On March 2, The Cabinet of Ministers of Ukraine approved the amendments to Resolutions #615 and #594 of 5/30/2011 determining procedures of granting special permits for subsoil use and procedures for conducting auctions for selling such kind of permits. The Better Regulation Delivery Office (BRDO) developed this document jointly with the Ministry of Economic Development and Trade and the Ministry of Ecology and Natural Resources.
According to the BRDO head Oleksiy Honcharuk, only 5% of special permits were sold through auctions. Now this mechanism can really start working.
“The resolution significantly reduces a list of reasons previously used to avoid an auction and removes corruption barriers to allow responsible companies to participate in auctions. In particular, now the business will have enough time and information to review a lot for sale. This will allow to create a fair competition between subsoil users,” Oleksiy Honcharuk says.
Due to approved amendments, business will be able to independently initiate offering some subsoil areas for auctions. In addition, specific reasons for the refusal of subsoil use will be determined.
According to data collected with the help of the Doing Business rating methodology, the worst situation is with the settlement of insolvency proceedings among all rating components in Ukraine.
For example, the average duration of an enterprise’s bankruptcy procedure described by the rating methodology is 2.9 years (in comparison, it is 1.7 years in developed OECD countries), and its cost is 42% of the debtor’s property value (9% for OECD countries). However, the biggest shock is an index of funds provided by the domestic bankruptcy procedure for returning to a creditor – 8.3%. As regards this indicator, Ukraine shares the 161st-162nd place among 165 countries, where there is a juridical bankruptcy procedure, with Cambodia. The situation is worse than ours just in the Central African Republic, Federated States of Micronesia, Venezuela and Burundi. The result of Suriname, Liberia, the Dominican Republic, Sao Tome and Principe and Sierra Leone is a little better than our one.
At the same time, we shouldn’t think that the Ukrainian legislation is very imperfect and primitive. On the contrary, the relevant Law of Ukraine “On Restoring Debtor’s Solvency or Declaration of Bankruptcy” technically includes almost all institutions commonly found in developed countries having efficient bankruptcy systems. However, imperfect language of certain provisions of the law and especially its implementation negates any innovative attempts of legislators.
Avoidance of bankruptcy
One of the main problems of bankruptcy in Ukraine is that such a procedure is typically started by enterprises, which are insolvent for a long time and their more or less liquid assets have been already withdrawn. As a result, most creditors are left with nothing and the bankruptcy procedure doesn’t solve their problems.
Generally, according to the international practice, this problem is solved as follows: a head of an enterprise is obliged to apply to a court for bankruptcy of the company he leads if there are the first signs of insolvency. The attempt to implement this approach was made in the domestic Law On Bankruptcy, but it failed because the law didn’t provide for either the terms of such a request or the liability for non-compliance with this obligation. Hence, the law provisions on a debtor’s mandatory appeal to the court don’t actually work.
This problem can be partially solved by the draft law #3132, which is currently under consideration by the Parliament: it provides for a period, during which a debtor’s governing body will be obliged to apply to the court for insolvency. However, as before, this document won’t contain an effective system of sanctions for non-compliance with the mentioned rule.
The practice of some Western countries, where a head who hid insolvency of his enterprise and didn’t apply to the court bears joint liability for debts of the enterprise with all his assets, could be interesting in this regard.
Strengthening the protection of secured creditors’ rights
Another weak point of the Bankruptcy Law is a lack of adequate protection of secured creditors. The Bankruptcy Law is based on two basic ideas regarding these creditors:
1) maximum protection for interests of creditors, whose claims are secured by pledge (for example, by removing the pledged property from the liquidation estate; sending the proceeds from the sale of such a property exclusively to secured creditors; providing secured creditors with the right to veto a reorganization plan or a settlement agreement, etc.);
2) depriving secured creditors of an operational impact on bankruptcy procedures (by excluding their participation in the meetings and a creditors’ committee as well as depriving of right to foreclose on the pledged property by themselves).
In theory, this concept is correct and reasonable, but today, its implementation has many shortcomings. This is primary due to the fact that a secured creditor loses all control over the property, which was transferred to him as a pledge, and sooner or later finds himself in a situation, when this property is sold either at a very low price or too long or there are other difficulties. In this regard, each creditor, whose claims are secured by pledge and who is guided by common sense, doesn’t initiate a bankruptcy procedure and tries to avoid it in every possible way.
