#09 September 2012

In focus – International Corporate Finance

The second wave of the financial crisis in early 2012 and deepening uncertainty in Europe immediately brought calm to international capital markets and new risks for major lenders. From the finance perspective the public focus is gradually shifting from monitoring expectations to searching for new alternative sources and instruments for raising finance

Expert Opinion

A Lawyers Take on Finance Opportunities for Ukrainian Business in 2012

Glib V. Bondar, Artem V. Shyrkozhukhov

Finance is the bloodstream for growth of any business. Cut it and, unless a business sits on a big pile of cash, growth is significantly curtailed. The second half of 2011 and most of 2012 were not particularly impressive as to the opportunities for Ukrainian businesses to raise finance. Showing some life in 2011, international capital markets completely closed down for Ukrainian businesses and banks lost or significantly restricted their appetite for Ukrainian risk in 2012. However, excessive dwelling on the negative side of things, particularly those beyond ones control, is counterproductive...

In Re

Currency Regulations in Cross Border Financing: Awaiting Regulatory Impetus

Iryna V. Pokanay, Gabriel P. Aslanian

The last few months have proved the recovery from the global financial crisis remains shaky. Political instability in Greece and unfavorable expectations for the euro increased the cautiousness of investors and reduced capital flows to developing countries. The effect of instability was felt by the majority of Ukrainian businesses linking their development plans with financing projections on international capital markets

Pledge of a Participatory Interest: Problems and Risks

Inna M. Kostrytska

Over the last decade securing obligations by the pledge of a participatory interest in share capital has become more and more popular with Ukrainian banking institutions and business. This is explained not only by the general trend of expansion of the range of assets that can be encumbered or Western tendencies, where such type of the pledge is common, but also by the fact that the pledge of the participatory interest gives more opportunities to obtain credit for many limited liability and additional liability companies the most numerous group of legal entities in Ukraine which is important in a volatile economy

Funding Sources for Agriculture in Ukraine

Oleksandr A. Aleksyeyenko, Arthur V. Yalovyy

The agricultural sector plays a significant role in the economy of Ukraine. From the smallest of farmers to the largest agri-giants work the worlds most fertile black soil and put Ukraine sixth in the list of the worlds largest exporters of grain. The story of agricultural business development in Ukraine has often been one of reliance on self-generated resources, until a decision is made to make a leap forward which only external financing could allow for. The following choice of whether to finance this leap by issuing debt or equity was one of the most important decisions to make, since the chosen path would inevitably have a substantial impact on the success of that business

Hot Issue

Payments in Hryvnia in Cross-Border Transactions

Oleg P. Zagnitko

Consisting of lines, the On Amendments to Article 7 of the Decree of the Cabinet of Ministers of Ukraine On the System of Currency Regulation and Currency Control Act of Ukraine (the Act) came into effect as of 12 January of this year. The principal idea of the Act can be quoted in a passage: The Ukrainian Hryvnia shall be used in payments between residents and non-residents during trade transactions as a means of payment, a foreign currency and a monetary unit of Ukraine. Such payments shall be only made through authorized banks following the procedure stipulated by the National Bank of Ukraine...


Novelties of the Rehabilitation Procedure in Ukraine

Andriy M. Konoplia

The new edition of the On Restoration of Debtors Solvency or Bankruptcy Recognition Act of Ukraine was signed on 22 December 2011. According to the final and transitional provisions, the Act shall take effect one year after its publication. The new edition has been based on the old version. Just as before, bankruptcy proceedings consist of the following judicial procedures: administration of the debtors property, financial rehabilitation of the debtor, amicable settlement agreement, and liquidation of the bankrupt...

Global Legal Update

Legal Issues of Investments by Ukrainian Tax Residents in Cyprus

Maksym B. Ferenc

The Republic of Cyprus is deemed a safe and financially efficient treasury to deposit gained profits among Ukrainian investors for many years. Due to constant legislative changes and political turbulences in Ukraine, increasingly more entrepreneurs are deciding to use a company seated in Cyprus as a holding company for conducted business. This solution is relatively safe and simple. As since 2004 Cyprus is a member of the European Union and officially is not regarded as a tax heaven, the investments made in this country are entirely in line with the law and company budget...


Scanning Regulatory Developments and Finance Opportunities

Yulia Yashenkova

As of the date, the law-making process on derivatives in Ukraine remains in shambles. Since 2008 three of four drafts On Derivates have been withdrawn and the last one is in an ambiguous situation. Moreover, on 6 July 2012 the On the System of Custodian Accounting of Securities Act of Ukraine was voted and is unwontedly expected to be enacted. The crucial issue is that the said Act in its recent edition implies a true-to-fact risk of monopolization of clearing of derivatives by the Central Settlement Centre, bringing adverse changes to Ukrainian stock markets, in general, and derivatives transactions, down to their vanishing, in particular


Olexander Olshansky

The initiative of the National Commission on Securities and Stock Market about cross-listing of Ukrainian issuers on the Moscow stock exchange, which would open access to the Russian capital market, has gained significant public attention. However, the permits are never applied for due to associated regulatory constraints. Instead, Ukrainian issuers resort to structures where investors provide financing to offshore special purpose entities (SPvs) or holding companies rather than Ukrainian companies directly


Yaroslav Abramov

On 10 July the National Securities Commission approved the revised draft regulation On Admission of Securities of Foreign Issuers to the Ukrainian Stock Market a version which includes proposals from market players. The document has been actively developed for over a year now.

Previously the Commissions main message associated with the regulation was that a new type of asset foreign issuers security should become an investment instrument with enough liquidity to give new life to the stock market. After all, the regulation provides for the trades in such securities only at the dedicated stock exchanges qualifying under the information exchange requirements (except if granted a special permit of the Commission for which the regulation provides no criteria)


Artem Shyrkozhukhov

Bondholders in Ukrainian deals are sophisticated investors, i.e. banks, pension funds, investment funds, etc. Compared to public deals, prospectus requirements for deals with sophisticated investors are less strict. However, issuers still need to disclose all material information about their business, financial results, etc. The extent of such disclosure usually depends on whether it is a regulation S deal (i.e. bonds are distributed strictly among non-US bondholders) or a rule 144A deal (i.e. bonds may be distributed among US institutional investors only). Rule 144A deals tend to be more stringent

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