New factoring rules: what Law No. 4466-IX provides for

What is factoring and why is it needed?

In practice, factoring is the sale of a monetary claim arising from economic activity. Most often, this refers to a situation where a company has delivered goods or provided a service, and payment is to be made at a later date. Instead of waiting, the client can transfer (sell) the right to this payment to a third party — the factor. The factor pays the client immediately (in full or in part) and then receives the money from the debtor. This is convenient: the company receives financing without waiting for income, and the factor receives a profit.

What does the Law provide for?

The Law ‘On Factoring’ provides for several fundamentally new approaches.

1. Universal definition of factoring and other terms

Factoring is a service or several services provided by a factor based on a factoring agreement.

The subject of a factoring agreement is the right to a monetary claim. Under a factoring agreement, the factor transfers or undertakes to transfer funds to the client by paying the price of the monetary claim for a fee (remuneration) (in any manner provided for in the agreement), and the client assigns or undertakes to assign to the factor its right to a monetary claim against the debtor.

Thus, factoring is a service or set of services provided by the factor to the client on the basis of a factoring agreement, the content of which is the assignment by the client of a monetary claim against the debtor that has arisen or is to arise from its economic activity in exchange for payment (remuneration) to the factor.

2. The law clearly defines the parties to a factoring agreement:

• factor – a financial services provider that has the right to provide factoring services in accordance with the law (provided that it has the appropriate licence);
• client – a legal entity or individual entrepreneur who transfers the right to a monetary claim arising from the base agreement to the factor;
• debtor – an individual, individual entrepreneur or legal entity that is obliged to pay a monetary amount to satisfy a monetary claim arising from the underlying contract.

Therefore, in accordance with the Law of Ukraine ‘On Factoring’, only a financial services provider can be a factor. Only a legal entity or an individual entrepreneur can assign a monetary claim. In this case, the debtor can be anyone who is obliged to pay the monetary claim. 

3. Determination of the scope of the Law and exceptions

It is important that the Law clearly defines the relationships to which it applies and establishes several exceptions. 

This Law regulates the relationships between factors, clients, and debtors during the provision of factoring services.

This Law does not apply to transactions involving the assignment of monetary claims:

• if the monetary claim being assigned arises from financial services agreements other than factoring agreements;
• which do not provide for the payment of any remuneration, including in the form of a commission, discount on the value of the monetary claim (obligation) to the new creditor in the obligation;
• committed by persons who do not meet the requirements of this Law;
• if the term for the performance of the assigned monetary claim has expired at the time of such transaction;
• committed in cases provided for by the Law of Ukraine ‘On the System of Guaranteeing Deposits of Individuals’.

Thus, the Law of Ukraine ‘On Factoring’ applies only to legal relations in which factoring services are provided by the terms of this law. It explicitly provides a list of cases where the assignment of a monetary claim is not considered factoring and is not subject to its regulation. This allows for a clear demarcation of the scope of the law.

4. The prohibition on the assignment of monetary claims provided for in the basic agreement is null and void and has no legal consequences

According to Article 9 of the Law of Ukraine ‘On Factoring’, any terms of the basic agreement that directly prohibit or restrict the client’s right to assign a monetary claim to the factor are considered null and void. This means that such prohibitions have no legal force and cannot be used to cancel or restrict a factoring agreement.

Moreover, the law clearly states that a factoring agreement is valid even if the underlying agreement contains prohibitive or restrictive conditions. This provision protects the interests of factors and clients by preventing abuse by debtors or other parties who may attempt to prevent the transfer of rights of claim.

Therefore, the right to assign a monetary claim under a factoring agreement cannot be restricted by individual terms of the underlying agreement.

5. Register of assignments of monetary claims as a tool for transparency in factoring transactions

The law introduces a Register of Assignments of Monetary Claims under Factoring Agreements, which is a modern information and communication system consisting of two main parts:

• a public electronic register, where all assignments of monetary claims are recorded in real time and information about such records is made public;
• an electronic factoring system that provides automated exchange of documents and information between factors, clients and debtors via the Internet.

The Register contains detailed information about each assignment of monetary claims, their modification or cancellation. 

The introduction of such a Register is an important step towards creating a transparent and controlled market for factoring services in Ukraine, increasing the level of protection for participants in factoring relationships and minimising the risks of double assignment of rights.

6. Regarding the Debtor’s notification of the assignment of the monetary claim

After registering the assignment of the monetary claim in the Register, the factor shall, within three business days, send the debtor a notification of the client’s assignment of the monetary claim to the factor.

Therefore, the Debtor is obliged to pay the factor the monetary amount to satisfy the monetary claim, provided that the assignment of the monetary claim has been registered in the Register and such debtor has received a notification of the assignment of the monetary claim.

7. Regarding transitional provisions. How the Law affects participants.

The Law provides for a number of important requirements and restrictions for individuals and companies that, prior to its entry into force, were already conducting transactions with monetary claims or had a factoring licence:

• individuals who are not financial institutions but who acquired rights to consumer loan claims prior to the entry into force of the Law are required to relinquish such rights within 30 days of the entry into force of this Law. Exceptions are the Deposit Guarantee Fund for Individuals and claims acquired in the course of bank liquidation;
• financial companies with a valid factoring licence must notify the NBU in writing within one month of their intention to continue operating in this area. Within six months, such companies must bring their activities into full compliance with the new law, in particular by relinquishing monetary claims that do not meet the new requirements;
• if a company fails to submit such a notification, the NBU automatically excludes the right to factoring from its licence. Instead, it adds to the licence the right to provide financial services for the provision of funds and bank metals on credit. The National Bank of Ukraine shall notify the financial company in writing within five working days of the date of entry in the State Register of Financial Institutions;
• the National Bank of Ukraine shall notify in writing legal entities that, prior to the entry into force of the Law, submitted applications for obtaining or extending a licence for the activities of a financial company, which provides for the right to provide financial services for factoring, of the possibility of refusing to consider such applications. If no refusal is submitted, the consideration shall continue in the usual manner; if a refusal is submitted, the proceedings shall be closed.

Regarding the application of the law

It should be noted that the provisions of this Law apply to relations arising from factoring agreements concluded after its entry into force. Relations arising from factoring agreements concluded before the date of its entry into force shall be governed by the legislation in force prior to the entry into force of this Law. 

The law comes into force on 30 July 2026, so from that date its provisions apply to relevant agreements concluded after that date. At the same time, legal relations that arose before that date remain regulated in accordance with the previous legislation.

Conclusion

Law of Ukraine No. 4466-IX ‘On Factoring’ is an important step in the development of the regulation of the factoring services market in Ukraine. It not only systematically regulates factoring as a separate financial service for the first time, but also provides legal certainty for participants in such relations. The law establishes requirements for the composition of parties, the content of contracts, and the procedure for assigning monetary claims, and also introduces a Register as a tool for transparency and accounting of factoring transactions. Defining the scope of the law and exceptions helps avoid legal confusion with other forms of assignment. All this will contribute to the formation of a civilised, competitive and reliable factoring market in Ukraine.