Law of Ukraine

“On Agrarian Bonds”

Date of entry into force:
March 18, 2013

The Law regulates relations arising during preparation, issue, turnover and execution of agrarian bonds, determines the procedure for their registration, and aims to create legal, economic and organizational conditions for the use of these documents.

Article 1 of the Law provides definition of terms used in it. For example, an agrarian bond is a title document that records the debtor’s unconditional obligation, secured by a pledge, to supply agricultural products or pay funds, on the terms determined by the bond.

According to Article 2 of the Law, agrarian bonds are used in operations with agricultural products. Agrarian bonds can be issued to persons that hold title to an agricultural land plot, or have a lawful right to use such a land plot for production of agricultural products. If the title to the land plot belongs to two or more co-owners, or the right to use is held by two or more users, agrarian bonds are issued by them jointly. Joint issuers of an agrarian bond bear solidary liability for the failure to fulfill their obligations. Transfer of title or use right of the land plot does not cancel the pledge of future harvest stated in the bond, and does not cancel the rights of the debtor and creditor under the agrarian bond to use the land plot up until the reaping of the appropriate harvest, but no later than the end of the current marketing year. The debtor under an agrarian bond is obligated to inform the persons to whom they are transferring the title or use right for the land plot, the agricultural products from which are pledged under an agrarian bond, of the restrictions existing under the issued agrarian bonds. Agrarian bonds are drawn up in two copies, one of which is stored in the files of the person that carries out the notarial certification and registration of the bond, and the other delivered to the creditor under the bond. At the request of the debtor under an agrarian bond, they can be issued a certified copy of the agrarian bond issued by them. Depending on the type of obligation, agrarian bonds are classified as commodity agrarian bonds and financial agrarian bonds.

A commodity agrarian bond is an agrarian bond that establishes an unconditional obligation of the debtor under the bond to deliver the agreed agricultural products, with the quality, quantity, place and time of delivery determined in the agrarian bond (Article 3 of the Law). A financial agrarian bond is an agrarian bond that establishes an unconditional obligation of the debtor to pay funds in the amount calculated according to the formula agreed by the debtor and the creditor, with regard to the price of the specified quantity of agricultural products of appropriate quality. Obligations under financial agrarian bonds are only fulfilled by the debtors by bank transfer (Article 5 of the Law).

The template of the commodity and financial agrarian bonds are established by Articles 4 and 6 of the Law.

An agrarian bond secures the obligations of the debtor under the bond by a pledge of their future harvest. The subject of such pledge can be exclusively the future harvest of agricultural products (Article 7 of the Law).

The procedure for monitoring the pledge of the future harvest of agricultural products is established by Article 8 of the Law.

According to Article 9 of the Law, an agrarian bond is issued separately for each type of agricultural products defined by generic or individual characteristics. A commodity agrarian bond can be issued for each batch of agricultural product agreed on by the debtor and the creditor. At the time of issue, an agrarian bond is subject to notarial certification, according to the procedure provided for by the Law of Ukraine “On Notariate” for documents of legal relations, with regard to the specifics established by this Law. Information about the agrarian bond is entered into the Register of Agrarian Bonds by the person carrying out the notarial actions, at the time of the bond certification. Information about the pledge under the agrarian certificate is entered into the State Register of Encumbrances of Movable Property by the person carrying out the notarial actions, at the time of the bond certification. In case of additional security for the agrarian bond, information about such security can be entered into appropriate registers, according to the legislation. An agrarian bond is considered issued on the day of its registration in the Register of Agrarian Bonds.

Article 10 of the Law determines the procedure for keeping the Register of Agrarian Bonds.

The rights of the creditor under an agrarian bond can be assigned by endorsing the agrarian bond or its integral appendix as “Assigned” and specifying the new creditor. This endorsement must be signed and sealed (if a seal is available) by the previous creditor under the agrarian bond. Assignment of rights under an agrarian bond is subject to notarial certification according to the procedure envisaged by the Law of Ukraine “On Notariate” for documents of legal relations, with regard to the specifics established by this Law (Article 11 of the Law).

The specifics of fulfilling obligations under agrarian bonds are provided for by Article 12 of the Law.

Article 13 of the Law establishes the liability.
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