Ukrainian market
December 18, 2017

Overview of 2017 Reforms to Improve Business Climate in Ukraine

The Law Firm Marchenko Danevych  made a short and concise overview of reforms which were introduced in 2017 to improve business climate in Ukraine.

Ukraine Enhances Protection of Minority Investors

In June 2017 Ukraine significantly increased legal protection of minority shareholders of Ukrainian companies, as well as introduced other important amendments, namely:

  • introduction of a “squeeze-out” (the right of mandatory purchase of shares of a minority shareholder of a joint-stock company by the shareholder, owning 95% (or more) of the common shares of this company) and a “sell-out” (the right of minority shareholders to mandatory sale their shares to the shareholder, owning 95% (or more) of the common shares of this company) mechanisms;
  • establishing the possibility to block funds on a pledged bank account and forbade the termination and/or amendment of the bank account agreements without the consent of the mortgagee;
  • introduction of special escrow accounts, which provide for automatic transfer of funds to a person specified in the escrow agreement.

Simplified Employment Permits Procedures for Foreigners

 Ukraine simplified procedure of employment of foreigners. The main changes are:

  • reduced list of documents to get work permit;
  • the maximum permit validity term for certain categories of employees (highly paid professionals, founders or beneficiaries of Ukrainian legal entities, graduates of top world universities, IT professionals, employees in creative professions) is extended from one to three years;
  • foreigners owning share in the companies capital of Ukrainian legal entities of value exceeding EUR 100,000 may obtain a temporary residency permit.

Ukraine Introduces State Aid Regulations

 State aid legislation adopted pursuant to Ukraine`s obligations under the EU Ukraine Association Agreement became effective in August 2017. The Law defines that state aid is a measure which:

  • involves public resources;
  • distorts or threatens to distort competition;
  • creates a selective advantage to one or more business undertakings.

Consequently, direct budget subsidies, state guarantees, tax exemptions and deferrals, writing-off debts and penalties and many other similar selective benefits provided with help of public resources will now constitute state aid in Ukraine.

Relevant Ukrainian governmental/regulatory authorities will have to:

  • notify AMCU of new state aid and receive clearance from AMCU for providing such state aid (AMCU will decide whether such aid is permissible);
  • provide AMCU with information on the existing state aid (AMCU will decide whether such aid is permissible; if such aid is recognized as not permissible, AMCU will order the authority to bring it in compliance with the Law, otherwise such state aid will have to be paid back).

Ukraine Protects Business in Criminal Proceedings

 In December 2017 the Parliament improved legislation on criminal investigations concerning business (white-collar crimes, national security crimes etc.).

The new law provides the following main changes:

  • the court hearing where the court is considering the search order requests by law enforcement agencies, as well as searches themselves must be fully recorded using video and audio recorders;
  • law enforcement agencies are obliged to allow attorneys to participate in all searches at any stage (the rule used to be ignored for many years in many cases);
  • evidences shall be considered as inadmissible if the court hearing were not dully recorded or if attorneys were not allowed to participate in the search process.

 Ukraine becomes one of the first States to use Blockchain technology

 Electronic trading system of arrested property (СЕТАМ or Open Market) was transferred to the base of Blockchain technology. Thus, CЕTAM has become the World’s first electronic auction operating based on Blockchain technology bringing more transparency and accountability in this historically gray area.

One of the main advantages of using Blockchain technology for CETAM auctions is impossibility to alter manually (as a matter of fraud) the register of auctions.

Ukrainian Continues Judicial Reform

In October – November 2017 Ukraine introduced amendments to the Codes of Commercial, Civil, Administrative and Criminal Procedures of Ukraine, while most of the amendments are coming into force on December 15, 2017.

New administrative, civil, and commercial litigation rules

The administrative, civil, and commercial cases will be decided under new procedures. The main changes established by the new Codes concern the following:

  • unification of litigation rules;
  • written witness statements and electronic evidence are admitted as legitimate sources of evidence;
  • parties may engage expert witnesses, while the court’s powers to appoint expert examination are limited;
  • improvement of amicable settlement procedure between the parties to the dispute.

Pro-arbitration approach

Under the new Codes Ukrainian courts will provide better court support and control for arbitration, including:

  • courts can issue interim measures and obtain evidence;
  • corporate disputes are arbitrable provided that shareholders and the company conclude the arbitration agreement;
  • improved procedures for setting aside, recognition and enforcement of arbitral awards;
  • Kyiv court of Appeal becomes the primary institution for the court control of arbitration.

Amended procedure of investigation of criminal offences

The Code of Criminal Procedure was amended in terms of pre-trial investigation:

  • introduction of deadlines for pre-trial investigation;
  • investigating judge has a sole power to appoint expert examination;
  • higher threshold/requirements for obtaining a search order and conducting a search;
  • appeal of a notice of suspicion becomes possible.

Ukraine Improves Fast-Track Registration Procedure for Medicines

In November 2017 Ukraine improved Procedure for fast-track registration of medicines registered in the United States, Switzerland, Japan, Australia, Canada, and the European Union (centralized procedure).

The fast-track registration procedure started working back in January 2017 but turned out to be largely ineffective in practice due to excessively high level of required similarity between the Ukrainian and the reference dossiers. As a result, the regulator in many cases had no choice but to refuse localized dossiers that had insignificant discrepancies with the reference dossiers.

Now it is expected that companies from around the World will be promptly entering Ukrainian market with their medicines of quality, efficacy and safety confirmed by strongest regulatory authorities.

Ukraine Introduces Long Awaited Healthcare Reform

In October – December 2017 Ukraine introduced the Healthcare Reform. The Ministry of Health (key promoter of the reform) commented that “the reform scraps the remnants of the Soviet system and will modernize Ukrainian healthcare to meet today’s needs. Modeled after the best international practices and “know how” from other countries together with Ukrainian experts, the reform provides healthcare insurance for all Ukrainians. Given that recent surveys show that 93% of Ukrainians have no medical insurance at all, this is a tangible benefit that concretely helps ordinary people. The introduction of medical insurance greatly reduces corruption by eliminating the current system which demands illegal cash payments for medical services.  The reform also fights corruption and price gouging by introducing reference pricing for pharmaceuticals”.

Practically, the reform provides for gradual introduction of free healthcare services market with public single payer. It starts in 2018 with transformation of first level of healthcare (family doctors), guaranteed set of healthcare services (basic care, palliative care), basic reimbursement, basic e-Health and establishing of the single payer. It shall be further developed with extension to secondary and tertiary levels by 2020.

The reform shall ensures that state budget “money follows the patient”, giving patients the freedom to choose doctors and institutions, and stimulating top performing doctors and institutions all over the country.


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