Earlier this month, the Law of Ukraine “On amendments to certain laws in relation to improvements of the state registration of rights to real estate and protection of ownership rights” (the “Law”) came into effect, aimed primarily at preventing the misappropriation of immovable property and corporate rights following the recent substantial liberalisation of administrative registration procedures. These changes should be taken into account by all market participants planning to enter into immovable property transactions, register legal entities, change their participants, directors, or carry out other actions subject to registration.
Registration of rights to immovable property
Place of registration
The new rules abolish the extraterritorial principle for notaries: notaries, like other registrars, may perform registration actions only within the respective administrative-territorial unit (oblasts, or cities such as Kyiv or Sevastopol, Crimea).
Examination of grounds for a registration action
To avoid possible abuses and misappropriations of property, when making a registration, the registrar in particular undertakes:
- to immediately notify the owner of immovable property of filing/receiving the request to pursue the respective registration action;
- to verify the information from the State Land Cadastre and other registers, including the Uniform State Register of Judgments;
- to make electronic copies of the documents being the basis for the registration action (or use documents in electronic form) and to upload them into the State Register of Proprietary Rights to Immovable Property (the “State Register”).
Having been notified about the initiated registration actions, the owner of immovable property may request to defer the registration action, and may further revoke such request. Notwithstanding the existence of such a request, the state registrar will have to resume the registration procedures unless it receives within 10 (ten) business days a relevant court decision prohibiting such registration action.
The state registrar may implement registrations without any application of an interested party, on the basis of notices served by the State Judicial Administration concerning entry into legal force of judicial decisions relating to the acquisition, change, termination of rights to immovable property, or related encumbrances, and pertaining to making amendments to the records of the State Register.
Confirmation of the right/title registration
To confirm the state registration of rights/titles, a duly signed and sealed extract in a paper form may be issued by the registrar.
Period of state registration and administrative fee
The Law provides for the general five-day period to register the right of ownership and other proprietary rights (except for mortgage) and increase the period to register encumbrances and mortgages up to two business days. Any rights stemming from notary acts should be registered immediately, but no later than within the above-stated periods.
Ownership to a company/enterprise as integral property complex should be registered in accordance with the general rules.
If rights are registered as a result of notary act, then irrespective of the period of the state registration the administrative fee will amount to 10% of the statutory minimum salary. An administrative fee of 2.5% of the statutory minimum salary should be paid to receive an extract from the State Register in paper form, and half this amount – for an electronic document.
Registration of legal entities
Place of registration
The new rules limit the application of the recently introduced extraterritorial principle in registration of legal entities. At present, any registration action in relation to a legal entity may be carried out within the respective oblast or cities with special status such as Kyiv or Sevastopol, and Crimea.
Based on a decision of the Ministry of Justice, the registration actions may be performed within several administrative-territorial units. This, in particular, concerns the possibility to carry out registration actions in neighbouring oblasts regarding the legal entities registered in Crimea.
Requirements to documents
The Law specifies additional requirements to documents, which are the basis of the registration actions. In particular, any decision taken by the competent body of legal entity and Articles of Association should be:
- in writing;
- bound and numbered; and
- signed by the founders (participants), their authorised persons or Chairman and Secretary (if such a decision is taken by the General Meeting, but in no case when incorporating a legal entity). The Articles of Association shall provide for the procedure how it has to be signed.
The authenticity of signatures on Articles of Association and on the decisions resulting in changes of information contained the Unified Companies Register (e.g., change of participants or directors) has to be certified by notary.
Requirements as to notary certification of signatures should also extend to transfer acts or demerger balance sheets in case of mergers, acquisitions and other transformations of legal entities.
An original counterpart or notarised copy of the founders’ decision should be submitted when incorporating a legal entity.
Under the new rules, the registrar can issue a sealed hardcopy extract from the Unified Companies Register in relation to a legal entity.
The Law strengthens the responsibility of the persons engaged in registration actions both concerning immovable property and legal entities, including by amending the Criminal Code and establishing a mechanism for the Ministry of Justice to exercise control over the registration.
Thus, decisions, actions or inactions of the state registrar may be challenged by the person concerned at the Ministry of Justice, its local departments or the courts. Following the examination of such a complaint or in case of violations as detected during the exercise its controlling function, the Ministry of Justice (or its local departments) has the right to recommend to the High Qualification Commission of Notaries to cancel the notary license. The threat of severe sanctions should reduce the number of violations by dishonest notaries when they discharge the functions of state registrars.