Doing Business 2019 Ukraine Economy Profile Ukraine Page 1 Doing Business 2019 Ukraine Economy Profile of Ukraine Doing Business 2019 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction permits Procedures, time and cost to complete all formalities to build a warehouse and the quality control and safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, and the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time, total tax and contribution rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality Page 2 Doing Business 2019 Ukraine About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more efficient regulation; offers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business offers detailed subnational reports, which exhaustively cover business regulation and reform in different cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The first Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has benefited from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. More about Doing Business (PDF, 5MB) Page 3 Doing Business 2019 Ukraine Ease of Doing Business in DB 2019 Rank Region Europe & Central Asia 190 1 Ukraine Income Category Lower middle income 71 DB 2019 Ease of doing business score Population 44,831,159 0 100 City Covered Kiev 68.25 DB 2019 Ease of Doing Business Score 0 100 77.89: Kazakhstan (Rank: 28) 75.77: Belarus (Rank: 37) 73.54: Moldova (Rank: 47) 72.34: Regional Average (Europe & Central Asia) 68.33: Kyrgyz Republic (Rank: 70) 68.25: Ukraine (Rank: 71) Note: The ease of doing business score captures the gap of each economy from the best regulatory performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s ease of doing business score is reflected on a scale from 0 to 100, where 0 represents the lowest and 100 represents the best performance. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Ukraine 1 30 32 28 56 54 57 55 63 72 78 82 Rank 109 135 136 145 163 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Ease of Doing Business Score on Doing Business topics - Ukraine 100 91.07 79.35 77.62 80 76.91 75.00 69.74 63.59 59.17 58.33 Score 60 40 31.72 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Page 4 Doing Business 2019 Ukraine Starting a Business This topic measures the number of procedures, time, cost and paid-in minimum capital requirement for a small- to medium-sized limited liability company to start up and formally operate in each economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times the income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and formally operate To make the data comparable across economies, several assumptions about the a company (number) business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay no bribes. • Preregistration (for example, name verification or reservation, notarization) The business: • Registration in the economy’s largest business - Is a limited liability company (or its legal equivalent). If there is more than one type city of limited liability company in the economy, the most common among domestic firms • Postregistration (for example, social security is chosen. Information on the most common form is obtained from incorporation registration, company seal) lawyers or the statistical office. - Operates in the economy’s largest business city. For 11 economies the data are • Obtaining approval from spouse to start a business or to leave the home to register the also collected for the second largest business city. company - The entire office space is approximately 929 square meters (10,000 square feet). - Is 100% domestically owned and has five owners, none of whom is a legal entity; • Obtaining any gender specific document for has a start-up capital of 10 times income per capita and has a turnover of at least company registration and operation or national 100 times income per capita. identification card - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does not perform foreign trade Time required to complete each procedure activities and does not handle products subject to a special tax regime, for example, (calendar days) liquor or tobacco. It does not use heavily polluting production processes. • Does not include time spent gathering - Leases the commercial plant or offices and is not a proprietor of real estate and the information amount of the annual lease for the office space is equivalent to the income per capita. • Each procedure starts on a separate day (2 procedures cannot start on the same day) - Does not qualify for investment incentives or any special benefits. - Has at least 10 and up to 50 employees one month after the commencement of • Procedures fully completed online are recorded operations, all of whom are domestic nationals. as ½ day - Has a company deed that is 10 pages long. • Procedure is considered completed once final document is received The owners: • No prior contact with officials - Have reached the legal age of majority. If there is no legal age of majority, they are assumed to be 30 years old. Cost required to complete each procedure (% of - Are sane, competent, in good health and have no criminal record. income per capita) - Are married and the marriage is monogamous and registered with the authorities. - Where the answer differs according to the legal system applicable to the woman or • Official costs only, no bribes man in question (as may be the case in economies where there is legal plurality), the • No professional fees unless services required by answer used will be the one that applies to the majority of the population. law or commonly used in practice Paid-in minimum capital (% of income per capita) • Funds deposited in a bank or with third party before registration or up to 3 months after incorporation Page 5 Doing Business 2019 Ukraine Starting a Business - Ukraine Standardized Company Legal form Tovarystvo z Obmezhenoyu Vidpovidalnistyu - Limited Liability Company Paid-in minimum capital requirement UAH 0 City Covered Kiev Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Procedure – Men (number) 6 5.2 4.9 1 (New Zealand) Time – Men (days) 6.5 12.9 9.3 0.5 (New Zealand) Cost – Men (% of income per capita) 0.6 4.6 3.1 0.0 (Slovenia) Procedure – Women (number) 6 5.2 4.9 1 (New Zealand) Time – Women (days) 6.5 12.9 9.3 0.5 (New Zealand) Cost – Women (% of income per capita) 0.6 4.6 3.1 0.0 (Slovenia) Paid-in min. capital (% of income per capita) 0.0 2.3 8.6 0.0 (117 Economies) Figure – Starting a Business in Ukraine and comparator economies – Ranking and Score DB 2019 Starting a Business Score 0 100 95.55: Moldova (Rank: 14) 93.39: Belarus (Rank: 29) 92.97: Kyrgyz Republic (Rank: 35) 92.96: Kazakhstan (Rank: 36) 91.07: Ukraine (Rank: 56) 90.02: Regional Average (Europe & Central Asia) Note: The ranking of economies on the ease of starting a business is determined by sorting their scores for starting a business. These scores are the simple average of the scores for each of the component indicators. Page 6 Doing Business 2019 Ukraine Figure – Starting a Business in Ukraine – Procedure, Time and Cost Time (days) Cost (% of income per capita) 0.35 6 0.3 Cost (% of income per capita) 5 0.25 Time (days) 4 0.2 3 0.15 2 0.1 1 0.05 0 0 1 2 3 4 5 6 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 7 Doing Business 2019 Ukraine Details – Starting a Business in Ukraine – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Register at the Registration Office 1 day No charge if Agency : State Registrar, Notary performed at the Currently, the LLC founders to enforce its registration must submit to the registrar State Registrar; or notary the following documents according to Art. 17 of the Law of Ukraine "On Notary fee is due if State Registration of Legal Entities, Individual Entrepreneurs and Public done at the Notary's Formations" No.755-IV, dated May 15, 2003: - Form 1 "Application for registration of legal entity" (format approved by the order of Ministry of Justice of Ukraine dated 18 November 2016 No. 3268/5); - original or notarized copy of the decision of founders on establishment of the entity (Minutes of General Meeting of Participants); - LLC company's charter executed by the founders. Information about individual beneficiary owners is to be specified in the text of application form itself and is not a separate document, as it was in 2015. Online registration system (https://kap.minjust.gov.ua/, http://rp.irc.gov.ua/) is available, however not popular due to a complicated procedure for submitting the documents online. Registration of employer with the relevant social security agency is performed automatically in course of the State registration. Additionally, application for voluntary VAT registration may be attached to the incorporation application. In this case, an electronic (scanned ) copy of the registration application shall be transferred by the state registrar to the controlling bodies simultaneously with the information from the Unified State Register of Legal Entities. 2 Prepare a seal 1 day UAH 190-250, Agency : Sealmaker depending on the The use of a company seal is not mandated by law but the seal is widely use in complexity of a seal practice. Еhe state and local authorities, banks and notaries generally accept documents that are not certified with a company seal. However, in some cases, such they may request a duly certified copy of the company's document containing resolution to not use a company seal (e.g., the company's charter, respective resolution of the highest governing body, etc.). 3 Notarize signature card 1 day UAH 150-250 Agency : Notary Notarized signature card is required to open a bank account. According to Section 7 of Chapter 7 the Procedure for Making of Notarial Actions by Notaries of Ukraine, approved by the Order of the Ministry of Justice of Ukraine No. 296/5 dated 22 February 2012, as amended (available at: http://zakon0.rada.gov.ua/laws/show/z0282-12), to notarize a specimen signature card, an authorized person shall submit to a notary the documents evidencing his/her right to represent the company and execute documents on its behalf (e.g., a copy of the order on appointment of the authorized person, a copy of the GMP Minutes on election of the authorized person, or a Power of Attorney issued for such authorized person, etc.) Page 8 Doing Business 2019 Ukraine 4 Open a permanent bank account 1 day no charge Agency : Bank According to the Regulation of the National Bank of Ukraine No. 492 dated November 12, 2003 on Approval of the Instruction "On the order of opening, use and closure of accounts in local and foreign currencies" (with amendments), the list of required documents for opening of the bank account for the Legal Entity includes: - the copy of the charter of the LLC (simple copy certified by the director of the LLC or notarized copy); - a notarized copy of the signature card; - completed bank questionnaire; - completed application form(s) to open a bank account(s), as well as to activate the online banking system; - signed bank account agreement, etc. (depends on the requirements of the particular bank); - due to anti-money laundering rules, the bank will require disclosure of the whole group structure of the founder(s) down to the natural persons who are the ultimate beneficial owners of the founder(s) (if any). The above list of information/documents is not exhaustive and may be changed due to the requirements of the specific bank. In case the incorporation of a company was done electronically, no paper version of the charter should be submitted. If the LLC did not open a bank account prior to the state registration of a limited liability company, the bank, pursuant to the Tax Code, must notify the tax inspection about the account opening within 1 business day after the account opening. Within three business days after receiving a notification from the bank, the tax inspection must notify the bank on registration of the account or about refusal to register the account. In practice, notification of the tax inspection by bank and receiving answer from the tax inspection takes 1-2 business days. A limited liability company may use its account for outflow operations only after the bank receives notification from the tax inspection on registration of the respective account. According to the Tax Code Amendments and the Notification Order, the bank shall notify the State Fiscal Service via Internet about the account opening within 1 business day. After receiving the electronic notification through the Internet portal, a local tax authority within 1 business day shall notify the bank about registration of the account/refusal to register the account (if applicable). 