Financial services & insurance in Ukraine
1. Banking 1.1. Participants of the banking sector in Ukraine 1.1.1. The NBU 1.1.2. Commercial banks 1.1.3. Foreign banks, their branches and banks with foreign participation 1.2. Operational requirements 1.2.1. Banking license 2. Financial institutions 2.1. Participants of financial sector in Ukraine Market entry conditions 2.2. Regulatory body 2.3. Operational requirements 2.2.1. Licensing 2.2.2. Regulation of activity 3. Insurance 3.1. Subjects of insurance industry 3.1.1. Ukrainian subjects 3.1.2. Foreign subjects 3.2. Operational requirements 3.2.1. Insurers registration 3.2.2. Life insurers 3.2.3. Regulation of activity 3.2.4. Licensing 4. Investment institutions 4.1. Types of investment institutions 4.1.1. Joint investment institutions 4.1.1.1. Corporate investment funds 4.1.1.2. Mutual funds 4.1.1.3. Assets management companies 4.1.2. Private pension funds 4.2. Regulatory body 5. Currency regulations 5.1. Objects of currency regulation 5.1.1. Currency valuables 5.1.2. National currency 5.1.3. Foreign currency 5.1.3.1. Purchase of foreign currency 5.1.3.1. Transfer of foreign currency 5.2. Licenses 5.2.1. General license 5.2.2. Individual licenses 5.2.3. Other operations subject to special requirements 5.3. Transactions with non-residents 5.3.1. Services special regulations 5.3.2. Loans special regulations
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Banking & finance The sector of Banking & Finance services is truly vital for the Ukrainian economy. Since the Orange Revolution at the end of 2004 Ukraine is continuingly attracting the attention of foreign investors to its financial sector. The country’s financial services institutions have grown in value significantly within a very short span of time and could be showing promising potential in the near future. The value of foreign acquisitions since 2004 reached impressive indices, which makes the financial sector essential for the economy in terms of direct foreign investments. Although the interest of foreign investors to the Ukrainian banking sector has waned after the crisis of 2008, the banking sector will remain important for the Ukraine economy in any circumstances.
banks took place, which has increased competition and growth of the sector. The participants of the market are acting based on international accounting standards and as Ukrainian banking legislation is in process of its assimilation with European regulations, market participants are obliged to comply with IMF banking reform program, Basel Capital Accord and other numerous international requirements.
1. Banking
1.1. Participants of the banking sector in Ukraine
The banking sector has shown itself as one of the most promising and fastest growing sectors of the Ukrainian economy in the years before the crisis of 2008. A number of acquisitions of Ukrainian banks by foreign
The banking sector in Ukraine is structured of two levels, varying by their subjects. The first level is represented by Ukrainian central bank: the National Bank of Ukraine (the "NBU"), the second level is composed by commercial banks of different types, forms of ownership and incorporation.
No single bank currently has a dominant position in any banking business in Ukraine. The level of concentration in the Ukrainian banking industry (measured using the Herfindahl-Hirschman index) is similar to the levels in the United Kingdom or France.
The banking sector in Ukraine
The NBU
National central bank
Commercial banks
Universal (general)
Specialized
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1.1.1. The NBU Being a specialized state institution in the banking sector, the NBU is ensuring external and internal stability of the national currency of Ukraine – the Hryvnia (UAH), as its principal objective, and possesses broad regulatory and supervisory functions in the banking sector, as its key participant. Two principal governing bodies of the NBU are the Council and the Board.
The NBU
The Council, in particular, is entitled to develop the principles of Ukraine’s monetary policy and is empowered to veto the Board’s decisions if they contravene such principles. The Board responds for implementing Ukraine’s monetary and other policies in the banking sector and generally managing the activity of the NBU.
Empowerments
Functions
Obligations
developing and conducting monetary policy
overseeing compliance with applicable legislation and imposing appropriate sanctions for relevant violations
ensuring stability of the monetary, financial and banking systems
issuing and canceling banking licenses and approving banks' statutory documents
establishing rules of carrying out banking operations, accountancy rules, rules for protection of information, property and funds
providing protection of interests of depositors and creditors
arranging foreign exchange system
performing regulation and supervision of banks
implementing monetary policy
determining interest rates on overnight unsecured loans and overnight loans secured by state securities
issuing state currency and controlling its circulation
providing efficient functioning of the banking system
determining interest rates on depositary certificates
pursuing exchange control of banks
sustaining prices stability
providing for methodological support of safe-keeping, protection, use and disclosure of information which constitutes banking secrecy
1.1.2. Commercial banks Ukrainian applicable legislation provides for two types of commercial banks: the "universal" (general) commercial banks and "specialized" commercial banks. Universal banks provide a broad range of banking and financial services which cover numerous sectors of financial market and branches of Ukrainian economy.
