Grain export curbs deter investors; Customs tariff;
Export restrictions should be rejected;
Corrupt system of farm product exports;
Donetsk clan to monopolize grain-export market;
Grain export madness; Tax code discriminates against agrarians;
Campbell's Soup to Ukraine;
Legal Bulletins: Salans; DLA Piper, Baker & McKenzie,
Vasil Kisil & Partners
U.S.-Ukraine Business Council (USUBC)
Washington, D.C., Friday, March 11, 2011
INDEX OF ARTICLES ------
Clicking on the title of any article takes you directly to the article.
Return to Index by clicking on Return to Index at the end of each article
1. UKRAINE, RUSSIA GRAIN EXPORT CURBS DETER INVESTORS
EBRD writes to Ukraine PM in plea against export monopoly, Ukraine policy decisions limit agri invest potential
Interview with Gilles Mettetal, Director, EBRD Agribusiness Unit, Reuters, London, UK, Thu, Mar 10, 2011
2. UKRAINE SHOULD USE CUSTOMS TARIFF PROTECTION FOR KEEPING OF AGRARIAN PRODUCTS ON THE DOMESTIC MARKET
AgriNews, APK-Inform, Kyiv, Ukraine, March 9, 2011
3. PARLIAMENTS EXPERT DEPARTMENT RECOMMENDS PARLIAMENT REJECT RESTRICTIONS ON RIGHT TO EXPORT GRAIN
Ukrainian News-on-line, Ukrainian News Agency, Fri, March 11, 2011
4. CORRUPT SYSTEM OF FARM PRODUCT EXPORTS COULD BE CREATED IN UKRAINE, SAYS EXPERT
Publication: Interfax - Ukraine Business, Kyiv, Ukraine, Thursday, March 10, 2011
5. DONETSK CLAN TO MONOPOLIZE UKRAINIAN GRAIN-EXPORT MARKET
Who are the people behind the country's largest grain scheme?
Yuriy Nikolov, Ukrainian Week, Kyiv, Ukraine, Wed, February 23, 2011
6. UKRAINE: GRAIN EXPORT MADNESS
Post by Levko, Foreign Notes Blog, Wed, March 9, 2011
7. TAX CODEX DISCRIMINATES AGAINST UKRAINIAN AGRARIANS
Return monopoly of foreign trading of the Soviet Union period
AgriNews, APK-Inform, Kyiv, Ukraine, Thu, March 10, 2011
8. CAMPBELL'S PONDERS EXPANSION IN UKRAINE
The global soup marker is said to be eyeing the establishment of a production facility in Ukraine.
Mark Rachkevych, Kyiv Post, Kyiv, Ukraine, Thu, March 11, 2011
9. SALANS ADVISES PJCS "KREDITPROMBANK" ON DEGT RESTRUCTURING
Salans, LLP, Kyiv, Ukraine, Fri, Feb 18, 2011
10. UKRAINE: AMENDMENTS TO THE LAW "ON JOINT STOCK COMPANIES"
DLA Piper Ukraine LLC, Kyiv, Ukraine, Friday, 04 March 2011
11. NATIONAL BANK OF UKRAINE UPDATES FOREIGN INVESTMENT RULES
Baker & McKenzie, Kyiv, Ukraine, Wed, March 9, 2011
12. WEBCAST: DERIVATIVES - THE ART OF TAX PLANNING YOUR ECONOMIC ACTIVITY
Vasil Kisil & Partners, Kyiv, Ukraine, Wed, March 9, 2011
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1. UKRAINE, RUSSIA GRAIN EXPORT CURBS DETER INVESTORS
EBRD writes to Ukraine PM in plea against export monopoly, Ukraine policy decisions limit agri invest potential
Interview with Gilles Mettetal, Director, EBRD Agribusiness Unit, Reuters, London, UK, Thu, Mar 10, 2011
LONDON - Grain export restrictions in Ukraine and Russia to address food security concerns are making investors re-think their commitments in these regions, the European Bank for Reconstruction and Development (EBRD) said.
"There's been more downscaling and taking more time over investment decisions," in light of the policy decisions in Ukraine and Russia, said Gilles Mettetal, director of the EBRD's Agribusiness unit.
Ukraine's government is considering a draft law that would allow only the state-run grain company and producers, not private traders, to export agricultural commodities. It already had introduced export limits this season after a drought last summer, and neighbouring Russia has also banned grain exports.
EXPORT QUOTAS HAVE DAMAGED CONFIDENCE OF INVESTORS
"Export quotas have damaged the confidence of investors already. Now this new law will do even more damage, and it will take a long time to ever regain that confidence," Mettetal said.
