Publications
Ukraine tightens investment, currency control and foreign loan regulation November 27, 2009
To overcome the negative effects of the financial crisis the Parliament of Ukraine introduced significant changes to the Ukrainian legislation. Starting form 24 November 2009 the term for settlement under export-import transactions has been decreased from 180 to 90 days. Furthermore, the state registration of foreign investments has become mandatory. Finally, the Ukrainian borrowers are now prohibited to repay early their cross-border foreign currency loans.
On 24 November 2009 the Law of Ukraine No. 1533-VI "On the Introduction of Amendments to Certain Laws of Ukraine for Overcoming the Negative Effects of the Financial Crisis" (the "Law") became effective. The Law introduced a number of important changes to the Ukrainian legislation, namely, provided for more strict foreign currency rules with regard to the foreign investments in Ukraine and the regulation of cross-border currency payments and foreign loans. The Law also prohibited foreign currency lending to individuals by Ukrainian banks and introduced new procedure for restructuring by Ukrainian banks of the loan indebtedness of individuals, the formation by Ukrainian banks of the reserves securing loan transactions, and the taxation of Ukrainian banks. Below you will find our brief summary of the main changes to the Ukrainian legislation.
Foreign Investments Restrictions to be effective until 1 January 2011
Under the Law, foreign investments in cash on the territory of Ukraine may be made in Ukrainian Hryvnias following the procedure established by the National Bank of Ukraine (the “NBU”). From the conservative standpoint the above statement could be interpreted as prohibiting foreign investments in Ukraine in foreign currency, therefore, when making foreign investment, foreign investors will have to transfer foreign currency funds into their investment accounts opened with Ukrainian banks, convert them into Ukrainian Hryvnias, and then use such Ukrainian Hryvnias for purposes of their investments in Ukraine. Before the Law became effective, foreign investors could transfer foreign currency from their foreign bank accounts directly into investment targets, while Ukrainian Hryvnias could be used for the purposes of making foreign investments only in case of the re-investment of profits gained in Ukraine by such investor;
The Law provides that foreign investments in cash should only be made through investment accounts opened with Ukrainian banks. Foreign investments should be made in the convertible currency as defined by the NBU; and
The Law establishes a requirement on mandatory registration of foreign investments. Before the Law became effective mandatory registration of foreign investments was not required. The local state authorities will continue to carry out the state registration of in-kind foreign investments, while the state registration of foreign investments made in cash will be conducted in accordance with the procedure to be established by the NBU by 24 December 2009.
Restriction of Term for Settlement under Export-Import Transactions
Under the Law the term for settlement under export-import transactions is decreased from 180 to 90 days.
Prohibition of Reduction of Maturity of Foreign Currency Loans to be effective until 1 January 2011
The Law prohibits Ukrainian residents, e.g., individuals or legal entities, to introduce amendments to cross-border foreign currency loan agreements in order to shorten the maturity or to allow early payment of such loans. The NBU temporarily suspends registration of amendments to cross-border foreign currency loan agreements, which decrease the maturity or provide for early payment of such loans; and
Under the Law Ukrainian residents, e.g., individuals or legal entities, are prohibited from early payment under cross-border loan agreements.