June news digest

Corporate Law Practice

Contributions to LLCs without observance of proportionality of their size – under consideration of the Parliamentary Committee

In the Committee on Economic Development on June 20, 2024, hearings were held on the topic: “Attracting investments (in the form of additional contributions) to the capital of companies.” During the hearings, the possibility of amending Law No. 2275 “On Limited and Additional Liability Companies” and Law No. 755-IV “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations” was discussed. These amendments would allow clear mechanisms for attracting additional contributions to LLCs without requiring the percentage size of shares to necessarily match the monetary value of the contributions expressed as capital deposits.

As a result of the hearings, it was decided to develop proposals to improve the legislation, which will be submitted to the Committee for approval.

It is planned to gradually lift the moratorium on the recovery of property of state-owned enterprises

On 07.06.2024, the Committee provided its conclusion on the consideration of Draft Law No. 11139 “On Amendments to Certain Laws of Ukraine on Improving the Efficiency of State Property Management, Improving the Mechanism for the Sale of Seized Property and Approximation of Legal Standards in Ukraine to European Standards.”

The draft law provides for the lifting of the moratorium on the compulsory sale of property of enterprises with a state share of more than 25%. This will help restore economic ties between private and state-owned companies and protect the rights of the latter. The lifting of the moratorium provides for a gradual process that will allow for the lifting of restrictions on debt collection from state-owned enterprises with a 50% or more state shareholding within three years of the law’s adoption. It is important to note that these changes will not apply to defence industry enterprises due to their sensitivity for Ukraine during the war.

The government will increase funding for decarbonisation and energy efficiency transformation

The Cabinet of Ministers of Ukraine approved the Procedure for the Use of the State Fund for Decarbonisation and Energy Efficient Transformation at its meeting on 21 June. This was announced by the Government’s Permanent Representative in the Verkhovna Rada, Taras Melnychuk. This document defines the mechanism for using the funds provided for by the state budget under the State Fund for Decarbonisation and Energy Efficient Transformation budget programme. According to the procedure, the budget funds are allocated to:

• financial support for measures and government targeted programmes in the field of energy efficiency, increasing the use of renewable energy sources and alternative energy sources, and reducing carbon emissions;
• financial support for compensation, refunds, and reduction of liabilities of individuals and legal entities under loan agreements concluded for energy efficiency measures, implementation of energy services, increasing the use of renewable energy sources and alternative fuels, and reducing carbon emissions;
• fulfilment of debt obligations on borrowings received by the state to implement investment projects in this area.

During the Cabinet of Ministers meeting, Prime Minister Denys Shmyhal mentioned that it concerns an additional program for energy efficiency and strengthening the resilience of Ukraine’s energy system in the amount of UAH 759 million.

Under the “Affordable Loans 5-7-9%” programme, it is now possible to purchase gas-powered electricity generation facilities

The Cabinet of Ministers of Ukraine has expanded the possibilities of the state program “Affordable Loans 5-7-9%”. Now, entrepreneurs can use it to purchase and install gas-powered electricity generation facilities. The relevant resolution was adopted by the Government during the meeting on June 18, 2024.

The programme provides entrepreneurs with an opportunity to obtain a concessional loan for the construction and installation of gas turbine, gas piston, and biogas generating units. The maximum loan amount is up to UAH 150 million and the loan term is up to 10 years. In addition, the programme allows the loan funds to be used for the purchase of solar and wind power plants, as well as equipment for the accumulation of electricity. Earlier, the “Affordable Loans 5-7-9%” programme was reoriented to investment purposes.

NBU: The threshold value of credit exposure to be reported from the Credit Register is UAH 80 thousand

According to the Resolution of the National Bank of Ukraine (NBU) dated June 21, 2024, No. 225-rsh, starting from July 1, 2024, the threshold value of credit indebtedness, information about which is provided by the NBU from the Credit Register, will be UAH 80,000.

NBU clarifies the procedure for inspections of currency traders during martial law

The NBU Board Resolution No. 68 “On Amendments to the NBU Board Resolution No. 165 dated 29 July 2022” dated 18 June 2024 clarified the specifics of regulation and supervision of the trading of currency valuables in cash during martial law.