The EBRD sent a joint letter with the IMF and World Bank to Ukraine's Prime Minister three weeks ago airing concerns that a proposed state-controlled grain export monopoly could deter future private sector investments in the country's agricultural industry, but no response has been received, Mettetal said.
"I spent half an hour on the phone yesterday trying to reassure a private sector investor, who is reconsidering an investment in a (agricultural) processing facility in Ukraine," Mettetal said.
High grain prices are a global concern, which helped fuel protests that toppled the rulers of Tunisia and Egypt earlier this year and have spread through North Africa and the Middle East. "Politically the (Ukraine) government wants to reassure the population that these (private) traders are not going to export grain while the population starves," Mettetal said.
EBRD AND INVESTMENT
Ukraine, the world's top barley exporter and a major wheat supplier, benefitted from around 170 million euros ($236.1 million) in EBRD investment in agricultural projects in 2010. "I estimate that last year we could have financed an additional 50-100 million euros in the Ukraine if the political conditions were better," Mettetal said.
The EBRD is the largest single investor in agribusiness in Eastern Europe and Central Asia and invested around 800 million euros in the region in 2010. Earlier this year the EBRD brought together Ukrainian government officials and private sector investors to discuss the challenges to developing agriculture in the region and address growing frustration from its private sector clients.
"We want to continue to support policy dialogue with the government, providing them with instruments such as pre-harvest financing as alternative market-oriented ways to prevent systematic state intervention," Mettetal said.
The draft law for the state grain export monopoly has already raised concerns among traders, who have invested millions of dollars in Ukrainian grain export terminals, silos and local farms.
"Russia, Ukraine and Kazakhstan could export half of the world's grain export needs, including 60 percent of the world's wheat needs. The potential is enormous," Mettetal said. "Without private sector investment they will never be able to achieve progress." (Reporting by Sarah McFarlane, editing by Jane Baird)
LINK: http://www.forexyard.com/en/news/INTERVIEWUkraine-Russia-grain-export-curbs-deter-investors-2011-03-09T120325Z-INTERVIEW
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2. UKRAINE SHOULD USE CUSTOMS TARIFF PROTECTION FOR KEEPING OF AGRARIAN PRODUCTS ON THE DOMESTIC MARKET
AgriNews, APK-Inform, Kyiv, Ukraine, March 9, 2011
KYIV - Iryna Akimova, First Deputy Head of the President’s Administration, considers that Ukraine should use the mechanism of customs tariff protection for keeping of agricultural products on the domestic market, but not the regime of export quotas.
According to I. Akimova, such mechanism will be more transparent, and more profitable for the state budget, and will not raise any additional questions on unequal access of various agricultural producers and traders to the distributing mechanism. The official expressed own hope that the present quotas for grain exports will no longer be in force in the fixed terms, and not be prolonged.
USUBC NOTE: Ukraine should let the free, private markets allocate grain for the domestic market and not government controls and customs tariff.
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3. PARLIAMENTS EXPERT DEPARTMENT RECOMMENDS PARLIAMENT REJECT RESTRICTIONS ON RIGHT TO EXPORT GRAIN
Ukrainian News-on-line, Ukrainian News Agency, Fri, March 11, 2011
KYIV - The parliaments main scientific and expert department has recommended that the parliament reject the draft law No. 8163 that provides for restricting grain producers right to export grain in the quantities they produce as well as the grain export rights of the state export agency and companies that make down payments equal to at least 50% of the value of grain. The department made the recommendation in its conclusions.
According to the department, the draft laws provisions regarding establishment of a government grain export operator will result in monopolization of the market in violation of Section 3 of Article 42 of the Constitution (protection of competition in business).
The departments conclusions also state that adoption of this draft law will result in duplication of the functions of various government agents in the area of export of grain.
For example, according to the departments conclusions, Paragraph 28 of Article 1 of the draft law introduces the concept of government operator, which should be a state enterprise in which the state owns a 25% stake.
In addition, Paragraph 5 of this article defines a government agent for import and export of grain as a state enterprise in which the state owns a 75% stake.
The department drew attention to the fact that the explanatory note to the draft law states a significant proportion of the revenues from sale of agricultural products is appropriated by intermediaries and traders, most of which are companies with foreign capital.
The department notes that Article 2 of the Law on Foreign Economic Operations states that Ukrainian and foreign business entities are to be guided by, among other things, the principle of freedom of foreign entrepreneurship during performance of foreign-trade operations.