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Specialized banks limit their activity with a restricted number of operations or function in a narrow sector of financial market or provide services in specific branches of economy.
Universal banks
COMMERCIAL BANKS
Provide banking, financial and other services, including: soliciting deposits and other funds placing raised funds opening and maintaining bank accounts issuing credits
Specialized banks
Savings banks
Mortgage banks
Investment banks
investments safekeeping services
Settlement (clearing) banks
securities registration services issuance of lotteries, etc.
In 2011, commercial banks operating in Ukraine have been divided by the NBU into 4 groups according to their size of assets as of 1 October 2011. 17 major banks with total assets exceeding UAH 12.5 billion were classified in the 1st group. 21 banks with total assets ranging from UAH 4.1 billion to UAH 18.9 billion were classified in the 2nd group, 21 banks with total assets ranging from UAH 2.2 billion to UAH 4.7 billion were classified in the 3rd group and 116 banks with total assets of less than UAH 4.3 billion were classified in the 4th group.
1.1.3. Foreign banks, their branches and banks with foreign participation The presence in Ukraine of a foreign bank may be established through a representative office (without authorities to conduct banking business) and/or a Ukrainian commercial subsidiary bank. Foreign participation in a Ukrainian commercial bank is not limited; nevertheless prior permission of the NBU is required for the establishment of a commercial bank with foreign participation, or for the "conversion" of an existing commercial bank into a bank with foreign participation. Notwithstanding that the applicable legislation does not limit the allowed participation in the charter capital of a commercial bank to any maximum threshold, the permission of the NBU is still required for a Ukrainian or foreign legal entity, or for an individual, to directly or indirectly own, hold, or control various thresholds of a commercial bank’s charter capital or voting rights in its governing body,
Development banks, etc.
i.e., 10% or more, 25% or more, 50% or more, or 75% or more. Each threshold requires a new permission of the NBU. According to NBU information, there are no plans to limit the amount of foreign capital in the Ukrainian banking sector.
1.2. Operational requirements Banks should be established only in the form of a public joint stock company or cooperative bank. Legal entities, individuals or Cabinet of Ministers of Ukraine on behalf of the State may be bank’s shareholders. The regulatory capital of a bank (i.e., the sum of principal (core) capital and additional capital) cannot be less than the minimum set forth by the applicable Ukrainian legislation, which is UAH 120 million as of today.
1.2.1. Banking license It should be emphasized that pursuant to the legislation in force – a bank has a right to pursue banking activity only if it receives a banking license. The carrying out of banking activity without a banking license is generally prohibited and may result in criminal, civil or administrative liability of a person carrying out this type of activity without a banking license. A banking license, which is issued by the NBU, may not be assigned to third parties and permits a bank to carry out "exclusive banking operations", financial and other additional services.
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Exclusive banking operations
BANKING SERVICES
Additional services
solicitation of funds (deposits) from legal entities and individuals
financial services through commercial agents
issuance of own securities
opening, maintaining, and carrying out transactions with current accounts of clients and correspondent banks
provision of safekeeping services (excluding securities custody)
consulting and information services related to banking
investments
organization and issuance of monetary lotteries
placement of attracted funds in its own name, on its own terms, and at its own risk
transportation of currency valuables and cash collection
conducting registered securities registration activities
2. Financial institutions Financial (non-banking) services constitute a large and integral part of services market in Ukraine. The course of Ukraine for liberalization and modernization of financial relations favors the growth of its internal market and, as a result, has led to a rapid development of trade in financial services, emergence of new financial instruments and advanced financial institutions, which are key players in financial services market.
2.1. Participants of financial sector in Ukraine Pursuant to applicable Ukrainian legislation, financial services are provided exclusively by financial institutions (or, if explicitly provided by the law, by other
entities or individuals which are not financial institutions). Any services are considered to be financial when such services are rendered for the benefit of a third party (regardless of whether the burden of costs is taken by a service provider or it is allocated to a client) in order to obtain income or to preserve the actual value of financial assets. The law defines a financial institution as a legal entity that provides one or several financial services, as well as other services associated with the provision of financial services, and is entered into the relevant register pursuant to the procedure prescribed by law.
investment funds
credit unions
FINANCIAL INSTITUTIONS
(excluding commercial banks)
pension funds
pawnbrokers
leasing companies
insurance companies
trusts
other legal entities, which exclusively pursue financial services activity
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Market entry conditions A legal entity, which intends to provide financial services, shall conform with legislative requirements and obey procedures prescript by regulations in relevant field of activity.
