February news digest

Corporate Law Practice

The Commercial Code abolished: The President signed Law No. 4196-IX

On February 26, President Volodymyr Zelensky signed Law No. 4196-IX (Draft Law No. 6013) “On the Peculiarities of Regulating the Activities of Legal Entities of Certain Organizational and Legal Forms During the Transitional Period and Associations of Legal Entities.” The document provides for the abolition of the Commercial Code of Ukraine and the reform of state and municipal enterprises.

The law enters into force the day after its official publication, which took place on February 27 in the newspaper “Holos Ukrainy” and will be implemented six months later. Certain provisions have a longer transition period: Part Two of Article 13, concerning the establishment and operation of legal entities, will take effect in three years and six months, while Clause 4 of Article 17 will come into force immediately upon the law’s enactment.

The document provides for the corporatization of all state and municipal unitary enterprises, which must be transformed into joint-stock companies or limited liability companies. The law also aligns regulations with the Civil Code of Ukraine and the Law “On Local Self-Government” to avoid legal gaps following the repeal of the Commercial Code, adopted in 2003.

Despite the abolition of the Commercial Code, commercial courts and commercial jurisdiction will continue to operate.

The Humanitarian Demining Center announced tenders for agricultural land clearance

The Humanitarian Demining Center has launched a procurement process for agricultural land demining services based on applications submitted for the current year. The first three auctions will take place in the Prozorro system in the first half of March 2025, according to the Ministry of Economy. Based on the auction results, the final price will be determined, and contractors will be selected to sign agreements with the Demining Center. The estimated cost of clearing 472.4 hectares is 28.1 million UAH. The auctions will follow the classic English auction format in three rounds, with a gradual reduction of the starting price.

The cost of demining depends on the level of contamination. For instance, the largest plot in the Kharkiv region (392.1 hectares) contains abandoned munitions, making its clearance cheaper compared to areas with mines or unexploded ordnance. Other factors influencing the final cost include terrain type, slope angle, vegetation presence, and its characteristics, explained Demining Center Director Volodymyr Bayda.

The demining cost compensation program has been in place since September 2024. The state covers 100% of the demining costs for land that has not yet been cleared and 80% of the costs for demining conducted between February 24, 2022, and April 15, 2024. The state budget for 2025 allocates 1 billion UAH for the compensation program. Since its launch, 47 agreements have been signed for the demining of over 9,000 hectares of agricultural land.

Ukraine carries out first pipeline delivery of biomethane to the EU

In February 2025, Ukraine and the European Union completed the first-ever pipeline delivery of biomethane. A Ukrainian producer exported 67,000 cubic meters of biomethane through Ukraine’s gas transmission system.

Minister of Energy Herman Halushchenko emphasized that this is a key step in strengthening energy independence and integrating Ukraine into the European energy sector. Biomethane will contribute to decarbonizing the economy and reducing dependence on fossil fuels.

Ukrainian producers can export biomethane to the EU via the gas transmission and distribution networks, under conditions similar to those for natural gas transportation.

The development of Ukraine’s biomethane market has been ongoing since the signing of the Memorandum on Strategic Partnership with the EU in the biomethane, hydrogen, and synthetic gas sectors in February 2023. To facilitate biomethane exports, a Customs Clearance Procedure was approved, which came into force in September 2024.

Biomethane is purified biogas that has properties similar to natural gas and can be used for heating, electricity production, and transport fuel. It can be integrated into the existing gas infrastructure without additional network investments, making it an accessible and promising energy source.

The Verkhovna Rada passed the Draft Law on Factoring in the first reading

On February 12, the Verkhovna Rada approved in the first reading the draft law No. 12306 “On Factoring”, aimed at improving the regulation of factoring activities in Ukraine.

The document provides for the implementation of the Model Law of the International Institute for the Unification of Private Law on Factoring, which will align Ukrainian legislation with international standards. The draft law introduces state registration of receivables assignment, enhancing market transparency and reducing fraud risks.

The draft also defines the subject and content of factoring agreements, the priority of receivables assignment, and differentiates between trade factoring and financial debt operations. Companies engaged in the assignment of receivables under consumer credit agreements will operate under a financial license. Such a license allows lending but will not be compatible with trade factoring.

Tax Law Practice | Tax Alert

A law on the stimulation of charity during martial law is passed

On February 25, 2025, the Verkhovna Rada of Ukraine adopted the law “On Amendments to the Tax Code of Ukraine Regarding the Stimulation of Charity During Martial Law” (draft law No. 12328-д dated February 20, 2025).