5 Register VAT at the State Tax Authority and obtain a VAT number 2 days no charge Agency : District Tax Office As defined in Law No. 71-VIII On Amendments to the Tax Code of Ukraine and some Legislative Acts of Ukraine Concerning Tax Reform which went into effect on January 1, 2015, if the total amount of transactions with delivery of goods or/and services, including the use of local or global computer network, charged (paid) during last 12 calendar months, totally exceeds UAH 1 million (excluding VAT), such company is obliged to register as VAT taxpayer, except single tax payer company. Actually, Art. 182 of the above mentioned Tax Code also provides option for voluntarily VAT taxpayer registration. Application on voluntary registration of a VAT payer may be submitted simultaneously with the state registration of a legal entity. The state registrar or notary submits electronic copy of such an application to the District Tax Office together with the information from the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Organisations on the registration of a legal entity. The Government of Ukraine issued an Order of the Ministry of Finance № 185/26630 “On Amendments to the Regulation on registration of taxpayers VAT” on February 2, 2015, which came into effect on March 30, 2015. The aforementioned order stipulates that the VAT registration shall be made within 3 working days after filing the registration statement to the state authority. In the future, the filing of the VAT registration statement will be done electronically. The online system is not yet operational in practice. Page 9 Doing Business 2019 Ukraine 6 Register employees with the State Fiscal Service Less than a day no charge Agency : State Fiscal Service (online procedure) According to Article 24 of the Labor Code of Ukraine, an employer is obliged to notify local tax authority of hiring an employee at least one day prior to commencement of work. The procedure for notification was set by the Regulation of the Cabinet of Ministers of Ukraine no. 413 dated 17 June 2015. The notification can be done in one of the following forms: 1) by filing a filled form to the local tax authority (provided that number of hired employees does not exceed 5); 2) by both filling a filled form to the local tax authority and a digital copy of the form; 3) by filing a filled electronic form using electronic digital signature. Most companies use online systems to notify tax authorities about employment. Takes place simultaneously with previous procedure. Page 10 Doing Business 2019 Ukraine Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifications, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in May 2018. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse To make the data comparable across economies, several assumptions about the (number) construction company, the warehouse project and the utility connections are used. • Submitting all relevant documents and obtaining The construction company (BuildCo): all necessary clearances, licenses, permits and certificates - Is a limited liability company (or its legal equivalent) and operates in the economy’s largest business city. For 11 economies the data are also collected for the second • Submitting all required notifications and receiving largest business city. all necessary inspections - Is 100% domestically and privately owned; has five owners, none of whom is a • Obtaining utility connections for water and legal entity. Has a licensed architect and a licensed engineer, both registered with sewerage the local association of architects or engineers. BuildCo is not assumed to have any other employees who are technical or licensed experts, such as geological or • Registering and selling the warehouse after its completion topographical experts. - Owns the land on which the warehouse will be built and will sell the warehouse Time required to complete each procedure upon its completion. (calendar days) The warehouse: • Does not include time spent gathering information - Will be used for general storage activities, such as storage of books or stationery. - Will have two stories, both above ground, with a total constructed area of • Each procedure starts on a separate day— approximately 1,300.6 square meters (14,000 square feet). Each floor will be 3 though procedures that can be fully completed meters (9 feet, 10 inches) high and will be located on a land plot of approximately online are an exception to this rule 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the • Procedure is considered completed once final warehouse is valued at 50 times income per capita. document is received - Will have complete architectural and technical plans prepared by a licensed architect. If preparation of the plans requires such steps as obtaining further • No prior contact with officials documentation or getting prior approvals from external agencies, these are counted Cost required to complete each procedure (% of as procedures. income per capita) - Will take 30 weeks to construct (excluding all delays due to administrative and regulatory requirements). • Official costs only, no bribes The water and sewerage connections: Building quality control index (0-15) - Will be 150 meters (492 feet) from the existing water source and sewer tap. If there • Quality of building regulations (0-2) is no water delivery infrastructure in the economy, a borehole will be dug. If there is • Quality control before construction (0-1) no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. • Quality control during construction (0-3) - Will have an average water use of 662 liters (175 gallons) a day and an average • Quality control after construction (0-3) wastewater flow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater flow of 1,136 liters (300 • Liability and insurance regimes (0-2) gallons) a day. • Professional certifications (0-4) - Will have a constant level of water demand and wastewater flow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Page 11 Doing Business 2019 Ukraine Dealing with Construction Permits - Ukraine Standardized Warehouse Estimated value of warehouse UAH 3,604,839.20 City Covered Kiev Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 11 16.0 12.7 None in 2017/18 Time (days) 85 170.1 153.1 None in 2017/18 Cost (% of warehouse value) 6.3 4.0 1.5 None in 2017/18 Building quality control index (0-15) 12.0 12.0 11.5 15.0 (3 Economies) Figure – Dealing with Construction Permits in Ukraine and comparator economies – Ranking and Score DB 2019 Dealing with Construction Permits Score 0 100 77.10: Kyrgyz Republic (Rank: 29) 76.91: Ukraine (Rank: 30) 75.77: Kazakhstan (Rank: 35) 74.69: Belarus (Rank: 46) 69.02: Regional Average (Europe & Central Asia) 52.19: Moldova (Rank: 172) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their scores for dealing with construction permits. These scores are the simple average of the scores for each of the component indicators. Figure – Dealing with Construction Permits in Ukraine – Procedure, Time and Cost Time (days) Cost (% of warehouse value) 4.5 80 4 Cost (% of warehouse value) 70 3.5 60 3 Time (days) 50 2.5 40 2 30 1.5 20 1 10 0.5 0 0 1 *2 *3 4 *5 6 7 *8 9 10 11 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 12 Doing Business 2019 Ukraine Figure – Dealing with Construction Permits in Ukraine and comparator economies – Measure of Quality 15 13.0 13.0 12.0 12.0 12.0 11.0 Index score 10 5 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Details – Dealing with Construction Permits in Ukraine – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Obtain a topographic survey of the land plot 30 days UAH 12,000 Agency : Private licensed company BuildCo must obtain a land survey at a scale of 1:500/1 by a specialized organization. A report is prepared as a result of the topographic survey with a layout of the building and structure. 2 Obtain a geological survey of the land plot 21 days UAH 30,000 Agency : Private licensed company BuildCo must hire a private company to obtain a geological survey of the land plot. 3 Request and obtain technical conditions from water and sewage authority 21 days UAH 2,895 Agency : Kyivvodokanal Joint Stock Company The application must include the plan, information on the expected volume of water and sewerage system use, and basic characteristics of the building. A fee estimated to UAH 2,895.00 might be paid by BuildCo. The calculation of such fees is based on estimated labor expenditures in accordance with the Rules on using the central sewage and water supply systems as approved by Order of Ministry of Housing and Communal Services of Ukraine No. 190, from June 27, 2008 as further amended. 4 Request and obtain urban planning specifications and requirements for 9 days no charge land plot development Agency : Department of Urban Development and Architecture of Kiev City Administration According to Article 29 of the Law of Ukraine "On the Regulation of Urban Development Activities", the town-planning conditions and restrictions for the development of the land plot, together with the technical conditions and design assignment, are part of the initial data for planning the construction site. To obtain the town-planning conditions and restrictions for the development of the land plot, BuildCo applies to the City Planning and Architecture Department of the executive body of the Kiev City Council (Kiev City State Administration) through the administrative services center and submits the following documents: - Copy from the topographic and geodetic plan M 1: 2000 - Extract from the State Land Cadastre - Application for granting town-planning conditions and restrictions for the design of the construction site - A copy of the document certifying the ownership of the immovable property located on the land plot - A copy of the document certifying the ownership or use of the land plot, or a copy of the superficies agreement. - Urban planning with the technical and economic indicators of the planned construction site. Provision of town-planning conditions and restrictions or a decision to refuse to provide them is carried out within 10 working days from the date of registration of the application. Information on the provided town-planning conditions and restrictions are subject to entry into the register of town-planning conditions and restrictions. Access to the data of the register of town-planning conditions and restrictions should be provided free of charge by users through the official website of the Department of Urban Planning and Architecture of the KSCA. However, the website (https://kga.gov.ua/reestr-mistobudivnikh-umov-ta-obmezhen) of the Register is not functioning properly yet. Page 13 Doing Business 2019 Ukraine 5 Hire a technical supervision firm/engineer 1 day UAH 36,048 Agency : Licensed private firms BuildCo is required to hire a licensed firm to conduct technical supervision of construction throughout the construction period. The market price for technical supervision services is about 5-10% of construction costs. For a simple project the cost would be closer to 5%. 6 Submit declaration of the beginning of construction works 7 days no charge Agency : Department of State Architectural and Construction Control of Kiev City Administration The procedure is regulated by the Law of Ukraine "On regulation of urban development" of March 12, 2011. BuildCo must notify the Department for State Architectural Control Kiev City Council about the beginning of the construction works. According to Article 36 of the Law, applicant shall obtain the right to perform construction works after registering the declaration of the beginning of construction work. In accordance with the Cabinet of Ministers of Ukraine "Some questions of preparatory and construction works" № 466 dated April 13, 2011, the declaration must be registered at the Inspectorate of State Architectural and Construction Control in Kiev within 5 working days from the date of submission. If inspection is not registered within the prescribed period, the applicant based on "tacit consent" acquires the right to perform construction work on the 11th working day from the date when the declaration had to be registered or returned. 