A legal entity shall Perform state registration
Bring its accounting and registering system in compliance with law
Apply for the entry into the State register of financial institutions within 30 calendar days after state registration
Bring its internal policies system in compliance with relevant regulations
A company shall apply for the entry into the State Register of Financial Institutions to the appropriate state body regulating relevant financial market services. It should be mentioned that financial institutions are entitled to voluntarily conduct joint activity, uniform their operations and create associations unless this contravenes Ukrainian antimonopoly legislation and requirements of regulations governing certain financial service markets. In such case, an association of financial institutions obtains the status of a legal entity from the date of its state registration. The legal status, types, the procedure of establishment, the legal regime of operations and the termination of activities of associations is provided by the applicable Ukrainian legislation.
2.2. Regulatory body Financial services in Ukraine are regulated and supervised and overseen by the National Commission on the Regulation of the Financial Services Markets
Financial Services Commission
imposes administrative sanctions
Confirm professional qualities and business reputation of the staff
(the "Financial Services Commission"), which is responsible for financial (non-banking) institutions and other companies engaged in financial services, except for commercial banks, which are subject to supervision by the National Bank of Ukraine, and securities traders/brokers and asset management companies, which are under the ambit of the National Commission on Securities and Stock Market. The Financial Services Commission is the specialized state agency responsible for the regulation and control of (non-bank) financial institutions in Ukraine. It is authorized to issue licenses to financial institutions and other companies engaged in financial services, and therefore – to grant, refuse, restrict or revoke a company’s authorization to the market, as well as to adopt specific regulations. The Financial Services Commission is authorized to hold on-site inspections and documentary examinations of financial institutions. It may also appoint an additional annual audit of the financial statements of a company, which are to be conducted by an auditor appointed by the Financial Services Commission at the cost of the company. The Financial Services Commission is also authorized, inter alia, to perform following actions.
initiates criminal or anti-trust proceedings
brings an action in a civil or a commercial court regarding regulatory breaches
issues mandatory warning to a financial institution or a self-regulated organization regarding rectifying of breaches of applicable law
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2.3. Operational requirements A financial institution may be established in any organizational and legal form, unless otherwise provided in regulations governing certain financial services. Depending on the type of a financial institution, the requirements to the minimal amount of its charter capital will vary pursuant to legislative prescriptions. For example, the minimum amount of the charter capital set for pawnbrokers is UAH 200,000. According to the applicable Ukrainian legislation, the status of a financial institution may be obtained by a legal entity after it has been registered in the State Register of Financial Institutions.
2.2.1. Licensing In the financial sector certain types of professional activity may only be carried out by the Financial Institution provided that it obtained a respective license from the Financial Services Commission. A foreign legal entity would have to either set up a new company and obtain an appropriate license for it or buy an existing licensed entity. In both cases it would have to comply with the legislation applicable to foreign investments and competition.
Application for an authorization to conduct licensable activities in Ukraine must be made to the Financial Services Commission. Pursuant to the applicable Ukrainian legislation, the Financial Services Commission issues licenses within its competence to financial institutions for: insurance activity; administering of private pension funds; issuing of financial credits using solicited deposits; rendering of any financial services, provider of which intends to directly or indirectly solicit financial assets from natural persons. The Financial Services Commission shall make a decision to whether issue or deny a license within 30 calendar days of the date of receipt of the application for a license with supporting documents. In case of refusal pursuant to the applicant's failure to meet certain licensing conditions, the company may submit a new application for license upon the removal of nonconformity which led to the license denial.
2.2.2. Regulation of activity
Financial Institutions are prohibited from disseminating (of any form) of advertising and other information, which contains false information about their operations in financial services
are obliged to provide customers with information on their operations, services, prices, indices and other information prescript by applicable legislation
must keep record of operations and provide reports pursuant to requirements of laws and specific regulations
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must disclose information provided by Ukrainian laws to authorized state bodies
shall operate in line with the requirements of legislation on economic competition protection and on protection from unfair competition
3. Insurance The insurance industry as an individual industry of financial services is also showing a rapid growth, especially since third-party motor liability insurance became obligatory in Ukraine. This change came about because of the government’s ambitious plan to make Ukrainian legislation compliant with that of the European Union. The financial crisis of 2008 has affected the insurance services market to a significant extent but the prospects of the market remain positive in the long-term.
3.1. Subjects of insurance industry Insurance services, as a type of relationships designed to protect property interests of individuals and legal entities in case of occurrence of specific events (insured accidents), may be provided only by a finan
cial institution provided it obtained a license to render insurance services. The words "insurer", "insurance company" and "insurance organization" in the name of a company may be used only by legal entities possessing an insurance license. The specialized state agency responsible for the regulation and control of the insurance business in Ukraine is the Financial Services Commission, with its powers defined in section 2.2. of the present Brochure.
