of all, it is necessary to:

– classify an enterprise as a microenterprise, small, medium-size or a big one, or an enterprise of public interest;

– make a comprehensive analysis with regard to compliance by the enterprise accounting office with the Generally Acceptable Accounting Principles specified by the international standards or national regulations (standards) of accounting taking into account the amendments made;

– determine the scope of financial reports and consolidated financial statements as well as the requirements for their issuance taking into consideration the classification of the enterprise as one of the enterprise types specified by the relevant Law. Assure the implementation of new requirements of the Law concerning the public nature of the financial reports and their provision under the requests of the parties interested.

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Evris newsletter #2 in English
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Evris newsletter #2 in English
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Monthly Digest by Evris. Here you will find the 9 most important changes in the legislation of Ukraine for the current month.
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Evris
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