9 e-points

Dear colleagues, partners, friends!

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

What to expect of the Law on Currency

The matter of amendments

The law of Ukraine “On currency and foreign exchange transactions” was passed in the second reading and adopted as a whole

The Law “On currency and foreign exchange transactions” comes into force on the day following the day of its publication, and is put into effect seven months after its entry into force.

Signed by the President of Ukraine on July 4th, 2018

Whom it will affect

Banks, non-residents and residents (natural and legal persons), CMU, SSMCS and NС, which regulates financial services markets

Consequences

The approved Law:

  • Will allow Ukrainians to invest abroad without obtaining individual licenses;
  • For businesses the deadline for export and import operations will be prolonged till more than 180 days;
  • Eliminates ineffective administrative pressure on banks and their clients;
  • Cancels foreign exchange controls for external economic activity transactions below the threshold level (for example, financial monitoring will start with 150 thousand UAH);
  • Lifts sanctions in the form of fines and termination of foreign economic activity if the terms of contract closure are violated (at the moment the fine is 100% of the transaction amount);
  • Introduces only 2 types of licenses: banking (which also includes the exchange one) and exchange – for non-bank financial institutions;
  • Non-residents will enjoy the same rights as residents of Ukraine in the field of foreign exchange transactions;
  • Cancels the credit and loan registration for non-residents.

How to prepare / mechanism of the amendments introduction

Individual and general licenses, other licenses for foreign exchange transactions, expire after the enactment of the Law, except for general licenses for foreign exchange transactions issued by the NBU to non-bank financial institutions and postal communication operators. After the enactment of the Law, the banks continue to carry out foreign exchange transactions on the basis of a banking license.

Can you process cash transactions correctly?

The matter of amendments

NBU has improved the order of cash transactions

The NBU Resolution No. 54 of May 24, 2018, amended the Resolution of NBU No. 148 dated December 29, 2017 “On Approval of the Regulation on Financial Monitoring Execution by Banks.” The NBU Resolution No. 54 of May 24, 2018 came into force on June 1, 2018

Whom it will affect

Individuals and legal entities, bodies of state power and local self-government

Consequences

The procedure for making settlements in cash in the amount of up to 50,000 UAH between individuals and business entities is specified and

the peculiarities of the cash capitalization at cash desks of business entities are regulated, including but not limited to:

  • establishments/enterprises and their separate subdivisions and individual entrepreneurs (IEs), that carry out cash settlements including the cash order formations and cashbook keeping, is the accounting of cash in the full amount of its actual receipts in the cash book on the basis of cash receipt orders;
  • IEs who carry out cash settlements with the registration of their sales receipts (receipts) and keeping the ledger of income and expenditure, is the implementation of cash accounting in the full amount of its actual income in the ledger of income and expenditure (or income ledger) on the basis of sales receipts (receipts);
  • separate units of establishments/enterprises, as well as at IEs’ cash desks that carry out cash settlements using payment transactions recorders and/or accounting book of settlement operations without keeping a cash book, is the accounting of cash in the full amount of its actual receipts on the basis of settlement documents by forming and printing fiscal reporting checks and affixing them to corresponding pages of record book of settlement operations/entry of settlement receipts to record book of settlement operations;
  • The Resolution also establishes cases of using the record book of settlement operations.

How to prepare / mechanism of the amendments introduction

By June 30, 2018 the business entities:

  • may use in their activities forms of sheets to payment, income and expense cash order, the register of receipt and expenditure reports, cash book, books of accounting issued and accepted by the senior cashier and the act on results of inventory of available funds;
  • must develop and approve the procedure for cash capitalization at the cash desk and the procedure for calculating the cash limit. During this period the economic entities may use the cash flow limits which were previously calculated, established and approved.

New requirements to the participants of payment systems

The matter of amendments

NBU strengthens oversight over the activity of payment systems

The NBU Resolution No. 61 dated 06/07/2018 “On Approval of Amendments to Some NBU Regulations”, came into force on June 13, 2018

Whom it will affect

NBU, banks and payment systems parties

Consequences

The Resolution concerns NBU, banks and payment systems parties: a clearing institution, a processing entity and other persons authorized to provide certain types of services in payment systems, payment system users (individuals and legal entities).

Resolution No. 61, in particular, provides:

  • establishment of requirements for organizational and technical measures that must be used by oversight objects to ensure the continuity of activities;
  • simplification of requirements to information which the oversight objects are obliged to place at cash receipt/payment locations;
  • improvement of requirements to information, which should be on the official sites of oversight objects, monitors of software and technical complexes of self-service and at cash receipt/payment locations, which are used by them;
  • definition of the content of information, which is fixed by the oversight objects after the occurrence of each violation of the continuity of activities, and the establishment of a mechanism for its delivery to the National Bank;
  • improvement of the requirements for storage of information about each transaction on money transfer carried out in the payment system;
  • setting requirements for oversight objects as for the availability of its own official website.