3.1.1. Ukrainian subjects To obtain the status of an "insurer", a company shall meet specific requirements provided by applicable legislation.
INSURERS may be established exceptionally as: Joint-stock companies
General partnerships
Limited partnerships
Additional liability companies
Besides insurers, the market is also represented with insurance intermediaries, who perform intermediary activity in insurance and reinsurance sectors as their sole and exceptional activity. INSURANCE INTERMEDIARIES
Agents individuals or legal entities representing, acting on behalf of, and under the authorization of an insurer carry out a portion of the insurance company’s activities (insurance contracts conclusion, obtaining insurance premiums, performing functions in connection with insurance payments and reimbursements, etc.); receive fees from insurer under agency agreements
may be a single company
Insurance brokers legal entities or individuals acting in own behalf but in the interests of a person requiring insurance act pursuant to brokerage agreement with an insured; the sale of the insurance products of one insurer must not constitute more than 35% of a broker’s activity (must sell the insurance products of at least 3 insurers); receive fees from insured under brokerage agreements
Reinsurance brokers legal entities acting in own behalf on the basis of a brokerage agreement with an insurer requiring reinsurance
Brokerage activities are very narrowly defined in Ukraine and do not include the provision of any services on behalf of and/or in favor of an insurer. Pursuant to the abovementioned, a broker must have a brokerage agreement with an insured rather than with an insurer and it is suggested that a broker may not enter into an agreement with an insurer.
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3.1.2. Foreign subjects Ukrainian applicable legislation provides that foreign insurers are not allowed to conduct direct insurance activity in the Ukrainian market except for certain exclusions and upon condition that certain requirements are met. Services Allowed to Foreign Insurers in Ukraine
Statutory Requirements
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insurance of risks related to overseas transporting, commercial aviation, launching of spaceships and freight (including freight of satellites), transit insurance contracts providing coverage against risks relating to cargo in transit and/or transport by which the cargo is transferred, and/or any liability arisen as a result of such cargo transportation
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reinsurance
II
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intermediary services in the form of agency or brokerage operations for reinsurance of risks explicitly mentioned in p. 1 above
III the country of the foreign insurer’s registration exercises
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the country where the foreign insurer is registered is a member of the World Trade Organization (the WTO) and such country participates in the international cooperation aimed at prevention of and the counteraction to the legalization of money laundering and financing of terrorism and cooperates with the Financial Action Task Force (FATF). For the purposes of conducting reinsurance activity on the territory of Ukraine the requirement regarding the membership in the WTO by the country where the foreign insurer is registered is not applicable; presence of a memorandum (agreement) on exchange of information signed between Financial Services Commission and relevant authority of the country where the foreign insurer is registered; state control over the insurance business;
IV presence of a treaty on avoidance of double taxation
agreement signed between Ukraine and the country where the foreign insurer is registered;
V the country where the foreign insurer is registered is not
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auxiliary insurance services such as, for example, consulting, actuarial risks assessment and satisfaction of claims
included by Ukraine to the list of tax heaven jurisdictions;
VI the foreign insurer has obtained the insurance license in
the country of its registration;
VII the foreign insurer’s financial reliability rating meets the
requirements established by the Financial Services Commission
As for non-resident insurance and reinsurance brokers in Ukraine, they may provide their services related to concluding insurance agreements with non-resident insurance companies either independently or through their permanent representative offices in Ukraine. A non-resident insurance or reinsurance broker which provides its services without such office shall notify in writing the Financial Services Commission about its intention to conduct business in Ukraine, and the latter will then publish such information on its official web-site and printed mass media.
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3.2. Operational requirements An insurance company shall be established just for insurance services provision since its very inception. Enterprises, institutions and organizations may not become insurers by amending and/or updating their statutory documents if they have been previously engaged in another type of activity, even if such amendments or updates would comply with legislative requirements.
3.2.1. Insurers registration A Ukrainian legal entity must undergo certain registration procedures in order to be qualified to carry out insurance activity.
REGISTRATION OF AN INSURER State registration as a legal entity (subsidiary) and post-registration formalities
Registration with the State Register of Financial Institutions, which confirms its status of a financial institution
Receipt of an insurance license, either for life insurance services or general (non-life) insurance services
Moreover, an insurer must be established by, and must exist with, at least 3 shareholders (participants), which may be Ukrainian and foreign legal entities and individuals.
amount paid by an insurance company to the charter capital of any other Ukrainian insurer must not exceed 30% of its own charter capital (fund), and 10% of the charter capital per a particular insurer.
