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• State or municipal-owned, undeveloped land plots are
subject to sale at auctions (public sale). There is a number of
exclusions whereby the public sale is not applicable (e.g. the
owner of the building located on the state or municipal land is
entitled to buy out such land plot without an auction).
• Purchase of the building should go along with purchase of the
underlying land plot (if owned by the same seller). Although
the law has rules providing for an “automatic” transfer of title
to land in case the building is purchased (and vice versa), in
practice, purchase of these two properties requires separate
agreements. A similar approach also applies to mortgage.
• If the purchased property is situated on the land plot that is
leased, the lease does not transfer automatically. Although
the law has some provisions to the contrary, in practice, the
purchaser has to re-execute the lease agreement with the
land owner.
• The buyer’s ownership right should be registered in the
Immovable property register by the notary immediately
upon signing the agreement or at any time later by the state
registration authority should the agreement provide for the
relevant condition precedent (e.g. payment by instalments).
Equity deals
• The most common form of a Ukrainian company set up to
own property is limited liability company (LLC). The shares in
the LLC may be sold, purchased and pledged.
• Foreign investors have the same rights with the Ukrainian
investors with regard to establishment or acquisition of shares
in Ukrainian companies.
• Acquisition of certain types of immovable property (e.g.
an integral property complex or a structural sub-unit of an
undertaking) which results in acquisition of control over the
undertaking by the acquirer may qualify as concentration.
Such concentration requires a prior merger clearance of the
Antimonopoly committee of Ukraine if any of the following
thresholds are triggered: (A) Turnover/assets-based (for
the last fiscal year): the combined worldwide asset value or
turnover of the parties exceeded €12 million; and (i) the value
of each of at least two of the parties’ total worldwide assets
or turnover exceeded €1 million; and (ii) the value of assets or
turnover of at least one party in Ukraine exceeded €1 million;
or (B) Market share-based: either individual or combined
market share of the parties in the market concerned or the
adjacent market exceeds 35%.
Investment agreements (equity contribution agreement)
• Investment agreements are used for sale and financing of a
property that has not yet been constructed.
• The seller is committed to erect the property in accordance
with agreed specifications, price and deadline.
• The purchaser pays the price in full or in instalments, along
with the construction progress.
• Upon completion of the construction and commissioning
of the building the buyer (investor) applies to the state
registration authority for registration of its right of ownership
to the invested real estate.
Preliminary contracts
• Preliminary contracts provide for the material conditions of
the main (definitive) agreements and determine the parties’
undertaking to conclude such main agreement within an
agreed term (which, however, may not exceed 1 year).
Preliminary agreements may stipulate conditions precedent
and exit clauses regarding execution of the main agreement.
Preliminary agreements are subject to notarization in case
notarial form is required for the main agreements they
concern.
Other regulatory aspects
• Acquisition process by foreign investors should comply with
certain currency and other banking regulations related to
transfer of funds in foreign currency to Ukraine and opening
of the special investment bank account. For the purposes of
opening of the investment bank account foreign investor must
be registered with the Ukrainian tax authority.
• For the purposes of special legislative protection and tax
benefits related to the further sale, acquisition of immovable
property by the foreign investors is subject to registration as a
foreign investment within the local state authorities.
• If financing of property acquisition implies a loan to a
Ukrainian company from a foreign bank or a company, such
loan is subject to the registration with the National Bank of
Ukraine (“NBU”) and the following limitations regarding rate
of interest. The following maximum permitted rate of interest
established under a fixed rate interest loans (for loans in
the currencies of the 1st group of the currency classification
system adopted by the NBU, such as USD or EUR): (i) with
a term less than one year – at 9.8 per cent per annum; (ii)
with a term from one to three years – at 10 per cent per
annum; (iii) with a term of exceeding three years – at 11 per
cent per annum. The maximum permitted rate of interest
under a floating rate interest is three month USD LIBOR
plus 7.5. Interest rates are viewed by the NBU as inclusive
of contractual interest, any fees, default interest and other
charges provided by the respective loan agreement. The
mentioned caps do not apply to loans granted in connection
with production sharing agreements.
Construction of real estate objects
• Construction and commissioning of a real estate property in
Ukraine is subject to the following key permitting stages (may
somewhat vary depending on the category of construction
complexity):
–– land acquisition;
–– receipt of source data for engineering and design works.
–– Preparation of the construction project and its approval by
a licensed institution;
–– state audit of the construction project (if required by the
category of complexity);
–– receipt of a permit for execution of construction works
from the relevant state construction inspection;
–– commissioning of the newly created or reconstructed
real estate object after completion of the construction
and receipt of the relevant commissioning certificate or
declaration of conformity.
122 Investors Guide to Europe 2015