In particular, the resolution establishes the following:

• the obligation of the institution’s representatives to provide, at the request of the inspection group, copies of video archive data fragments or written reasoned explanations of the circumstances that make it impossible to provide such copies within a certain period of time;
• the obligation of representatives of the inspection group to establish the grounds and procedure for preparing an act on the refusal of structural/separate divisions of the institution to conduct an unscheduled inspection instead of the act on non-admission/act on obstruction, approved by Resolution of the NBU Board No. 90 dated 30.06.2020;
• the obligation of representatives of the inspection group and structural/separate subdivisions of the institution to temporarily suspend unscheduled inspections when the “Air Alert!” signal is sounded and resume them within 30 minutes after the “Cancel Air Alert!” signal, taking into account the work schedule of the structural/separate subdivision of the institution.

LLC directors planned to be given the opportunity to be dismissed at will – without a general meeting

The Verkhovna Rada registered Draft Law No. 11371 amending Laws No. 2275-VIII “On Limited Liability Companies” and No. 755-IV “On State Registration of Legal Entities, Individual Entrepreneurs and Public Organisations.”

The draft law provides for the introduction of a procedure for the voluntary dismissal of a company’s director without a decision of the general meeting in the absence of a quorum or impossibility of termination of powers by a decision of the general meeting, and also defines the procedure for state registration of changes, including: submission of a notice of dismissal, notification of the company’s shareholders about the convening of the general meeting, a protocol on the absence of a quorum and justification of the impossibility of termination of powers. These amendments are aimed at ensuring the exercise of the director’s right to resign at will.

Tax Law Practice | Tax Alert

Exemption from fines for CFCs’ controlling persons, VAT peculiarities in the export security regime application: the law came into force

The Law of Ukraine dated 09.05.2024 No. 3706-IX “On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine on Peculiarities of Export of Certain Types of Goods during the Period of Martial Law” (Draft Law No. 10168-2) came into force on 01.07.2024. 

The law provides for, in particular, the following:

• The peculiarities of VAT regulation concerning the export of certain goods (inter alia, some types of grain and oilseeds) to which the export security regime is applied. This regime can be introduced by the Cabinet of Ministers of Ukraine;
• From 01.01.2022 and during the period of martial law and 6 months after its termination the following liability shall not apply to taxpayers:
• The fines for failure to submit/late submission of a report on the controlled foreign company (“CFC”); failure to disclose information on existing CFCs/incomplete information on CFCs in the report; failure to notify the tax authority of the acquisition/disposal of a share in a CFC, or the commencement/termination of actual control over a foreign company;
• Administrative and criminal liability for violations related to the application of CFC regulations. More information about the adoption of this law is here.

The law on peculiarities of bona fide taxpayers’ administration was adopted

On 18.06.2024, the Verkhovna Rada of Ukraine adopted the Law of Ukraine “On Amendments to the Tax Code of Ukraine on Peculiarities of Tax Administration during Martial Law for Taxpayers with a High Level of Voluntary Compliance with Tax Legislation” (Draft Law No. 11084). 

According to the text of the law, signed by the Chairman of the Verkhovna Rada of Ukraine, it provides for certain specifics of the administration of taxes for taxpayers with a high level of voluntary compliance with tax legislation that will be applied during the martial law and until 31 December of the year of its termination. The State Tax Service of Ukraine (the “STS of Ukraine”) will form and approve a list of the said taxpayers (the “List”) no later than the last business day of March, May, August, and November. The List will include taxpayers that will meet certain requirements, and for the period of their inclusion in this List, the following peculiarities of tax administration are set out:

• The tax authority does not initiate factual audits on specific issues and some documentary unscheduled audits;
• The term for conducting desk and documentary audits for VAT budget refunds is 5 and 10 business days, respectively;
• Individual tax consultations are provided exclusively by the STS of Ukraine within 15 calendar days after the date of receipt of the application without the possibility of extending the term of its consideration;
• An official of the tax authority responsible for interaction with the taxpayer is assigned (compliance manager);
• A taxpayer, upon request, receives within 5 days information available in the tax authority regarding tax risks as well as advice on their elimination. The law was sent to the President of Ukraine for signature.