7 Request and connect to water and sewage services 4 days UAH 700 Agency : Kyivvodokanal Joint Stock Company The exact total price and other terms for connection the warehouse to water and sewage services should be stipulated in the agreement between the BuildCo as the customer and Kyivvodokanal Joint Stock Company as the supplier on the basis of project documentation elaborated for the purpose of connection. Therefore the cost provided above should be deemed as an average approximate cost. 8 Pay contribution to the city social and engineering-transport infrastructure 1 day UAH 144,194 Agency : Department of Economics and Investment of Kiev City Administration Payment of the contribution to the city's social and engineering-transport infrastructure is regulated by Law of Ukraine "On town-planning regulation" and is clarified in Kiev by newly adopted Decision of Kyiv City Council No.411/1415 from 15.11.2016. Accordingly, the contribution shall be paid prior to putting the building into operation. BuildCo shall submit a written application to Kyiv City Council with the following included: - document on approval of design documentation; - design documentation in part of technical-economic indexes and budget (if applicable); - conclusion of state expertise of budget (if applicable); - technical passport of warehouse; According to the Decision, the value of the contribution is 4% of the construction budget starting from 1 January 2018. 9 Prepare and submit declaration of readiness to operate the constructed 14 days no charge warehouse to the State Inspection of Architectural and Building Control Agency : Department of State Architectural and Construction Control of Kiev City Administration The procedure for obtaining permission to start the operation of a newly constructed building depends on the class of consequences of construction projects. The warehouse that BuildCo intends to build will fall into objects with minor consequences (CC1). However, such conclusions must be confirmed by the project organization. The assignment of a warehouse to objects of class CC1 assumes that its acceptance into operation is carried out by registration of the declaration of readiness of the object for operation submitted by the Department of State Architectural and Construction Control of Kiev (hereinafter referred to as the Department). BuildCo is responsible for completeness and reliability of the data specified in the submitted declaration. The Department verifies the completeness of the data specified in the declaration within ten working days from the date of receipt of the declaration and ensures that the information specified in the declaration is included in a single register of documents indicating the acceptance of the completed construction projects. The date of acceptance of the facility is the date of registration of the declaration. In detail, the procedure for accepting completed construction projects is described in the Law No. 3038-VI of Ukraine "On the Regulation of Urban Development Activity" dated 17.02.2011 and Resolution No. 461 of the Cabinet of Ministers of Ukraine dated 13.04.2011 on "The issues of commissioning completed construction projects." Page 14 Doing Business 2019 Ukraine 10 Obtain a postal address for the newly constructed building 14 days no charge Agency : Department of Urban Development and Architecture of Kiev City Administration Assignment of the postal address is carried out on the basis of the corresponding order of the Department of Urban Development and Architecture of Kiev City Administration. For the purpose of assigning a postal address to the warehouse, it is necessary to apply to the Urban Development and Architecture Department through the city licensing center (the Administrative Services Center) with the appropriate application, including, inter alia, a declaration on the readiness of the facility for operation, a certificate of payment of equity participation in the creation of a social and the engineering and transport infrastructure in Kiev, a copy of the technical passport of the warehouse and a copy of the executive (control and geodetic) survey. The Urban Cadaster Department of the Urban Development and Architecture Department considers applications for assigning a postal address within fifteen working days and prepares a draft of an appropriate order of the Urban Planning and Architecture Department on assigning a postal address. The address of the object is considered to be assigned from the moment the address is entered in the register. The address in the register of addresses is made by the Urban Cadaster Service of the Urban Planning and Architecture Department within three working days from the date of issuance of the order of the Urban Planning and Architecture Department about the assignment of the postal address. 11 Register the warehouse 7 days UAH 239 Agency : Department for Registration of Kiev City State Administration The registration of the ownership of BuildCo is carried out by making a new record of the warehouse in the State Register of Rights. This procedure is regulated by the Law No. 1952-IV of Ukraine "On State Registration of Real Property Rights and Their Encumbrances" dated 01.07.2004, as well as the Resolution No. 1127 of the Cabinet of Ministers of Ukraine "On State Registration of Real Rights to Immovable Property and their Encumbrances" dated 25.12.2015. In particular, according to paragraph 41 of Resolution No. 1127, for the state registration of ownership of the constructed property, the applicant submits the following list of documents: 1) a document evidencing the acceptance into operation of the completed construction project; 2) technical passport for the immovable property; 3) a document confirming the assignment of the immovable property address. The resolution also provides for the submission of documents to the state registering entity in electronic form, but in practice this norm does not work yet. The ownership of the property is considered registered at the time of posting information about the ownership of the site on the Ministry of Justice web portal for access to the applicant. After the information is entered into the State Register of Rights, the state registrar, with the help of software for maintaining the specified register, generates an extract from it on state registration of rights, posted on the Ministry's web portal for access to the applicant for the purpose of viewing, downloading and printing. An extract from the State Register of Rights on the state registration of rights can be provided by the state registrar in paper form at the request of the applicant, by printing with the help of software for maintaining the State Register of Rights on sheets of A4 paper without the use of special forms, with the signature and seal of the state registrar. Takes place simultaneously with previous procedure. Page 15 Doing Business 2019 Ukraine Details – Dealing with Construction Permits in Ukraine – Measure of Quality Answer Score Building quality control index (0-15) 12.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly specified in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 0.0 Which third-party entities are required by law to verify that the building plans are in By law, there is 0.0 compliance with existing building regulations? (0-1) no need to verify plans compliance. Quality control during construction index (0-3) 2.0 What types of inspections (if any) are required by law to be carried out during construction? Inspections by in- 1.0 (0-2) house engineer; Inspections by external engineer or firm; Inspections at various phases. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 1.0 inspections are always done in practice. Quality control after construction index (0-3) 3.0 Is there a final inspection required by law to verify that the building was built in accordance Yes, in-house 2.0 with the approved plans and regulations? (0-2) engineer submits report for final inspection. Do legally mandated final inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural flaws or problems in the building Architect or 1.0 once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) engineer; Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover possible No party is 0.0 structural flaws or problems in the building once it is in use (Latent Defect Liability Insurance required by law or Decennial Insurance)? (0-1) to obtain insurance . Professional certifications index (0-4) 4.0 What are the qualification requirements for the professional responsible for verifying that the Minimum number 2.0 architectural plans or drawings are in compliance with existing building regulations? (0-2) of years of experience; University degree in architecture or engineering; Passing a certification exam. Page 16 Doing Business 2019 Ukraine What are the qualification requirements for the professional who supervises the construction Minimum number 2.0 on the ground? (0-2) of years of experience; University degree in engineering, construction or construction management; Passing a certification exam. Page 17 Doing Business 2019 Ukraine Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tariffs index measures reliability of supply, transparency of tariffs and the price of electricity. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions about the (number) warehouse, the electricity connection and the monthly consumption are used. • Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. • Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the data are receiving all necessary inspections also collected for the second largest business city. • Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is in an purchasing material for these works area with no physical constraints. For example, the property is not near a railway. - Is a new construction and is being connected to electricity for the first time. • Concluding any necessary supply contract and - Has two stories with a total surface area of approximately 1,300.6 square meters obtaining final supply (14,000 square feet). The plot of land on which it is built is 929 square meters Time required to complete each procedure (10,000 square feet). (calendar days) The electricity connection: • Is at least 1 calendar day - Is a permanent one with a three-phase, four-wire Y connection with a subscribed • Each procedure starts on a separate day capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, when 1 kVA = 1 • Does not include time spent gathering kilowatt (kW). information - Has a length of 150 meters. The connection is to either the low- or medium-voltage distribution network and is either overhead or underground, whichever is more • Reflects the time spent in practice, with little common in the area where the warehouse is located and requires works that involve follow-up and no prior contact with officials the crossing of a 10-meter road (such as by excavation or overhead lines) but are all Cost required to complete each procedure (% of carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road. income per capita) - Does not require work to install the internal wiring of the warehouse. This has • Official costs only, no bribes already been completed up to and including the customer’s service panel or • Value added tax excluded switchboard and the meter base. The reliability of supply and transparency of The monthly consumption: tariffs index (0-8) - It is assumed that the warehouse operates 30 days a month from 9:00 a.m. to 5:00 • Duration and frequency of power outages (0–3) p.m. (8 hours a day), with equipment utilized at 80% of capacity on average and that • Tools to monitor power outages (0–1) there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours (kWh); hourly consumption is 112 kWh. • Tools to restore power supply (0–1) - If multiple electricity suppliers exist, the warehouse is served by the cheapest • Regulatory monitoring of utilities’ performance supplier. (0–1) - Tariffs effective in January of the current year are used for calculation of the price of electricity for the