There was a portion of legislative novelties from Parliament this month, which prompted lots of questions for consideration. For example, recently the Government submitted Draft Law No. 9236.

Some of the problems raised in the Draft Law are of a purely technical nature (for example, the situation with the transfer of rights to mortgage property), while other theses of the draft law, on the contrary, actually create, and not solve, problems.

Sergii Papernyk, partner, head of banking and finance, gives his brief explanation to the proposed amendments and describes how they will affect the situation of the procedure in Ukraine, exclusively for The Ukrainian Journal of Business Law:

The Law of Ukraine “On Financial Restructuring” entered into force more than two years ago. During its use by many market players, a number of defects of this regulatory act were noted, which should be eliminated.

These comments concern both the imperfections of the procedure itself and the insufficient number of benefits that would encourage the parties to participate in it.

Regarding the procedure itself, it can be noted, for example, the uncertainty of the date of the independent business review (IBR). Thus, according to the Law, the IBR report should be carried out after the submission of the application to the Secretariat. At the same time, in fact, this report is necessary for the bank to make a decision on its consent to participate in the procedure.

As for benefits, today all debtor company debts, which the bank agrees to forgive, will be considered an additional benefit and be subject to corporate income tax. This does not look very fair in conditions when the debtor is unable to service his debts.

Unfortunately, the draft law №9236 does not solve any of these problems.

Some of the problems raised in the draft law are of a purely technical nature (for example, the situation with the transfer of rights to mortgage property), other theses of the draft law, on the contrary, to create, and not to solve problems.

In particular, the proposal to shift responsibility for the conditions of restructuring from state-owned banks to the Cabinet of Ministers of Ukraine only adds excessive regulation to a situation where the parties could independently agree. At the same time, less than a year is left until the end of the Law, and whether the Cabinet of Ministers of Ukraine will have time to develop and adopt relevant resolutions in time remains unknown.

The proposal to authorize the sole arbitrators to impose administrative and economic sanctions on the parties is contrary to other laws of Ukraine.

Thus, the draft law №9236 is unlikely to significantly affect the situation with problem loans in Ukraine.