How to prepare / mechanism of the amendments introduction

Resolution No. 61 amends:

  • The Provision on the procedure for conducting inspections regarding supervision (oversight) of requirements of the Ukrainian legislation on payment system activities in Ukraine, ratified by the NBU Resolution No. 503 of December 9, 2013;
  • The Provision on the use by the NBUof measures to influence the violation of the objects of supervision (oversight) of Ukrainian legislation on payment system activities in Ukraine, ratified by the NBU Resolution No. 524 of December 19, 2013;
  • The Provision on supervision (oversight) of payment systems and settlement systems in Ukraine, ratified by the NBU Resolution No.755 of November 28, 2014.

How the banks can manage risks properly

The matter of amendments

NBU has set requirements for the organization of risk management system in banks

The NBU Resolution No. 64 of June 11, 2018 “On Approval of the Regulation on the Organization of the Risk Management System in Banks of Ukraine and Banking Groups” came into force on June 16, 2018

Whom it will affect

Banks

Consequences

The present Provision:

  • stipulates greater involvement of the bank in creating a powerful risk management culture;
  • introduces the requirements to the subjective structure of the organizational structure of the bank on risk management;
  • strengthens requirements for the authority, competence and independence of the risk management units and control over requirements (compliance):
  • defines a list of main risks (credit risk, liquidity risk, bank interest rate, market risk, operational risk and compliance risk); 
  • imposes requirements for risk management at the time of introduction of new products and significant changes in the activities of the bank.

How to prepare / mechanism of the amendments introduction

Given the scale of the NBU Provisions requirements, it envisages phase-by-phase implementation by April 2020/

Large-scale privatization has begun

The matter of amendments

The State Property Fund of Ukraine (the SPFU) made a decision on privatization of 22 major privatization objects

Whom it will affect

Privatization subjects: state and local privatization authorities, buyers, investors and advisers

Consequences

  1. In pursuance of the Law of Ukraine “On Privatization of State and Municipal Property” (the Law), the State Property Fund of Ukraine (the SPFU):
    1. made a decision on privatization of 22 major privatization objects (in accordance with the list approved by Order of the Cabinet of Ministers of Ukraine (the CMU) No. 358-р of May 10, 2018);
    2. announced a tender for selection of advisers for preparation for privatization and sale of stakes in 6 major privatization objects from the list: PJSC “Odessa Port Plant”, PJSC “President-Hotel”, PJSC “United Mining and Chemical Company”, PJSC “Indar” and State Enterprises “Krasnolymanska Coal Company” and “Elektrotiazhmash Plant”.
  2. Also, certain regulations of the CMU aimed at fulfilment of the provisions of the Law and ensuring the implementation of all subsequent privatization stages were approved/updated and entered into force.

How to prepare / mechanism of the amendments introduction

  1. Major privatization:
    1. Orders of the SPFU on privatization of June 8, 2018;
    2. announcement of the tender for selection of advisers in the “Vedomosti Privatizatsii” dated June 25, 2018;
    3. Resolution of the CMU No. 386 dated May 10, 2018 “On Approval of the Procedure for the Sale of Large State-Owned Major Privatization Objects”;
    4. Resolution of the CMU No. of May 10, 2018 “On Amendments to Resolution of the Cabinet of Ministers of Ukraine No. 878 dated November 30, 2016”;
  2. Minor privatization:
    1. Resolution of the CMU No. 433 dated May 10, 2018 “On Approval of the Procedure for Selection of Electronic Platform Operators for Organization of Electronic Auctions for Sale of Minor Privatization Objects, Authorization of Electronic Platforms and the Appointment of the Administrator of the Electronic Trading System”;
    2. Resolution of the CMU No.432 of May 10, 2018 “On Approval of the Procedure for Conducting Electronic Auctions for Sale of Minor Privatization Objects”.

The regulatory procedures and mechanisms stipulated by the Law and aimed at ensuring the implementation of each individual stage of the privatization process were determined

New rules of the game for LLC – launch!

The matter of amendments

The Law of Ukraine “On Limited Liability Companies” has come into force

The Law of Ukraine “On Limited Liability Companies” (the Law), which was adopted by the Verkhovna Rada on February 6, 2018, has come into force

Whom it will affect

Existing LLCs, their members, investors

Consequences

N

The main changes include the following:

  1. decrease in the scope of mandatory information required to be entered into the articles of association of an LLC:
    1. name of the company;
    2. management bodies, their competence and decision-making procedure;
    3. procedure for joining and withdrawal from the company.

