Investment Climate in Ukraine: Progress and Outlook by Integrites Managing Partner, Dr. Oleksiy Feliv
Dr. Oleksiy FelivManaging Partner, Head of EU Desk
In 2016 the business and real property registration system was modified to grant approximately 7,000 notaries with full authority to perform the state registration of the business and real property
The government of Ukraine has introduced a number of promising reforms during 2015 — 2016 aiming to ease the investment climate and attract inves-tors into the country. As a result, Ukraine improved its position in 2017 in the World Bank’s “Doing Business” rankings to 80 out of 189 countries measured. Moreover, in 2016 the Ukrainian economy has showed first signs of stabiliza-tion and growth.
With more yet to be achieved, in 2016 the main efforts to improve invest-ment climate were targeted at simplification of registration procedures, cross-border regulations, corporate and antitrust matters.
In 2016 the business and real property registration system was modified to grant approximately 7,000 notaries with full authority to perform the state registration of the business and real property (along with other accredited en-tities and state registrars). In addition, the paper certificates/title documents to real property were cancelled and maximum duration of a real property reg-istration has been reduced from 14 to 5 business days. Such modification sig-nificantly facilitated the registration process, although the online services are still need to be improved and developed.
At the same time, the Parliament also adopted the so-called “Anti-Raider” Act in order to protect investors from potential “raider” attacks which could take place due to simplification of the registration process. In particularly, the Act introduced mandatory notarization of certain corporate documents (i. e. company resolutions used for registration, transfer or split up balance sheet, etc.) and obligation of the notary/registrar to notify a real property owner on any registration actions with its property (with corresponding right of a real property owner to block such registration actions).
In 2016 a number of actions were made to protect the rights of investors– shareholders.
A new concept of the “derivative suits” was introduced into Ukrainian legislation. Derivative suits permit a shareholder owning at least 10 % of a company’s shares to bring an action in the name of the company against its management for compensation of damages caused by the management’s ac-tions. In addition, starting from 2016 any company officer may be held liable for the losses caused by its misfeasance, violation of pre-approval procedures, misrepresentation and misconduct.
Another innovation was connected with payment of dividends in joint stock companies (the “JSC”). Before 2016, all JSC dividends were to be paid through the accounts of the Central Depository of Ukraine. However, in 2016 the JSC obtained an option to pay the dividends directly to shareholders, which speed up the payment process.
Moreover, the National Bank of Ukraine canceled its requirement to ob-tain a price evaluation certificate in order to make gross border payments. For over 13 years this document served as a ground for enabling the residents to make payments abroad for works, services and use of IP rights in excess of EUR50,000.
In November 2016 the Parliament simplified the paperwork for cross-bor-der contracts.
In particular, as of today parties may execute a cross-border contract in electronic form (which generally includes, but is not limited to, exchange of e-mails, web-protocol, facsimile or other messaging forms). Export of servic-es (with the exception to transportation services) does not require a written contract anymore and may be done based on public offer (e. g. terms of refer-ence on the importer’s web-site) or an invoice.
Finally, the Ukrainian banks were released from an obligation to control settlements for the exported services.
ANTITRUST & COMPETITION
In 2016 the Parliament finally changed the criteria for mandatory clearance of the Antimonopoly Committee of Ukraine on merger (“Clearance”). The threshholds for merger clearance have been increased almost by four times. As a result of such innovation, a number of cases when an investor is obliged to obtain the Clearance have been reduced on approximately 35 — 40 %.
Notwithstanding the substantial reforms made in 2016, the government intends to proceed with further structural reforms. In particular, the govern-ment should focus on struggle against corruption and further simplification of administrative procedures (including, administration of taxes, customs regulations, etc.), as well as on reform of the court system and rotation of judges.
Finally, the government should use its best efforts to attract internation-al investors to involve additional investments and innovative technologies. In order to be able to do so, the government should work with such investors on “individual basis”, which includes, inter alia, granting of individual preferenc-es and full governmental support.