However, according to Article 20 of the Law on Foreign Economic Operations, establishment of any form of state monopoly on exports and imports of commodities not mentioned in this article is not permitted and may be challenged in court.
In addition, according to department, the draft law does not take the requirements of the antimonopoly legislation into account. As Ukrainian News earlier reported, the draft law No. 8163, which provides for restricting the rights to export grain by grain producers, the state export agent, and traders that make an advance payment of at least 50%
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4. CORRUPT SYSTEM OF FARM PRODUCT EXPORTS COULD BE CREATED IN UKRAINE, SAYS EXPERT
Interfax - Ukraine Business, Kyiv, Ukraine, Thursday, March 10, 2011
KYIV - A "state agent" for the provision of exports of food,the prices of which are regulated by the state,could lead to the creation of a totally corrupt farm product export system,according to an assistant professor at Institute of International Relations,Serhiy Koziakov.
In an article in the Dzerkalo Tyzhnia.Ukraine newspaper published on Saturday,he said that in the summer and winter strange,non-transparent procedures for grain export quota distribution were created,but that this had not been enough for "a group of serious people."
As a result,draft law No. 8053 on amendments to the law on the state support of Ukrainian agriculture was drawn up, foreseeing the creation of a state agent. According to the draft,only farmers within the volume of their harvests or a state agent would be able to export food (the price of which is regulated by the state).
The author of the article said that there were many problems with the draft law.
"The draft law foresees the creation of an absolutely new food exports system worth billions of dollars,changes in thousands of economic chains between producers and banks,producers and traders,traders and carriers and elevators and ports,while the explanatory note has nothing about the financial and tax consequences for the budget!" he said.
"For example,it is expected that the state agent,which could be created with the participation of the state,is selected at a tender conducted by the cabinet. We could ask several uncomfortable questions.
Who will define the size of the state share? How and using what means the sides will contribute to the statutory fund? How the shares will be assessed? If the state agent is selected at a tender,how will the nongovernmental participant be selected?" Koziakov asks in the article.
"This is supposed to be another anticorruption passage [of the law]: the list of food that will be exported in line with the law will be defined by the Ukrainian cabinet every year following the results of an agrarian market study. On what principles? In what terms? Imagine that in 2011 the cabinet does not include wheat on the list,but in 2012 it is included on the list,and in 2013 it is left off it again. Who will spend money on logistics,business development and searching for financing? [This affects] barley,rye,rapeseeds,sunflower seeds," Koziakov said.
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5. DONETSK CLAN TO MONOPOLIZE UKRAINIAN GRAIN-EXPORT MARKET
Who are the people behind the country's largest grain scheme?
Yuriy Nikolov, Ukrainian Week, Kyiv, Ukraine, Wed, February 23, 2011
KYIV - Agriculture Minister Mykola Prysiazhniuk recently found himself outside his comfort zone – journalists forced him to reveal his own version of the new scheme being implemented on the Ukrainian grain market and particularly the role played by a new favorite – Khlib Investbud Ltd. (KhIB).
The minister made an attempt to convince the mass media that everything was just fine: the state has a 61–percent stake in a company which has been given unprecedented preferences to export grain and is now operating as the grain supplier for the Agrarian Fund. However, The Ukrainian Week obtained a document which shows that Mr. Prysiazhniuk’s figure is off the mark.
BILLIONS FOR MILLIONS
In early August 2010, it transpired that the Agrarian Fund – essentially the state’s granary – contracted KhIB in a no–bidder procedure to supply five million tons of grain worth UAH 7 billion; this comes to an average price of UAH 1,400 per ton.
At the same time, the government tightened the screws on grain exporters. Following the redistribution of export quotas, a number of big–name transnational corporations that have been active on the Ukrainian market for years got next to zero in terms of allowed exports volumes. The void thus created was filled by KhIB. The bureaucrats’ desire to re-carve the market was so unabashedly obvious that British ambassador to Ukraine Leigh Turner even crossed the limits of diplomatic discourse.
“In 2010, grain quotas were quite unexpectedly introduced. This means that grain traders lost an opportunity to freely buy and sell grain,” Turner said. "Essentially, Ukraine took a step which has hurt the business climate creating barriers to business in the country. This situation in which some companies get the opportunity to earn money using grain quotas while others don’t facilitates corruption", he added.
The ambassador’s reasoning is easy to follow. First the government gives incredible preferences to a state company, thereby pushing private businesses out of the market. Then a stake in this company is sold into private hands. Then a different state agency was tasked with overseeing its operation: a year ago the state–owned Khlib Ukrainy (Bread of Ukraine) was believed to be KhIB’s sole founder, but it was officially declared bankrupt in the fall of 2010. The government is establishing the State Food and Grain Corporation of Ukraine (DPZKU) to replace it.
