On 1 January 2017 the Law of Ukraine On Amendments to the Law of Ukraine On Fundamentals of Public Supervision (Control) of Business Activity (regarding Liberalization of Public Supervision (Control) of Business Activity) and the Law of Ukraine On Temporal Peculiarities of Public Supervision (Control) of Business Activity (hereinafter the “Laws”) became effective. The Laws should ensure liberalization of state supervision (control) of economic activity in Ukraine.

The Laws were developed in order to refer to and implement the Deregulation Plan and are in the line with Ukraine’s commitments under the cooperation with the International Monetary Fund. The Laws should significantly simplify the business environment by limiting the state’s influence on business whilst also promoting its cooperation with the government.

The major changes introduced by the Laws include the following:

  • extension of a moratorium for state supervision authorities on business routine audits until 31 December 2017; however, the moratorium is subject to certain exceptions: the state supervision authorities can conduct extraordinary inspections based on a court’s decision, application of a natural person which suffered damages (approved by the Public Regulatory Service), written request of a business entity and in case of emergency or causality caused by the company's business activity.
  • setting out of transparent and unified rules for state inspections;
  • introduction of a presumption of innocence for business which means that ambiguities in the legislation shall be interpreted in favour of business;
  • establishment of an integrated public database of state inspections which should contain information on scheduled and already carried out inspections;
  • introduction of clear rules for applying the risk criteria when scheduling annual inspections and abolition of quarterly state inspections;
  • limiting the frequency (which will depend on the assigned risk criterion) and the duration of inspections (which will depend on the size of the business); and
  • improvement of a mechanism of providing consultations by state supervision authorities. State supervision authorities can address consultations to all business entities or to a specific one. Business entities can rely on them during audits, communication with authorities and in courts. Notably, the business entity cannot be found liable if its conduct was based on such consultation even in case it has been further amended or cancelled.

The signing of the Laws is a significant step forward towards improving the business climate in Ukraine by eliminating corruption risks and reducing the pressure on business.

It is expected that adoption of the Laws should serve as a prevention tool against abuse by the supervisory authorities in the process of supervising business in Ukraine and turning the inspection agencies from punitive into business-friendly ones.

Legislation: the Law of Ukraine On Amendments to the Law of Ukraine On Fundamentals of Public Supervision (Control) of Business Activity (regarding Liberalization of Public Supervision (Control) of Business Activity) No. 1726-VIII dated 3 November 2016 and the Law of Ukraine On Temporal Peculiarities of Public Supervision (Control) of Business Activity No. 1728-VIII dated 3 November 2016.