With effect from 23 September 2014, the National Bank of Ukraine (the "NBU") introduced a number of additional contingency measures related to certain foreign trade and investment transactions and, at the same time, relaxed previously introduced rules on the mandatory sale of foreign currency proceeds.
What Measures Apply?
The NBU has prohibited the following transactions in foreign currency:
- payments in import transactions for goods that are not actually delivered to Ukraine;
- payments under import contracts if the goods under such contracts were delivered and customs formalities were fulfilled more than 180 days ago;
- repatriation of proceeds of the sale of (i) securities of Ukrainian issuers, if such sale was not conducted at a stock exchange (except for sovereign bonds), or (ii) corporate rights (other than shares);
- repatriation of dividends to foreign investors (except for dividends on securities traded at stock exchanges); and
- payments permitted by individual licenses issued by the NBU (except under licenses issued to legal entities for opening bank accounts abroad and depositing foreign currency in such accounts).
Foreign investors are entitled to receive the purchase price for securities or corporate rights, or dividends in foreign currency, on their investment accounts in Ukraine. However, such proceeds can not be transferred abroad.
The National Bank of Ukraine reduced the maximum amount of foreign currency that one bank can sell in cash per capita a day from the equivalent of UAH15,000 to UAH3,000. This restriction does not apply if the foreign currency is purchased to repay loans denominated in foreign currency.
Reduction of the Mandatory Sale of Foreign Currency
Along with the introduction of the above measures, the NBU has relaxed the requirement for legal entities and representative offices to sell a portion of the foreign currency proceeds received from abroad, from 100% to 75%.
Actions to consider
According to the NBU the measures introduced are of a temporary nature and will be revoked once the negative factors currently affecting the forex market are mitigated. Until that happens, we recommend you to consider the following:
- making an inventory of the contracts your Ukrainian entity has with foreign partners, under which it acts as payer, to make sure that the payments are made/scheduled to be made not later than 180 days after the delivery of the goods. Contracts, including any templates, providing for other settlement schedules may need to be amended;
- in case of public joint stock companies, applying for trading/listing at a stock exchange (if not done already);
- revisit any transaction structures you may have, especially if they involve Ukrainian purchasers, to analyze the impact of the new rules in each particular case.
The introduction of these contingency measures is aimed at stabilizing the situation in the forex market. The NBU expects these measures to increase the inflow of foreign currency into Ukraine, mainly due to transactions other than foreign-trade transactions. In practice local players will have to quickly adapt to the new rules both in their commercial and investment activities.