warehouse. Although January has 31 days, for calculation • Financial deterrents limiting outages (0–1) purposes only 30 days are used. • Transparency and accessibility of tariffs (0–1) Price of electricity (cents per kilowatt-hour)* • Price based on monthly bill for commercial warehouse in case study *Note: Doing Business measures the price of electricity, but it is not included in the ease of doing business score nor the ranking on the ease of getting electricity. Page 18 Doing Business 2019 Ukraine Getting Electricity - Ukraine Standardized Connection Price of electricity (US cents per kWh) 7.1 Name of utility JSC Kievenergo City Covered Kiev Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 5 5.3 4.5 3 (25 Economies) Time (days) 281 110.3 77.2 18 (3 Economies) Cost (% of income per capita) 402.5 325.1 64.2 0.0 (3 Economies) Reliability of supply and transparency of tariff 6 5.5 7.5 8.0 (27 Economies) index (0-8) Figure – Getting Electricity in Ukraine and comparator economies – Ranking and Score DB 2019 Getting Electricity Score 0 100 90.24: Belarus (Rank: 20) 76.79: Kazakhstan (Rank: 76) 74.88: Moldova (Rank: 81) 71.66: Regional Average (Europe & Central Asia) 59.17: Ukraine (Rank: 135) 46.01: Kyrgyz Republic (Rank: 164) Note: The ranking of economies on the ease of getting electricity is determined by sorting their scores for getting electricity. These scores are the simple average of the scores for all the component indicators except the price of electricity. Page 19 Doing Business 2019 Ukraine Figure – Getting Electricity in Ukraine – Procedure, Time and Cost Time (days) Cost (% of income per capita) 400 250 350 Cost (% of income per capita) 300 200 Time (days) 250 150 200 100 150 100 50 50 0 0 1 2 3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Figure – Getting Electricity in Ukraine and comparator economies – Measure of Quality 8 8 8 7 7 6 6 5.5 Index score 5 4 3 2 1 0 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Page 20 Doing Business 2019 Ukraine Details – Getting Electricity in Ukraine – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Submit application to Kievenergo and await technical conditions 30 calendar days UAH 0 Agency : Kievenergo The customer submits to Kievenergo an application for an electricity connection. Attached to the application the customer has to submit a number of documents: a letter with a company seal requesting the connection, bank details of the applicant, company statute, registration certificate from the tax authorities, registration certificate of the company, certificate stating that the company is included in the national company registry, document stating the appointment of the CEO, property ownership certificate and location plan of the property to be connected. After reviewing the application Kievenergo issues technical conditions. The technical conditions concern only the external connection. In general they may include instructions for construction of a new substation; lining of high-voltage and low-voltage cables; in a case of reconstruction works - participation of the subscriber in the given actions. The application for technical conditions is submitted to the Department of Development (департамент перспективного развития) at Kievenergo which is then internally passed on to the Regional Office in the particular area of Kiev where the warehouse is located and the regional office determines the point of connection. Technicians in the Regional offices know the network and the substations in their area very well and usually do not need to visit the site for preparation of technical conditions. At this point the connection contract is concluded which outlines the responsibilities between the customer and the utility. 2 Await project design of external connection by private firm and its approval 90 calendar days UAH 41,900 Agency : Project design firm Once the technical conditions are issued the customer hires a licensed project design company to prepare the electrical project design of the external connection. As part of the project design the company prepares a topogeodesic plan (топогеодезическую съемку М 1:500). The topogeodosic plan is prepared to determine the technical aspects of running cable through the landscape. While the project is being developed the approval of the location of the substation connection to the network and/or the route of the cable 10 kV and 0.4 kV has to be obtained from Kievenergo and from the Main Architectural Planning Organization. At this point the customer should have an operation permit for the warehouse or Main Plan with the Landscape Allocation Plan. These approvals are obtained by the project design firm. Considering the load (140 kW) when receiving an approval of the project of external connection from Kievenergo it is required to attach the project of the internal wiring of the warehouse which at this point should be approved as part of the general architectural design of the warehouse. While the project is being developed the approval of the location of the substation connection to the network and/or the route of the cable 10 kV and 0.4 kV has to be obtained from Kievenergo and from the Main Architectural Planning Organization. At this point the customer should have an operation permit for the warehouse or Main Plan with the Landscape Allocation Plan. The approvals are obtained by the project design firm. If a substation is required before the project design is submitted for approval to Kievenergo it will have to be approved at the State Energy Inspectorate (Energonadzor/“Dergenergonaglyadu”). Considering the load (140 kW) when receiving an approval of the project of external connection from Kievenergo it is required to attach the project of the internal wiring of the warehouse which at this point should be approved as part of the general architectural design of the warehouse. 3 Await completion of external connection works 120 calendar days UAH 248,324 Agency : Kievenergo Once the external connection design is ready and approved, the customer needs to make the payments for the connection. Kievenergo will select a contractor on a tender base who will under utility's supervision obtain the necessary permits, including excavation permit, and carry out the works. Page 21 Doing Business 2019 Ukraine 4 Conclude supply contract with Kievenergo (Energosbyt) 20 calendar days UAH 0 Agency : Energosbyt (Kievenergo) Before turning on the power, the customer has to first conclude a supply contract with Kievenergo (Energosbyt). The supply contract can be concluded only after all the inspections are completed. The documents for the supply contract can be presented in the office or sent by mail. It is required to submit a number of documents regarding internal wiring including a Technical Report of the tests of the internal wiring which should be completed after the internal wiring was finished by an electrician. 5 Request and receive turn-on of power by Kievenergo 21 calendar days UAH 0 Agency : Kievenergo Once supply agreement is concluded, the customer can visit the dispatcher department of Kievenergo and request power turn on. The dispatcher department processes the order which permits it to turn off the 10 kV cable line, do the testing of the high voltage cable and finally turn on the electricity for the substation. Takes place simultaneously with previous procedure. Page 22 Doing Business 2019 Ukraine Details – Getting Electricity in Ukraine – Measure of Quality Answer Reliability of supply and transparency of tariff index (0-8) 6 Total duration and frequency of outages per customer a year (0-3) 2 System average interruption duration index (SAIDI) 3.8 System average interruption frequency index (SAIFI) 2.0 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on reliability of Yes supply? Financial deterrents aimed at limiting outages (0-1) 0 Does the utility either pay compensation to customers or face fines by the regulator (or both) if outages No exceed a certain cap? Communication of tariffs and tariff changes (0-1) 1 Are effective tariffs available online? Yes Link to the website, if available online http://kyivenergo.ua/ ee-company/tarifi Are customers notified of a change in tariff ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tariff index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Page 23 Doing Business 2019 Ukraine Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has five dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on To make the data comparable across economies, several assumptions about the immovable property (number) parties to the transaction, the property and the procedures are used. • Preregistration procedures (for example, The parties (buyer and seller): checking for liens, notarizing sales agreement, paying property transfer taxes) - Are limited liability companies (or the legal equivalent). - Are located in the periurban area of the economy’s largest business city. For 11 • Registration procedures in the economy's largest economies the data are also collected for the second largest business city. business city. - Are 100% domestically and privately owned. • Postregistration procedures (for example, filling - Have 50 employees each, all of whom are nationals. title with municipality) - Perform general commercial activities. Time required to complete each procedure The property (fully owned by the seller): (calendar days) - Has a value of 50 times income per capita, which equals the sale price. • Does not include time spent gathering - Is fully owned by the seller. information - Has no mortgages attached and has been under the same ownership for the past • Each procedure starts on a separate day - 10 years. though procedures that can be fully completed - Is registered in the land registry or cadastre, or both, and is free of title disputes. online are an exception to this rule - Is located in a periurban commercial zone, and no rezoning is required. - Consists of land and a building. The land area is 557.4 square meters (6,000 • Procedure is considered completed once final square feet). A two-story warehouse of 929 square meters (10,000 square feet) is document is received located on the land. The warehouse is 10 years old, is in good condition, has no • No prior contact with officials heating system and complies with all safety standards, building codes and legal requirements. The property, consisting of land and building, will be transferred in its Cost required to complete each procedure (% of entirety. property value) - Will not be subject to renovations or additional construction following the purchase. • Official costs only (such as administrative fees, - Has no trees, natural water sources, natural reserves or historical monuments of duties and taxes). any kind. - Will not be used for special purposes, and no special permits, such as for • Value Added Tax, Capital Gains Tax and illicit residential use, industrial plants, waste storage or certain types of agricultural payments are excluded activities, are required. - Has no occupants, and no other party holds a legal interest in it. Quality of land administration index (0-30) • Reliability of infrastructure index (0-8) • Transparency of information index (0–6) • Geographic coverage index (0–8) • Land dispute resolution index (0–8) • Equal access to property rights index (-2–0) Page 24 Doing Business 2019 Ukraine Registering Property - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Procedures (number) 7 5.3 4.7 1 (4 Economies) Time (days) 17 20.3 20.1 1 (New Zealand) Cost (% of property value) 1.8 2.6 4.2 0.0 (Saudi Arabia) Quality of the land administration index (0-30) 14.5 19.6 23.0 None in 2017/18 Figure – Registering Property in Ukraine and comparator economies – Ranking and Score DB 2019 Registering Property Score 0 100 92.19: Belarus (Rank: 5) 90.27: Kyrgyz Republic (Rank: 8) 84.62: Kazakhstan (Rank: 18) 82.62: Moldova (Rank: 22) 75.57: Regional Average (Europe & Central Asia) 69.74: Ukraine (Rank: 63) Note: The ranking of economies on the ease of registering property is determined by sorting their scores for registering property. These scores are the simple average of the scores for each of the component indicators. Figure – Registering Property in Ukraine – Procedure, Time and Cost Time (days) Cost (% of property value) 1.8 16 1.6 14 Cost (% of property value) 1.4 12 1.2 Time (days) 10 1 8 0.8 6 0.6 4 0.4 2 0.2 0 0 1 2 3 4 5 *6 *7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a different procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://doingbusiness.org/en/methodology ). For details on the procedures reflected here, see the summary below. Page 25 Doing Business 2019 Ukraine Figure – Registering Property in Ukraine and comparator economies – Measure of Quality 30 25 23.5 24.0 22.0 Index score 19.6 20 17.0 14.5 15 10 5 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Details – Registering Property in Ukraine – Procedure, Time and Cost No. Procedures Time to Complete Associated Costs 1 Assess the price of the land 4 days UAH 1,000 Agency : Legal entities which are licenced by the State Center of the Land Cadastre The document on expert evaluation of the price of immovable property can be provided by experts certified by the State Property Fund of Ukraine. Such experts have access to evaluation software and record the price at the State Property Fund. Expert evaluation of the price of immovable property is required for tax assessment purposes. 