On 01 November 2018, the President of Ukraine signed a recently adopted by the Ukrainian Parliament Law of Ukraine “On Amendments to Certain Legal Acts of Ukraine on Resumption of Lending” (the “Law”). The Law significantly contributes to eliminating legislative gaps that have long been used by unscrupulous debtors to evade fulfilment of their contractual obligations towards banks and other creditors.

Once it comes into effect, the Law will establish the preconditions to resume more intensive lending in Ukraine and facilitate customers’ access to various banking services. The adoption of the Law received support from the main international financial institutions cooperating with Ukraine, such as the International Monetary Fund, the European Bank for Reconstruction and Development, the World Bank, and the International Financial Corporation.


The law ensures that debtor’s winding up will no longer cause a mortgage/pledge to be terminated, provided the creditor has enforced its rights under the pledge/mortgage agreement by way of filing a court claim or enforcement notice before the liquidation is complete.

The Law also extends mortgage to any reconstructions or unauthorised constructions carried out in relation to the collateral. This means that reconstructed collateral, as well as any new real estate objects built on the same land plot provided it is owned or lawfully used by the mortgagor, will be considered as part of the collateral under the initial mortgage agreement. Previously, unscrupulous debtors widely exploited a legislative gap allowing them to reconstruct mortgaged assets and apply to terminate or invalidate the mortgage agreement, claiming that the initial real estate object had ceased to exist and that the reconstructed collateral was a new real estate object not covered under the initial mortgage agreement.

Out-of-court enforcement of a mortgage will no longer result in the automatic discharge of secured obligations in full in relation to legal entities or individual entrepreneurs, unless otherwise agreed in the mortgage and/or loan agreement. In relation to individuals, however, the parties will have to agree expressly in the mortgage agreement that such automatic discharge does not apply. Thus, the creditors will be able to seek to satisfy their claims from other available assets of the debtor if the value of the mortgaged asset does not fully cover such creditor’s claims.

The Law clarifies that a pledge agreement does not have to specify the nature, amount and term of the secured obligation but may contain a reference to the underlying agreement secured by pledge instead. This allows the parties to simplify the wording of the pledge agreement and avoid doubling the identical provisions in both documents.

The Law also repeals the requirement to notarise agreements for pledging vehicles. At the same time, it will not be possible to register ownership of a vehicle that has been pledged without the consent of the pledgee.


Under the existing regulations, a suretyship is deemed terminated if the underlying secured obligations are scaled-up without the surety provider’s consent. The Law stipulates that if an underlying obligation is changed without the surety provider’s consent, the suretyship will nevertheless remain binding for the scope and extent of the surety before the change. Surety providers that granted suretyships for the same obligations of the same debtor, whether in a single suretyship agreement or in separate agreements, will be considered as jointly and severally liable unless otherwise provided in the suretyship agreements.

If the due date of a secured obligation is not specified in the respective agreement or is determined by the moment of performance request from the creditor, the creditor will be allowed to bring an action against a surety for three years after the suretyship is executed instead of one year under the existing regulations. If the obligation secured by a surety is to be performed in parts, a three-year term would be calculated for each of these parts separately.

In addition, winding up of the borrower will no longer cause termination of the suretyship, provided that the creditor has initiated court proceedings against the surety claiming breach of obligation by the borrower before the liquidation is complete. Furthermore, the suretyship is terminated if the borrower changes, unless the surety provider has consented to secure the obligations of other borrowers whose consent can be provided not only during assignment, but also in advance in the suretyship agreement.

Loan agreements

The Law also requires banks and financial institutions to notify the borrower about changes in the interest rate in loan agreements with a floating interest rate within 15 days following the date from which the new rate applies. It also explicitly stipulates that if the borrower disagrees with a new interest rate value, its outstanding obligations under the loan agreement become due and payable in full within 30 calendar days after receiving the bank’s or financial institution’s notice. We note, however, that this rule will only apply if the bank or financial institution determine a new interest rate value pursuant to the procedure for adjusting a floating interest rate agreed in the loan agreement. The amendment in no way authorises lenders to unilaterally change fixed interest rates or the procedure for determining the floating interest rate.

Also, the Law clarifies the regulation of various issues related to disclosing bank secrets (e.g., the death of an account owner), use of bank agreements in electronic form, clarifications regarding the determination of the auction price in the case of enforcement, etc.

The final text of the Law has not yet been officially published thus the available text may have been subject to editorial changes. The Law will come into effect 3 months after its official publication. It is important to note that the Law mentions that it will also apply to agreements that had been in effect before the Law became operational, but continue onwards.


Law of Ukraine “On Amendments to Certain Legal Acts of Ukraine on Resumption of Lending” No. 2478-VIII dated 3 July 2018.

The Law amends the following legislative acts:

  • The Civil Code of Ukraine, dated 16 January 2003, as amended;
  • Law of Ukraine "On Banks and Banking Activity", No. 2121-III dated 7 December 2000, as amended;
  • Law of Ukraine "On Payment Systems and Transfer of Funds in Ukraine", No. 2346-III dated 5 April 2001, as amended;
  • Law of Ukraine "On Pledge", No.2654-XII dated 2 October 1992, as amended;
  • Law of Ukraine "On Mortgage", No.898-IV dated 5 June 2003, as amended;
  • Law of Ukraine "On Road Traffic", No.3353-XII dated 30 June 1993, as amended;
  • Law of Ukraine "On Notaries", No.3425-XII dated 2 September 1993, as amended;
  • Law of Ukraine "On State Registration of Rights to Real Estate and Their Encumbrances", No.1952-IV dated 1 July 2004, as amended; and
  • Law of Ukraine "On State Registration of Civil Status Acts", No.2398-VI dated 1 July 2010, as amended.