It seems that problem described above could and should be solved by strengthening the secured creditors’ control over their collateral and increasing their rights related to the sale of pledged assets. However, the efforts of the banking community to be eligible to vote in the committee or creditors’ meetings seems to be wrong, because in this case the secured creditors will decide the debtor’s fate in matters that don’t concern their rights and interests but significantly affect the rights and interests of other (scheduled) creditors.
Settlement agreement and reorganization
The bankruptcy procedure should not always end with the liquidation of debtor’s assets. Sometimes the continued operation of the enterprise after making adjustments in its activity, such as selling part of assets, debt restructuring, transferring corporate rights to creditors and others, will meet the interests of all parties concerned. The Bankruptcy Law provides such opportunities to some extent, but does this by using two different instruments, legal and economic nature of which is the same: reorganization procedure and settlement agreement.
Combining these two mechanisms in a single restructuring procedure and, therefore, providing a comprehensive approach to solve the problem of insolvency by using all available tools would make this procedure more efficient and attractive for both a debtor and a creditor.
Limits on maximum period of moratorium
The optimum bankruptcy procedure should find a balance between creditors’ and debtors’ interests as well as take into account social consequences of closing down of an enterprise. However, the current Law On Bankruptcy is considered to be rather a law that protects primarily the interests of debtors. This is largely due to the moratorium introduced for each bankruptcy procedure. This moratorium deprives creditors of the opportunity to forcibly recover the whole amount of funds from a debtor. Moratorium or its analogues exist in almost every country of the world, where there is a practice of bankruptcy, but special features of Ukraine are an excessive duration of moratorium. In fact, moratorium is applied to the whole bankruptcy procedure, hence delaying this process for several years makes it impossible for creditors to protect their rights effectively.
One of the possible problem solutions would be to introduce fixed time limits for the period of moratorium, with the expiry of which moratorium would be automatically ceased despite the continuation of a bankruptcy case. This rule would not only allow the creditors to see “a light at the end of the tunnel”, but also introduce some mechanism to speed up the bankruptcy procedure and keep to the deadlines provided by the law for such a procedure.
Appointment of an estate administrator
For all 16 years of the insolvency practitioner profession, the approach to this occupation has been the same in law and jurisprudence: “the one who has the gold makes the rules”. The main specific feature of this rule in bankruptcy is that it is important not only who has the gold, but also who influences the decision on appointing an insolvency practitioner.
Introduction of an automated system that randomly choses an estate administrator on the basis of the experience and workload of insolvency practitioners was an attempt to overcome this trend. However, according to the reviews of many experts, the operation of such a system is far from being perfect and the choice of an insolvency practitioner in “manual mode” in situations, when the system’s choice failed, allows to apply a very subjective approach to electing a candidate for insolvency practitioner.
The problem of the estate administrator’s appointment is very complex and could be solved only by implementing a range of measures, such as guaranteeing proper wages for estate administrators, introducing the effective liability mechanisms and providing creditors with the opportunity to officially and openly influence the election of an estate administrator, including by choosing the candidates offered by the automated system.
Insolvency practitioner’s fee
Society began gradually to accept the idea that as a rule, a person who manages significant resources won’t work for a minimal fee. Insolvency practitioners are a very good example of this rule. An insolvency practitioner is a person, who should have deep legal, economic, managerial knowledge and skills and should be liable for his actions (including the criminal liability).
Contrary to international practice, the Law On Bankruptcy doesn’t consider an insolvency practitioner’s fee as a priority fee in the liquidation process and guarantee the payment for labour of an estate administrator. As a result, not only insolvency practitioners who are on a financial hook of certain participants of proceedings in bankruptcy, but also many creditors, whose interests are not taken into account optimally, are suffering.
Only a high and guaranteed salary of insolvency practitioners can ensure their required minimum objectivity and impartiality in the proceedings of bankruptcy.
The Law On Bankruptcy has a number of other moments to be improved, including the better regulation of extrajudicial reorganization, recognizing foreign bankruptcy procedures and bringing the law in real line with the UNCITRAL Model Law on Cross-Border Insolvency, introducing databases for creditors to inform them about the state of bankruptcy. Special attention should be given to the bankruptcy procedure of individuals, the implementation of which would allow to regulate the status and fate of bad debts of individuals to banks in a civilized manner and partially relieve the pressure associated with foreign currency loans secured by a pledge.
