Law of Ukraine "On Prevention of Corruption" has come into effect

Baker&McKenzie, Kyiv, Ukraine
Wed, June 10, 2015

National Agency

The Law provides for the establishment of the National Agency for Prevention ofCorruption (the "Agency") designed to ensure implementation of thepublic anti-corruption policy.  In particular, the Agency may accept reportsfrom any individual or legal entity on violation of the Law, initiate and carryout any examination of potential violations, have access to any documents orother materials of the company necessary for such examination etc. 

Founders (members) are liablefor prevention of corruption in the activities of legal entities

According to the Law, corruption risks must be regularly evaluated, andanti-corruption measures must be taken by both the officers and the founders(or members) of a company.  Any officer or official, or other employeesmust:

(1) not commit or take part in committing corrupt offenses related to thelegal entity's activities;

(2) refrain from any conduct that may be regarded as readiness to commitany corrupt offense related to the legal entity's activities;

(3) immediately inform the officer responsible for preventing corruptionin the activities of legal entity, the head or the founders (members) of thelegal entity in the event of (i) incitement to commit a corrupt offense relatedto the legal entity's activities; (ii) corrupt acts (or related) or offense byany other employee of the legal entity or any other person; or (iii) any actualor potential conflict of interests.

Anti-corruption program

The Law provides that companies must put into effect anti-corruption programs(the "Program") for:

(1) any legal entity engaged in public procurement (if the cost ofprocurement is equal to or over 1 mln UAH for the procurement of goods, and 5mln UAH for the procurement of services);

(2) any public/municipal company or business (having public/municipalshare over 50%) with an average number of more than 50 listed employees (in thereferenced financial year), and over 70 mln UAH of gross sales for such period.

Among other things, the Program should provide for the ability to maintain theconfidentiality of information reported to the person in charge of theProgram's implementation (the "Authorized Person") by employees aboutany fact of being incited to commit a corrupt offense; the procedure ofprotection of such employees; and the procedure of periodic training ofemployees on anti-corruption legislation matters, etc. 

The Program must be approved only after having been discussed with theemployees of the company, and must always be available to them. Furthermore, provisions on obligatory compliance with the Program must beincorporated into employment agreements with the employees of the company aswell as the company's internal regulations.  Such provisions may beincorporated into any other agreement of the company. 

Authorized Person incharge of Program implementation

Any company adopting the Program must appoint the Authorized Person that is acompany's officer. 

The Law also provides for the conditions to dismiss the Authorized Person fromhis/her position early. In particular, among other things, he/she can bedismissed at the request of the head of the company or its founders (ormembers) subject to consent of the Agency (the latter is required for anycompany that must adopt the Program).  In addition, the head of thecompany must notify the Agency of the Authorized Person's dismissal within twobusiness days, irrespective of the reason for such dismissal.

Gifts to persons entrustedwith state duties

The Law also lists requirements for any gift that may be accepted by governmentofficials.  In particular, such gift:

(1) must comply with the generally accepted idea of hospitality;

(2) its maximum one-time value must not exceed one minimum monthly salary,as determined on the day such gift was accepted;

(3) the aggregate value of such gifts received from the same person (or agroup of persons) within a year must not be more than twice the rate of thecost of living, as determined for an able-bodied person as of 1st January ofthe year in which the respective gifts were accepted.

At the same time, any decision made for the benefit of a person who has given agift to the respective person or any member of his/her family is subject tocancellation or may be found invalid by the court.

Government authorities areprohibited from obtaining any privilege, service or property

According to the Law, no government or municipal authority may obtain funds,property, or intangible assets, etc. from any individual or legal entitywithout consideration, except for when otherwise provided by any laws orinternational treaties in force.

Anonymous notifications

Any violation of the Law can be examined on the grounds of anonymousnotifications.  As a rule, such notification must be reviewed within nomore than 15 days after its receipt to determine whether any information in itrefers to a certain person or provides verifiable data.

Effects of violation ofanti-corruption legislation

The Law provides for the following adverse effects for violating theanti-corruption legislation:

(1) any decision made in violation of the Law is subject to cancellationby a competent authority/officer or may be found illegal by the court;

(2) any agreement concluded in violation of the anti-corruptionlegislation may be found invalid;

(3) any funds or other property obtained as a result of a corrupt offensemust be subject to seizure or special seizure on the basis of a court decisionas provided for by legislation.

Furthermore, certain information on individuals or legal entities will beentered into the Unified State Register of Persons that Committed Corruption(or Related) Offenses.  Such information is available free of charge 24hours a day.

Hence, as soon as possible, legal entities must adopt (if necessary) theanti-corruption program, appoint the authorized person, introduce the requiredamendments to employment agreements with its employees and implement internalregulations.  In addition, compliance due diligence should be carried outin respect of the contracting companies, in particular, those operating in thespheres with potentially high risks of corruption, and strict compliance withthe anti-corruption legislation should be ensured.

Additional notes

ThisLEGAL ALERT is issued to inform Baker & McKenzie clients and otherinterested parties of legal developments that may affect or otherwise be ofinterest to them. The comments above do not constitute legal or other adviceand should not be regarded as a substitute for specific advice in individualcases.