The charter capital (fund) of an insurer must be paid in cash, with the exception that 25 per cent may be paid by state securities at par value. The statutory minimum for the charter capital of an insurer must be equal to the UAH equivalent of EUR1,000,000.00. The total
In order to obtain the status of financial institution a company must apply for registration with the State Register of Financial Institutions and comply with subsection 2.1.1. of this Brochure and with some additional prescript legislation requirements.
REQUIREMENTS FOR FINANCIAL INSTITUTION STATUS
the paid-in charter capital must be equal to or exceed the UAH equivalent of EUR 1,000,000 (calculated pursuant to the exchange rate of the NBU on the date of its application)
the company must have the required number of qualified insurance professionals, office premises, and software, hardware, and communication facilities installed therein
the company must present a business plan of its insurance activity for not less than three years
3.2.2. Life insurers Life insurers are prohibited from providing any other types of insurance, except for: 1) re-insurance of life insurance; 2) financial activities connected with the accumulation, investment, and management of insurance reserves (asset management);
3) crediting the insured individuals; and 4) the performance of any operations aimed at satisfying its own business needs. The statutory minimum for the charter capital, paid in cash with specifics provided in subsection 3.2.1. hereinabove, of a life insurer must be equal to the UAH equivalent of EUR1,500,000.00.
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The insurer which provides services different from life insurance and contributes to the charter capital of the insurer who provides life insurance services may not obey to the requirements regarding the total amount paid by an insurance company to the charter capital of any other Ukrainian insurer (which must not exceed 30% of its own charter capital (fund), and 10% of the charter capital per a particular insurer).
It should be emphasized, that when the cost of insuring a single object exceeds 10% of the sum of paid charter capital and formed free reserves and insurance reserves, the insurer is obliged to conclude a reinsurance agreement, which is subject to the registration pursuant to the procedure established by the Financial Services Commission.
The requirements for financial institution status, set in subsection 3.2.1. hereinabove, apply in the same manner for life insurers with regard that the paid-in charter capital of a company intending to provide life insurance must be equal to or exceed the UAH equivalent of EUR1,500,000.
Insurance premiums may only be paid in UAH. Upon agreement of the parties the financial obligations of the life insurance agreement may be determined in a foreign currency. Insurance benefits are to be paid in the currency stated in the insurance agreement, provided that it does not contradict the applicable law.
3.2.3. Regulation of activity
3.2.4. Licensing
In addition to regulations provided in subsection 2.2.2 of this Brochure, insurers are also obliged to:
The licenses for insurance activity are issued by the Financial Services Commission. In addition to the requirements discussed in subsection 2.1.1. and hereinabove, in order to obtain and maintain an insurance license a financial institution must comply with specific requirements provided by the applicable legislation.
- submit quarterly and annual reports to the Financial Services Commission; - prepare and publish their annual financial statements and consolidated reports (the accuracy of these reports must be confirmed by an independent auditor).
The general manager and chief accountant of a company must have
LICENSE PROVISIONS
- advanced professional skills and a good business reputation;
The company must adopt and register its insurance conditions (containing a description of all of its insurance products) and any amendments thereto with Financial Services Commission
- a university (or equivalent) degree in law or economics and have at least 5 years relevant work experience; - the Chief Accountant must hold a university degree in economics and have at least 3 years relevant work experience; - both of them must (a) complete the appropriate professional skills enhancement courses organized by the Financial Services Commission; (b) not have been the senior manager or chief accountant of a financial institution declared bankrupt or subjected to compulsory liquidation over the previous last 5 years; and (c) not have any standing or unsuspended conviction for a deliberate crime, including crimes in commercial or administrative spheres.
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The actuary of a company must have - a university degree; - at least three years actuarial work experience; - a special qualification certificate issued by the Regulator; - a document proving successful completion of the professional exams according to the American or British examinations systems
4. Investment institutions Ukrainian legislation recognizes investment institutions as participants of Ukraine’s capital market. Although the Ukrainian capital market is currently much smaller than the banking industry in Ukraine, it increasingly attracts foreign interest. Since Ukraine took the course for liberalization of its investment legislation, the role of investment institutions has significantly increased. Investment institutions have shown themselves as a promising alternative for investing in financial markets.
4.1. Types of investment institutions Investment institutions are institutional investors that perform operations with financial assets in the interests of third parties on their own account or on account of such parties or on account of funds borrowed from other financial assets, in order to secure profit or preserve the real value of financial assets.
Mutual funds
Private pension funds
Investment institutions
Joint investment institutions
Corporate investment funds
4.1.1. Joint investment institutions Joint Investment Institutions (the "JII") are investment institutions which may exist as a legal entity: the Corporate Investment Fund (the "CIF"), or as an amount of assets belonging to investors: Mutual Funds (the "MF").