Meanwhile, KhIB continued to live off the fat of the land. The Ukrainian Week obtained a document dated 21 January 2011 in which DPZKU asked permission of the Ministry of the Economy to contract KhIB in a one–bid procedure to supply 3.5 million tons of grain worth “approximately six billion hryvnias.”
Taking this approximate figure as the starting point for our calculations, we find that a ton of grain would cost approximately UAH 1,700. DPZKU is literally pleading with the ministry to give the go–ahead for this transaction. If the corporation fails to place this contract, “nearly 5.5 million employees and their families will experience financial difficulties,” it says.
Funding for this scheme is already being sought. In January, the government issued a regulation that reveals its intention to grant a five–billion loan to the Agrarian Fund by selling internal bonds and, at the same time, the government decided to raise the sovereign debt cap by this same amount.
To sum up the situation, in the summer of 2010, the Agrarian Fund bought five million tons of grain from KhIB at UAH 1,400 per ton, while now the state corporation wants to purchase 3.5 million tons at UAH 1,700 per ton.
A GRAIN OF TRUTH FOR THE MINISTER
No wonder the press had questions for Mr. Prysiazhniuk. If a company with this much revenue is fully owned by the state, it’s one thing, but if it shares its profits with a private investor, there is legitimate doubt that the state would get any portion of it.
The Ukrainian Weeksent an inquiry to the Agriculture Ministry asking about the current owners of Khlib Investbud and how much the state earned by selling a stake in a company that landed a colossal grain supply contract and was given huge grain–export quotas by the government. The press secretary politely replied that the ministry has nothing to do with KhIB and thus will not offer any comments.
Driven into a corner by journalists’ questions at one point, Mr. Prysiazhniuk was forced to say this: “The state’s share in Khlib Investbud is 61% if my memory serves me right.” He refused to name the co–owner, saying he didn’t know.
Meanwhile, The Ukrainian Week obtained a reference from the state business register which says that KhIB’s authorized capital of UAH 31,000 is comprised of two shares: one belonging to Khlib Ukrainy (UAH 15,190) and the other one to Kalasar Ltd. (UAH 15,810). Thus, Kalasar owns 51% and the state 49% of the company’s stock.
The Ukrainian Week has also learned that this private investor got involved in August 2010, precisely when KhIB landed a contract from the Agrarian Fund. Intriguingly, Khlib Ukrainy is still listed as a KhIB co–founder, even though it is now being replaced by DPZKU. Who is entitled to the state’s share is an open question.
The CEO and one of the founders of Kalasar is Oleksandr Kozyriev who was recently reported in the press as the CEO of companies which the Agrarian Fund contracted last fall to supply UAH 717 million hryvnias worth of sugar at 10% above the market price.
Mr. Kozyriev was also the CEO of Ukrainian Investment Company (UIK) which earlier founded Forest City Ltd. In 2009, UIK was replaced as a founder by Andrii Adamovsky, head of the supervisory board at Rinat Akhmetov’s Farlep–Invest; Olha Dzharty, daughter of Head of the Crimean Council of Ministers Vasyl Dzharty; and Tetiana Prysiazhniuk, Mykola Prysiazhniuk's daughter.
Mr. Prysiazhniuk must have known about who owns KhIB and should have avoided supplying media with questionable information.
ONE-PLAYER MARKET
When Mr. Prysiazhniuk spoke to the press, he said, among other things: “Zerno Ukrainy, a state–owned enterprise, is the state operator on the grain market. Khlib Investbud is not a state grain operator.”
Meanwhile, government bill No. 8053 was published which introduces the concept of a “state export securing agent.” Such a company must be a state–owned enterprise or a commercial business co–owned by the state and chosen by the Cabinet of Ministers for the job. KhIB fills the bill.
If this government bill passes parliament, the export agent will have an exclusive right to purchase agricultural products intended for export. No other companies will be permitted to do likewise. Naturally, all producers will have to do business through this government–appointed agent and pay export commission fees.
That is pretty much what is already happening on the grain–export market. Lacking export quotas, some large exporters started receiving proposals to purchase some of the quota belonging to Khlib Investbud.
LINK: http://www.ukrainianweek.com/Economics/17664
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6. UKRAINE: GRAIN EXPORT MADNESS
Post by Levko, Foreign Notes Blog, Wed, March 9, 2011
This article from "Ukrainian Week" [in English][see article above] explains how the Ukrainian grain–export market is being monopolised by the Donetsk clan.