2 Obtain the extract from the State Center of the Land Cadastre 10 days UAH 90; (5% of the Agency : State Service for Geodesy, Cartography and Cadastre - living wage of 1762, (Derzhgeocadastre) rounded to the The extract from State Land Cadastre contains full information about the land nearest 10 UAH.) plot (owner, location, use restrictions, encumbrances etc). The notary may not attest the agreement without such extract. The procedure is governed by Article 38 of the Law 'On State Land Cadastre' and Paragraphs 162 - 186 of the CMU Resolution No 1051. While the CMU Resolution No 1051 allows the notary to obtain the extract electronically, this option is not available for technical reasons. The Seller shall submit the following documents to obtain the extract: - application in accordance with established form; - document confirming payment of fee for issuance of the extract; - document confirming powers of the person to request and obtain the extract. In addition to the above documents, the Seller shall present original document confirming ownership rights to the land plot (e.g. a state act of ownership rights) and personal identification document. The extract is valid for 3 months. From 31 August 2015 notary has on-line access to the State Land Cadastre and includes cost of obtaining the extract from the State Land Cadastre into the notary fees. In addition, the extract from the State Center of the Land Cadastre can be also provided through Administration Service Center. In this case an applicant may order the document (excerpt from the State Land Cadastre about a land plot) online at http://map.land.gov.ua, but will have to visit the Administration Service Center in order to receive the document. Page 26 Doing Business 2019 Ukraine 3 Notary registers ownership rights for seller in the new State Register of Less than one day, UAH 1,740; (UAH Property Rights to Immovable Property online 1500 notary fee Agency : Notary UAH 120 for the initial From January 01, 2013, a new State Register of Property Rights to Immovable registration of the Property (“Register of Property Rights”) has been launched. Unlike the State land in the new Land Cadastre, which automatically absorbed information about all existing land registry of ownership plots from the (no longer active) State Register of Lands, the Register of Property Rights does not contain information about the ownership rights to immovable rights property which have been registered before January 01, 2013. For this reason, UAH 120 for the initial prior to execution of the Property sale and purchase agreement, the Seller has to registration of the register ownership rights to the Property in the new Register of Property Rights. warehouse) Starting from January 01, 2016 registration of ownership rights for seller in the new State Register of Property Rights to Immovable Property is not mandatory. The notary may skip this step and proceed directly with the registration of the ownership right of the buyer regardless of the fact that the property to be acquired has not been registered with the Register of Property Rights. However, the procedure is still widely implemented in practice. Procedures 3-7 are being completed simultaneously at the notary's office. Registration of Seller's ownership rights to the Property is performed by the notary attesting the sale and purchase agreement. The Seller shall provide to the notary: - ownership documents to the Property; - application in accordance with established form; - documents confirming payment of registration fees. The notary: (1) checks the Seller’s ownership documents; (2) records Seller's ownership rights in the Register of Property Rights; and (3) issues an extract from the Register of Property Rights confirming Seller’s ownership rights to the Property. " 4 Obtain the extract from the State Register of Encumbrances over movable Less than one day, UAH 70; (4% of living property online wage of 1762, Agency : Notary rounded to the The notary will verify through this procedure that the tax authorities have not nearest 10 UAH.) registered a security interest over the real property. Since January 2013, the notaries can obtain this information online. 5 Check for encumbrances at the State Registry of Property Rights on Less than one day, UAH 153; (UAH 51 Immovable Property online for the Seller's LLC Agency : Notary UAH 51 for checking Notary searches the former State Register of Ownership Rights to Immovable against Property, State Register of Mortgages, State Register of Immovable Property encumbrances on Alienation Bans and State Register of Encumbrances over Movable Property. land From January 01, 2013, three state registers containing information about UAH 51 for checking encumbrances on immovable property: against (1) State Register of Mortgages; encumbrances on (2) State Register of Immovable Property Alienation Bans; and warehouse) (3) State Register of Encumbrances over Movable Property (in respect of tax liens) – are inactive. These registers serve only as a source of information for the notary who transfers the relevant encumbrances from these registers to the Register of Property Rights upon first-time registration of ownership rights to immovable property in the Register of Property Rights. Therefore, to verify encumbrances on the property ownership rights to which have been registered in the Register of Property Rights, the notary will search only in this register. This procedure takes one day and is performed on the same day on which the Property sale and purchase agreement is executed, prior to the execution of the agreement. Page 27 Doing Business 2019 Ukraine 6 Prepare and notarize the sale agreement (land and building) 1 day UAH 57,072.59; Agency : Notary (Notary fee for the The sale purchase agreement of the building is notarized by a private or public land (paid by the notary. Notary’s fees are agreed among parties. There could be one single buyer): UAH 1,500 agreement underpinning both sale of building and sale of land or be two separate Notary fee for the agreements: the sale of building (warehouse) and the sale of land parcel. Parties warehouse (paid by can prepare the sale agreements by themselves before notarization, but usually the notary prefers to use his standard proforma. the buyer): UAH 1,500 State Duty (fee) is paid to the notary and equals 1% of the transactional value of 1% of the value of the the building. The buyer of the building will also pay a special assessment in the land amount of 1% of building’s transactional value to the State Pension Fund. The 1% of the value of the buyer can make the payment to the State Pension Fund prior to the notarization warehouse of building sale agreement or provide the notary with the money to make such 1% of the value of the payment. warehouse (NOT THE LAND, only the The documentation shall include: building) for the • Ownership documents pension fund • Founding documents of the company contribution.) • Decision with respect to the sale of the building (if necessary) • Extract from the State Land Cadastre, • Extracts from the Unified State Registry of Legal Persons and Physical Persons - Entrepreneurs (documents - copy of the passport and application, issuing authority - any State District Administration in the City (but it is recommended to obtain it in the administration in which respective legal person was registered)) • Act of evaluation of parcel of land, powers of attorney (if necessary) • Notary certifies agreement, makes inscription on the State Certificate on Land Ownership as to the transference of title over parcel of land to new owner, registers information as to the transaction in the Unified State Registry of Transactions and issues an extract from this registry on above mentioned transaction. 7 Notary registers Buyer's ownership rights on the property in the Register of Less than one day, UAH 3,201.6; (Notary Property Rights online fee: UAH 1,500 Agency : Notary UAH 730.8 From January 01, 2013, the registration of ownership rights to immovable administrative fee for property (other than newly constructed building/newly allotted land plot in some the land ownership other cases) is performed by notaries attesting the sale and purchase agreement transfer (adminsbor) (Articles 3.5, 9 of the Law of Ukraine “On State Registration of Property Rights to Immovable Property and Their Encumbrances”). UAH 730.8 administrative fee for Following notarial attestation of the Property sale and purchase agreement, the the warehouse notary shall register Buyer’s ownership rights to the Property in the Register of ownership transfer Property Rights. The procedure of registration is governed by Articles 15-24 of (adminsbor) the Law of Ukraine “On State Registration of Property Rights to Immovable UAH 120 (land) Property and Their Encumbrances” No 1952-IV of July 01, 2004, as restated and registration fee amended, and the Resolution of Cabinet of Ministers of Ukraine No 703 dated UAH 120 June 22, 2011, as amended (“CMU Resolution No 703”). The registration is (warehouse) performed by the notary based on the Buyer’s application (in accordance with registration fee.) established form) and the Property sale and purchase agreement. Upon registration of Buyer’s ownership rights to the Property, the notary issues an extract from the Register of Property Rights for the Buyer. Takes place simultaneously with previous procedure. Page 28 Doing Business 2019 Ukraine Details – Registering Property in Ukraine – Measure of Quality Answer Score Reliability of infrastructure index (0-8) 5.0 What is the institution in charge of immovable property registration? State Registry on Property Rights under the Ministry of Justice In what format are the majority of title or deed records kept in the largest business city—in a Computer/Scann 1.0 paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for checking for encumbrances (liens, mortgages, restrictions Yes 1.0 and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: State Enterprise "Centre for the State Land Cadastre" In what format are the majority of maps of land plots kept in the largest business city—in a Computer/Fully 2.0 paper format or in a computerized format (scanned or fully digital)? digital Is there an electronic database for recording boundaries, checking plans and providing Yes 1.