Draft laws on exemption from VAT and customs duties for the import of goods for energy infrastructure

On 17.06.2024, the following draft laws were registered in the Verkhovna Rada of Ukraine:

• Draft Law No. 11343 “On Amendments to Subsection 2 of Section XX “Transitional Provisions” of the Tax Code of Ukraine on Facilitating the Restoration of the Energy Infrastructure of Ukraine”;
• Draft Law No. 11344 “On Amendments to Section XXI “Final and Transitional Provisions” of the Customs Code of Ukraine on Facilitating the Restoration of the Energy Infrastructure of Ukraine”.

The draft laws propose for the period of martial law, but no longer than 01.06.2025:

• To exempt from VAT and import duties operations on the import of certain equipment for energy infrastructure;
• To exempt from VAT operations on the import of goods carried out under sale and purchase agreements, under which the Energy Community Secretariat is a party, concluded between suppliers of goods/services and companies licensed to produce, transmit, distribute electricity and transport, distribute and supply natural gas.

Likewise, on 25.06.2024, alternative draft laws No. 11343-1 and No. 11344-1 were registered. They propose to establish the VAT and import duty exemption mentioned above until 31.12.2025 and to exempt goods purchased under contracts with the Energy Community Secretariat from import duty.

Resolution of the Cabinet of Ministers of Ukraine on consideration of taxpayers’ complaints via videoconference

On 16.06.2024, Resolution of the Cabinet of Ministers of Ukraine No. 703 dated 13.06.2024 “On Amendments to the Procedures Approved by Resolution of the Cabinet of Ministers of Ukraine No. 1165 dated 11.12.2019” came into force. The resolution provides for the details of the exercise of the right of a taxpayer to participate in the consideration of a submitted complaint against a decision on refusal to register a tax invoice/adjustment calculation, on disregarding a data table, and on compliance with risk criteria via videoconference.

For this purpose, the taxpayer will be sent a notice no later than 5 calendar days before the date of the complaint consideration, indicating the date, time, and the relevant link. Further, when connecting, the taxpayer must specify in the user name only the tax number or series (if any) and passport number, name of the legal entity, surname, name, and patronymic of the individual entrepreneur. If the taxpayer fails to connect to the videoconference on the date and time specified in the notification or cannot be identified, the complaint shall be considered without the taxpayer. In addition, if the taxpayer expresses a desire to participate in the consideration, the complaint is considered within 30 calendar days, and if the taxpayer does not express such a desire – then within 10 calendar days.

The State Tax Service of Ukraine updated the plan-schedule of conducting documentary scheduled audits for 2024

On 28.06.2024, the State Tax Service of Ukraine on its website published an updated schedule of conducting documentary scheduled audits of taxpayers for the year 2024. According to the current version, Sections I and II of the schedule were amended. As a reminder, from 01.12.2023 until 31.12.2024, changes to the schedule can be made on a monthly basis, taking into account force majeure circumstances and the presence/absence of safe conditions for audits. The updated schedule shall be published no later than the last day of the month in which such updated schedule was approved. At the same time, from 01.12.2023 until 31.12.2024 inclusively, only certain taxpayers can be included in the schedule of conducting documentary scheduled audits (taxpayers operating in the field of production/sale of excisable goods, gambling, providing financial and payment services; non-residents operating through separate subdivisions/permanent establishments, separate subdivisions, permanent establishments of a non-resident that meet certain criteria; other taxpayers that, based on the indicators resulting from the 2021 year, meet certain criteria).

Labor Law Practice

The Cabinet of Ministers has extended the terms of postponement of conscription for military service on the basis of deferral for another two months

The Cabinet of Ministers has amended Resolution No. 516 of May 7, 2024, which provides for an automatic extension of the period of validity of postponement of conscription for military service granted in connection with deferrals that have not expired on the date of the resolution for three months (instead of one).

The changes were established by the Cabinet of Ministers Resolution No. 642 of June 4, 2024, which entered into force on June 6, 2024.

The Cabinet of Ministers amended the deferral procedure

On June 8, 2024, Resolution of the Cabinet of Ministers of Ukraine No. 650 of June 5, 2024, “Some Issues of Deferral for Persons Liable for Military Service during Martial Law” came into force, which amended the deferral procedure.

