NBU Amends Foreign Investment Rules

On 23 December 2009, the National Bank of Ukraine (the "NBU") adopted Resolution No. 762 "On Regulation of Issues Regarding the Making and Registration of Foreign Investments" (the "Regulation"), which became effective on 15 March 2010. The Regulation was adopted to fulfill the requirements of Law of Ukraine No. 1533-VI, "On the Introduction of Amendments to Certain Laws of Ukraine for Overcoming the Negative Consequences of the Financial Crisis", dated 23 June 2009 (the "Law"), which came into effect on 24 November 2009 and introduced a number of important changes into the Ukrainian currency control regime in respect of the procedure for making foreign investments in Ukraine. 

The following is a brief summary of the major changes introduced by the Regulation.

1.     Registration of Foreign Investment

The Regulation outlines the procedure for the registration by the NBU of all foreign investments in monetary form. A foreign investor is now required to apply to the local NBU branch in the region of the investment for the registration of any such foreign investment within 30 calendar days after the making of the investment (or from the effective date of the Regulation in respect of those foreign investments made from 24 November 2009 through 15 March 2010). The process of such registration should take up to 10 business days upon the submission of the application, and it may be extended by an additional 5 business days if the NBU requests additional documents from the applicant. The registration of the foreign investment is evidenced by a Registration Notice issued by the NBU.  

On its face, the procedure for the registration of a foreign investment established by the Regulation is straightforward and compliance with it should not result in any significant complications.  However, foreign investors should pay close attention to the documents required for such registration (especially those documents which are required to be legalized or apostilled before submission), because the NBU tends in practice to be formalistic in this respect.  

2.     New Rules for Making Foreign Investment

The Regulation introduces several important changes to NBU Regulation No. 280 "On Foreign Investment in Ukraine", dated 10 August 2005 (the "Foreign Investment Regulation"), which is the principal NBU regulation governing the process of making an investment in monetary form into Ukraine and a divestment from Ukraine. 

In particular, the Regulation changes the following major rules of the Foreign Investment Regulation:

• the Regulation removes the term "direct investment" and unifies the rules for making and returning of all types of foreign investments in monetary form.  As a general rule, all operations of a foreign investor related to making a foreign investment in monetary form may now be carried out only in Ukrainian Hryvnias through an investment account opened with a Ukrainian bank;
• foreign currency must be transferred to the investment account of the foreign investor, which have been opened with a Ukrainian bank for the purposes of its conversion into Hryvnias and making a cash investment in Ukraine;  
• the return of the foreign investment may be made in foreign currency by means of the transfer of foreign currency funds from the investment or deposit account of the foreign investor with a Ukrainian bank, or by means of a foreign currency payment of a Ukrainian resident directly to the foreign bank account of the foreign investor; and
• the Regulation expressly provides that a foreign investor may place a deposit in a Ukrainian bank only in Hryvnias and such deposit must be placed from the foreign investor's investment account opened with a Ukrainian commercial bank.  The Ukrainian commercial bank will be able to repay its existing foreign currency investment deposits to the foreign investor only if the placement of such deposit is duly registered by the foreign investor.