All these and many other problems are awaiting to be resolved by the Ukrainian parliament which, unfortunately, is extremely reluctant to deal with the bankruptcy procedure in recent times. The Verkhovna Rada of Ukraine registered a number of draft laws aimed at improving the bankruptcy procedures (among them are #3132, #3163, #228ba, #2714 and #2353a), but their consideration is unduly delayed. For example, the draft law #3132 has been included in the agenda of the Verkhovna Rada of Ukraine six times, but it hasn’t even been considered.
The source: “Economichna Pravda”
On February 29, the Better Regulation Delivery Office (BRDO) presented a draft law providing a clear mechanism to protect the rights of owners of property to be built in the future from a double resale and illegal change of other technical specifications.
“There is no mechanism that could protect investors at present. That is why we believe that the adoption of a draft law, which would control the possibility to register ownership rights to properties that will be built in the future, is very important,” the BRDO Construction Sector Head Olena Shuliak said.
According to the Kyiv Dentons Office lawyer Angelica Livitska, every fifth buying transaction for properties to be built carries a risk.
That is why, the Draft Law “On Amendments to Certain Legislative Acts of Ukraine regarding protection of ownership rights to properties to be built in the future” provides for registering property rights to facilities that will be built. This registration will have 3 steps:
I step – a construction project owner registers the property right to every facility (apartment) to be built in the future;
II step – the property right is being reregistered in the name of an investor after acquiring the facility;
III step – the “ownership right to immovable property to be built in the future” title changes into the “ownership right to immovable property” title when the construction is finished and the facility is put into service.
It is also proposed to legislate the investor’s obligation to create a website devoted to the construction object. There must be a public information about object’s characteristics, approved project documentation for construction, construction progress, investors’ forum, etc. The website address should be present in advertising of residential real estate for sale.
Also the draft law proposes to reduce the state fee for notarial certification of real estate developers’ alienation contracts for newly built immovable property. For today, the amount of this fee is 1% of the contract. It is proposed to reduce it to 170 UAH.
The BRDO expert Maria Hrabovska noted that the conception of proposed changes must provide maximum efficiency of all available construction investment vehicles and eliminate unnecessary restrictions.
“Our idea is that the business has the right to choose financial mechanisms of construction investments independently. For this, we propose to include corresponding amendments to the legislation and abolish the part 3 of Article 4 of the Law of Ukraine “On Investment Activity” that restricts the ways of investment. But state registration of property rights should be carried out independently from the selected construction investment mechanism,” Maria Hrabovska said.
The representatives of the Department of Civil and Financial legislation and Land Relations legislation of the Ministry of Justice of Ukraine, the Confederation of Builders of Ukraine, the Construction Chamber of Ukraine, the Ukrainian Building Community, Ukrainian leading law firms and business representatives in the field of real property commercialization participated in the roundtable.
During the roundtable, the experts discussed terms, which should be used in the Law (property rights or right of ownership). As well as the postal address registration. Among others, it was proposed to identify objects that are being built by not the address, but the numbers in the cadastre. Examination of taxation issues and the process of the technical implementation of rights registration requires the further attention.
The BRDO called all the industry experts to provide their suggestions for draft law improving. All suggestions and comments sent to the Better Regulation Delivery Office (BRDO) will be took into account while creating the most effective mechanism of state registration of ownership rights to such properties.
On February 23, the Verkhovna Rada registered a draft law abolishing 18 permits and licenses for tour operator activities developed by the Ministry of Economic Development and Trade together with Better Regulation Delivery Office (BRDO) experts.
The draft Law “On Amendments to Certain Legislative Acts of Ukraine regarding reducing the number of permits including by promoting a declarative (registration, application) principle” is registered under #4131.
According to BRDO experts, the adoption of this draft law will simplify entrepreneurs’ activities and save more than 200 million hryvnias business annually spends on official and unofficial payments for getting different permits.
The document proposes to abolish permits, the necessity of getting which is not being justified with public health care, environmental or other essential interests of the state. However, only some of mentioned permits are abolished. In the rest of cases (10 documents), license procedures will be replaced with declarations. With the help of declarations, the state will get necessary information and will be able to carry out the current control over business activities without creating bureaucratic barriers for starting such activities.
There are licenses for tour operator activities, certificates of assigning a hotel category, quarantine permits (for import and transit) and others among the abolished permits.