According to the text of the law signed by the Chairman of the Verkhovna Rada of Ukraine, the following tax changes are to be introduced, in particular:

• For reporting (tax) periods, starting from the year 2025 and until the end of the calendar year in which martial law is terminated, corporate income taxpayers will be allowed not to increase their financial result for taxation purposes by the amount of funds and/or the cost of goods, performed works, rendered services transferred free of charge during the reporting year to non-profit organizations included in the Register of Non-Profit Institutions and Organizations (except for some organizations) in an amount not exceeding 8% of the taxable profit of the previous reporting year, provided that from this amount of funds (cost), more than 4% of profit is transferred to charitable organizations.
• The rule on non-inclusion in taxable income for PIT purposes of targeted or untargeted charitable assistance provided to a taxpayer affected by environmental, industrial and other disasters, natural disasters, accidents, epidemics and epizootics, armed aggression of the Russian Federation during the period of martial law, state of emergency – will also be extended to charitable assistance provided in a non-monetary form, in particular, for the restoration of lost property, housing, social and household needs, etc.
• In the case of payment (provision) of charitable assistance to PIT payers, its amount (value) will be included by the tax agent in the tax calculation of income amounts.

The law is submitted to the President of Ukraine for signing.

An explanatory letter of STS regarding tax measures to combat bribery of foreign officials in international business transactions

On February 26, 2025, the State Tax Service of Ukraine published explanatory letter No. 2/2025 on Certain Amendments to the Tax Code of Ukraine Introduced by the Law of Ukraine “On Amendments to the Tax Code of Ukraine Regarding the Implementation of the Recommendations of the Organization for Economic Co-operation and Development on Tax Measures to Further Combat Bribery of Foreign Officials in International Business Transactions” (hereinafter – the “Law”).

This letter provides taxpayers with an overview of the changes introduced by the Law, as well as clarification on the application of its key provisions:

• Prohibition of deductibility of expenses for tax purposes in transactions related to the provision of an improper advantage to officials.
• Notification issued by the tax authority to the National Anti-Corruption Bureau of Ukraine of circumstances (facts) that may indicate the taxpayer’s provision of an improper advantage to an official.
• Possibility for taxpayers to self-adjust their tax obligations if there were facts of providing improper advantage, as well as the application of liability in case of submission of clarifying tax calculations in such cases.
• Obligation to increase the financial result for CIT purposes by the amount of expenses in respect of which it is established that they were made to provide an improper advantage.

It’s worth noting that the Law will come into force on March 25, 2025.

A review of Supreme Court practice in administrative cases for January 2025 is published

On February 27, 2025, the Cassation Administrative Court within the Supreme Court published a review of current judicial practice for January 2025.

In this review, the Supreme Court highlighted positions, in particular, regarding:

• Lawfulness and validity of the decision of the tax authority to cancel the registration of a VAT payer in case of failure to submit declarations or submission of declarations with indicators of the absence of supply or purchase of goods or services for 12 consecutive months (resolution as of January 07, 2025, in case No. 160/7847/24).
• Absence of the obligation of the tax authority to issue tax notice decisions for the accrual of penalties for late payment of tax obligations. Since the penalty, which is automatically accrued on tax debts, is not a monetary obligation in the context of its definition determined in the Tax Code of Ukraine. 

At the same time, the penalty accrued for violation of the terms of payments in the field of foreign economic activity is a monetary obligation, and a tax notice decision must be issued in that case (resolution as of January 08, 2025, in case No. 280/3821/24).

• Possibility of exemption of financial institutions from VAT on the sale of mortgaged property if it is transferred as collateral by persons who are not VAT payers, as well as absence of the obligation to register as a VAT payer for such institutions, provided that the difference between the purchase price and the supply price of the mortgaged property does not exceed the established threshold of UAH 1 million (resolution as of January 08, 2025, in case No. 826/9066/18).

Litigation Practice

The Cabinet of Ministers of Ukraine Extended the Deadline for Recognizing Enterprises as Critical and Rebooking Employees Until March 31, 2025

The Cabinet of Ministers of Ukraine has decided to extend the transition period for enterprises that have not yet confirmed their critical status and rebooked employees. Until March 31, 2025, such companies can submit the necessary documents, and their current bookings will remain valid.

Resolution No. 208 of the Cabinet of Ministers of Ukraine dated February 25, 2025, introduced amendments to Resolution No. 1332 of the Cabinet of Ministers of Ukraine dated November 22, 2024, “Some Issues of Booking Conscripts During Mobilization and Wartime.”

It is established that deferments from military service during mobilization, granted to conscripts by decisions of the Ministry of Economy or via the Diia Portal, which were still valid on the date these amendments took effect, will remain in force until March 31, 2025.

Additionally, state authorities are required to review within four months the decisions previously made regarding the recognition of enterprises, institutions, and organizations as critical for the functioning of the economy and ensuring the livelihoods of the population during the special period.