The applicable legislation provides several types of Joint Investment Institutions, depending on their specifications.
JOINT INVESTMENT INSTITUTIONS Private
TYPES
Public Interval
The JII (or his assets management company) may not redeem the securities issued by such JII (or his assets management company) until its termination. May be only established for a fixed term. The JII (or his assets management company) shall redeem the securities issued by such JII (or his assets management company) any time at the request of investors. May be only of diversified form. The JII (or his assets management company), at the request of investors, may redeem the securities issued by such JII (or his assets management company) during certain period of time, a specified in the prospectus (interval). An interval shall be at least once a year, but at most once a quarter, and last at least 10 working days during a year and at least 1 working day for each interval. May be only of diversified form.
Fixed Term
A JII terminates after a certain term provided in its statute expires.
Termless
May be established for a termless period.
Diversified
- the number of securities of 1 issuer in the assets of a JII shall not exceed 10 % of the total amount of relevant securities issue; - the total value of securities which are assets of a JII in amount exceeding 5 % of their total emission volume, at the time of their purchase shall not exceed 40 % of net JII assets; - at least 80 % of the a JII’s total asset value shall be cash, savings certificates, corporate bonds and local bonds, government securities and securities traded on stock exchange.
Non-diversified
Other JII, which are not considered as diversified. A non-diversified JII, which carries out exclusively private placement of securities of JII among legal entities and individuals, is a venture fund. An individual can participate in a venture fund exclusively provided the acquisition of such fund’s securities in an amount not less than 1500 minimum wage*.
FORMS
* as of 01.02.2012 a minimum wage is set in the amount of UAH 1073,00.
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The JII are forbidden to change their form and type. Securities of public and interval JIIs dividends are not subject to calculation and payment of dividends. In order to perform its activity, a JII must be registered in the State Register of JII. The State body which performs registration and issues certificates of registry
in the State Register of JII is the National Commission on Securities and Stock Market (the "Securities Commission").
4.1.1.1. Corporate investment funds Ukrainian applicable legislation provides the following aspects of inception and activity of a CIF.
CIF
May be established exceptionally as a public JSC
May not be established by legal entities whose carter capitals belong to state bodies by 25 % or more
May not: - issue and place securities other than shares; - involve loans or loan of more than 10 percent of its assets; - assets to bail in the interests of third parties; - place the shares at a price below par value;
Assets are managed by an assets management company
- place the shares at a price below net asset value of the corporate investment fund per share; The minimal amount of the initial charter fund is UAH 1,341,250 (as of 1 February 2012)
- place over the announced number of shares; - refuse to buy shares on the grounds not specified in this Act or the regulations of the Commission; - create any special or reserve funds.
4.1.1.2. Mutual funds Mutual funds are not legal entities, but are assets belonging to investors on common partial ownership, which are managed by an asset management company.
Submit to the Securities Commission the documents necessary for registration of MF statute for registration of the fund in the State Register of JII;
Develop and adopt MF statute
The minimum amount of mutual fund assets can not be less than the minimal amount of the initial charter fund of CIF (UAH 1,341,250 – as of 1 February 2012). In order to create a mutual fund, an asset management company shall undergo the following steps.
Develop and approve a prospectus of MF certificates
Conclude c ontracts with auditor (audit firm), custodian, registrar or depositary, property valuator
Organize public or private placement of MF certificates
Submit to the Securities Commission the documents necessary for registration of a prospectus of MF certificates
A mutual fund is deemed as created since the date of its registration in the State Register of JII.
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4.1.1.3. Assets management companies An asset management company (the "AMC") is a joint-stock or a limited liability company which manages the assets of a JII. An AMC may simultaneously manage the assets of several JII but may not perform any other activity than assets management. Charter capital of an asset management company shall not be less than UAH 7,000,000, with regard that the State may not own a share which exceeds 10 per cent of AMC charter fund. The activity of AMC shall be conducted under a license issued by Securities Commission. AMC is
properly rewarded as well as is fully liable for his activity.
4.1.2. Private pension funds Non-state (or "private") pension funds (the "PF") are established by the decision of their founders and act without intention to secure profit for its subsequent distribution among founders. Pension fund assets (pension assets) are contributions to the pension fund (pension contributions) and other financial receipts. Non-state pension provision shall be the sole activity of pension funds. Any other activity not provided by the applicable legislation is prohibited.