The Resolution approves the Deferral Procedure for Persons Liable for Military Service during Martial Law by means of the Unified State Web Portal of Electronic Services and sets forth in a new wording the Deferral Procedure for Persons Liable for Military Service during Martial Law.

Among the main changes:

• The possibility of submitting a list of persons liable for military service who are offered for deferral not only in paper and/or electronic form, but also through the Diia Portal (after technical implementation);
• The obligation of managers of enterprises, institutions, and organizations that are critical to the functioning of the economy and the livelihoods of the population during a special period to confirm that the employees offered for deferral have updated their military registration information in accordance with the requirements of the new mobilization law;
• Entitling the body that made the decision to recognize enterprises, institutions, and organizations as critical, in case of doubt about the information provided by the enterprise, institution, and organization or the compliance of the credentials of persons liable for military service indicated in the list with their military registration documents, to request documentary confirmation of the relevant information;
• Deferral for employees, regardless of military rank, age, and military specialty;
• Extension of the deferral period for employees to 12 months instead of 6 months;
• Expanding the grounds for canceling a deferral, etc.

Litigation Practice

GOLAW’s Victory for the Entire Alternative Energy Market

GOLAW successfully represented a manufacturer in a case against State Enterprise «Guaranteed Buyer».

Case Study:

The State Enterprise Guaranteed Buyer (hereinafter also referred to as Guaranteed Buyer) did not fully pay producers at the feed-in tariff for the electricity supplied. Guaranteed Buyer referred to the restrictions on payments during martial law established by Order No. 206 of the Ministry of Energy. Due to the ambiguous court practice, one of these cases was referred to the United Chamber of the Commercial Court of Cassation within the Supreme Court. Guaranteed Buyer argued that legal relations with producers before the introduction of martial law and during martial law have a different legal nature and regulation. In particular, Guaranteed Buyer insisted that he had the right to make partial payments to the producers, as Order No. 206 of the Ministry of Energy allegedly changes the procedure for settlements with alternative energy producers both in terms of advance payments and final payments during the special period.

As a result of the case, the United Chamber of the Commercial Court of Cassation of the Supreme Court upheld the position of GOLAW’s attorneys and upheld the decisions of the courts of previous instances, thereby confirming Guaranteed Buyer’s obligations to pay in full the principal debt, 3% per annum, and inflationary losses. This decision is extremely important for all producers under the feed-in tariff to whom Guaranteed Buyer is indebted.

GOLAW’s team of litigation attorneys took part in the project: partner Kateryna Manoylenko, partner Kateryna Tsvetkova, senior associate Anastasiya Klian, and associate Igor Selivakin.

A Military Registration Document Can Now Be Created in Reserve+ and Received at the ASC

Starting June 18, persons liable for military service, conscripts, and reservists can create a military registration document with a QR code through the Reserve+ application. In addition, starting from June 25, it is possible to receive a military registration document with a QR code free of charge at the ASCs when clarifying personal data. The document will be generated if the Unified State Register of Conscripts, Persons Liable for Military Service, and Reservists contains all the necessary information about the applicant.

Such a document is valid for 1 year from the date of formation. The military registration document contains the following information:

• Personal data of the applicant;
• A separate entry number in the Unified State Register of Conscripts, Persons Liable for Military Service, and Reservists;
• Information about the military medical commission;
• Military rank and military specialty;
• Information on military registration.

New Rules of Military Registration for Ukrainians Abroad

Cabinet of Ministers Resolution No. 675 of June 7, 2024, amended the rules of military registration for Ukrainians abroad. The Resolution stipulates that citizens of Ukraine who have been deregistered from military registration due to leaving Ukraine for more than three months are obliged to register for military service within 30 days from the date of entry into force of Resolution No. 563 of the Cabinet of Ministers of Ukraine dated May 16, 2024 (the Resolution entered into force on May 18) in one of the following ways:

• Personal visit to the TCR.
• Submission of an application through a Ukrainian diplomatic mission abroad. Citizens may submit an application for military registration in any form along with the information specified in Appendix 4 to the Procedure for the Organization and Conduct of Military Registration of Conscripts, Reservists, and a copy of the first page of the Ukrainian citizen’s passport for travel abroad to the respective authority.

