On 26 April 2015 Law of Ukraine No. 1700-VII "On Prevention of Corruption" dated 14 October 2014 (the "Law") establishing a number of new obligations and limitations on business entities. Below you can find a brief summary of only a small part of the new requirements.
The Law provides for the establishment of the National Agency for Prevention of Corruption (the "Agency") designed to ensure implementation of the public anti-corruption policy. In particular, the Agency may accept reports from any individual or legal entity on violation of the Law, initiate and carry out any examination of potential violations, have access to any documents or other materials of the company necessary for such examination etc.
Founders (members) are liable for prevention of corruption in the activities of legal entities
According to the Law, corruption risks must be regularly evaluated, and anti-corruption measures must be taken by both the officers and the founders (or members) of a company. Any officer or official, or other employees must:
- not commit or take part in committing corrupt offenses related to the legal entity's activities;
- refrain from any conduct that may be regarded as readiness to commit any corrupt offense related to the legal entity's activities;
- immediately inform the officer responsible for preventing corruption in the activities of legal entity, the head or the founders (members) of the legal entity in the event of (i) incitement to commit a corrupt offense related to the legal entity's activities; (ii) corrupt acts (or related) or offense by any other employee of the legal entity or any other person; or (iii) any actual or potential conflict of interests.
The Law provides that companies must put into effect anti-corruption programs (the "Program") for:
- any legal entity engaged in public procurement (if the cost of procurement is equal to or over 1 mln UAH for the procurement of goods, and 5 mln UAH for the procurement of services);
- any public/municipal company or business (having public/municipal share over 50%) with an average number of more than 50 listed employees (in the referenced financial year), and over 70 mln UAH of gross sales for such period.
Among other things, the Program should provide for the ability to maintain the confidentiality of information reported to the person in charge of the Program's implementation (the "Authorized Person") by employees about any fact of being incited to commit a corrupt offense; the procedure of protection of such employees; and the procedure of periodic training of employees on anti-corruption legislation matters, etc.
The Program must be approved only after having been discussed with the employees of the company, and must always be available to them. Furthermore, provisions on obligatory compliance with the Program must be incorporated into employment agreements with the employees of the company as well as the company's internal regulations. Such provisions may be incorporated into any other agreement of the company.
Authorized Person in charge of Program implementation
Any company adopting the Program must appoint the Authorized Person that is a company's officer.
The Law also provides for the conditions to dismiss the Authorized Person from his/her position early. In particular, among other things, he/she can be dismissed at the request of the head of the company or its founders (or members) subject to consent of the Agency (the latter is required for any company that must adopt the Program). In addition, the head of the company must notify the Agency of the Authorized Person's dismissal within two business days, irrespective of the reason for such dismissal.
Gifts to persons entrusted with state duties
The Law also lists requirements for any gift that may be accepted by government officials. In particular, such gift:
- must comply with the generally accepted idea of hospitality;
- its maximum one-time value must not exceed one minimum monthly salary, as determined on the day such gift was accepted;
- the aggregate value of such gifts received from the same person (or a group of persons) within a year must not be more than twice the rate of the cost of living, as determined for an able-bodied person as of 1st January of the year in which the respective gifts were accepted.
At the same time, any decision made for the benefit of a person who has given a gift to the respective person or any member of his/her family is subject to cancellation or may be found invalid by the court.
Government authorities are prohibited from obtaining any privilege, service or property
According to the Law, no government or municipal authority may obtain funds, property, or intangible assets, etc. from any individual or legal entity without consideration, except for when otherwise provided by any laws or international treaties in force.
Any violation of the Law can be examined on the grounds of anonymous notifications. As a rule, such notification must be reviewed within no more than 15 days after its receipt to determine whether any information in it refers to a certain person or provides verifiable data.
Effects of violation of anti-corruption legislation
The Law provides for the following adverse effects for violating the anti-corruption legislation:
- any decision made in violation of the Law is subject to cancellation by a competent authority/officer or may be found illegal by the court;
- any agreement concluded in violation of the anti-corruption legislation may be found invalid;
- any funds or other property obtained as a result of a corrupt offense must be subject to seizure or special seizure on the basis of a court decision as provided for by legislation.
Furthermore, certain information on individuals or legal entities will be entered into the Unified State Register of Persons that Committed Corruption (or Related) Offenses. Such information is available free of charge 24 hours a day.
Hence, as soon as possible, legal entities must adopt (if necessary) the anti-corruption program, appoint the authorized person, introduce the required amendments to employment agreements with its employees and implement internal regulations. In addition, compliance due diligence should be carried out in respect of the contracting companies, in particular, those operating in the spheres with potentially high risks of corruption, and strict compliance with the anti-corruption legislation should be ensured.