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The NBU introduces procedure for opening escrow accounts in Ukraine
Dentons, Kyiv, Ukraine,
Thu, Jan 11, 2018
December 27, 2017
Following recent regulatory changes implementing the concept of escrow accounts into Ukrainian legislation, the National Bank of Ukraine (the NBU) developed a procedure to open and operate escrow accounts and for the use of such accounts by foreign investors. The relevant novelties were introduced by Regulation No. 133 dated 18 December 2017 (Regulation No. 133) and Regulation No. 147 dated 28 December 2017 (Regulation No. 147).
Regulation № 133 stipulates the following:
- The procedure to open and close escrow accounts
- The possibility of opening escrow accounts by Ukrainian legal entities and individuals, as well as non-resident investors (both in Ukrainian hryvnias and foreign currencies)
- An exhaustive list of transactions, which may be carried out through the escrow account, in particular:
- Crediting by the bank of funds received from the account holder and/or third parties, which may be transferred to the beneficiary(ies) or returned to the account holder, as established by the terms of escrow account agreement
- Transactions related to enforcement of the property rights to funds held on escrow account or account holder’s/beneficiary’s rights of claim to the bank under the escrow account agreement
- Fees payment to the bank for servicing the escrow account and maintaining operations with it, if such fee is arranged under the escrow account agreement.
The bank acting as escrow agent shall identify any beneficiary requesting funds from the escrow account and verify legal grounds for the release of funds from such an account.
Regulation No. 147 made it possible for non-resident investors to use escrow accounts for investments in Ukraine. As of now, foreign investors will be able to use escrow accounts when selling/purchasing securities and their derivatives, property rights, corporate rights, real estate objects in Ukraine, etc. Moreover, a foreign investor being a dominating shareholder of a joint stock company will be able to use escrow account for the purposes of settlement for shares of minority shareholders under the squeeze-out procedure.
The Regulations entered into force give a green light for Ukrainian business and foreign investors to use a flexible settlement tool, which at the same time minimizes counterparty risks of violation or non-fulfillment of contractual obligations.