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the cadastral Separate 0.0 or mapping agency kept in a single database, in different but linked databases or in separate databases databases? Do the immovable property registration agency and cadastral or mapping agency use the No 0.0 same identification number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of immovable Only 0.0 property registration in the largest business city? intermediaries (notaries, lawyers, etc.) Is the list of documents that are required to complete any type of property transaction made Yes, online 0.5 publicly available–and if so, how? Link for online access: http://zakon3.rad a.gov.ua/laws/sh ow/1127-2015- %D0%BF Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available–and if so, how? Link for online access: http://npu.in.ua/n ovini/rozmiri_adm inistrativnogo_zb oru_2018 Does the agency in charge of immovable property registration commit to delivering a legally Yes, online 0.5 binding document that proves property ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: http://ddr.minjust. gov.ua/uk/4424b bf47abcd8a3a6f6 5ca7a0256435/n ormatyvnopravov a_baza/ Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available official statistics tracking the number of transactions at the No 0.0 immovable property registration agency? Page 29 Doing Business 2019 Ukraine Number of property transfers in the largest business city in 2017: Who is able to consult maps of land plots in the largest business city? Freely accessible 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made publicly available— Yes, on public 0.5 and if so, how? boards Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a Yes, on public 0.5 specific time frame—and if so, how does it communicate the service standard? boards Link for online access: http://zakon2.rad a.gov.ua/laws/sh ow/3613-17/ Is there a specific and separate mechanism for filing complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable property No 0.0 registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 6.5 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private guarantee? Yes 0.5 Is there a specific compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property Yes 0.5 transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Notary; Does the legal system require verification of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Notary; Is there a national database to verify the accuracy of identity documents? No 0.0 For a standard land dispute between two local businesses over tenure rights of a property The Commercial worth 50 times gross national income (GNI) per capita and located in the largest business (Economic) Court city, what court would be in charge of the case in the first instance? of Kyiv How long does it take on average to obtain a decision from the first-instance court for such a Less than a year 3.0 case (without appeal)? Are there any statistics on the number of land disputes in the first instance? Yes 0.5 Number of land disputes in the largest business city in 2017: 5,379 cases out of 102,122 Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes Do married men and married women have equal ownership rights to property? Yes 0.0 Page 30 Doing Business 2019 Ukraine Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the effectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions through 2 sets of • Rights of borrowers and lenders through indicators. The depth of credit information index measures rules and practices collateral laws (0-10) affecting the coverage, scope and accessibility of credit information available • Protection of secured creditors’ rights through through a credit registry or a credit bureau. The strength of legal rights index bankruptcy laws (0-2) measures the degree to which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first Depth of credit information index (0–8) determined whether a unitary secured transactions system exists. Then two case • Scope and accessibility of credit information scenarios, case A and case B, are used to determine how a nonpossessory security distributed by credit bureaus and credit registries interest is created, publicized and enforced according to the law. Special emphasis (0-8) is given to how the collateral registry operates (if registration of security interests is possible). The case scenarios involve a secured borrower, company ABC, and a Credit bureau coverage (% of adults) secured lender, BizBank. • Number of individuals and firms listed in largest In some economies the legal framework for secured transactions will allow only case credit bureau as a percentage of adult population A or case B (not both) to apply. Both cases examine the same set of legal provisions Credit registry coverage (% of adults) relating to the use of movable collateral. • Number of individuals and firms listed in credit Several assumptions about the secured borrower (ABC) and lender (BizBank) registry as a percentage of adult population are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Page 31 Doing Business 2019 Ukraine Getting Credit - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Strength of legal rights index (0-12) 8 7.2 6.1 12 (5 Economies) Depth of credit information index (0-8) 7 6.6 6.7 8 (42 Economies) Credit registry coverage (% of adults) 0 25.3 21.8 100.0 (4 Economies) Credit bureau coverage (% of adults) 45.9 43.4 65.3 100.0 (25 Economies) Figure – Getting Credit in Ukraine and comparator economies – Ranking and Score DB 2019 Getting Credit Score 0 100 75.00: Kyrgyz Republic (Rank: 32) 75.00: Ukraine (Rank: 32) 70.00: Moldova (Rank: 44) 68.70: Regional Average (Europe & Central Asia) 65.00: Kazakhstan (Rank: 60) 55.00: Belarus (Rank: 85) Note: The ranking of economies on the ease of getting credit is determined by sorting their scores for getting credit. These scores are the sum of the scores for the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Ukraine and comparator economies 8 9 8 8 7.2 7 6 6 Index Score 5 4 4 3 2 1 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Page 32 Doing Business 2019 Ukraine Details – Legal Rights in Ukraine Strength of legal rights index (0-12) 8 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without Yes requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring a Yes specific description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds and Yes replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be Yes secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is unified geographically and by Yes asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be performed No online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization No procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow Yes the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Ukraine and comparator economies 8 7 7 7 7 6.6 6 6 6 Index Score 5 4 3 2 1 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Page 33 Doing Business 2019 Ukraine Details – Credit Information in Ukraine Depth of credit information index (0-8) Credit Credit Score bureau registry Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and No No 0 financial institutions - distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries Yes No 1 that distribute more than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or Yes No 1 credit registry? Can banks and financial institutions access borrowers’ credit information online Yes No 1 (for example, through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help Yes No 1 banks and financial institutions assess the creditworthiness of borrowers? Total Score ("yes" to either public bureau or private registry) 7 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 13,800,000 0 Number of firms 200,000 0 Total 14,000,000 0 Percentage of adult population 45.9 0 Page 34 Doing Business 2019 Ukraine Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions • Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related- party transactions The business (Buyer): • Extent of director liability index (0–10): Ability - Is a publicly traded corporation listed on the economy’s most important stock of minority shareholders to sue and hold exchange. If there are fewer than ten listed companies or if there is no stock interested directors liable for prejudicial related- exchange in the economy, it is assumed that Buyer is a large private company with party transactions; Available legal remedies multiple shareholders. (damages, disgorgement of profits, fines, - Has a board of directors and a chief executive officer (CEO) who may legally act on imprisonment, rescission of the transaction) behalf of Buyer where permitted, even if this is not specifically required by law. • Ease of shareholder suits index (0–10): - Has a supervisory board in economies with a two-tier board system on which Mr. Access to internal corporate documents; James appointed 60% of the shareholder-elected members. Evidence obtainable during trial and allocation of - Has not adopted bylaws or articles of association that go beyond the minimum legal expenses requirements. Does not follow codes, principles, recommendations or guidelines that are not mandatory. • Extent of conflict of interest regulation index - Is a manufacturing company with its own distribution network. (0–10): Simple average of the extent of disclosure, extent of director liability and ease of The transaction involves the following details: shareholder indices - Mr. James owns 60% of Buyer, sits on Buyer’s board of directors and elected two • Extent of shareholder rights index (0-10): directors to Buyer’s five-member board. Shareholders’ rights and role in major corporate - Mr. James also owns 90% of Seller, a company that operates a chain of retail decisions hardware stores. Seller recently closed a large number of its stores. • Extent of ownership and control index (0-10): - Mr. James proposes that Buyer purchase Seller’s unused fleet of trucks to expand Governance safeguards protecting shareholders Buyer’s distribution of its food products, a proposal to which Buyer agrees. The price from undue board control and entrenchment is equal to 10% of Buyer’s assets and is higher than the market value. - The proposed transaction is part of the company’s principal activity and is not • Extent of corporate transparency index (0-10): outside the authority of the company. Corporate transparency on ownership stakes, - Buyer enters into the transaction. All required approvals are obtained, and all compensation, audits and financial prospects required disclosures made—that is, the transaction was not entered into fraudulently. • Extent of shareholder governance index (0– - The transaction causes damages to Buyer. Shareholders sue Mr. James and the 10): Simple average of the extent of shareholders executives and directors that approved the transaction. rights, extent of ownership and control and extent of corporate transparency indices • Strength of minority investor protection index (0–10): Simple average of the extent of conflict of interest regulation and extent of shareholder governance indices Page 35 Doing Business 2019 Ukraine Protecting Minority Investors - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Extent of disclosure index (0-10) 8.0 7.3 6.5 10 (13 Economies) Extent of director liability index (0-10) 2.0 4.9 5.3 10 (Cambodia) Ease of shareholder suits index (0-10) 6.0 6.8 7.3 10 (Djibouti) Extent of shareholder rights index (0-10) 5.0 7.1 6.4 10 (Kazakhstan) Extent of ownership and control index (0-10) 6.0 5.6 5.4 None in 2017/18 Extent of corporate transparency index (0-10) 8.0 7.5 7.6 10 (6 Economies) Figure – Protecting Minority Investors in Ukraine and comparator economies – Ranking and Score DB 2019 Protecting Minority Investors Score 0 100 85.00: Kazakhstan (Rank: 1) 68.33: Moldova (Rank: 33) 66.67: Kyrgyz Republic (Rank: 38) 65.29: Regional Average (Europe & Central Asia) 63.33: Belarus (Rank: 51) 58.33: Ukraine (Rank: 72) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their scores for protecting minority investors. These scores are the simple average of the scores for the extent of conflict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Ukraine and comparator economies – Measure of Quality the Ukraine 8 2 8 6 5 6 Belarus 8 2 7 7 6 8 Kazakhstan 9 6 9 8 10 9 Kyrgyz Republic 7 5 7 8 5 8 Moldova 9 4 7 5 8 8 OECD high income 7.4 5.5 6.5 5.2 6.3 7.4 Europe & Central Asia 7.6 4.6 7.2 5.6 7.3 6.8 0 10 20 30 40 50 60 Sub-Indicator Score Extent of corporate transparency index (0-10) Extent of director liability index (0-10) Extent of disclosure index (0-10) Extent of ownership and control index (0-10) Extent of shareholder rights index (0-10) Ease of shareholder suits index (0-10) Page 36 Doing Business 2019 Ukraine Details – Protecting Minority Investors in Ukraine – Measure of Quality Answer Score Extent of conflict of interest regulation index (0-10) 5.3 Extent of disclosure index (0-10) 8.0 Whose decision is sufficient to approve the Buyer-Seller transaction? (0-3) Board of 2.0 directors excluding interested members Must an external body review the terms of the