The Verkhovna Rada of Ukraine have introduced legislative changes providing for the protection against foreclosure and arrest of funds granted for the preparation and implementation of investment programmes in the areas of heat supply, water supply, and water disposal (the “Utilities Sector”) by international financial institutions (“IFIs”) and foreign governmental agencies. These changes also extend to funds which have been granted under intergovernmental agreements or received either by the state or business entities subject to state or municipal guarantees.
The legislative amendments, on the one hand, should ensure due fulfilment of contractual obligations in the Utilities Sector, as well as a better quality of services delivered to consumers. On the other hand, they should also provide for the protection of creditors’ funds and stimulate foreign investments into Ukraine.
The Law of Ukraine “On Amendments to Certain Legislation of Ukraine Related to Prohibition of Foreclosure and Arrest of Business Entities’ Funds in the Spheres of Heat Supply, Water Supply, and Water Disposal Obtained from International Financial Institutions to Implement Investment Projects (Arrangements) in Ukraine” No 2417-VIII dated 15 May 2018 (the “Law”) introduces a new type of bank current accounts, namely special current accounts for credit funds (“IFI Account(s)”). These IFI Accounts allow for the accumulation and utilisation of borrowed funds received for the implementation of investment projects in the Utilities Sector.
The key objective of the Law is to prohibit foreclosure and arrest of funds in IFI Accounts.
Business entities operating in the Utilities Sector may open IFI Accounts either in Ukrainian Hryvnia or in a foreign currency. These accounts can be credited only with the following funds:
- funds provided by IFIs and foreign governmental agencies;
- funds granted under intergovernmental agreements;
- funds secured by state or local guarantees; or
- funds received for the repayment and servicing of the above mentioned loans.
The opening of an IFI Account imposes the following additional obligations on its owner:
(1) to credit and debit the account in accordance with the terms and conditions of intergovernmental agreements or agreements entered into with IFIs or foreign governmental agencies; and
(2) to utilise the credited funds only for the purposes of the preparation and implementation of the investment projects and to control such utilisation.
The IFI Accounts have been introduced in addition to the pre-existing special accounts used for settlements under the investment programmes, which can be opened at specific Ukrainian banks and used exclusively for the purposes of implementation of the investment programmes in the Utilities Sector which have been approved by the Ukrainian government.
The Law became effective on 13 June 2018.
Legislation: Law of Ukraine “On Amendments to Certain Legislation of Ukraine Related to Prohibition of Foreclosure and Arrest of Business Entities’ Funds in the Spheres of Heat Supply, Water Supply, and Water Disposal Obtained from International Financial Institutions to Implement Investment Projects (Arrangements) in Ukraine” No 2417-VIII dated 15 May 2018.
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