Extending martial law in Ukraine: consequences for business

Contents

  1. Force majeure
  2. State registration during martial law and operation of state registers
  3. Carrying out notarial actions
  4. Rules for making trans-border payments
  5. Limits on operations on cross-border transfer of currency
  6. Labour relations during martial law

On August 15, Verkhovna Rada of Ukraine approved the Decree of the President of Ukraine dated August 12, 2022 No. 573 “On Extending the Period of Martial Law in Ukraine”, thereby having extended the period of martial law and general mobilization in Ukraine from 5:30 a.m. on August 23, 2022, until November 21, 2022.

In connection with the prolongation of martial law in Ukraine, the business will continue to function with certain restrictions and peculiarities. Below you will find detailed information on current financial, corporate, and labour issues for business during wartime.

Force majeure

As before, the military aggression of the russian federation against Ukraine and the introduction of martial law in Ukraine are considered force majeure circumstances.

The occurrence of force majeure circumstances is certified by the relevant letter of the Chamber of Commerce and Industry of Ukraine dated February 28, 2022 No. 2024/02.0-7.1. In the mentioned letter, the Chamber of Commerce confirmed that the specified circumstances from 5:30 a.m. on February 24, 2022, until their official end are considered extraordinary, unavoidable, and objective circumstances for business entities and/or private individuals under a contract, a separate tax and/or other obligations/undertakings, the performance of which has occurred in accordance with the terms of the agreement, contract, arrangement, legislative or other regulatory acts and the performance of which has become impossible within the prescribed period due to the occurrence of such force majeure circumstances.

At the same time, it should be emphasized that the presence of the indicated letter of the Chamber of Commerce does not release the obligation of the parties to the contract to receive the corresponding certificate of the Chamber of Commerce to confirm the impossibility of fulfilling obligations due to force majeure.

In this regard, after more than 5 months of martial law in Ukraine, the courts managed to develop certain case law regarding the interpretation of force majeure circumstances in the conditions of war. The main points emphasized by the judges are as follows:

  • force majeure exempts from responsibility for non-fulfillment of an obligation (meaning, in particular, the payment of penalty and compensation for damages), but not from the fulfillment of the obligation itself (that is, the parties remain obligated to fulfill their obligations);
  • the letter of the Chamber of Commerce dated February 28, 2022, itself is not sufficient to confirm the existence of force majeure in relation to a specific obligation. Invoking force majeure as a basis for exemption from liability, the interested party must prove how exactly the military actions affected its ability to fulfill a particular obligation, that is, the existence of a relationship between the military actions that are force majeure and inability to fulfill own obligations;
  • lack of funds does not affect the debtor’s obligation to fulfill his monetary obligation, and should not be considered not a force majeure circumstance.

State registration during martial law and operation of state registers

Given the prolongation of martial law in Ukraine, certain features of the state registration of legal entities, individual entrepreneurs, and public organizations, as well as real estate rights and their encumbrances introduced by the Cabinet of Ministers of Ukraine, remain in force.

Taking into account the relevant restrictions, the state registration of legal entities, individual entrepreneurs, and public organizations, as well as real estate rights and their encumbrances during martial law may be carried out by:

  • state registrars of legal entities, individual entrepreneurs and public organizations, state registrars of real estate rights and their encumbrances, who are in labor relations with the subject of state registration (except for subjects located within the temporarily occupied regions of Ukraine);
  • officials of the Ministry of Justice, its territorial offices, the list of which is notified in writing by the Ministry of Justice to the technical administrator of the Real Estate Registry/Unified State Register;
  • notaries, included in the list of notaries approved by the Ministry of Justice, who perform notarial actions regarding valuable property under martial law (the “List of Notaries”).

The Unified State Register of Legal Entities, Individual Entrepreneurs, and Public Organizations operates partially. Currently, it is possible to conduct the most requested registration actions, such as:

  • incorporation of legal entities and farming commercial entities;
  • change of director of a legal entity, except for public organizations;
  • change of address of a legal entity (if as a result of the change, the new address will not be on the temporarily occupied regions);
  • transfer of a share in the authorized capital of a business entity (notaries not included in the list approved by the Ministry of Justice are prohibited);
  • incorporation of charitable organizations and public organizations and making amendments to information about them, etc.

