Dear colleagues and partners!

On October 21, 2019, the President of Ukraine Volodymyr Zelenskyi signed the bill №1056-1 “On Amendments to Certain Legislative Acts of Ukraine on the Protection of Property Rights” (hereinafter – the Law). This was a logical step in the decisive fight against raiders, which Mr. Zelensky so often and persistently spoke about.

The authors of the Law are convinced that the document eliminates the main legal gaps that create problems for property and business owners in our country. What changes to the current legislation have been made, and what awaits business in the future, we propose to consider in this article.

Termination of accredited entities

It is probably no secret that accredited entities (particularly in the form of utility organisations) have been involved in the majority of pre-trial investigations. Such entities, endowed with the rights of state registrars, have in fact become a major and extremely effective tool in the hands of raiders. In fact, this is mentioned in the explanatory note of the authors of the Law, which states that a significant number of accredited entities took an active part in dubious or openly criminal registration actions.

It should be noted that we cannot but agree with the statement of the legislator and unequivocally support the provision on deprivation of accredited entities of the right to state registration.

Notarization of agreements on the alienation of corporate rights

A significant provision of the Law was the introduction of the obligation to notarize agreements on the alienation of corporate rights and certain other documents related to the functioning of legal entities. Such documents must now be notarized on the appropriate forms.

In our opinion, the positive effect of this provision will not be as noticeable as, as mentioned earlier, the termination of the institution of accredited entities. This is explained by the fact that since 2018, for the state registration of changes in the participants of the legal entity, an act of acceptance of the transfer of shares in the authorized capital was submitted. At the same time, the authenticity of signatures on such an act is notarized.

On the one hand, this eliminates certain inconsistencies in the legislation, such as the fact that the act of acceptance-transfer of shares is not a statutory document. Undoubtedly, it is a relevant agreement. On the other hand, the requirement of notarization in addition to the act and other documents will lead to additional costs. Whether this will have a positive impact on the situation with raider seizures, time will tell.

The principle of simultaneity of notarial acts and state registration of rights

The law introduces the principle of simultaneity of notarial acts and state registration of rights. This means that the state registration of rights as a result of a notarial act with real estate, object of unfinished construction, resulting in the acquisition, change or termination of property rights, their encumbrances simultaneously with such a notarial act will be carried out by a notary who performed the notarial act.

Checking the legal capacity of the applicant

It should be mentioned that the adopted Law has added some procedural trouble to state registrars. So, the state registrars are now obliged to:

• determination of the amount of civil capacity of natural persons – applicants;
• verification of civil capacity and legal capacity of legal entities – applicants and their representatives;
• powers of the representative of a natural or legal person – the applicant;
• establishing the presence or absence of encumbrances on corporate rights (during the state registration of changes related to changes in the founders (participants) of a legal entity of private law, and if such changes did not occur as a result of notarial acts or court decisions).

Verification of civil capacity and legal capacity of an individual will be carried out by obtaining information about such a person from the State Register of Civil Status Acts. Relevant state registers have already been established and exist for the remaining inspections.

Software changes

The software used during the state registration procedure has also changed. From now on, the state registrar will have access to the State Register of Rights through multi-factor authentication, and in cases of state registration of property rights by notaries and their encumbrances as a result of notarial acts, the registration file will be formed electronically.

Thus, the legislator hopes to leave in the past stories about stolen access keys of state registrars and unauthorized access to registers under someone else’s name (key).

Determining the amount of liability of state registrars for violation of registration procedures

An extremely expected innovation was the announced increase in the level of liability of unscrupulous state registrars. However, in reality it is only a matter of instructing the Cabinet of Ministers of Ukraine to determine the criteria for determining the degree of responsibility in the field of state registration. Unfortunately, we will be able to evaluate the proposed criteria for adequacy and discuss their effectiveness only after their approval and publication.

However, it is important to understand that the problem has never been the lack of current legislation on liability for criminal acts in the field of state registration. The problem was, first of all, the lack of an effective mechanism for bringing to justice and enforcing the sentence. As a rule, state registrars, with whose hands enterprises were raided, simply lost access to the registers for a certain period of time.

Instead of conclusions

In general, the proposed provisions of the Law testify to the legislator’s awareness of the most problematic issues of the registration system. The law certainly has positive provisions, but it can hardly be blamed for making it easier for citizens and businesses to access registration services. Instead, the new requirements for notarization of additional documents will inevitably lead to increased costs. One can only hope that raiders are also scared away by such innovations.

If you need to receive legal advice on protecting your business or assets from unauthorized encroachment, please contact:

Andrii Martyniuk, Director of Business Development of Law offices of OMP
+38 098 244 6262; +380 44 391 30 01
a.martyniuk@omp.ua

Halyna Brun, Marketing Director of Law offices of OMP
+380 95 497 66 05; +380 44 391 30 01
g.brun@omp.ua