News (#06 June 2017)

Draft

Draft proposes better regulation of leasing of assets

There are plans to improve state regulation of leasing activities, to strengthen the protection of rights of financial services consumers and to bring Ukrainian legislation into line with the best European and world practices. Corresponding Draft Law No. 6395 On Financial Leasing has been registered in Parliament.

Among other things, it was proposed to settle the issue of ensuring protection of consumers’ (lessees’) rights. Thus, standards for providing protection of lessees’ rights to leased assets along with standards for protection established in respect of ownership and use of property that are not available in the current Law On Financial Leasing will be outlined.

It is also proposed to define clear requirements for adopting leased assets into lessee ownership. The procedure and requirements for a lessee to acquire the ownership right to an object of financial leasing may be determined by a financial leasing agreement or a separate agreement.

In any case, transfer of title to object of financial leasing to a lessee will be possible pursuant to the proper, complete and unconditioned performance of all terms and conditions of a financial leasing agreement by the lessee. The lessor may in whole or in part yield its rights under a financial leasing agreement to a third party.

The object of financial leasing cannot be confiscated; it cannot be seized in connection with any action or inaction of a lessee. Also, the object of financial leasing cannot be included in a liquidation estate in case of a lessee’s liquidation.

Clear requirements on how to draw up a financial leasing agreement are also established. The agreement is concluded in writing (in paper or electronic form) and is not subject to notarization unless otherwise agreed to by its parties.

Amendments to the Criminal Code provide for a lessee’s criminal liability for misapplication, alienation, concealment, substitution, damage, destruction of property or other unlawful actions with property transferred to finance leasing. The topic of criminal liability for fraud with financial resources, infringing specifically financial leasing services, was also resolved.

The Civil Code of Ukraine will be supplemented with an article defining the requirements to a lessee to acquire title to leased assets, as well as with an article regulating relations associated with invalidation of a financial leasing contract.

 

Audits and unscheduled inspections reintroduced by draft law

The Ukrainian Parliament has registered Draft Law No.6482 On Amendments to the Criminal Procedural Code of Ukraine and other Laws of Ukraine (regarding appointment of unscheduled audits, inspections), which proposes to introduce the possibility of appointing unscheduled field audits and inspections by investigators and prosecutors in criminal proceedings.

Unscheduled audits and inspections are proposed to be classified as measures that ensure criminal proceedings.

Audits and inspections are conducted in order to discover the circumstances of criminal proceedings that are evidence of compliance with financial, accounting, tax and other legislation.

It is suggested that unscheduled audits and inspections being conducted on the basis of a decision by an investigating judge. After the results of the audit an act is drawn up, and following the inspection results a conclusion is drawn up.

The absence of proper regulation in criminal procedural legislation in terms of conducting financial inspections and audits creates obstacles in the fulfillment of tasks of criminal justice in the course of pre-trial investigation of economic and official crimes. Earlier, prosecutors and investigators had the right to independently initiate audits and inspections in bodies of the State Control and Revision Service.

 

Financial audit and auditing activities

The Parliamentary Committee on Tax and Customs Policy recommends to adopt Draft Law No. 6016 On Financial Audit and Auditing Activities in the first reading.

Members of the Parliamentary Committee considered both Draft Law No.6016 and alternative Draft Law No.2534. The objective of both drafts is to bring norms of national legislation in the field of audit activities into line with the legislation of the European Union, particularly with provisions of Directive 2006/43/EC and Regulation 537/2014.

Draft Law No.6016 is expected to establish the legal framework for financial audit, audit activities implementation in Ukraine and for regulating relations arising from their implementation. The Draft Law proposes: to raise the level of investor confidence in financial statements of domestic enterprises, including of state-owned companies, to ensure their transparency and comparability; to deregulate auditing activities; the Draft Law provides the possibility for Ukrainian auditing companies to enter European markets by recognizing the equivalence of systems; expansion of the audit activities market; increase in prestige and confidence in the work of auditors; rooting out of corruption; increase in public confidence in Ukrainian banks, insurance companies, other public companies, including state-owned companies; creation of the conditions for national companies to enter capital markets; increase confidence of regulatory bodies in company financial statements; creation of a positive investment climate in Ukraine.

In the opinion of the authors of the alternative Draft Law On Audit Activities, No. 2534, bringing Ukrainian legislation in the field of auditing into line of European standards will make it possible: 1) to create public supervision over the profession of an auditor in Ukraine; 2) to build a quality control system with regard to provision of auditing services; 3) to formalize application of international auditing standards in Ukraine; 3) to increase auditors’ credibility on the part of users of financial statements; 4) to ensure recognition of auditors not only in Ukraine, but also at international level.

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