PENSION FUNDS Professional pension funds Individuals connected by their professional activities defined in a fund’s charter, as well as individuals who work for employers and their associations, members or employees of trade unions, their associations, which have created such fund, may be participants in such funds
Open pension funds
Any individuals regardless of location and nature of their professional occupation may become its participants
May be established by one or several legal entities
Corporate pension funds Individuals who are (were) in professional relations with fund’s founders-employers or employers-payers may be participants in such funds
May be established by one or several legal entities-employers joined by employers-payers
May be established by associations of legal entities – employers, individuals, including trade unions (associations of trade unions), or individuals associated with their professional activities
Act on the basis of a charter The sole regulatory body is the board Pension fund acquires legal status and rights to conduct activities in non-state pension provision since its registration by Financial Services Commission, and the issuing of relevant certificate
The assets of pension funds are managed by assets management company on same conditions as provided in subsection 4.1.1.3 herein
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4.2. Regulatory body Besides the Financial Services Commission, another principal regulatory body in Ukraine, which was set up to regulate the financial services industry is the Securities Commission, mainly responsible for investment institutions. The Securities Commission is the state agency authorized to determine and implement a uniform state policy in the securities market in Ukraine, and to monitor compliance of Ukrainian and foreign entities and individuals with the legal requirements governing securities and the securities market. The Securities Commission has been granted broad powers with respect to the formation of the overall legislative framework for the operation and development of Ukraine’s securities, investment and capital markets,
as well as registration, licensing and enforcement powers. It is the Securities Commission who registers joint investment institutions and issues relevant certificates. In addition to its role of authorizing and supervising the activities of regulated securities market participants, also performs a number of other important functions and tasks. Moreover, the Securities Commission adopted a Code of Principles of Corporate Governance. The aim of the Code is to bring about changes in corporate governance practice of Ukrainian corporate entities taking into account modern international standards and the characteristics of the national market. This Code has non-binding voluntary nature.
5. Currency regulations The decision of Ukraine on integration to the EU has since then left a positive imprint on the regime for currency transactions in Ukraine, redefined general principles of currency regulation, the powers of state bodies and functions of banks and other financial institutions in Ukraine in the regulation of foreign exchange transactions, rights and obligations of foreign investors and other subjects of the market and broaden the possibilities to benefit from operations with currency valuables.
5.1. Objects of currency regulation 5.1.1. Currency valuables Currency valuables, as objects of currency regulation in Ukraine, are also objects of financial transactions and of financial market in general.
CURRENCY VALUABLES
Ukrainian Currency (UAH)
Payment Documents and other Securities denominated in UAH
Foreign Currency
Bank Metals
Payment Documents and other Securities denominated in foreign currency
Shares, bonds, debentures and warrants, bills (bills of exchange), promissory notes, letters of credit, checks, bank orders, certificates of deposit, savings books and other banking and financial instruments
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5.1.2. National currency
5.1.3.1. Purchase of foreign currency
Hryvnia (UAH), the Ukrainian national currency, is the only lawful means of payment on the territory of Ukraine, and that it is acceptable without any limitations in the settlement of any obligations.
Ukrainian residents (legal entities or individuals) may acquire non-cash foreign currency in Ukraine only through a duly licensed Ukrainian commercial bank (or non-bank financial institution) possessing general license from the NBU. The applicable Ukrainian legislation provides a limited number of cases for such purchase and a list of various documents that shall be submitted to such bank (or non-bank financial institution) in order to confirm the legitimacy of the purchase. Instances in which such a purchase will be permitted include, inter alia, the need for such resident to discharge its payment obligation to a non-resident in connection with:
Amounts in UAH, which have been legally exported, transferred, forwarded abroad, may be freely exported, forwarded, transferred back to Ukraine.
5.1.3. Foreign currency The applicable Ukrainian legislation provides a general rule that any use of foreign currency on the territory of Ukraine, as means of payment or as an object of pledge, may legally be carried out only pursuant to a permit of the NBU issued on a case-bycase basis (the "individual license"). The abovementioned rule does not apply to foreign currency transfers performed within Ukraine by a Ukrainian commercial bank or financial institution possessing a general license of the NBU for the carrying out of currency transactions. Trade in foreign currency on the territory of Ukraine may be carried out only by or through Ukrainian commercial banks and licensed financial institutions, and only on the inter-bank currency market of Ukraine.
Transfer of foreign currency abroad by a Ukrainian resident individual within the limit determined by the NBU
purchase of goods or services from such non-resident; repayment of a loan extended by such non-resident and/or the payment of interest thereon; and payment of dividends or other income earned as a result of such non-resident’s investment.
5.1.3.1. Transfer of foreign currency Any transfer of foreign currency from Ukraine abroad requires an individual license of the NBU, with an exhaustive list of exemptions.
