Legal updates (27.06.23)

Below, you will learn about:

• The reservation procedure for conscripted employees for the period of mobilization and wartime has been improved
• Criteria for determining companies that are important for the economy in the field of digitalization was published
• Several changes in the fields of notary and state registration were adopted
• Ukrainian electronic signatures and seals may be fully used to certify digital documents in the territory of the European Union and in relationships with residents of the European Union
• The Law of Ukraine on the condemnation and prohibition of propaganda of russian imperial policy in Ukraine was adopted
• The procedure and rules for recording shares of limited liability companies and additional liability companies in the recording system of shares of the Central Securities Depository were introduced
• The National Bank of Ukraine adopted a number of decisions
• The list of states whose citizens or residents may obtain the status of electronic resident (e-resident) in Ukraine has been published
• The terms of martial law and general mobilization have been extended
• The extension of the COVID-19 quarantine
• Access to some registers of the State Tax Service of Ukraine has been restored
• Ukraine imposes sectoral sanctions against Iran for 50 years
• The conscription age for male citizens of Ukraine has been reduced
• The procedure for conducting an audit of industrial and fire safety of companies upon their applications was approved

The reservation procedure for conscripted employees for the period of mobilization and wartime has been improved

By Resolution dated April 28, 2023, No. 400, the Government of Ukraine determined strict terms for the submission and consideration by state authorities and other public authorities of documents on the reservation of conscripted employees for the period of mobilization and wartime. Accordingly, starting from May 02, 2023 (the day the Resolution came into force):

• submission by state authorities and other public authorities of lists of conscripted employees who are proposed for reservation for the period of mobilization and wartime to the General Staff of the Armed Forces (Security Service of Ukraine, Foreign Intelligence Service) should be made in a term not longer than 5 working days;
• approval of the lists and submission by the General Staff of the Armed Forces (Security Service of Ukraine, Foreign Intelligence Service) to the Ministry of Economy of Ukraine should be made in a term not longer than 10 working days;
• adoption by the Ministry of Economy of Ukraine of a decision on the reservation of conscripted employees should be made in a term not longer than 5 working days from the date of approval;
• enrolment of a conscripted employee for special military registration by a military authority should be made in a period not longer than 5 working days.

According to statements by representatives of the Ministry of Economy of Ukraine, due to these improvements, the reservation procedure from the moment of receipt of reservation lists by the state authorities and other public authorities to the enrolment of a conscripted employee for special military registration will take no more than 25 working days.

Mazars team analyzed the provisions of Ukrainian legislation on the reservation of conscripted employees by companies in more detail in previous legal updates.  

Criteria for determining companies that are important for the economy in the field of digitalization was published

The Ministry of Digital Transformation of Ukraine, by order dated March 23, 2023, No. 30, approved criteria for determining companies that are important for the economy in the field of digitalization.

According to this order, a company may be considered to be of importance to the economy in the field of digitalization if it meets one or more of the criteria listed below:

• ensures the functioning and development of the infrastructure for broadband Internet access and electronic communications;
• provides electronic trust services, meaning that it is a qualified electronic trust service provider that has generated at least 1 thousand qualified electronic signature certificates in the previous year;
• operate in the IT industry, meaning:
  • carries out one or more types of IT activities (in particular, computer programming, consulting on informatization matters, publishing computer games and other software, educational activities in the IT industry, data processing and related activities, etc.);
  • has an average salary of employees for the last calendar quarter not less than the equivalent of EUR 1200 at the official exchange rate of UAH to EUR determined by the National Bank of Ukraine as of the first day of the relevant calendar month;
  • has an average number of employees for the last calendar quarter of at least nine people;
• ensures the functioning of public electronic registers, databases, national electronic information resources, information (automated) systems, information and communication systems;
• ensures the development of the IT industry, meaning that it provides non-refundable financial grants (in the amount of at least UAH 30 million for the previous and/or current year) to private sector subjects that carry out innovative activities, implement innovative projects, carry out technology development activities, activities related to creative industries, scientific activities, and scientific and technical activities;
• provides information counteraction to russia by means of information (automated), information and communication systems, as well as on the Internet.

Recognition of a company as important to the economy in the field of digitalization may allow the reservation of conscripted employees of such a company for the period of mobilization and wartime.

In addition, other relevant ministries and public authorities (the Ministry of Environmental Protection and Natural Resources of Ukraine, the Ministry of Community, Territorial and Infrastructure Development of Ukraine, the National Bank of Ukraine, and the Ministry of Finance of Ukraine) have defined criteria for determining companies that are important for the economy in the fields of forestry and hunting, transport, postal services, construction and energy efficiency, as well as in financial markets and among companies providing accounting and auditing services.

Mazars team has provided more details on the criteria for determining companies that are important for the economy or public needs established by other relevant ministries and public authorities in previous tax and legal updates.