The State Register of Rights to Immovable Property and their Encumbrances has almost completely resumed its activities. Currently, most operations are allowed with certain peculiarities and restrictions, in particular:

  • conducting state registration of real estate rights and their encumbrances on the basis of contracts certified by a notary after February 25, 2022, until the day of its inclusion in the list of notaries is prohibited;
  • state registration of the acquisition of real property is prohibited before the end of one month from the date of state registration of the previous acquisition of such property if each such acquisition was made on the basis of a contract or in connection with the transfer of property rights of a legal entity as a contribution to the authorized capital, initial, membership and target contributions of members of the cooperative, etc., or in connection with the exit of the founders (participants) of the business entity.

State registration of legal entities, public organizations, immovable property, the location of which is in temporarily occupied settlements, according to the list determined by the Ministry of Justice, is carried out regardless of the location of such legal entity, public organization, immovable property.

As of August 16, 2022, the operation of the Unified Register of Debtors, the State Register of Encumbrances over Movable Property, the Electronic Register of Apostilles, the Unified State Register of Court Decisions, the Inheritance Register, the Register of Powers of Attorney, the Unified Register of Special Forms of Notarial Documents, the Register of Civil Acts, the Register of Agricultural Receipts and other registers, the holder of which is the Ministry of Justice in all regions of Ukraine, except for certain areas in the Donetsk, Kharkiv, Mykolaiv, Zaporizhzhia regions where active hostilities are taking place and the entire Luhansk and Kherson regions.

Carrying out notarial actions

State and private notaries of Ukraine continue to work under martial law and perform urgent notarial actions, such as notarizing powers of attorney (with certain exceptions), wills, authenticating signatures on applications, opening inheritance cases, etc.

At the same time, some notarial actions such as:

  • notarization of contracts on the alienation, division (separation) of real estate, inheritance contracts, mortgage contracts, on the replacement of the creditor under a credit contract and/or mortgage contract, determining the size of shares in the right of joint ownership, contracts on the division of common property of spouses (separation from it), loans, hiring (lease), leasing of a building or other capital structure (a separate part thereof) for a period of at least three years, alienation of securities, corporate rights, including agreements on amendments to such agreements or their termination, etc;
  • notarial certification of powers of attorney for the right to dispose of real estate, manage and dispose of securities, corporate rights;
  • certification of the authenticity of the signature on the acts of acceptance and transfer of a share (part of a share) in the authorized (compounded) capital (statutory fund) of a legal entity;
  • issuance of certificates of ownership of a share in joint property of spouses (former spouses) under their joint application, certificates of acquisition of property from public auctions (electronic auctions), including those that did not take place

are carried out exclusively by notaries, included in the list of notaries who perform notarial actions on valuable property under martial law approved by the Ministry of Justice of Ukraine.

In addition, during the period of martial law, but for no more than 4 months, the period for accepting inheritance or refusing to accept it is suspended.

Rules for making trans-border payments

Updated rules on making trans-border payments in Ukraine are currently contained in the Resolution of the National Bank of Ukraine “On the Operation of the Banking System During the Introduction of Martial Law” No. 18 as of February 24, 2022 (the “Resolution”).

First of all, it should be emphasized that there are no restrictions on making payments from abroad. Therefore, all payments and settlements for work performed, services rendered, etc., take place freely and without any restrictions imposed due to martial law.

However, certain restrictions should be noted, in particular: the prohibition of crediting funds to the accounts of clients of natural persons by transfers initiated using electronic means of payment issued by participants of international payment systems operating in the territory of the Russian Federation and the Republic of Belarus; a ban on accepting in Ukraine electronic means of payment (including transfers, making calculations and issuing cash) issued by participants of international payment systems operating on the territory of the Russian Federation and the Republic of Belarus.

Concerning payments abroad, the Resolution introduces a ban on cross-border transfers of currency values ​​from Ukraine by relevant institutions on behalf of clients, except for:

