News (#01-02 January-February 2020)

Draft

Final version of draft law on land market submitted to Parliament

Draft Law No. 2278-10 On Agricultural Land Circulation, submitted with amendments for its second reading, envisages a ban on foreigners acquiring title to land plots. The prohibition could be cancelled following approval of the sale of land to foreigners in any referendum that may be held.

Introduction of changes are envisaged to the Land Code regarding acquisition of title to agricultural land and the total area of land plots. According to the Draft, title to agricultural land can be acquired by citizens of Ukraine; legal entities of Ukraine incorporated and registered under the laws of Ukraine, whose members are only citizens of Ukraine and/or the state and/or territorial communities; territorial communities; the state.

It is also envisaged that banks and loan institutions may acquire title to land plots following the procedure of their enforced collection as collateral. Such land plots should be alienated by banks and loan institutions at auction within 2 years from the date of acquisition of title.

At the same time, legal entities, which founders or ultimate beneficiaries are non-citizens of Ukraine, may acquire title to agricultural land from the date and subject to the relevant approval obtained through a referendum.

Under all circumstances, including the case of approval through a referendum, acquisition of title to land plots is prohibited for:

legal entities, whose members or beneficiaries are foreigners in relation to state and communal property land, as well as to lands allocated to holders of land shares, which are located less than 50 km from the state border of Ukraine (except for the sea state border);

legal entities, whose members or ultimate beneficiaries are citizens of the Russian Federation;

persons that were or are members of terrorist organizations;

legal entities, whose members or beneficiaries are foreign states;

legal entities where it is impossible to identify the ultimate beneficiary;

legal entities, whose beneficiaries are registered in offshore areas;

individuals and legal entities that find themselves under sanctions;

legal entities registered in those countries included in the list of those that do not cooperate in the field of combating money laundering.

According to the Draft, the total area of agricultural land owned by a citizen may not exceed 10,000 hectares. A legal entity may not be the owner (except for banks and loan institutions) of land plots exceeding the total area of land plots that can be owned by all its members, not more than 10,000 hectares. Moreover, it is envisaged that the settlements related to the payment of land plot prices should be made in non-cash form. The acquisition of title under non-gratuitous contracts will also not be allowed in the absence of documents confirming the origin of funds or other assets, which are used to pay for the acquisition of such title.

Verkhovna Rada wants to renew already canceled law on bankruptcy

The Verkhovna Rada adopted in the first reading the Draft Law that changes the bankruptcy procedure by making the previously canceled Law On Restoration of Debtors Insolvency or Bankruptcy valid once again.

The Law was adopted in 1992 and has been amended numerous times ever since.

On 21 October 2019, this law became invalid following adoption of the Bankruptcy Code of Ukraine. This Code simplifies bankruptcy procedures, increases the debtors liability for law violations, proposes a new bankruptcy procedure for individuals, and prevents possible abuse by debtor companies. In December 2019, the Draft Law was adopted in its first reading, amending provisions of the Code. These changes envisage the revalidation of the previous law in relation to a number of procedures followed before the Code was adopted. Such changes have raised many objections from the Independent Associationof theBanksofUkraine.

The Association believes that the revalidation of the old law will result in the renewal of dubious schemes which create grounds for tax evasion and complicate the bankruptcy procedure.

According to the changes being proposed, bankruptcy procedures initiated before the Code has come into force will be governed by the old law, while the Code will be applied only when transitioning to a reorganization or liquidation procedure.

In fact, the Code is not applicable to all bankruptcy procedures initiated before its introduction and that are still ongoing. This means that the new rules of the Code will not be applicable to troubled debtors who managed to open a relevant case. This stage is very important for bankruptcy as it is the enforcement procedure that creates a list of creditors claims and a committee of creditors. The prolonged bankruptcy process is among the abuses presented by the Banking Association. Under the old law, the enforcement term in relation to property following bankruptcy was valid for 115 days with the possibility of it being extended. Thus, dishonest debtors prolonged this process for years, which allowed them to continue their business activities despite debts owed by them.

The new Code has limited the enforcement term in relation to a debtors property to 170 days without the possibility of it being extended.

The Parliamentary Committee on Economic Development is working on the Draft Law On Amendments to the Final and Transitional Provisions of the Code on Bankruptcy of Ukraine in its second reading.

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