A company called Khlib Investbud Ltd. (KhIB) last year was granted a major portion of the country's grain export quotas, whilst other big grain export traders were shut out. Agriculture minister, Mykola Prysyazhnyuk, tried to convince the mass media that this was all OK and 'above board' because KhIB was 61% state-owned.
However, the Ukrainian version of 'Ukr.Week', 'Tyzhden' magazine, has documents revealing that the state no longer controls 'KhIB' - which is now Ukraine's main grain trader. It seems 'KhIB' is in the hands of a company linked to business spheres close to the minister himself - 'Kalasar Ltd'.
'Tyzhden' says 'Kalasar's joint owners are Oleksandr Kozyryev [connected to the Yenakiyiv business group], and also Genetechma Finance Limited, an offshore company registered in Cyprus [surprise, surprise]. The latter is a daughter company of the Luxembourg-registered Belevue Industries Sarl, who, in turn, are a daughter company of VEB-Leasing. They are a daughter company of the Russian VneshEkonomBank [VEB]....and the head of the supervisory council of VEB is PM of Russia, Vladimir Putin, no less.
'Tyzhden' calls this classic layering arrangement a new 'RosUkrEnergo', or 'RosUkrZerno'.
The periodical declares: Now Putin's bank has found easy money on the Ukrainian grain market. Last summer, the state lost control of 'KhIB' but nevertheless selected the company to be the state's chief grain trader. 'KhIB' received a contract to purchase 5 million tons of Ukrainian grain for 7 billion hryven [1,400 hryven/tonne], then received the lion's share of grain export quotas. As a result, other large transnational corporations who for years worked in Ukraine were squeezed out of the grain business.
'KhIB' monopolised the market and Ukrainian farmers have been forced to sell their grain to the company at a depressed price. Now the main state exporter sells the same grain inside Ukraine at a higher price. The activity of the 'KhIB' in the domestic grain market is one of the reasons why cheap flour has disappeared from store shelves, and the price of bread has increased.
Last month the Ukrainian Agrarian [strategic reserve] Fund decided to buy well over 2 million tons of grain from KhIB in three batches. It will have to pay 1.55 Bn hryven for each batch - providing a tidy profit the 'KhIB', basically for doing nothing..
Several weeks ago and article entitled: "Quotas threaten 'collapse' in Ukraine grain output" was posted on 'Agrimoney' site.
"The head of one of Ukraine's major farm operators has warned of a potential "collapse" in the country's grains production if it does not repeal quotas which could cost farmers up to $1.3bn.
Eugene Leng, the chief executive of Ukrzernoprom Agro warned that a fall in sowings of winter crops would herald an even greater drop in spring plantings unless the government lifts the quotas which are denying farmers the full benefit of high world crop prices."
Last week the respected Ukraine-watcher Anders Aslund, in a TV interview with Mykola Knyazytsky, stated he was very disturbed about the monopolisation of grain trade in the country -"There is no reason for it", [apart from the obvious.]
Agrobusiness is one of the great hopes for the future of Ukraine, but short-term greed is threatening its future development. In Ukraine export scams such as those described above are still then norm rather than the exception.
Update: A comment note in an article in Wednesday's 'Ekonomichna Pravda' which fleshes out this story], claims the above-mentioned Oleksandr Kozyryev has close business ties, via another company to the daughter's of agriculture minister Mykola Prysyazhnyuk and of head of the council of ministers of Crimea, Vasyl Dzarty,
More on the dapper Dzarty from a previous blog here
"50`year`old Prysyazhnyuk is considered to be a member of Yanukovych’s team. He met Yanukovych in Yenakiyevo in the 1980s and at that time Prysyazhnyuk was production manager at Ordzhonikidzevuhillya agrarian economy. Yanukovych was head of its motor pool.
They say Prysyazhnyuk was appointed first deputy head of Zhytomyr Oblast State Administration in 2002 under Yanukovych’s patronage. By that time he founded and became head of the PR oblast organization in Yenakiyevo. Prysyazhnyuk was elected MP from the PR in 2006. In the VR of next convocation he was promoted to the office of head of the agrarian committee.
