Law of Ukraine
"On Amendments to Certain Legislative Acts of Ukraine on Regulating Relations between Creditors and Financial Service Consumers"
Date of entry into force:
October 16, 2011
According to the new version of part 1, Article 107 of the Civil Code of Ukraine, if a legal entity is being terminated and its obligations are not secured, a creditor may demand extinguishment or early fulfillment of the obligation or securing the fulfillment of the obligation, except for cases provided for by the legislation.
According to amendments to part 5, Article 107 of the Civil Code of Ukraine, a succeeding legal entity created as a result of division bears secondary liability on the obligations of the terminated legal entity that were transferred to the succeeding legal entity created as a result of division according to the distribution balance. If more than two succeeding legal entities were created as a result of division, they shall bear such secondary liability in solidarity. If a legal entity has several successors, and it is not possible to clearly determine the successor of the specific obligations of the terminated legal entity, the succeeding legal entities shall bear joint liability before the creditors of the terminated legal entity. The participants (founders) of the terminated legal entity that bore its obligations according to law or the constituent documents shall bear the obligations of the successors that arose before the legal entity was terminated, to the original extent, unless a larger extent of liability on the successor obligations was established for the participants (founders) according to law or their constituent documents.
After a separation decision is made, the legal entity participants or the body that issued the separation decision shall draft and adopt the distribution balance. The resolution of the court that made the separation decision shall determine the participant or supreme body of the legal entity (owner) obligated to draft and adopt the distribution balance. The separated legal entity shall bear secondary liability on the divided legal entity's obligations that did not pass to the separated legal entity according to the distribution balance. The divided legal entity shall bear secondary liability on the obligations that passed to the separated legal entity according to the distribution balance. If there are two or more separated entities, they shall bear secondary liability jointly with the divided legal entity. If, after the separation, it is impossible to clearly determine a separated entity's liability on a specific obligation that the divided legal entity bore before the separation, then the divided entity and the separated entities shall bear solidary responsibility on such obligation before the creditor (amendments to Article 109 of the Civil Code of Ukraine).
The Law presents a new version of Article 1056-1 of the Civil Code of Ukraine, according to which loan interest can be fixed or variable. The type of interest rate is determined by the loan agreement. The amount of interest, type of interest rate (fixed or variable) and the procedure for payment of interest under a loan agreement are determined in the agreement, depending on the credit risk, collateral provided, supply and demand on the credit market, loan maturity, discounting rate, and other factors. Fixed interest rate is unchanged throughout the entire duration of the loan agreement. The fixed interest rate established in the agreement cannot be changed by the bank unilaterally. An agreement provision granting the bank the right to unilaterally change the fixed interest rate is invalid. In case a variable interest rate is applied, the creditor, at its own discretion and according to the frequency established in the loan agreement, has the right to increase and is obligated to decrease the interest rate according to the terms and procedure established by the loan agreement. The lender must notify the borrower, guarantor and other parties obligated under the agreement of the interest rate change, in writing, no later than 15 calendar days before the date on which the new rate becomes effective. The loan agreement establishes a procedure for calculating the variable interest rate with the use of the index agreed on by the parties. The procedure for calculating a variable interest rate must allow to determine the precise loan interest rate at any moment of time throughout the duration of the loan agreement. The creditor has no right to change the variable interest rate calculation procedure without the borrower's consent. The index used in the variable interest rate calculation formula must satisfy the following requirements:
- the current index value must be periodically, but at least once a month, published in mass media or promulgated through other publicly available sources of information. The loan agreement must contain a reference to the source of information about the respective index;
- the index must be based on objective indicators of the financial sphere that allow determining the market value of credit resources;
- the index value must be set by an independent authority with a recognized business reputation on the financial services market.
In case a variable interest rate is used, the loan agreement must state the maximum amount of interest rate increase.