However, in this regard you should keep in mind that the requirements for the content of articles of association are also established by the Economic and Civil Codes of Ukraine, which define a wider range of issues as they did before.

  1. authorized capital (AC):
    1. will be basically formed within a 6-month period upon the state registration date (twice shorter than before), unless otherwise stipulated by the articles of association;
    2. in the case of an increase of the AC, the period for payment of additional contributions will be 1 year (for existing members) and 6 months (for new members at whose expense additional contributions are made);
    3. the issue of payment of additional contributions due to joining of new members was regulated;
    4. the deadline for creditors’ claims in the event of a decrease in the AC was shortened to 30 days (previously it was 3 months).
  2. the decision-making procedure at the general meeting was changed:
    1. refusal from the quorum concept;
    2. three categories of issues were determined depending on the number of votes required for them to be adopted: (1) 50% + 1 of the total number of votes of the members; (2) 3/4 of the total number of votes of the members; (3) by unanimous vote.

The articles of association of an LLC may provide for a different number of votes of the members required for a decision to be adopted (but in any case not less than a simple majority of the total number of votes).

  1. a new procedure for formalization and registration of joining of new members to an LLC:
    1. the list of documents certifying the relevant changes and submitted for state registration was established (e.g., an acceptance and transfer certificate with notarized signatures for the purposes of alienation of a share);
    2. documents for state registration of changes in the membership shall be submitted directly by the persons whom such changes concern (e.g., a new member in case of purchase or acquisition of a stake otherwise);
    3. decision of the members on acceptance of a new member in case of purchase of a share is no longer required;
    4. it is no longer required to amend the articles of association due to changes in the membership (in case the member enjoyed the right granted and did not include the relevant data in the articles of association).
  2. limitations on the maximum number of members of an LLC was canceled.

We believe that the above novelties give more freedom in regulating the activities of LLCs, considerably simplify individual management procedures and, subject to proper drafting of the statutory documents, will contribute to the protection of the interests of investor members of LLCs.

How to prepare / mechanism of the amendments introduction

The main focus of the Law is on the maximum discretion in determining the mechanisms of operation and management of LLCs, as well as interaction of their members. The law proposes a novelty to the national law, namely the possibility for members to conclude confidential incorporation agreements. Through such agreements the members may, in particular, specify the voting procedure, establish cases of compulsory purchase or sale of a share in the company.

What will it bring for Ukraine? Large-scale liberalization of doing business. Protection of rights of corporate right holders. Increase in the investment attractiveness of Ukraine.

Fight against corruption!

The matter of amendments

The Law “On the Supreme Anti-Corruption Court” was passed

The Law was adopted on June 7, 2018, on June 11 it was signed by the President of Ukraine

Whom it will affect

All citizens of Ukraine, but primarily to judges, candidates for judges, civil servants and persons committing corruption-related offences

Consequences

It became effective on the day following its publication, except for sub-clause 3 clause 2 of the Transitional Provisions thereof [regarding the amendment of the Code of Criminal Procedure of Ukraine], which will become effective on the day the Supreme Anti-Corruption Court starts its work.

The Law “On the Supreme Anti-Corruption Court” introduces qualitative changes to the system of general jurisdiction courts. The Law defines the principles of organization and activities of the Supreme Anti-Corruption Court and special requirements to judges of such a court and guarantees of their activity.

How to prepare / mechanism of the amendments introduction

The Law “On the Supreme Anti-Corruption Court” is expected to become a significant step in counteracting corruption in Ukraine.

What are the prospects of tourism development in Ukraine?

The matter of amendments

The Draft Law of Ukraine on tourist sphere issues was submitted to the Verkhovna Rada

On 21/06/2018, Draft Law No. 8513 was submitted to the Verkhovna Rada of Ukraine.

Currently, the Draft Law is being finalized by the Committee on Budget.

Whom it will affect

Tourism, economy of Ukraine

Consequences

Draft Law of Ukraine “On Amendments to the Budget Code of Ukraine Concerning Tourism Development” (hereinafter – the “Draft Law”) has been developed for performing tasks and activities defined in the Law of Ukraine “Law of Ukraine “On Tourism”, Recommendations of the parliamentary hearings on “Issue of Development of Tourism Industry as Instrument for Economic Development and Investment Attractiveness of Ukraine” approved by Regulation of the Verkhovna Rada of Ukraine No. 1460-VIII dated 13/07/2016, and the Strategy of Tourism and Resorts Development until 2026 approved by Resolution of the Cabinet of Ministers of Ukraine No. 168-p dated 16/03/2017, in terms of budgetary financial support for tourism development in Ukraine.

