KYIV - Banking and Finance News in Ukraine- June-July 2011: In this Issue:

• On Amending Certain Legislative Acts of Ukraine Regarding Regulation of Relations between Creditors and Consumers of Financial Services
• On Amending Certain Regulatory Legal Acts of the National Bank of Ukraine
• On Amending Certain Legislative Acts of Ukraine Regarding Bonds
• On Amending Certain Laws of Ukraine Regarding Supervision on a Consolidated Basis
• On Amending Certain Legislative Acts of Ukraine on Prevention of Legalisation (Laundering) of Revenues of Proceeds from Crime
• Regarding Amending Regulation of Activity of Limited Liability Companies

1. On Amending Certain Legislative Acts of Ukraine Regarding Regulation of Relations between Creditors and Consumers of Financial Services
The Law of Ukraine dated 8 July 2011 No. 7351 (the “Law”)

The Law adds provision to the Law “On Consumer Rights Protection”, which prohibits lending (obtaining) consumer credits in foreign currency in the territory of Ukraine. It is also prohibited for a lender to fix in the agreement on lending consumer credits any charges, interests, commission fees, payments etc. for actions which are not services in the definition of this Law.
The Law will enter into force if it is signed by the President of Ukraine and after it has been published.

2. On Amending Certain Regulatory Legal Acts of the National Bank of Ukraine
Resolution No. 111 of the NBU Management Board, dated 6 May 2011 (the “Resolution”)

The Resolution amended the Regulation on the Procedure and Conditions for Trading in Foreign Currency (approved by resolution No. 281 of the NBU Management Board dated 10 August 2005), whereby banks are allowed to perform currency swap operations for purchase and sale as well as for foreign currency exchange. It determines that currency swap operations are performed within a time period of up to 365 calendar days. It also permits entering into foreign exchange forward contracts with clients within the set currency position.
The resolution came into force.

3. On Amending Certain Legislative Acts of Ukraine Regarding Bonds
The Law of Ukraine dated 2 June 2011 No. 3461-VI (the “Law”)

The Law “On Securities and Stock Market” was amended by adding the provision whereby bonds may exist exclusively in a non-documentary form. Apart from that, the definition of targeted bonds was clarified. Targeted bonds are discharged through the transfer of goods and/or provision of services according to the requirements established by the terms of the bonds’ placement and by payment of funds to the bonds’ holder (the previous edition did not mention a possibility to pay funds). It is also specified that legal entities may place only interest-bearing and discount bonds for amounts not exceeding three times the amount of the equity capital or third party security. The Law also provides for certain other amendments.
The Law enters into force from 1 January 2012.

4. On Amending Certain Laws of Ukraine Regarding Supervision on a Consolidated Basis
The Law of Ukraine dated 19 May 2011 No. 3394-VI (the “Law”)

With the goal to supervise the activity of financial groups, the Law made a number of amendments and additions to corresponding laws. Thus, the Law differentiates the powers between State regulators with regard to supervision on a consolidated bases and defined forms of supervision on a consolidated basis. The Law considers relations of control between its participants as the main criterion for definition of a financial group.

Depending on entities performing supervisory functions within a group and the activity of what financial institutions (banks or financial institutions) prevail, financial groups are divided into bank groups and non-banking financial groups. Accordingly, the NBU is vested with supervision over bank groups on a consolidated basis, and the State Commission for Regulation of Financial Services Markets and the State Commission for Securities and Stock Market – over non-banking financial groups. The corresponding authority with the goal to supervise on a consolidated basis is entitled to determine subgroups within a bank (or correspondingly financial) group, which consist of at least two financial institutions, and perform supervision over them on a sub-consolidated basis.
According to the Law, a financial group is obliged to determine a responsible person within the participants of a financial group and agree with him/her a corresponding State regulator. The responsible person from a financial group must ensure compliance to the requirements by the group, which are determined by a corresponding State regulator. The Law establishes a number of other provisions regarding supervision on a consolidated base.

The Law enters into force on 19 December 2011.

5. On Amending Certain Legislative Acts of Ukraine on Prevention of Legalisation (Laundering) of Revenues of Proceeds from Crime
The Law of Ukraine dated 21 April 2011 No. 3267-VI (the “Law”)

The Law adds a definition of stock market manipulation to the Law of Ukraine “On State Regulation of Securities Markets in Ukraine”. In addition, it is stipulated that signs of stock market manipulation are defined by the State Commission for Securities and Stock Market. Further it introduces criminal responsibility for stock market manipulation.
The Law entered into force on 19 May 2011.

6. Regarding Amending Regulation of Activity of Limited Liability Companies

According to the Law of Ukraine “On Introducing Amendments to Some Laws of Ukraine Regarding the Number of participants of limited liability companies dated 12 May 2011, entered into force on 11 June 2011, the maximum number of participants of a limited liability company is increased from 10 persons to 100. Apart from this, the Law of Ukraine “On Amending Certain Legislative Acts Regarding Simplification of the Procedure of Establishing Business” dated 21 April 2011 (entered into force on 7 June 2011), the requirements regarding the minimum amount of statutory capital of the company are cancelled.

This newsletter does not constitute legal advice with respect to any matter or set of facts and may not be relied upon for such purposes. Readers are advised to seek appropriate legal advice before entering into any transaction, making any determination or taking any action related to matters discussed herein. No part of this newsletter may be copied or quoted without the prior written consent of Salans. LINK: www.salans.com

NOTE: Salans is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.