Prysyazhnyuk’s main business is little related to agrarian sector, though. He mostly profits from extraction of quartzite (used for production of ferroalloys) and gravel. Mass media estimated his fortune as US $80 — 90 mn." source: Kyivweekly.com
LINK: http://foreignnotes.blogspot.com/2011/03/grain-export-madness.html
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7. TAX CODEX DISCRIMINATES AGAINST UKRAINIAN AGRARIANS
Return monopoly of foreign trading of the Soviet Union period
AgriNews, APK-Inform, Kyiv, Ukraine, Thu, March 10, 2011
KYIV - The new Tax Codex, which gradually comes into force in Ukraine, provides serious discrimination of producers of agricultural commodities. The agrarian sector of the country received the most damage, due to shortages of the Codex, informed Eugene Leng, General Director of Ukrzernoprom Agro Ltd.
[1] First of all, non-end consumers lost the opportunity to receive tax credit using the VAT while purchasing agricultural products. Such steps will automatically cause the situation that they will demand 20% discount during any purchasing from agricultural producers, which essentially damages market liquidity.
[2] Secondly, the new Tax Codex almost bans agricultural producers to become participants of foreign economic activity. Of course, the Codex dies not include the direct prohibition form grain exports.
However, in practice provisions of the Codex block independent exports of grains by the direct producers. The Government does not recompense the VAT to agricultural producers during export operations. Thus, agrarians will be able to realize exports of own-produced commodities with essential losses only.
In such terms, the new draft laws #8053 and #8163, which allow to agrarians and the State agent to export agricultural commodities, receive the new overview.
According to E.Leng, the reporting draft laws and the Tax Codex discriminate agricultural producers, and return monopoly of the foreign trading of the Soviet Union period.
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8. CAMPBELL'S PONDERS EXPANSION IN UKRAINE
The global soup marker is said to be eyeing the establishment of a production facility in Ukraine.
Mark Rachkevych, Kyiv Post, Kyiv, Ukraine, Thu, March 11, 2011
KYIV - Campbell’s, the world’s leading maker and marketer of soup, is mulling the possibility of establishing production in Ukraine, Agra-Net.com reported on March 4.
Media reports said the American food giant is looking to establish a joint production facility with a domestic partner. The company has no plans to start building its own facilities due to unpredictability of the local market, according to Agra-Net.com, a provider of soft commodities, agriculture and food policy information.
Speaking with the Kyiv Post, a Campbell’s spokesperson said: “Campbell’s Soup doesn’t comment on rumors or speculation in the media.” But a source in Ukraine’s business community told the Kyiv Post that Campbell’s was, indeed, looking at the possibility of stepping into Ukraine.
Campbell’s has had a presence on the Russian market since 2007 under the Domashnaya Klassika (“Home Classic”) range of broths. As in Russia, soup is one of the most popular foods in Ukraine, often eaten once or twice a day. The company’s products are sold in 120 countries and its annual turnover exceeds $7 billion.
NOTE: Kyiv Post staff writer Mark Rachkevych can be reached at
This e-mail address is being protected from spambots. You need JavaScript enabled to view it
LINK: http://www.kyivpost.com/news/business/bus_general/detail/99495/
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9. Salans advises PJCS “Kreditprombank” on debt restructuring
Salans, LLP, Kyiv, Ukraine, Fri, Feb 18, 2011
KYIV, UKRAINE –Salans has advised PJSC “Kreditprombank” on the restructuring of $300 million of the bank’s external debt.
Natalia Selyakova, partner in Salans Kyiv office and the Head of Salans’ Banking and Finance practice in Ukraine, commented: “We are glad to assist our client with structuring and implementation of this landmark complex restructuring. We are proud of the client’s confidence in our knowledge and expertise in such a challenging project and offer our heartiest congratulations on its successful implementation.”
About Kreditprombank
The Public Joint Stock Company "Kreditprombank" (www.kreditprombank.com) is a stable universal commercial bank represented in the financial market of Ukraine since 1997. According to the NBU’s classification it is included into the group of the largest banks of the country.
The Bank provides full range of financial services for the corporate and retail clients, representatives of small and medium business and its customer base amounts to about 400 thousand of physical persons and more than 18 thousand of legal entities. As of 01 February, 2011 the regional network of branches and outlets of "Kreditprombank" included 185 sale points.
About Salans
Salans is a full service leading international law firm with 22 offices worldwide. Salans LLP has offices, or is associated with Salans offices in: Almaty, Baku, Barcelona, Beijing, Berlin, Bratislava, Brussels, Bucharest, Budapest, Frankfurt, Hong Kong, Istanbul, Kyiv, London, Madrid, Moscow, New York, Paris, Prague, Shanghai, St. Petersburg, Warsaw. Salans Kyiv office is nominated to win the Chambers Europe Award for Excellence 2011 in Ukraine.
