In 2012 the Ukrainian Parliament passed a number of laws intending to improve the investment and regulatory regime in the securities, restructuring, banking and finance areas. At the same time new restrictions were introduced in the currency exchange regulation apparently ensuring stability of the national currency at the time of global economic instability.

Securities law

In July 2012 the Parliament adopted the Law on Amendments to Certain Legal Acts of Ukraine Regarding Improvement of Securities Legislation introducing numerous complex amendments to a number of important legislative acts. In particular, the Law (i) substantially expanded the competence and authority of the National Securities and Stock Market Commission, (ii) introduced the notion of advertisement of securities in the stock market and established principles of its regulation, (iii) clarified requirements to participation of a licensed Ukrainian broker in any transactions with Ukrainian securities, and (iv) extended the list of sanctions which can be imposed on legal entities for violation of securities.

The Parliament also adopted the Law of Ukraine on Depositary System of Ukraine. According to this Law, starting from October 2013, the Ukrainian depositary system will function as a vertically integrated mechanism with the single central depositary – the National Depositary of Ukraine (there have been two competing depositaries until this change). The Law established an important principle that all securities (including shares and bonds) can be issued in Ukraine only in a non-documentary form and must be registered by the National Depositary of Ukraine. Finally, the Law provided the explicit grounds for disclosing information contained in the securities depositary system.

Banking and finance

The most significant change in the financial sector relates to introduction in the Law on Financial Services and State Regulation of the Financial Services Market of the requirement of an approval of the Ukrainian Financial Services Commission for acquisition or increase of equity interest securing a direct or indirect control over 10, 25, 50 or 75% of equity in a financial institution (such as an insurance company, a leasing company, a credit union, a factoring company, etc.). Prior to enactment of the relevant amendment this rule applied only to banks. Under the Law and relevant implementing regulations, an acquirer of qualifying equity in a Ukrainian financial institution must comply with a number of financial standing (such as working capital amount, profitability, etc.) and reputational requirements that did not exist before. If acquisition of equity in a financial institution is completed without approval of the Financial Services Commission, it may appoint an agent for participation in the meetings of the governing bodies of the financial institution with voting rights in lieu of the acquirer.

Another significant legislative development introduced in November 2012 as amendment to the Civil Code of Ukraine enhances protection of creditors' rights. According to the new rule borrowers will no longer be able to release property used as collateral by a mere invalidation of a relevant loan or security agreement Under a new procedure a court invalidating a loan (security) agreement must, upon a creditor's request, (i) order mutual restitution of everything received by the parties under the invalidated deal; (ii) determine the amount of funds due to the creditor; and (iii) arrest the property provided by a borrower as collateral to secure obligations under the loan agreement. The court may release the collateral only after the borrower pays to the creditor the due amounts determined by the court within 30 days from the effective day of the invalidating judgment. In case of borrower's failure to pay the court would start an enforcement procedure against the arrested property.

Regulation of unstable banks

In September 2012 the new Deposit Insurance Law came into effect introducing stricter regulation of Ukrainian banks and enhancing protection of individual depositors. Previously the Insurance Fund for Individuals' Deposits (the 'Fund') had a nature of a cash desk used for compensating individual depositors of liquidated banks. Upon introduction of a new regime, the Fund is transformed into an agency issuing regulation on insurance of bank deposits and termination of insolvent banks. The new Law established criteria for bank's instability, including an amount of bank's regulatory capital and other objective financial ratios less than the established minimum, default with respect to bank's depositor or other creditor, failure to comply with anti-money laundering and anti-terrorism financing laws, and failure to comply with reporting or disclosure requirements.

Significant changes have also been made in the banks' liquidation procedure. Now the Fund through its representatives, rather than a liquidator appointed by the National Bank of Ukraine, will act as a liquidator of a bank (except for liquidation according to the decision of the bank's owners). The Fund is now also entitled to require its major shareholders, supervisors and managers to satisfy demands of the bank's creditors at their expense if their acts or omissions damaged the interests of the bank's creditors.

Currency Exchange Control

In order to allow regulator's quick reaction to possible negative trends within Ukrainian foreign currency exchange market, the Parliament in November 2012 entitled the National Bank of Ukraine to (i) introduce the mandatory sale of foreign currency proceeds; and (ii) change the deadlines for payments under export and import contracts. The National Bank exercised its authority resolving that:

  • 50% of the foreign currency proceeds of Ukrainian companies and private entrepreneurs are subject to mandatory sale by a relevant Ukrainian bank on the interbank currency exchange market without client's instructions;
  • payments for goods and services exported by Ukrainian residents must be made by their foreign counterparties within 90 calendar days from the date of supply of goods or services; and
  • goods and services for which Ukrainian residents made an advance payment must be supplied into Ukraine by the foreign counterparty within 90 calendar days from the date of the advance payment.