Certificates of valuation activities, approvals for alienation or transfer of national monuments to their owner’s possession, permits for alternative medicine practice, permits for keeping wild animals and others are transformed into declarations.
A draft law of the State Fiscal Service of Ukraine on regulation of production and turnover of ethyl alcohol and tobacco introduces extra administrative and financial burden for business. BRDO experts expressed this view during the meeting with business and public representatives on February 16.
The SFS drafted the Law of Ukraine on amendments to the Law of Ukraine “On state regulation of production and turnover of ethyl, cognac and fruit, alcoholic beverages and tobacco products” and presents it as the one that has to improve licensing procedures (introducing electronic licensing) and simplify the procedure administration for business and the government, provide a grounding for fair competition between entities in this field, adapt Ukrainian legislation to EU norms, promote the country’s investment attractiveness and increase its position in the World bank’s ranking.
However, as BRDO experts noted, this draft law does not solve all the problems completely, and even introduces extra administrative and financial burden.
According to the BRDO expert Anna Palazova, it concerns proposed changes on the annual fee for a manufacturing license. As for today, the annual fee for ethyl alcohol, cognac, fruit, rectified ethyl alcohol grape, rectified ethyl alcohol fruit, alcoholic beverages, tobacco, alcohol, raw grape, fruit crude alcohol production for primary winemaking entities is 780 hryvnias.
The draft law proposes that annual fee for licenses to produce these types of goods will be 780 UAH, and in the case of wholesale trade of these goods, exports or imports – 500 000 UAH.
“As a result, the draft law proposes small and medium business entities (for example, primary producers of wine, beer, etc.) to pay 500 000 UAH additionally in case of wholesale trade, export or import. However, there is no financial and economic ground to introduce this fee,” Anna Palazova said.
Besides, according to her, the law drafter did not take into account the common position of the Government concerning reducing the number of permits in foreign economic activities.
Indeed, there is the government’s draft law №2498а “On Amendments to Certain Legislative Acts of Ukraine concerning reducing permits number in the foreign economic activity” of 11/08/2015 registered in the Verkhovna Rada. It proposes to abolish licensing for export and import of ethyl, cognac and fruit, alcoholic beverages and tobacco products and financial sanctions for entities that don’t submit reports in this area as measures unduly restricting the trade.
About 25% of regulatory acts are illegal in Ukraine. The head of the Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk informed the community about that during the presentation of the Rolling Review’s first results.
In January 2016, the BRDO experts launched a systematic review of regulatory legislation by using a special Rolling Review’s method providing the analysis of existing regulatory acts on clear criteria that don’t have double interpretation: legality, practicability, corruption risks, ease of doing business, regulation costs and its efficiency.
In Oleksiy Honcharuk’s words, 117 regulatory acts were analyzed on the criterion of legality during the first month of their work. The BRDO experts found 33 illegal documents among them.
“According to our preliminary estimations, about a quarter of regulatory documents existing in Ukraine have been adopted on the basis of voluntaristic decisions of officials and don’t fit in the legislative model,” Honcharuk said. All research data will be sent to the State Regulatory Service to obtain appropriate responses.
Another important finding of the BRDO experts is that the efficiency of a regulatory act can be figured out only in 7-8% of cases.
“The problem is that in most cases it is impossible not only to estimate the efficiency of regulation, but even to reliably ascertain what goal a regulator pursued when imposing rules or restrictions for business. 7-8% is a diagnosis that should be realized and factored into treatment order,” Honcharuk said.
According to him, the Better Regulation Delivery Office BRDO works closely with the Ministry of Economic Development and Trade of Ukraine and the State Regulatory Service of Ukraine, and the analysis conducted by the Office will be taken into account in the regulators’ work.
As anyone can analyze regulatory acts along with the BRDO experts at the official website, Oleksiy Honcharuk called on the public and businesses to get involved in the process of refining the legislation and review important acts by using Rolling Review’s methods.
In addition to above mentioned criteria, another filter for documents is their compliance with the Free Trade Area Agreement DCFTA. This is necessary in order to protect the documents approved to fulfill current international obligations of Ukraine.
The BRDO should give a primary review to regulatory acts in five sectors (agriculture, construction, energy industry, transport and infrastructure, control and supervision) during the year. Priority of their review is defined with the participation of business representatives. Based on this analysis, some regulatory acts are proposed for removal or improvement.