EXEMPTIONS
Repatriation from Ukraine abroad of the amount of a foreign investment in foreign currency previously made in Ukraine upon the termination of the relevant investment activity
Payment of interest under a loan or income earned (e.g., dividends) from a foreign investment in foreign currency abroad
Transfer of foreign currency abroad by a Ukrainian resident or non-resident individual, within the limit of the amount previously imported into Ukraine by such resident or non-resident on a legal basis
Payment in foreign currency abroad to the European Organization for the Safety of Air Navigation as a fee for the services on aircraft navigation
Payment in foreign currency abroad by a Ukrainian resident (legal entity or individual) in discharge of a contractual obligation in such foreign currency to a non-resident in settlement for goods, services, works, intellectual property rights, or other property rights acquired or received by such resident from such non-resident (N.B.: an acquisition of securities or other currency valuables does not fall within this exemption)
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5.2. Licenses The NBU issues "general" and "individual" licenses which allow subjects of currency regulation to perform certain operations with currency valuables. A list of certain documents, required for the provision of each type of licenses is set forth by the applicable Ukrainian legislation.
5.2.1. General license
GENERAL LICENSE
Is issued to banks and non-banking financial institutions Allows performing a broad range of operations with currency valuables, which do not require individual licenses
Is valid through all the period of currency regulation
Allows establishing currency exchange offices on the territory of Ukraine
5.2.2. Individual licenses Individual licenses are issued to residents and non-residents for the performance of a single currency transaction for the period required for such transactions.
INDIVIDUAL LICENSE is required, inter alia, for
Repatriation and transfer of funds in UAH to Ukraine, if in excess of the amounts in UAH which have been transferred abroad on legal grounds
Depositing funds in foreign currency and other currency valuables in an account or on deposit outside Ukraine (except, inter alia, the opening by a duly licensed Ukrainian commercial bank of a correspondent account with a foreign bank, and the opening by a Ukrainian resident individual of a bank account with a foreign bank for the duration of such individual’s stay abroad)
Investing abroad, including transferring foreign currency abroad in connection with acquisition of assets and securities
The obtainment of an individual license by one party of the currency transaction also permits the other party or a related third party to effectuate such transaction unless otherwise provided by conditions of individual licenses.
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5.2.3. Other operations subject to special requirements Receipt of a foreign currency loan by a Ukrainian resident (including a Ukrainian commercial bank) from a non-resident is subject to the registration of such loan with the NBU. Finally, under applicable legislation Ukrainian residents (legal entities and individuals) are required, upon opening a foreign bank account, to notify the NBU regarding such an account within 3 days from the date on which such account is opened. This requirement does not extend to the opening of correspondent accounts by Ukrainian banks, opening of a foreign bank account by a Ukrainian resident individual for the duration of its stay abroad and by the entities which enjoy diplomatic immunity and privileges.
5.3. Transactions with non-residents Foreign currency and Hryvnia are used as means of payment in the settlements between residents and non-residents for business deals. Such settlements are made only through authorized banks in the order established by the NBU.
5.3.1. Services special regulations Ukrainian applicable legislation provides a regulation of the remittance of funds in national and foreign currency to non-residents, which is aimed at restricting the remittance of funds from Ukraine as, inter alia, payment for works and/or services provided by nonresidents on "commercially unreasonable" terms and at making such a remittance of funds more transparent.
Center has refused to issue the Price Evaluation Act. The NBU approval cannot be issued if a Price Evaluation Act has been obtained in respect of the payment and indicates that the amount of such payment exceeds the applicable "fair market price". The mentioned requirements do not apply to, inter alia, financial, transport and communications services rendered by a non-resident service provider, as long as the resident-recipient possesses a license allowing it to engage in the relevant business activity, and the payments made under the loan registration certificates and individual licenses issued by the NBU.
5.3.2. Loans special regulations The NBU sets a maximum permitted rate of interest (the "Maximum Interest Rate") for loans extended by foreign lenders to Ukrainian borrowers, and may refuse the registration of a loan agreement which provides for an interest rate exceeding the Maximum Interest Rate. The Maximum Interest Rate applicable to loans in freely convertible currencies is as follows: (a) for fixed interest rate loans: with maturity of up to 1 year – 9.8% p.a.; with maturity from 1 to 3 years – 10% p.a.; with maturity over 3 years – 11% p.a.; (b) for floating rate loans – LIBOR for three-month USD deposits plus 750 basic points.
If the aggregate amount of such service payments as specified hereinabove would exceed, in respect of each respective agreement or each foreign payee, EUR 100,000 (or its equivalent), the payer would be required to obtain, prior to the making of any such payment, either: an act of price evaluation (the "Price Evaluation Act") issued by the State Information and Analytical Center for the Monitoring of the External Commodities Markets (the "External Markets Monitoring Center"), confirming that such payment does not exceed the "fair market price" for such works or services, or an individual approval of the NBU for the making of such payment, if the External Markets Monitoring
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