Furthermore, enterprises that have already updated their critical status are now allowed to book employees until April 1, 2025, without the mandatory 72-hour data processing period.

The Ministry of Economy reminded that applications for employee bookings must be submitted exclusively through the “Diia” portal. This ensures that business leaders avoid paper-based procedures, as the entire process is conducted electronically.

Changes to the Employee Booking Procedure

The Cabinet of Ministers of Ukraine has approved updates to the Employee Booking Procedure, introducing significant adjustments to the process of booking conscripts. From now on, when calculating the total number of employees eligible for booking, those mobilized after May 18, 2024, will also be taken into account.

Additionally, the cancellation period for booking has been reduced to 5 days.

Furthermore, the validity of previously issued bookings has been extended. According to the new amendments, deferments from mobilization, granted to conscripts by decisions of the Ministry of Economy of Ukraine or via the Diia portal, will remain valid until March 31, 2025, provided their validity had not expired before the new regulations took effect.

The “Reserve+” system has already been updated, allowing employees to check their booking status by refreshing their information in the system.

Supreme Court: The Appointment of a Member of the Executive Body of a Company Is Not Subject to Labor Law Regulation

The appointment of a member of the executive body of a company, by its legal nature, regulatory framework, and legal consequences, does not fall within the scope of labor law. According to Article 99 of the Civil Code of Ukraine, granting powers to a member of the executive body is a decision of the authorized body of the company, which vests the individual with the right to perform managerial functions on behalf of the company.

This conclusion was reached by a panel of judges of the Commercial Cassation Court within the Supreme Court in its ruling dated January 15, 2025, in case No. 910/15094/23.

The Supreme Court annulled the decisions of the lower courts and remanded the case for a new trial, as the dispute concerns the legality of the election of a management board member by the supervisory board, rather than labor relations.

In the case under review, the plaintiff sought to challenge the legality of the actions of the company’s governing bodies—specifically, the supervisory board—arguing that these actions should be assessed under civil, rather than labor law. The fact that a contract involves labor does not automatically imply that the dispute falls within the scope of labor law, as the terms of the contract were not the subject of consideration in this case.

Article on the Topic: Key Changes in Labor Legislation in 2024

Kateryna Tsvietkova, Attorney, Partner of Litigation Practice at GOLAW
Natalia Matviichuk, Attorney, Senior Associate at GOLAW

Throughout 2024, numerous changes in labor legislation have affected both employers and employees.

As of September 27, 2024, the Labor Code of Ukraine has been supplemented with new grounds for termination of an employment contract at the employer’s initiative, namely:

• A court verdict coming into legal force, sentencing an employee for committing a crime against the national security of Ukraine.
• Failure to comply with company rules regarding the non-disclosure of restricted information.

Employers are also entitled to require employees not to disclose restricted information, in particular:

• Information constituting state or commercial secrets.
• Information about the conditions of working with confidential data.

To implement this, it is necessary to supplement the company’s internal labor regulations with a corresponding section and provisions. These changes must be officially communicated to employees.

Possibility of Sending Employment Record Books Abroad. By Resolution of the Cabinet of Ministers of Ukraine No. 1045 dated September 10, 2024, amendments were introduced to the List of Prohibited Items for Postal Shipments. According to these amendments, as of September 12, 2024, employment record books can now be sent abroad.

Regulation of Business Ownership Transfer. In 2024, the Labor Code of Ukraine was supplemented with a new Article 36-1 regarding labor relations in the case of the transfer of a business entity. This provision came into force on May 15, 2024.

The mentioned article stipulates that when a company’s ownership changes, employees’ labor relations continue with the new owner. The rights and obligations under employment contracts remain unchanged.

Additionally, the status and functions of trade unions (employee representatives) remain in effect and must be observed under the same conditions. In turn, trade unions (employee representatives) have the right to initiate consultations with both the previous and new owner regarding the consequences of such changes for employees.

It is important to note that the transfer of a business entity is considered a significant change in working conditions, and employees must be notified no later than two months in advance.

Regulation of Domestic Work. The Labor Code of Ukraine has been supplemented with a new Chapter XI-A (Articles 173-2 to 173-7), which defines the conditions of domestic work. This category includes, for example, drivers, household workers, gardeners, etc.

The main provisions of the new amendments include:

• Domestic work is employment performed for a household under a written employment contract.
• It is prohibited to hire a domestic worker under the age of 16.
• The employer may provide accommodation to the employee but does not have the right to deduct its cost from the salary.
• Working hours are determined by the parties, but the employee is responsible for keeping their own time records.
• The employment contract may specify certain work periods.
• An employment contract with a domestic worker may be terminated at the initiative of either party.