As of today, tourism industry serves as a means of currency receipts, employment of population, increasing the contribution to balance of payments and GDP, economy diversification, increasing profits and improving the welfare of citizens, raising the authority of state at international level. Tourism development has a ripple effect on related branches of economy with intensified investment activity, creation of new jobs, extending cash turnover.

Financial support is a necessary means for functioning and development of tourism industry, as well as any branch of economy. Subject to systematic, comprehensive and relatively low costs, tourism industry can ensure significant profits, since capital turnover in this industry is 4 times higher than in other industries of the world economy, while the cost of creating one job is 20 times less than production sector. It should also be noted that financial support for tourism industry has a number of peculiarities and features associated with the need for systematic and comprehensive budget funding of both tourism facilities and state and municipal-owned infrastructure objects, which support tourism facilities and make them accessible to tourists.

How to prepare / mechanism of the amendments introduction

It is proposed in this Draft Law to amend the Budget Code of Ukraine, which will have a determining influence on the development of tourism in Ukraine. Establishment of a state fund for tourism development will allow for setting-up an effective mechanism of state financial support for tourism development.

Once the Law is adopted, it will ensure introduction of the mechanism for budgetary financial resources concentration in priority areas of tourism development identified in strategic documents, creation of a favourable environment for appropriation, distribution and attraction of budgetary financial resources for efficient and sustainable development of tourism in Ukraine and replenishing the State Budget of Ukraine.

It’s getting difficult to hide corrupt practice

The matter of amendments

The Draft Law “On Amendments to Certain Legislative Acts of Ukraine on Improving the Mechanism for the Prevention of Corruption” was submitted to the Verkhovna Rada of Ukraine.

On 21/06/2018, Draft Law No. 8517 was submitted to the Verkhovna Rada of Ukraine.

Currently, the Draft Law is being finalized by the Committee.

Whom it will affect

Law enforcement agencies, courts, economy of Ukraine

Consequences

It is proposed in the Draft Law to improve provisions of the first paragraph of Article 3682 of the Criminal Code of Ukraine “Illicit Enrichment”, in part defining the content of objective element of an offense, being a prerequisite for proper qualification of an offense and a guarantee of bringing an offender to criminal liability.

The Draft Law is aimed at improving provisions of Article 3682 of the Criminal Code of Ukraine in order to bring them into compliance with requirements of the Constitution of Ukraine, the United Nations Convention against Corruption.

It is proposed to more correctly define this type of criminal offense in legal terms. Thus, the term “illicit enrichment” has been replaced by the term “intentional acts aimed at unjust enrichment”. Its normative definition has been provided. Thus, unjust enrichment means inconsistency of person’s material prosperity level with information about income specified by a reporting subject in a return.

It is proposed to construe intentional acts aimed at unjust enrichment as acquisition by a person, who is authorized to perform functions of a state or local self-government body, of assets on a considerable scale, groundless receipt of which has been proved in accordance with the procedure established by law, and groundless transfer of acquired assets to those close to him/her.

How to prepare / mechanism of the amendments introduction

It is enshrined in provisions of the Law, according to the latest version of Article 3682 of the Criminal Code of Ukraine, that a suspected person must prove lawful nature of grounds for acquiring property rights as a condition for his/her exemption from criminal liability.

In general, this Draft Law:

– enshrines constitutional guarantees established in Article 62 of the Constitution of Ukraine;

– leaves the punishment for committing such an offense and its classification as a grave offense unchanged;

– clarifies the normative definition of illicit enrichment and brings it into compliance with the Constitution of Ukraine, defines a group of persons connected with a person authorized to perform functions of a state or local self-government body, persons whose groundless acquisition of the property constitutes an objective element of such a criminal offense.

Introduction of the proposed amendments to Article 3682 of the Criminal Code of Ukraine requires creation of a mechanism for identifying the grounds for unjust enrichment of a reporting subject and those close to him/her, making a corresponding decision by the National Agency for Prevention of Corruption as a central executive body with a special status that ensures the formation and implementation of state anti-corruption policy.

Decision made by the National Agency to establish the presence of elements of illicit enrichment by persons close to reporting subjects referred to in clause 1 of part one of this Law as a transfer by them of such assets is the only source of circumstances, which may evidence the commission of a relevant criminal offense by a reporting subject.

Adoption of the Draft Law will facilitate bringing the provisions of Article 3682 of the Criminal Code of Ukraine into compliance with provisions of the Constitution of Ukraine, the Convention for the Protection of Human Rights and Fundamental Freedoms, 1950, improves the mechanism for prosecuting for illicit enrichment.