The application shall be submitted by a citizen of Ukraine to a foreign diplomatic mission of Ukraine in person together with the passport of a citizen of Ukraine for traveling abroad, which, after acceptance of the application, shall be returned to the citizen of Ukraine, or by postal means together with a copy of the first page of the passport of a citizen of Ukraine for traveling abroad.

Criminal Law Practice

A law has been introduced to revive the Bureau of Economic Security in Ukraine

On June 20, 2024, the Verkhovna Rada of Ukraine adopted a law that enhances the procedure for selecting and re-evaluating the personnel of the Bureau of Economic Security of Ukraine (hereinafter-BES). The main amendments of the law address:

• Establishment and functioning of the competition commission for the selection of the BES Director, personnel and disciplinary commissions, and the Public Control Council;
• Establishment of an internal control unit and a corruption prevention unit;
• The procedure and frequency of external independent assessment (audit) of the BES’s performance.

Moreover, as of now, only BES and NABU detectives are permitted to initiate and participate in inspections of financial and economic activities conducted by enterprises, institutions, organizations, and individuals engaged in entrepreneurial or other economic activities, regardless of ownership.

The Constitutional Court of Ukraine has deemed the provision of the CPC of Ukraine regarding the appliance of detention as a preventive measure for suspects and accused individuals involved in crimes against national security, terrorism, and international law and order during martial law to be constitutional

On June 19, 2024, the Constitutional Court of Ukraine (hereinafter – the CCU) reached a decision in the case regarding the constitutional complaints of S. Bychkov and A. Bai on the constitutionality of part 6 of Article 176 of the CPC of Ukraine, which stipulates that during martial law, to persons suspected or accused of committing crimes under Articles 109-114-2, 258-258-6, 260, 261, 437-442 of the Criminal Code of Ukraine, if there are risks specified in Article 177 of the CPC of Ukraine, shall be applied a measure of restraint as custody.

The complainants argue that this article creates a presumption that suspicion of certain crimes automatically requires detention without the possibility of using other preventive measures. In assessing the compatibility of part 6 of Article 176 of the CPC of Ukraine with the Constitution, the CCU observed that this provision considers not only the seriousness of the alleged crime but also the existence of risks as determined by Article 177 of the CPC of Ukraine when determining the necessity of custody.

The CCU has determined that under part 6 of Article 176 bail may be used as a more lenient measure of restraint under certain circumstances outlined in Articles 177 and 178 of the CPC of Ukraine. Therefore, custody, according to part 6 of Article 176 of the CPC of Ukraine, is not considered as the only exceptional preventive measure without alternatives.

Ruling of the investigating judge on full or partial cancellation of property seizure or refusal to cancel property seizure is not subject to appeal as per the latest position of the Supreme Court

In case No. 712/191/23, the complainant, filing a cassation appeal, argued that the investigating judge’s decision to cancel the seizure of property or to refuse to cancel it leads to the same legal consequences as the decision to seize the property. In this regard, clause 9 of part 1 of Article 309 of the CPC of Ukraine, in conjunction with Articles 170, 173, and 174 of the CPC of Ukraine, provides the right to appeal against decisions to cancel or refuse to cancel the seizure of property.

However, the Joint Chamber of the Criminal Court of Cassation (hereinafter – the JC), in its judgment of 20 May 2024, emphasized once again that the list of investigating judge’s rulings that may be appealed during the pre-trial investigation is set out exclusively in Article 309 of the CPC of Ukraine. Importantly, the list does not incorporate the investigating judge’s rulings on the non-cancellation of property seizure issued under Article 174 of the CPC.

At the same time, the refusal to cancel the seizure of property does not deprive a person of the right to apply to the court with a repeated motion to cancel the seizure of property during the pre-trial investigation or the trial. Also, in this context, the JC recognized as unreasonable the positions of the panel of judges of the First Judicial Chamber of the Criminal Court of Cassation of the Supreme Court set out in the resolutions of 23 January 2024 in case No. 569/19829/21 and of 15 February 2024 in case No. 154/2859/18.