Ukraine will change its approach to factoring regulation: the relevant norms are being removed from the Civil Code and transferred to a separate law. This is stated in the text of the Law, which the Verkhovna Rada adopted on April 28 with 248 votes in favor. UNN examined what this will actually change for domestic business.
Details
The authors of the law emphasized in the explanatory note that they expect the changes to affect the rules of engagement between companies and financial institutions, as well as the conditions for access to financing.
Regulation via a separate document
Ukraine is introducing separate legislative regulation for factoring. The relevant norms are being excluded from the Civil Code and transferred to a special law. This means that the rules for providing factoring services will be concentrated in a single regulatory act. This approach is intended to ensure clarity in law enforcement and avoid conflicting interpretations of the norms.
Clear definition of a factoring agreement
The law defines a factoring agreement as a distinct type of civil contract. Requirements for its conclusion, content, and execution are established. The rights and obligations of the parties—the client company and the financial institution—are also codified. This creates a clear legal basis for businesses to enter into such agreements.
Clear rules for market participants
The document defines the participants in factoring relationships and their roles. The procedure for interaction between the parties is clarified, including the transfer of the right of claim and financing against such claims.
Access to financing
Factoring is viewed as a tool for obtaining working capital. Companies can receive financing against accounts receivable more quickly. It is expected that this will allow them to maintain operations, avoid payment delays, and plan expenditures.
Unification with international approaches
The law was developed taking into account the Model Law on Factoring prepared by the International Institute for the Unification of Private Law (UNIDROIT). This signifies an alignment of Ukrainian rules with international standards. For business, this opens up the possibility of operating under terms that are understandable to foreign partners.
Changes in the legal environment
Currently, factoring is regulated by the norms of the Civil Code and the general law on financial services. The new approach provides for specialized regulation, simplifies navigation of the legislation, and reduces the risk of errors when concluding contracts.