INFORMATION: For more information, please visit www.salans.com
NOTE: Salans is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org
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10. UKRAINE: AMENDMENTS TO THE LAW "ON JOINT STOCK COMPANIES"
DLA Piper Ukraine LLC, Kyiv, Ukraine, Friday, 04 March 2011
KYIV, Ukraine –The Law of Ukraine "On Amendments to the Law of Ukraine "On Joint Stock Companies" regarding Improvement of the Mechanisms of Joint Stock Companies' Activities" No. 2994-VI dated 3 February 2011 (the "Law") has been officially published on 2 March 2011.
The Law comes into force as of the date it has been published (i.e. from 2 March 2011), save for the provisions revoking the joint stock company's preemptive right to purchase its own shares, which shall become effective from 1 January 2012.
The Law has substantially changed operating and corporate governance procedures of joint stock companies and these novations are as follows.
It has been established that legal entities may be elected as supervisory board members of a joint stock company; previously, only individuals could serve as supervisory board members. Also, individual supervisory board members are prohibited to delegate their authorities to other persons. Quorum of a supervisory board meeting now constitutes "more than half of its members", previously it was "not less than half".
The Law has changed the definition of controlling stake now it is "more than 50%" instead of previously established "50% or more".
The obligatory listing of public joint stock company's shares on a stock exchange has been abolished; however, the requirement has been established to include them into register of at least one stock exchange. This procedure is substantially simpler than listing.
The decision-making procedure with respect to concluding of significant transactions, i.e. amounting to 50% or more of the value of a company's assets has been changed; now such decisions may be adopted by a majority constituting more than 50% of the total number of shareholders' votes; previously, such decisions required 3/4 of the total number of shareholders' votes.
Overall we positively evaluate the introduced changes and we believe that they will help to improve effectiveness of management of joint stock companies. It should be noted, however, that some of the introduced changes restrict rights of minority shareholders.
ABOUT DLA Piper Ukraine LLC
DLA Piper Ukraine LLC is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. A list of offices and regulatory information can be found at www.dlapiper.com. Kyiv switchboard: +380 44 490 9575
The matters covered in this newsletter are intended as a general overview. This newsletter is not intended, and should not be used, as a substitute for taking legal advice in any specific situation. DLA Piper Ukraine LLC will accept no responsibility for any actions taken or not taken on the basis of this newsletter. If you would like further advice, please contact Corporate Team at +380 44 490 9575.
INFORMATION: Galyna Zagorodniuk, Senior Associate, T +380 44 490 9561, E
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; Maryna Bychkova, Associate, T +380 44 490 9575, E
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.
NOTE: DLA Piper is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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U.S.-Ukraine Business Council (USUBC): http://www.usubc.org
Promoting U.S.-Ukraine business relations & investment since 1995.
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11. NATIONAL BANK OF UKRAINE UPDATES FOREIGN INVESTMENT RULES
Baker & McKenzie, Kyiv, Ukraine, Wed, March 9, 2011
KYIV - On 22 December 2010, the National Bank of Ukraine (the "NBU") adopted Resolution No. 572 "On Regulation of Certain Issues Relating to Currency Operations" (the "Regulation"), which will come into effect on 22 March 2011.
The Regulation was adopted to fulfill the requirements of Law of Ukraine No.2155-VI, "On Introduction of Amendments into Certain Laws on Lending and Stimulation of Foreign Investment", dated 27 April 2010 (the "Law"), which came into effect on 15 May 2010 and introduced a number of important changes into the Ukrainian currency control regime and the procedure for making foreign investments in Ukraine.
The following is a brief summary of the major changes introduced by the Regulation.
1. Rules for Making and Repatriation of Foreign Investment Updated
The Regulation introduces several important changes into NBU Regulation No.280 "On Foreign Investment in Ukraine", dated 10 August 2005 (the "Foreign Investment Regulation"), which is the principal NBU regulation governing the procedure for making investments in monetary form into Ukraine and divestment from Ukraine.
In particular, the Regulation changes the following major rules of the Foreign Investment Regulation:
- the Regulation removes the term "portfolio investment" and unifies the rules for making and returning of all types of foreign investments in monetary (cash) form;
- a foreign investor is no longer restricted to making investments only from its investment account in UAH. Instead, the Foreign Investment Regulation now permits fund transfers directly from a foreign or investment account of a foreign investor into the current account of a Ukrainian resident opened with a Ukrainian bank. Similarly, it now permits the return of foreign investments directly to the foreign account of a foreign investor;
- a foreign investor can make investments either in foreign currency of the 1st group of the national Currency Classifier (hard currencies such as USD or EUR) or, if the payment is made on the territory of Ukraine, in such foreign currency or UAH;
- a foreign investor can open an investment account and make investment deposits in UAH or in a foreign currency of the 1st group of the Currency Classifier;
- the payment of foreign currency at the return of foreign investments and/or profits thereon is to be carried out by Ukrainian banks on the basis of the documents required for the purchase of foreign currency for such operation and indicated in a separate NBU resolution governing the trade of the foreign currencies.