  • own operations of the banks, including settlements with international payment systems;
  • import operations of residents for the purchase of critical import goods according to the list approved by the Cabinet of Ministers of Ukraine;
  • currency operations of MFIs, including representative offices of MFIs, as well as currency operations of residents and non-residents for the transfer of funds in foreign/national currency for the purpose of settlements with the MFI or its representative office;
  • operations to return to a non-resident the advance payment received by the resident to his current account in a bank in Ukraine after February 23, 2022, under the contract for the purchase and sale of goods concluded with the non-resident, in connection with the resident’s non-fulfillment of obligations under this contract;
  • foreign exchange transactions conducted by residents and non-residents for mobilization and other measures (needs) determined by the laws of Ukraine regulating relations in the spheres of national security and defense;
  • operations for payment of expenses for treatment in medical institutions of a foreign country, payment of expenses for transportation of patients, payment of expenses related to the death of citizens abroad (transportation expenses and burial expenses), including operations to make insurance payments (insurance indemnities) under insurance contracts of persons traveling abroad to the accounts of assisting non-resident companies; settlements (payment of the cost of goods, works and services) abroad using electronic means of payment: for an amount equivalent to up to 100,000 hryvnias inclusive per calendar month from all bank client accounts opened in national currency; without limitation of the amount from all client’s bank accounts opened in foreign currency;
  • on the basis of individual permits (decisions) of the National Bank of Ukraine, adopted on the basis of appeals from the Cabinet of Ministers of Ukraine, ministries, and other state bodies of Ukraine;
  • transfers in favor of diplomatic missions, consular institutions of Ukraine abroad;
  • transfer to a foreign investor/non-resident of the funds received in connection with the repayment/payment of income on bonds of the domestic state loan of Ukraine made after April 1, 2023, in accordance with the terms of their placement (issue);
  • transfer of funds in foreign currency from correspondent accounts in non-resident banks in foreign currency opened in resident banks.

Limits on operations on cross-border transfer of currency

In accordance with the Resolution of the Board of the NBU No. 5 dated January 2, 2019 “On the Approval of the Regulation on Protection Measures and Determining the Procedure for Carrying Out Certain Transactions in Foreign Currency”, it is possible in Ukraine for private individuals freely to carry out cross-border currency transactions without providing any additional documents on the transfer of currency ​​by taking them out/forwarding them outside of Ukraine in a total amount not exceeding the equivalent to EUR 10,000 on the day of the export/forwarding.

In the case of carrying out such operations with amounts exceeding the specified limit, it is necessary to provide documents confirming:

  • withdrawal of cash by an individual from his own bank accounts and a receipt for a currency exchange transaction with this cash (in the case of carrying out such transaction) only for the amount exceeding the equivalent to EUR 10,000 on the day of exportation/forwarding;
  • purchase by this person of banking metals from banks and/or the National Bank exclusively for the amount that exceeds the equivalent of EUR 10,000 on the day of exportation/forwarding.

The respective documents are valid for 90 days from the moment of their issuance.

Labour relations during martial law

During the period of martial law in Ukraine, special rules of labour relations continue to apply, including:

  • There are new grounds for dismissing employees. In particular, the ground for termination of labour relations is the employee’s absence from work and information about the reasons for such absence for more than four consecutive months. In addition, employers are given the right to dismiss an employee on their initiative in connection with the impossibility of providing the employee with the work specified in the labour  agreement due to the destruction (absence) of production, organizational and technical conditions, means of production or the employer’s property as a result of hostilities. The employer will be able to terminate the labour  agreement due to this reason if it is not possible to transfer the employee to another job. The employee must be notified of such dismissal no later than 10 calendar days in advance and be paid severance pay in the amount of at least the average monthly salary.
  • The Law of Ukraine “On the Organization of Labour Relations under Martial Law” allowed employees and employers to suspend the labour  agreement during martial law if the employer cannot provide work to the employee due to the military aggression of the russian federation, and the latter is unable to perform the work. The employer must issue an order specifying the reasons and terms for the suspension of the labour  agreement, the number and data about employees with whom the agreement is being suspended, as well as the conditions for resuming the agreement.
  • Changes in essential terms of employment can take place in a simplified way. This means that the employer does not have to notify the employee about such a change within two months. However, in any case, the notification of the employee about the change in essential terms of employment is carried out no later than before the introduction of such conditions.
  • The employer is obliged to provide an employee who has left the territory of Ukraine or acquired the status of an internally displaced person, upon his application, unpaid time off for the duration specified in the application, but no more than 90 calendar days.
  • The law exempts employers from the obligation to pay average earnings to employees called up for military service. However, as before, the employer is obliged to keep the place of work for such employees. At the same time, during mobilization, the employer has the right to temporarily assign the duties of the mobilized employee to another employee or hire a new employee for the position of the mobilized employee under a fixed-term labour agreement.

If you have any questions about the operation of your business during martial law, please contact GOLAW experts and we will give answers to all questions.

Kateryna Tsvetkova

Kateryna Tsvetkova

Counsel, Attorney at law

  • Recognitions
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Oleksandr Melnyk

Oleksandr Melnyk

Counsel, Head of Corporate Law and M&A practice, Attorney at law

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