As a reminder, regulatory frameworks have been reviewed by certain criteria in the following countries: Vietnam, Mexico, Kenya, Moldova, Bosnia, Serbia, Croatia and Montenegro. As a result of this review, from 7 to 77% of regulations were simplified and from 8.8 to 68% were canceled in these countries. At this time, the economic benefits on average amounted to 1.4 billion dollars saved annually.
The BRDO experts expect that the effect of this reform in Ukraine will be similar to the international practice.
The Better Regulation Delivery Office together with the Construction Chamber of Ukraine and the Ukrainian Building Community agreed on common positions on draft laws, which will be reviewed in the Committee on Construction, Urban Development and Housing as the part of Deregulation Day in construction on Wednesday, February 17.
BRDO representatives, the executive director of the Construction Chamber Ruslan Kovtun and the UBC CEO Tatyana Shulga stressed the necessity to adopt draft laws related to this sector: particularly, the abolishment of share contribution and government regulation improvement.
Experts believe that it will raise Ukrainian positions in the World Bank’s Doing Business ranking that also will assist in increasing the investment attractiveness of the construction sector.
The BRDO suggests to simplify the land plot purchasing / leasing procedure and reduce the terms of registration. The Construction Sector Head Olena Shuliak said about it during the Ukrainian Building Community “Land and Freedom: Actual issues” business breakfast.
According to her, business surveys showed that land issues are one of the most urgent, as now the procedure of selling or getting the land from community property is rather non-transparent, costly and bureaucratic.
BRDO experts estimated that this procedure takes almost 9 months and sometimes even 2-3 years. During this time, businessmen have to register about 55 documents and meet with officials and a land surveyor about 17 times.
Olena Shuliak thinks that simplifying this procedure according to the BRDO proposal will allow to reduce the time required for registration to 2.5 months.
For this, it is necessary to act in two stages. The first one provides making selective amendments that can be done quickly to the land legislation within one-two months and without serious consequences for all procedure parties (both governmental authorities and business representatives). The second one is working out and implementing comprehensive changes, which require at least 1 year to be conducted.
BRDO experts participated in drafting the law, which allows shortening the procedure of getting a land plot from communal lands.
Particularly, the draft law allows copying cartographic materials submitted for getting permissions to develop land-planning projects on land allotment independently and free of charge.
It is also proposed to make land plot allocation permits an optional condition. An economic entity will be able to develop a land-planning project on land allocation and submit it for approval optionally.
Besides, it is proposed to abolish permits for conducting an expert money valuation of land plots while selling it, which are unnecessary permissive documents.
“We hope that the sufficient political will allow to deracinate bureaucracy in the land sector”, Olena Shuliak said.
Nowadays, the review of regulatory legislation, including the regulatory tools, is one of the Better Regulation Delivery Office (BRDO) priorities. The BRDO Food&Agriculture Sector Head Andriy Zablotskyi said about it during the Liga:Hub “The legislative platform for agribusiness – 2016″ discussion panel.
According to him, now the relations in the agricultural sector are regulated by 1396 acts. In January-early February, the BRDO had reviewed 35 acts and found out four of them (orders and decrees), which do not conform to current legislation by legitimacy and importance criterions.
“It is just the first example of the extent to which the agricultural legislation needs to be reviewed. For today, there are at least 100 regulatory tools in the sector and nearly 25% of them should be reviewed urgently. We are always open for proposals from the business, ready to work on them, address our position to the line ministries and departments, and help in the development of appropriate legislation,” Zablotskyi said.
At the same time, the Head of the Better Regulation Delivery Office (BRDO) Oleksiy Honcharuk believes that the main reason of system problems in the county, including the agricultural sector, is a lack of confidence between the business and the state.
“That is why we have a high cost of credits. Investors are not ready to invest in the state where the taxes are changing from today to tomorrow. Also, it is impossible to invest serious money in the agriculture, if you do not understand the regime of land ownership in this country. We need a dialogue between the state and business to solve all these problems,” he stated.
That is why the BRDO is working now on simplifying the business environment, in particular in the agriculture, which is one of the BRDO’s priorities. Business can influence this process as well:
“A consolidated and organized business community can really influence the rules that the state is establishing now. A wall of distrust must be broken,” Honcharuk added.
The Better Regulation Delivery Office (BRDO) together with the Ministry of Justice develop a mechanism to protect the investors’ rights for real estate property that will be built in the future. The Office experts discussed the proposals on improving the legislation in this area with the head of the department of regulatory support for state registration Anatoly Leshchenko during the working meeting today.
