On 6 October 2016, the Parliament adopted the Law of Ukraine "On Amendments to Certain Legislative Acts of Ukraine to Improve State Registration of Rights to Real Estate and Protection of Property Right" (registration No. 5067) (hereinafter – the "Law"). At this time, the Law is getting prepared for signing by the President, who has already spoken in support of the Law and promised to sign it.
The Law is aimed against the fraudsters, who illegally obtain other persons’ real estate, corporate rights and other assets misusing recent registration procedures simplification. At the invitation of one of the MP-initiators of the draft law, lawyers of Vasil Kisil & Partners joined in drafting the Law and some proposals of our team were reflected in the updated draft.
The key instruments against illegal takeovers provided by the Law are as follows:
- The registrar will notify the real estate owner about the application to carry out registration act with its property. The owner will have the right to temporarily suspend such registration act but in parallel has to apply to the court for a respective injunction. This procedure should prevent the practice of re-registration of rights to real estate without its legal owner’s knowledge;
- The exterritorial principle for state registrations of legal entities is abolished. The registration will be performed within the boundaries of the Autonomous Republic of Crimea, certain oblast (region), and cities of Kyiv and Sevastopol;
- The authenticity of signatures on the documents submitted for the state registration (Charter, corporate resolutions, participant’s withdrawal statements) will require notary certification. For the charity funds and other NGOs notary certification of signatures will be mandatory only if required by the Charter;
- A company’s Charter should regulate, among other issues, the procedure for its signing. Appropriate procedures may protect the company against the changes made without the true owners’ knowledge;
- Liability for document forgery and other violations of registration procedures will be significantly strengthened;
- The Law also clarifies the procedure for obtaining a digital signature, procedural aspects of the registers functioning and their interaction, the monitoring in the area of the state registration, and a number of other procedures.
Except for some provisions, the Law will take effect on the next day after its publication. Before that, changes to the Charters may be registered under the current procedure without notary certification of the signatures. On the other hand, fraudsters may also take this opportunity. Hence, business should be particularly careful within the last days before the new procedure will come into effect.