The new version of Article 388 of the Criminal Code of Ukraine envisages establishing criminal liability for embezzlement, alienation, concealment, substitution, damage, destruction or other illegal actions in respect of property that is arrested, used as collateral, or distrained; for violating the limitation (encumbrance) of the right to use such property by an entity entrusted with it; and for banking transactions with arrested funds carried out by a representative of a bank or other financial institutions.
The Law clarifies the procedure for notifying about the violation of the principal obligation and/or mortgage agreement (amendments to Article 35 of the Law of Ukraine "On Mortgage").
Simultaneously with the resolution to enforce collection on a mortgaged property, the court shall, by application of the mortgage holder, issue a resolution to evict the residents, subject to the grounds for such as provided by the law, if the mortgaged property is a residential house or residential premises (amendments to Article 39 of the Law of Ukraine "On Mortgage").
The Law proposes to also enforce collection of the object of collateral encumbrance based on the executor endorsement of a notary (amendments to Article 24 of the Law of Ukraine "On Securing of Creditor Claims and Encumbrance Registration").
The Law clarifies the definition of terms "subject of bankruptcy", "creditor", "monetary obligation", and "creditor claim moratorium", envisaged by Article 1 of the Law of Ukraine "On Restoration of Debtor Solvency or Declaration of Bankruptcy".
The Law obligates an arbiter to notify the creditor committee and the creditors with secured claims about the time, place and terms of sale of collateral property, by a separate registered letter with advice of delivery (amendments to Article 3-1 of the Law of Ukraine "On Restoration of Debtor Solvency of Declaration of Bankruptcy").
The Law envisages the following amendments to Articles 11, 14, 47-49 and 51 of the Law of Ukraine "On Restoration of Debtor Solvency of Declaration of Bankruptcy":
- introducing certain changes into the procedure of initiation of bankruptcy cases;
- if a creditor is recognized as a bankruptcy creditor, it has the right to receive information about the claims of other creditors recognized by the debtor and/or property administrator, from the property administrator; applications with claims of bankruptcy creditors contested by the debtor or other creditors are reviewed by an economic court prior to issuing a resolution about adopting a claims register; based on the results of reviewing such claims, the economic court issues a resolution to recognize or decline (in part or in full) claims of such creditors. The resolution can be contested according to the established procedure;
- in case a private entrepreneur is declared bankrupt, the liquidation estate shall not include the property of a private entrepreneur that cannot be subject to enforced collection according to the legislation of Ukraine and the property that serves as collateral for reasons not related to the entrepreneurial activity of such person;
- certain changes are made to the priority order of claim satisfaction for creditors of a bankrupt private entrepreneur;
- certain specifics of applying the bankruptcy procedure to a debtor liquidated by the owner are clarified.
The Law makes amendments to Article 11 of the Law of Ukraine "On Consumer Rights Protection", according to which:
- it is forbidden to grant (receive) consumer loans in foreign currency on the territory of Ukraine;
- the lender is forbidden to include in the consumer loan agreement any fees, interests, commissions, payments, etc. for activities that are not a service according to the definition of service according to the Law of Ukraine "On Consumer Rights Protection";
- the consumer loan agreement must specify, among other things, a detailed breakdown of the full cost of loan for the consumer, including the loan interest rate and the cost of all services (registrar, notary, insurer, assessor, etc.) related to receiving, servicing and repaying the loan and concluding the consumer loan agreement, as well as terms for early agreement termination;
- it is forbidden to make the text of the detailed breakdown of the full cost of consumer loan included in the consumer loan agreement or addition to it in any way more difficult for consumer's reading, including by printing in a font size smaller than the main text or blending the text color with the background color;
- in case of early repayment of a consumer loan, the consumer shall pay interest for the use of loan and for the cost of all services related to the loan servicing and repaying during the actual period of the loan use;
- the borrower is forbidden to refuse to accept payment from the lender in case of early repayment of a consumer loan;
- the borrower is forbidden to set any additional fee for the lender in relation to early repayment of a consumer loan;
- the borrower has the right to restructure the debt under a consumer loan agreement, by agreement with the consumer.