Article on the Topic: Debtor’s Period

Kateryna Manoylenko, Attorney, Partner, Head of Litigation Practice at GOLAW
Kateryna Tsvietkova, Attorney, Partner of Litigation Practice at GOLAW
Ihor Selivakin, Attorney, Lawyer at GOLAW

The most notable changes were introduced to the Bankruptcy Procedure Code of Ukraine (hereinafter – the Code) by Law of Ukraine No. 3249-IX dated July 13, 2023, which, among other things, supplemented the Final and Transitional Provisions of the Code with a new paragraph 1-6.

In particular, this paragraph of the Code introduced the possibility for the commercial court to refuse to initiate bankruptcy proceedings at the creditor’s request, if the debtor proves to the court that the creditor’s claims were not satisfied due to armed aggression against Ukraine, including cases where:

• The debtor’s entire property complex is located in areas where hostilities are ongoing (or have taken place).
• The debtor’s property complex is located in temporarily occupied territories.

Thus, if, due to russian aggression or the debtor’s property complex being located in a combat zone or occupied territories, the creditor’s claims were not satisfied, the commercial court refuses to initiate bankruptcy proceedings.

Undoubtedly, by introducing this provision into the Code, the legislator pursued the correct goal – to grant debtors affected by russian armed aggression the opportunity to continue business operations.

However, in practice, dishonest debtors have begun to use this provision to prevent the initiation of bankruptcy proceedings and evade their obligations to creditors.

For example, in Case No. 910/2423/23, the debtor claimed that the commercial court had grounds to refuse to initiate bankruptcy proceedings due to the presence of the debtor’s integrated property complex in the occupied territories of Ukraine, as well as insolvency caused by armed aggression.

At the same time, an important fact in this case was that the debtor had previously sold its property complex to a russian business.

However, the Supreme Court, in its ruling dated August 29, 2024, in Case No. 910/2423/23, outlined the circumstances established by lower courts in this case that make it impossible to apply paragraph 1-6 of the Code:

• The debtor continued business operations (production and sale of goods) in the temporarily occupied territories even after the occupation of the areas where the debtor’s production facilities were located.
• The debtor failed to take action to relocate production from the occupied territory of Ukraine to a territory free from occupation.
• The debtor disposed of its property complex before the full-scale invasion, which was located in the occupied territories of Ukraine.
• The debtor has assets in territories of Ukraine that are free from occupation.

Criminal Law Practice

The Supreme Court Determines the Beginning of Military Service for Mobilised Citizens in a Criminal Case

The Criminal Court of Cassation of the Supreme Court in case No. 233/2667/23 established that for a citizen called up for military service during mobilisation for a special period, the commencement of military service is marked by a departure from the territorial centre for recruitment and social support to an army unit, not by the swearing of the oath.

In the framework of this criminal proceeding, the serviceman was found guilty under Part 4 of Article 402 of the Criminal Code of Ukraine for refusing to comply with a combat order to equip defensive structures, which could have led to an enemy breakthrough. The defence of the accused insisted that he had legal grounds for disobedience, as he had not taken the military oath, had not received military training and considered his mobilisation illegal.

The Supreme Court upheld the lower courts’ decisions, emphasising that the defendant’s refusal to take the oath and undergo training was a consequence of his own actions. The Court referred to Article 24 of the Law of Ukraine “On Military Duty and Military Service”, which does not link the fact of taking the oath to the beginning of military service. Thus, a mobilised person acquires the status of a serviceman from the moment he is sent to an army unit.

The Supreme Court Clarifies the Application of the Statute of Limitations for Executing a Sentence

On 10 February 2025, the Supreme Court, in its ruling in case No. 229/207/24, determined the key aspects of applying the statute of limitations for executing a guilty verdict.

Under Article 80 of the Criminal Code of Ukraine, a person is released from serving a sentence if the sentence has not been executed within the established time limits, which depend on the type and severity of the sentence. For example, the statute of limitations for minor offences is 5 years; for grave offences – from 5 to 10 years; and for special grave offences – up to 15 years. If the convicted person evaded punishment, the statute of limitations is suspended, and if a new crime is committed, it is counted anew.

The Court clarified that a sentence whose statute of limitations has expired could not be joined to the sentence imposed under a new verdict when deciding on the cumulation of sentences under Article 71 of the Criminal Code of Ukraine.

In a particular criminal proceeding, the Court may decide to release a person from serving a sentence due to the expiry of the statute of limitations for executing a conviction if there are grounds for this under Article 80 of the Criminal Code of Ukraine. Such a decision can be made under the procedure provided for in Articles 537 and 539 of the Criminal Procedural Code of Ukraine and based on the criminal case results, which should be indicated in the operative part of the court decision.