According to the expert of the BRDO construction sector Taisiya Barynholts, today individuals and legal entities investing in construction-in-progress property are not protected as concluded agreements are without mandatory notarization and state registration.
“One of the risks of investing in a housing project is the possibility of its double resale by unscrupulous real estate developers. At the same time, none of the existing in Ukraine ways to invest in construction of residential facilities can fully protect investors from these risks,” Taisiya Barynholts said.
This problem can be resolved by registering the ownership of real property facilities that will be built in the future. Therefore, the BRDO and the Ministry of Justice are working to develop the relevant draft law in order to provide this mechanism with a real effect.
The Office experts and Mr. Leshchenko discussed the main provisions of the draft law during the meeting.
In particular, the BRDO head Oleksiy Honcharuk offered to secure a legal right of contract parties to regulate purchase-and-sale relations as for real property that will be built on the basis of a model contract.
The mechanism of registration was also agreed at the meeting. According to it, first the ownership of each facility that will be built (for example, an apartment) will be registered to a real estate developer. Then the developer obtains the right to sell the construction-in-progress property. The ownership titles for a sold facility will be reregistered to investors and when it is commissioned, these rights will be automatically attached to their owners.
The Office experts also drew attention to the advantages of adding the real estate developer’s duty to create a website on a residential facility that will be built in the future to the draft law. This web resource should contain the information on a construction project, approved construction project documentation, information on housing that has been already sold and still available for purchase as well as an investors’ forum.
The Better Regulation Delivery Office BRDO together with the USAID Leadership in Economic Governance (LEV) Program and EasyBusiness agreed on main mechanisms and principles of financial model of connecting to electricity supply networks. The BRDO Energy Sector Head Oleksii Orzhel said about it.
“We agreed that financial model procedures and mechanisms must be transparent. The information on the connection cost must be available. Applicants also must clearly understand terms and the cost of electricity supply networks connection,” Oleksii Orzhel said.
According to him, the financial model must be sustainable and stable; it must predict reimbursement of costs to connect a regional transmission company.
This model will be included in the draft law on simplifying the procedures of connecting to electricity supply networks developed by the Better Regulation Delivery Office BRDO with USAID LEV experts within the Ministry of Economic Development and Trade working group. The draft law is ready for submitting to the Parliament.
It is to be reminded that introducing the optimized procedure of standard connection to electricity supply networks will allow the business to save more than 5,000 hryvnias on every connection procedure. The total amount for the whole country would be more than 285 million hryvnias.
The State Regulatory Service supported Better Regulation Delivery Office (BRDO) proposals related to the improvement of draft licensing conditions of the Ministry of Ecology and Natural Resources of Ukraine on hazardous waste management. It has been stated at the SRS meeting on February, 3.
“The SRS could create an efficient and effective mechanism for discussing draft regulatory acts by all concerned parties,” the BRDO Market Surveillance Sector Head Volodymyr Holovatenko says. “This efficient work will result in licensing conditions, which not only simplify the procedure of access to license markets for business entities, but also stipulate clear requirements for their further activity”.
It is to be reminded that BRDO experts paid attention to the non-compliance of this draft with requirements of a wide range of regulatory acts.
In particular, during the meeting the SRS noted that the hazardous waste “management” instead of the “management operations” as it was proposed in the draft conditions of the Ministry of Ecology and Natural Resources must be licensed. In this context, the Ministry was suggested either to make relevant amendments to the Licensing Law, or take into account its demands in the developed draft law.
Besides, during the meeting, it was agreed to remove a license applicant’s duty to submit document copies, which are in hand of entities providing administrative services, from the draft licensing conditions. In addition, provisions duplicating competencies of other regulatory agencies, especially competencies of the State Inspectorate of Ukraine on Labor and the State Emergency Service of Ukraine will be removed as well.
The SRS invited the Ministry of Ecology and Natural Resources to bring the developed draft law in compliance with the Laws of Ukraine “On Principles of State Supervision (Control) of economic activity”, “On Administrative Services” and the Law “On Licensing Certain Types of Economic activities”.
The legislative provision obliging to invest in housing construction only through the Construction Financing Funds or other financial tools does not protect investors and essentially influences the housing cost. The most of members of the round table “Protection of citizenry and real estate developers’ rights and interests: Why the Law “On Investment Activity” is not efficient” stand assured of this fact. The Better Regulation Delivery Office BRDO Construction Sector Head Olena Shuliak became its moderator.
