Ukraine Law Alert

    May 2010

    On April 27, 2010 the Parliament of Ukraine passed the Law of Ukraine No. 2155-VI lifting a number of limitations on foreign investment and currency control that were introduced in November 2009 by Law No. 1533-VI, "On Amending Certain Laws of Ukraine to Overcome Negative Consequences of Financial Crisis". Specifically, the new law cancels the following requirements:

    • The requirement to make foreign investments only in Ukrainian hryvnia and only through investment accounts opened in Ukrainian banks;
    • The obligatory state registration of foreign investments[1];
    • The requirement that the National Bank of Ukraine perform state registration of cash foreign investments [2];
    • The ban on early repayment of loans by Ukraine-based borrowers to foreign lenders; and
    • The ban on amending loan agreements between Ukraine-based borrowers and foreign lenders regarding decrease of loan repayment terms or early repayment of obligations, as well as the ban on registration of such amendments to loan agreements by the National Bank.

    The president of Ukraine signed Law No. 2155-VI on May 14, 2010. It will go into effect after its publication.

    [1] However, even before the introduction of the mandatory registration of foreign investments, many foreign investors opted to go through the state registration procedure. This is because the Law of Ukraine "On Regime of Foreign Investments in Ukraine" establishes that unregistered foreign investments do not give investors the right to obtain privileges and guarantees envisaged by Ukrainian legislation. For instance, without such registration, any property imported to Ukraine as a contribution by a foreign investor to the share capital of a Ukraine-based company may not enjoy exemption from import duty.

    [2]Therefore, Law No. 2155-VI resurrected the rule pursuant to which foreign investments in cash, in kind and in the form of certain property rights will be registered by the respective local state administrations. The procedure for state registration is explained in the Regulation of the Cabinet of Ministers of Ukraine "On Approval of Regulation on the Procedure of State Registration of Foreign Investments," No. 928, dated August 7, 1996.