2. Rules for Foreign Exchange Trade Updated
The Regulation introduces several important changes to NBU Regulation No.281 "On Trading in Foreign Currencies", dated 10 August 2005 (the "FX Trade Regulation"), which is the principal NBU regulation governing the purchase of foreign currency on the inter-bank FX market in Ukraine.
- The return of dividends to foreign investors is significantly simplified. The FX Trade Regulation now provides for a separate set of documents which include, in addition to the currency purchase application, only confirmation of the ownership title of the investor to the corporate rights (shares) and copies of the issuer's decision on distribution of dividends to the foreign investor.
- If the term of acquisition of ownership title to the object of investment and its remittance by the foreign investors exceeds 5 calendar years, then the foreign investor may opt not to provide the investment agreement and evidence of its implementation (i.e., the bank confirmation of transfer of foreign currency in Ukraine) but rather provide evidence confirming acquisition of ownership title to the object of investment (for example, excerpt from the securities account with the securities custodian).
It remains to be seen how the new regulations will be applied in practice and if the updated rules simplify investment processes in Ukraine as intended. Careful legal planning and professional preparation of documents during any stage of the investment process should make compliance with the new Ukrainian FX rules a formality.
CONTACTS: Ihor Olekhov, partner; +380 44 590 0101 ;
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; Oleksandr Svyryd, associate 380 44 590 0101
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Baker & McKenzie - CIS, Limited: Renaissance Business Center; 24 Vorovskoho St.; Kyiv 01054, Ukraine; www.bakermckenzie.com
NOTE: Baker & McKenzie is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org.
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12. WEBCAST: DERIVATIVES - THE ART OF TAX PLANNING YOUR ECONOMIC ACTIVITY
Vasil Kisil & Partners, Kyiv, Ukraine, Wed, March 9, 2011
KYIV - On March 15, 2011 a Webcast with Peter Pereverzev, the Chairman of the Board of the Ukrainian Interbank Currency Exchange, and Natalia Dotsenko-Belous, a senior lawyer with Vasil Kisil & Partners is to be held through the LIGA portal http://www.liga.net/conf/ic/list.aspx.
The Internet Conference is targeting entrepreneurs that are open to recommendations on competent planning of economic activities in the light of the new Tax Code of Ukraine, as well as all those focused on quality, and solid long-term financial results with predictable risk management.
Ukrainian Interbank Currency Exchange and Vasil Kisil & Partners Law Firm joined forces to achieve one of the goals of the stock market - the development of derivatives, as well as to overcome the informational and psychological barriers in the minds of economic agents regarding the use of derivatives for the multidirectional optimization of their operations.
Among the issues to be discussed during the upcoming online conference:
Futures contracts: a tandem of commodity and stock market, what and how affects the price, the basics of tax planning through the prism of cooperation with the exchange Option Certificates - a simple and unique financial tool; applied aspects of Securities Commission’s Decisions # 572 of 16.06.2009 Option Certificates for rental services provision as a way to overcome the limitations of profitability, and as a tax planning tool, as well as a private entrepreneur alternative Option Certificates for the provision of finished housing and real estate under construction: the experience of the Ukrainian Interbank Currency Exchange and Vasil Kisil & Partners
ABOUT VASIL KISIL & PARTNERS
Vasil Kisil & Partners is one of the leading and long-established law firms in Ukraine that has impeccable reputation and unique expertise.
Since 1992, Vasil Kisil & Partners’ lawyers have advanced our clients’ interests with zeal and integrity. We have established a tradition of legal excellence, and we have earned a reputation as a law firm that always goes the extra mile for its clients. We provide professional service of the highest quality combining technical expertise with commercial awareness and a business savvy practical approach to legal issues.
We provide legal support to both Ukrainian companies operating abroad as well as foreign and international corporations doing business in Ukraine. We specialize in matters that require diligently tailored solutions, extensive experience, and direct personal attention of partners working with a team of recognized professionals.
CONTACTS: Vasyl Hubarets, Head of PR Department, Tel.: +380 44 581 7777,
E-mail:
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NOTE: Vasil Kisil & Partners is a member of the U.S.-Ukraine Business Council (USUBC), Washington, D.C., www.usubc.org. |