“In January, the BRDO started the regulatory legislation review – Rolling Review. It is a kind of antivirus positing that all statutory regulations must be reviewed regarding their importance for business and unprofitability for the state. And if these provisions are not necessary – we recommend to abolish them,” Olena Shuliak said.
The Law “On Investment Activity” became one of the first regulatory acts in construction sector analyzed by BRDO experts. Its review has a top-priority for business. That is why it was discussed during the round table in terms of construction issues (particularly, part 3 of Article 4 of the law).
According to UPD legal consultant Sergij Perchak, such tools as Construction Financing Fund (CFF) do not guarantee investments protection and possibilities to finish the building. Fund is not an efficient mechanism for real estate developers. The “Granit Plus” director Larisa Shevchuk said that the CFF makes the building process more expensive because most of these funds are “pocket” ones and investors stay unprotected.
Ukraine Turnaround Real Estate Fund partner Sergij Ovchynnikov insisted that all parties had to negotiate contracts without stakeholders by recording them by a notary. According to him, this mechanism is applied across the whole continental Europe. Therefore, only the introduction of state property rights registration for projects under construction can create the market transparency.
However, the Financial Company “Zhytlo-Kapital” director Yegor Smilyj is sure that the implementation of such a state registration is unreasonable as it can lead to new abuses. According to him, the CFF protects market members, as finances that come to fund’s accounts can be used only for building within one BFF. Therefore, the real estate developer gets the money and the investor – the immovable property.
Summing up the discussion results, Olena Shuliak paid attention to the fact that the business must have the right to choose mechanisms for investment in construction independently.
It is to be reminded that the round table was organized by the Ukrainian Building Community together with the Better Regulation Delivery Office BRDO and the ILC Dentons.
Business will be able to economize more than 500 million hryvnias due to liberalizing a procedure of business activity inspections, which is introduced by draft laws № 2418а, № 2531а and № 2422а (prepared for second reading) that have to liberalize the inspection procedure, the BRDO expert Volodymyr Holovatenko says.
“Draft laws reforming the state supervision (control) system propose to liberalize the inspection procedure. It has to help make business activities more predicted”, Volodymyr Holovatenko concluded. “Thus, the principle, according to which the state inspection (control) will be focused on crime preventing instead of the punishment application, is introduced. In order to implement this principle, it is planned to oblige a regulator to inform a business entity about identified mistakes in its reports.”
BRDO experts together with partners participated in the working group to improve these draft laws. Their adoption will bring a range of advantages for business.
The regulators will be able to inspect the business entity within 30 working days throughout the year, and small businesses – within 15 working days. Also, the deadline for planned inspections of business entities conducted by one regulator will be reduced from 15 to 10 working days.
For example, if the average inspection involves two employees, and their average pay amounts to 4 498 UAH (data for November, 2015), then average potential savings of a certain business will be 8 771 UAH per year. Considering the total number of planned inspections (about 120 000), we have business cost savings of 539 million UAH per year. BRDO experts believe that introduced changes will reduce business costs for interaction with regulatory agencies by 65%.
It is to be reminded, that the Parliament adopted draft laws № 2418а, № 2531а and № 2422а at the first reading on Day of Economic Development and Deregulation, on November 13, 2015.
The National Commission for State Regulation of Financial Services Markets (Natskomfinposlug) considered Better Regulation Delivery Office BRDO’s comments and proposals to the draft regulation of the Cabinet of Ministers of Ukraine “On Approval of Licensing Conditions to conduct business activities on providing financial services (except professional activities on securities market).
The drafter considered some of them straight away, and other comments were considered after the working session initiated by the State Regulatory Service with the participation of the public and businesses and held on February 1. The Better Regulation Delivery Office BRDO expert Leonid Lytvynenko informed about that.
In particular, the BRDO proposed to define a full list of characteristics that make other agreements equal to credit ones.
BRDO experts also proposed to include to the draft a provision, which would allow not only an authorized person but also the head of the Natskomfinposlug to make decisions concerning re-licensing or leaving an application undecided. It is needed to prevent delays in review terms for documents submitted by economic entities.
Also, BRDO’s comments on the necessity to indicate a document, in which the economic entity employees’ qualification is defined, were considered during the session.