Several changes in the fields of notary and state registration were adopted

The most important changes are as follows:

• to the range of objects, agreements on alienation, division (spin-off) of which may be notarized, added objects of unfinished construction or future real estate objects;
• the prohibition on notarization of agreements for the alienation of real estate acquired during martial law until the expiration of a period of 1 month from the date of state registration of ownership of such real estate has been cancelled;
• cancelled the requirement to provide a notary with an application from the principal of the individual alienator (mortgagor, settler of trust) confirming the authenticity of the power of attorney, from the date of issue of which has passed more than 1 month (2 months if it was certified by a consular or diplomatic representation or issued in accordance with the laws of a foreign state), during notarization of agreements for the alienation of real estate, securities, corporate rights, mortgages, satisfaction of mortgagee's claims, establishment of trust ownership of real estate, notarization of signatures on the act of acceptance and transfer of a share (part of a share) in the capital (charter capital) of a company.

Ukrainian electronic signatures and seals may be fully used to certify digital documents in the territory of the European Union and in relationships with residents of the European Union

This became possible due to the inclusion of Ukraine by the European Commission to the Third Countries AdES List Of The Lists (TC AdES LOTL) – the list of states that are not members of the European Union, but whose electronic signatures and seals may be verified in the European Union. The specific list of Ukrainian electronic trust service providers whose electronic signatures and seals may be used in the territory of the European Union and in relationships with residents of the European Union is published by the European Commission on its official website.

The Law of Ukraine on the condemnation and prohibition of propaganda of russian imperial policy in Ukraine was adopted

On April 27, 2023, the Law of Ukraine on Condemnation and Prohibition of Propaganda of Russian Imperial Policy in Ukraine and Decolonization of Toponymy adopted by the Parliament of Ukraine was published, most of the provisions of which will come into force on July 27, 2023.

According to its provisions, the russian imperial policy, meaning the policy of russia (in the broad sense of the word “russia”, which includes the russian federation, the russian kingdom, the russian empire, the union of soviet socialist republics, etc.), which has been carried out by it over a long historical period with the aim of subjugating, exploiting and assimilating the Ukrainian people, is recognized as criminal and condemned. In this regard, any propaganda of russian imperial policy is prohibited, including the use on the territory of Ukraine in almost any way of symbols associated with russia and russian imperial policy, names of events or any other names associated with russian imperial policy, names or pseudonyms of persons responsible for the implementation, support or justification of such policy.

Companies, in case of non-compliance with the provisions of the mentioned Law of Ukraine, will be obliged to make their charter documents, legal names and/or symbols compliant with its provisions within 1 month from the date of its full entry into force (until August 27, 2023), meaning that they should remove any names related to russia, russian imperial policy and persons responsible for its implementation, support or justification. The owners of trademarks for goods and services containing symbols of russian imperial policy will be obliged to make such trademarks compliant with the provisions of the mentioned Law of Ukraine within 3 months from the date of its full entry into force (until October 27, 2023).

In case of non-compliance by legal entities with the provisions of the said Law of Ukraine, their activities will be prohibited.

The procedure and rules for recording shares of limited liability companies and additional liability companies in the recording system of shares of the Central Securities Depository were introduced

The specified procedure and rules were approved by the decision of the National Securities and Stock Market Commission of Ukraine dated May 17, 2023, No. 525. They should be fully effective from January 01, 2024. The mechanism for recording shares of limited liability companies and additional liability companies (the “companies”) in the recording system of shares of the Central Securities Depository is expected to be fully launched at the same time.

As a reminder, the possibility for companies to register their shares in the recording system of the Central Securities Depository is provided for by the amendments to the corporate legislation of Ukraine introduced by the new Law of Ukraine on Joint Stock Companies.

The advantages of such recording include not only strengthening the guarantees of protection of companies shares and increasing the transparency of their circulation, but also opening up some new opportunities for companies, such as realization of certain rights of company shareholders, paying dividends and communicating with them (sending notifications) through the recording system of the Central Securities Depository, holding general meetings using means of electronic communications, and opening an escrow account at the Central Securities Depository for companies shares.

The recording of company shares may be chosen by the general meeting willingly and at any time as an alternative option to the usual reflection of the size of company shares in the State Register.

The National Bank of Ukraine adopted a number of decisions

In particular:

• the reference rate was kept at 25% per annum. The next meeting of the Board of the National Bank of Ukraine on the reference rate is scheduled for July 27, 2023;
• currency restrictions have been eased for the purpose of launching the electronic residency of Ukraine (e-residency). The National Bank of Ukraine has allowed e-residents (after paying taxes) to transfer to their own accounts outside Ukraine funds in foreign currency received by them on accounts in Ukrainian banks from non-residents from abroad (for provided services or performed works).
  Mazars team analyzed the provisions of the Ukrainian legislation that introduce the electronic residence of Ukraine (e-residency) in more detail in previous tax and legal updates;
• foreign investors are allowed to transfer abroad funds received from the interest on Ukrainian government bonds after April 01, 2023, subject to the requirement that the foreign investor should have held such a Ukrainian government bond for at least the last 90 calendar days prior to receiving the interest;
• residents of Ukraine are allowed to transfer funds abroad to fulfil their debt obligations under foreign loans if they are secured by guarantees or sureties of international financial institutions or granted with the participation of a foreign export credit agency or a foreign state through an institution authorized by it or through a foreign legal entity whose shareholders include a foreign state or a foreign state bank.
  The transfer of funds in this case is allowed not earlier than the terms (the most distant dates) specified in the terms and conditions of the loan agreements for the prompt fulfillment of the relevant debt obligations;
• residents of Ukraine are allowed to transfer funds abroad to fulfil their debt obligations under foreign loans, the funds for which will be transferred from abroad to Ukrainian bank accounts of such residents of Ukraine as borrowers after June 20, 2023.
  It requires compliance with certain conditions:
  • transfer of funds abroad to pay interest on foreign loans should be subject to a maximum interest rate of 12% per annum;
  • transfer of funds abroad to fulfil debt obligations under foreign loans received for a period not exceeding three years should be carried out by residents of Ukraine as borrowers only using their own funds in foreign currency;
  • if the period for obtaining foreign loans is longer than three years, the transfer of funds abroad to fulfil debt obligations under such foreign loans during the first three years should also be carried out by residents of Ukraine as borrowers only using their own funds in foreign currency. At the same time, residents of Ukraine as borrowers may purchase foreign currency to pay interest, commissions, fees and penalties, and starting from the fourth year, to repay the foreign loans;
  • transfer of funds abroad for the purposes of premature repayment of foreign loans is not allowed.

The list of states whose citizens or residents may obtain the status of electronic resident (e-resident) in Ukraine has been published

The Ministry of Digital Transformation of Ukraine has published on its website a list of states whose citizens or residents are allowed to obtain the status of electronic residents (e-residents) in Ukraine. This list includes such countries as India, Pakistan, Slovenia, and Thailand.

Mazars team analyzed the provisions of the Ukrainian legislation that introduce the electronic residence of Ukraine (e-residency) in more detail in previous tax and legal updates.

The terms of martial law and general mobilization have been extended

On May 19 and 20, 2023, the laws of Ukraine came into force, according to which the Parliament of Ukraine approved the Presidential Decrees on the extension of martial law and general mobilization in Ukraine for 90 days, which is until August 18, 2023.

The extension of the COVID-19 quarantine

On April 25, 2023, the Government of Ukraine extended until June 30, 2023, the quarantine imposed to prevent the spread of COVID-19 in the territory of Ukraine.  

Access to some registers of the State Tax Service of Ukraine is restored

The State Tax Service of Ukraine restored access to information in the Register of Non-Profit Organizations, the Register of Unified Tax Payers, the Register of Insurers and the Register of Value Added Tax Payers.

However, for the period of martial law, access to these registers will be provided only upon identification of the requestor using an electronic signature.

Ukraine imposes sectoral sanctions against Iran for 50 years

On May 29, 2023, a Resolution of the Parliament of Ukraine approved the Decision of the National Security and Defense Council of Ukraine on the imposition of sectoral sanctions against Iran.

In accordance with the Law of Ukraine on Sanctions, such sanctions are mandatory immediately upon approval by the Parliament of Ukraine of such Resolution.

The mentioned sectoral sanctions provide for a number of restrictions and prohibitions, in particular, regarding trade operations between Ukraine and Iran with military and dual-use goods and services, their transit by Iranian residents through the territory of Ukraine, withdrawal of capital by Iranian residents from Ukraine, transfer of technology and intellectual property rights to Iranian residents.

The conscription age for male citizens of Ukraine has been reduced

The Parliament of Ukraine has adopted amendments to the Law of Ukraine on Military Duty and Military Service, which provide that male citizens of Ukraine will be subject to military registration as conscripted person upon reaching the age of 25 (instead of 27, as previously), unless they have been registered earlier.

Military registration as a conscripted person means that such a male citizen of Ukraine may be mobilized in the absence of grounds for exemption from mobilization, in particular, as a result of a reservation by the company that is his employer.

Mazars team analyzed the provisions of Ukrainian legislation on the reservation of conscripted employees by companies in more detail in previous legal updates.

The procedure for conducting an audit of industrial and fire safety of companies upon their applications was approved

The fire and industrial safety audit (the "audit") is provided for by the Civil Protection Code of Ukraine and may be conducted at the request of the company in order to identify, prevent and eliminate violations of the legislation in the field of fire and industrial safety, as well as to avoid sanctions resulting from the detection of such violations by regulatory authorities in the future.

According to the procedure approved by the Resolution of the Government of Ukraine dated May 02, 2023, No. 436, the audit is conducted by organizations regardless of ownership that are included in the relevant register (the register is currently being created) and that are accredited by the National Accreditation Agency of Ukraine.

The audit is conducted in accordance with a civil law contract between a legal entity and an organization authorized to conduct it and consists of analysing the company's documentation, interviewing its employees, conducting a survey (inspection), including using measuring instruments and equipment, and taking other actions necessary to fully study fire and industrial safety in the company.

The audit is relevant for companies that plan to insure their civil liability for damage that may be caused to third parties as a result of emergencies, dangerous events, including fires and accidents on the territory and/or real estate objects, in order to be exempt from fire and industrial safety inspections for a certain period.

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