transaction before it takes place? (0-1) Yes 1.0 Must Mr. James disclose his conflict of interest to the board of directors? (0-2) Full disclosure of 2.0 all material facts Must Buyer disclose the transaction in periodic filings (e.g. annual reports)? (0-2) Disclosure on the 2.0 transaction and on the conflict of interest Must Buyer immediately disclose the transaction to the public? (0-2) Disclosure on the 1.0 transaction only Extent of director liability index (0-10) 2.0 Can shareholders representing 10% of Buyer's share capital sue for the damage the Yes 1.0 transaction caused to Buyer? (0-1) Can shareholders hold Mr. James liable for the damage the transaction caused to Buyer? (0- Not liable 0.0 2) Can shareholders hold the other directors liable for the damage the transaction caused to Liable if negligent 1.0 Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by No 0.0 shareholders? (0-1) Must Mr. James repay profits made from the transaction upon a successful claim by No 0.0 shareholders? (0-1) Is Mr. James disqualified upon a successful claim by shareholders? (0-1) No 0.0 Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of 0.0 fraud or bad faith Ease of shareholder suits index (0-10) 6.0 Before suing, can shareholders representing 10% of Buyer's share capital inspect the No 0.0 transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plaintiff request categories of documents from the defendant without identifying No 0.0 specific ones? (0-1) Can the plaintiff directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plaintiffs recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 6.3 Extent of shareholder rights index (0-10) 5.0 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Page 37 Doing Business 2019 Ukraine Do shareholders automatically receive preemption rights every time Buyer issues new No 0.0 shares? Must shareholders approve the election and dismissal of the external auditor? No 0.0 Are changes to the rights of a class of shares only possible if the holders of the affected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require No 0.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a No 0.0 meeting of members? Assuming that Buyer is a limited company, must all or almost all members consent to add a No 0.0 new member? Assuming that Buyer is a limited company, must a member first offer to sell their interest to Yes 1.0 the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 6.0 Is it forbidden to appoint the same individual as CEO and chairperson of the board of Yes 1.0 directors? Must the board of directors include independent and nonexecutive board members? Yes 1.0 Can shareholders remove members of the board of directors without cause before the end Yes 1.0 of their term? Must the board of directors include a separate audit committee exclusively comprising board Yes 1.0 members? Must a potential acquirer make a tender offer to all shareholders upon acquiring 50% of Yes 1.0 Buyer? Must Buyer pay declared dividends within a maximum period set by law? Yes 1.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to No 0.0 all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute profits within a maximum No 0.0 period set by law? Extent of corporate transparency index (0-10) 8.0 Must Buyer disclose direct and indirect beneficial ownership stakes representing 5%? Yes 1.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? Yes 1.0 Can shareholders representing 5% of Buyer’s share capital put items on the general meeting Yes 1.0 agenda? Must Buyer's annual financial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? No 0.0 Assuming that Buyer is a limited company, can members representing 5% put items on the Yes 1.0 meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual financial statements be No 0.0 audited by an external auditor? Page 38 Doing Business 2019 Ukraine Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as the administrative burden of paying taxes and contributions and complying with postfiling procedures (VAT refund and tax audit). The most recent round of data collection for the project was completed in May 2018 covering for the Paying Taxes indicator calendar year 2017 (January 1, 2017 – December 31, 2017). See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory contributions a 2017 (number per year adjusted for electronic medium size company must pay in a year, and measures the administrative burden and joint filing and payment) of paying taxes, contributions and dealing with postfiling processes. Information is also compiled on frequency of filing and payments, time taken to comply with tax • Total number of taxes and contributions paid or laws, time taken to comply with the requirements of postfiling processes and time withheld, including consumption taxes (value waiting. added tax, sales tax or goods and service tax) • Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: - TaxpayerCo is a medium-size business that started operations on January 1, 2016. Time required to comply with 3 major taxes It produces ceramic flowerpots and sells them at retail. All taxes and contributions (hours per year) recorded are paid in the second year of operation (calendar year 2017). Taxes and • Collecting information, computing tax payable mandatory contributions are measured at all levels of government. • Preparing separate tax accounting books, if The VAT refund process: required - In June 2017, TaxpayerCo. makes a large capital purchase: the value of the • Completing tax return, filing with agencies machine is 65 times income per capita of the economy. Sales are equally spread per month (1,050 times income per capita divided by 12) and cost of goods sold are • Arranging payment or withholding equally expensed per month (875 times income per capita divided by 12). The machinery seller is registered for VAT and excess input VAT incurred in June will be Total tax and contribution rate (% of commercial profits) fully recovered after four consecutive months if the VAT rate is the same for inputs, sales and the machine and the tax reporting period is every month. Input VAT will • Profit or corporate income tax exceed Output VAT in June 2017. • Social contributions, labor taxes paid by The corporate income tax audit process: employer - An error in calculation of income tax liability (for example, use of incorrect tax • Property and property transfer taxes depreciation rates, or incorrectly treating an expense as tax deductible) leads to an • Dividend, capital gains, financial transactions incorrect income tax return and a corporate income tax underpayment. TaxpayerCo. taxes discovered the error and voluntarily notified the tax authority. The value of the underpaid income tax liability is 5% of the corporate income tax liability • Waste collection, vehicle, road and other taxes due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax return, but within the tax assessment period. Postfiling Index • Time to comply with a VAT refund (hours) • Time to obtain a VAT refund (weeks) • Time to comply with a corporate income tax correction (hours) • Time to complete a corporate income tax correction (weeks) Page 39 Doing Business 2019 Ukraine Paying Taxes - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Payments (number per year) 5 16.6 11.2 3 (Hong Kong SAR, China) Time (hours per year) 327.5 214.8 159.4 49 (Singapore) Total tax and contribution rate (% of profit) 41.7 32.3 39.8 26.1% (32 Economies) Postfiling index (0-100) 85.95 64.41 84.41 None in 2017/18 Figure – Paying Taxes in Ukraine and comparator economies – Ranking and Score DB 2019 Paying Taxes Score 0 100 84.55: Moldova (Rank: 35) 79.35: Ukraine (Rank: 54) 79.28: Kazakhstan (Rank: 56) 75.80: Regional Average (Europe & Central Asia) 70.68: Belarus (Rank: 99) 56.55: Kyrgyz Republic (Rank: 150) Note: The ranking of economies on the ease of paying taxes is determined by sorting their scores for paying taxes. These scores are the simple average of the scores for each of the component indicators, with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax and contribution rate. The threshold is defined as the total tax and contribution rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax and contribution rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Ukraine and comparator economies – Measure of Quality 100 90.79 85.95 80 64.41 Index score 60 50.00 48.85 40 37.38 20 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Page 40 Doing Business 2019 Ukraine Details – Paying Taxes in Ukraine Tax or Payments Notes on Time Statutory Tax base Total tax Notes on mandatory (number) Payments (hours) tax rate and TTCR contribution contribution rate (% of profit) Unified Social 1.0 online 92.0 22% gross salaries 29.56 Contribution Corporate 1.0 online 36.5 18% taxable profit 11.00 income tax Land tax 1.0 online various rates land area and 1.10 value Environmenta 1.0 online various rates ton of waste 0.01 l taxes Military 0.0 online and 1.5% personal 0.00 withheld contribution jointly income Value added 1.0 online 199.0 20% value added 0.00 not included tax (VAT) Totals 5 327.5 41.7 Page 41 Doing Business 2019 Ukraine Details – Paying Taxes in Ukraine – Tax by Type Taxes by type Answer Profit tax (% of profit) 11 Labor tax and contributions (% of profit) 29.6 Other taxes (% of profit) 1.1 Page 42 Doing Business 2019 Ukraine Details – Paying Taxes in Ukraine – Measure of Quality Answer Score Postfiling index (0-100) 85.95 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? Yes Restrictions on VAT refund process None Percentage of cases exposed to a VAT audit (%) 75% - 100% Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) 16.0 68 Time to obtain a VAT refund (weeks) 14.3 78.55 Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 0% - 24% Time to comply with a corporate income tax correction (hours) 3.0 97.25 Time to complete a corporate income tax correction (weeks) No tax audit per 100 case study scenario Notes: Names of taxes have been standardized. For instance income tax, profit tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The postfiling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax correction and time to complete a corporate income tax correction. N/A = Not applicable. Page 43 Doing Business 2019 Ukraine Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tariffs) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: • Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 days are or border handling in origin economy recorded as 22×24=528 hours). If customs clearance takes 7.5 hours, the data are • Obtaining, preparing and submitting documents recorded as is. Alternatively, suppose documents are submitted to a customs agency required by destination economy and any transit at 8:00a.m., are processed overnight and can be picked up at 8:00a.m. the next day. economies The time for customs clearance would be recorded as 24 hours because the actual • Covers all documents required by law and in procedure took 24 hours. practice, including electronic submissions of Cost: Insurance cost and informal payments for which no receipt is issued are information excluded from the costs recorded. Costs are reported in U.S. dollars. Contributors Border compliance are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Contributors are private sector • Customs clearance and inspections experts in international trade logistics and are informed about exchange rates. • Inspections by other agencies (if applied to more than 20% of shipments) Assumptions of the case study: - For all 190 economies covered by Doing Business, it is assumed a shipment is in a • Handling and inspections that take place at the warehouse in the largest business city of the exporting economy and travels to a economy’s port or border warehouse in the largest business city of the importing economy. - It is assumed each economy imports 15 metric tons of containerized auto parts (HS Domestic transport 8708) from its natural import partner—the economy from which it imports the largest • Loading or unloading of the shipment at the value (price times quantity) of auto parts. It is assumed each economy exports the warehouse or port/border product of its comparative advantage (defined by the largest export value) to its • Transport between warehouse and port/border natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. • Traffic delays and road police checks while - The mode of transport is the one most widely used for the chosen export or import shipment is en route product and the trading partner, as is the seaport or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 44 Doing Business 2019 Ukraine Trading across Borders - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Time to export: Border compliance (hours) 6 22.1 12.5 1 (19 Economies) Cost to export: Border compliance (USD) 75 157.5 139.1 0 (19 Economies) Time to export: Documentary compliance (hours) 66 24.3 2.4 1 (26 Economies) Cost to export: Documentary compliance (USD) 192 97.9 35.2 0 (20 Economies) Time to import: Border compliance (hours) 32 21.1 8.5 0 (25 Economies) Cost to import: Border compliance (USD) 100 162.3 100.2 0 (28 Economies) Time to import: Documentary compliance (hours) 96 24.7 3.4 1 (30 Economies) Cost to import: Documentary compliance (USD) 162 93.9 24.9 0 (30 Economies) Figure – Trading across Borders in Ukraine and comparator economies – Ranking and Score DB 2019 Trading Across Borders Score 0 100 96.21: Belarus (Rank: 25) 92.32: Moldova (Rank: 35) 86.17: Regional Average (Europe & Central Asia) 80.74: Kyrgyz Republic (Rank: 70) 77.62: Ukraine (Rank: 78) 70.36: Kazakhstan (Rank: 102) Note: The ranking of economies on the ease of trading across borders is determined by sorting their scores for trading across borders. These scores are the simple average of the scores for the time and cost for documentary compliance and border compliance to export and import. Figure – Trading across Borders in Ukraine – Time and Cost Time (hours) Cost (USD) 120 250 100 192 96 200 Time (hours) 162 Cost (USD) 80 66 150 60 100 75 100 40 32 20 50 6 0 0 Export Export Import Import - - - - Border Documentary Border Documentary Compliance Compliance Compliance Compliance Page 45 Doing Business 2019 Ukraine Details – Trading across Borders in Ukraine Characteristics Export Import Product HS 72 : Iron and steel HS 8708: Parts and accessories of motor vehicles Trade partner Russian Federation Russian Federation Border Sumy Region Border Crossing Kharkiv Oblast border crossing (Goptovka- Nehoteevka) Distance (km) 335 335 Domestic transport time (hours) 5 5 Domestic transport cost (USD) 300 300 Details – Trading across Borders in Ukraine – Components of Border Compliance Time to Complete (hours) Associated Costs (USD) Export: Clearance and inspections required 4.0 75.0 by customs authorities Export: Clearance and inspections required 1.0 0.0 by agencies other than customs Export: Port or border handling 2.0 0.0 Import: Clearance and inspections required 8.0 100.0 by customs authorities Import: Clearance and inspections required 1.0 0.0 by agencies other than customs Import: Port or border handling 24.0 0.0 Page 46 Doing Business 2019 Ukraine Details – Trading across Borders in Ukraine – Trade Documents Export Import CMR waybill Contract (sale-purchase) Certificate of origin Compliance certificate on auto parts (Specification of the product) Certificate of quality Transit document (T1) Contract VED Specification of the product Commercial invoice Packing list Export declaration Import declaration Packing list Preliminary import declaration Act of loading Page 47 Doing Business 2019 Ukraine Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local first-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and efficiency in the court system. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract between 2 courts (calendar days) domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt • Time to file and serve the case enforcement. • Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses several • Time to enforce the judgment assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller and courts (% of claim) Buyer), both located in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. • Attorney fees - The buyer orders custom-made goods, then fails to pay alleging that the goods are • Court fees not of adequate quality. - The value of the dispute is 200% of the income per capita or the equivalent in local • Enforcement fees currency of USD 5,000, whichever is greater. - The seller sues the buyer before the court with jurisdiction over commercial cases Quality of judicial processes index (0-18) worth 200% of income per capita or $5,000. • Court structure and proceedings (-1-5) - The seller requests the pretrial attachment of the defendant’s movable assets to secure the claim. • Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. • Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. • Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Page 48 Doing Business 2019 Ukraine Enforcing Contracts - Ukraine Standardized Case Claim value UAH 119,603 Court name Kiev Commercial Court City Covered Kiev Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Time (days) 378 496.3 582.4 None in 2017/18 Cost (% of claim value) 46.3 26.3 21.2 None in 2017/18 Quality of judicial processes index (0-18) 11.5 10.3 11.5 None in 2017/18 Figure – Enforcing Contracts in Ukraine and comparator economies – Ranking and Score DB 2019 Enforcing Contracts Score 0 100 81.25: Kazakhstan (Rank: 4) 69.44: Belarus (Rank: 29) 65.65: Regional Average (Europe & Central Asia) 63.59: Ukraine (Rank: 57) 60.87: Moldova (Rank: 69) 50.42: Kyrgyz Republic (Rank: 131) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their scores for enforcing contracts. These scores are the simple average of the scores for each of the component indicators. Figure – Enforcing Contracts in Ukraine – Time and Cost Time (days) Cost (% of claim value) 700 47.0 46.3 50 Cost (% of claim value) 585 582.4 600 496.4 40 Time (days) 500 410 28.6 400 26.3 370 378 30 23.4 22.0 275 21.2 300 20 200 10 100 0 0 Belarus Europe Kazakhstan Kyrgyz Moldova OECD Ukraine & Republic high Central income Asia Page 49 Doing Business 2019 Ukraine Figure – Enforcing Contracts in Ukraine and comparator economies – Measure of Quality the Ukraine 1.5 3 2 5 Belarus 2.5 2.5 1 2.5 Kazakhstan 3 5 3 5 Kyrgyz Republic 1.5 1 0 2.5 Moldova 2.5 3 2 2 OECD high income 2.5 3.1 2.3 3.6 Europe & Central Asia 2.1 3 1.4 3.6 0 2 4 6 8 10 12 14 16 18 Sub-Indicator Score Alternative dispute resolution (0-3) Case management (0-6) Court automation (0-4) Court structure and proceedings (-1-5) Details – Enforcing Contracts in Ukraine Indicator Time (days) 378 Filing and service 48 Trial and judgment 150 Enforcement of judgment 180 Cost (% of claim value) 46.3 Attorney fees 25 Court fees 9.9 Enforcement fees 11.4 Quality of judicial processes index (0-18) 11.5 Court structure and proceedings (-1-5) 5.0 Case management (0-6) 3.0 Court automation (0-4) 2.0 Alternative dispute resolution (0-3) 1.5 Page 50 Doing Business 2019 Ukraine Details – Enforcing Contracts in Ukraine – Measure of Quality Answer Score Quality of judicial processes index (0-18) 11.5 Court structure and proceedings (-1-5) 5.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? Yes 1.5 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 3.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil Yes case? 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) time to Yes 1.0 disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the Yes 1.0 competent court? 5. Are there any electronic case management tools in place within the competent court for No 0.0 use by judges? 6. Are there any electronic case management tools in place within the competent court for No 0.0 use by lawyers? Court automation (0-4) 2.0 1. Can the initial complaint be filed electronically through a dedicated platform within the no 0.0 competent court? 2. Is it possible to carry out service of process electronically for claims filed before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? Yes 1.0 4. Publication of judgments 1.0 4.a Are judgments rendered in commercial cases at all levels made available to the Yes general public through publication in official gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme Yes court level made available to the general public through publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 1.5 1. Arbitration 1.0 Page 51 Doing Business 2019 Ukraine 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public Yes order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or No consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation No (i.e., if mediation or conciliation is successful, a refund of court filing fees, income tax credits or the like)? Page 52 Doing Business 2019 Ukraine Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are used: • Measured in calendar years • Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 suppliers. The hotel experiences financial difficulties. Cost required to recover debt (% of debtor’s - The value of the hotel is 100% of the income per capita or the equivalent in local estate) currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over the hotel’s • Measured as percentage of estate value real estate. The hotel cannot pay back the loan, but makes enough money to • Court fees operate otherwise. • Fees of insolvency administrators In addition, Doing Business evaluates the quality of legal framework applicable to • Lawyers’ fees judicial liquidation and reorganization proceedings and the extent to which best • Assessors’ and auctioneers’ fees insolvency practices have been implemented in each economy covered. • Other related fees Outcome • Whether business continues operating as a going concern or business assets are sold piecemeal Recovery rate for creditors • Measures the cents on the dollar recovered by secured creditors • Outcome for the business (survival or not) determines the maximum value that can be recovered • Official costs of the insolvency proceedings are deducted • Depreciation of furniture is taken into account • Present value of debt recovered Strength of insolvency framework index (0- 16) • Sum of the scores of four component indices: • Commencement of proceedings index (0-3) • Management of debtor’s assets index (0-6) • Reorganization proceedings index (0-3) • Creditor participation index (0-4) Page 53 Doing Business 2019 Ukraine Resolving Insolvency - Ukraine Indicator Ukraine Europe & OECD high Best Regulatory Central Asia income Performance Recovery rate (cents on the dollar) 9.6 38.6 70.5 None in 2017/18 Time (years) 2.9 2.3 1.7 0.4 (Ireland) Cost (% of estate) 40.5 13.2 9.3 1.0 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 8.5 11.1 11.9 None in 2017/18 Figure – Resolving Insolvency in Ukraine and comparator economies – Ranking and Score DB 2019 Resolving Insolvency Score 0 100 67.83: Kazakhstan (Rank: 37) 55.58: Regional Average (Europe & Central Asia) 54.12: Moldova (Rank: 68) 52.58: Belarus (Rank: 72) 47.62: Kyrgyz Republic (Rank: 82) 31.72: Ukraine (Rank: 145) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their scores for resolving insolvency. These scores are the simple average of the scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Ukraine – Time and Cost Time (years) Cost (% of estate) 3.5 40.5 45 2.8 2.9 40 Cost (% of estate) 3 35 Time (years) 2.5 2.3 30 2 1.7 25 1.5 1.5 1.5 1.5 17.0 20 15.0 15.0 15.0 13.2 15 1 9.3 10 0.5 5 0 0 Belarus Europe Kazakhstan Kyrgyz Moldova OECD Ukraine & Republic high Central income Asia Page 54 Doing Business 2019 Ukraine Figure – Resolving Insolvency in Ukraine and comparator economies – Measure of Quality the Ukraine 4 2 2 0.5 Belarus 5.5 2 2 0.5 Kazakhstan 6 3 4 2 Kyrgyz Republic 3 3 1 2 Moldova 4 2.5 3 2.5 OECD high income 5.3 2.8 2.2 1.9 Europe & Central Asia 4.5 2.6 2.3 1.8 0 2 4 6 8 10 12 14 16 Sub-Indicator Score Management of debtor's assets index (0-6) Commencement of proceedings index (0-3) Creditor participation index (0-4) Reorganization proceedings index (0-3) Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Figure – Resolving Insolvency in Ukraine and comparator economies – Recovery Rate Recovery rate(cents on the dollar) 100 80 60 39.6 38.9 36.2 38.6 40 30.9 20 9.6 0 Ukraine Belarus Kazakhstan Kyrgyz Republic Moldova Europe & Central Asia Page 55 Doing Business 2019 Ukraine Details – Resolving Insolvency in Ukraine Indicator Answer Score Proceeding liquidation (after Under current Ukrainian insolvency legislation (Articles 5-6 of the Bankruptcy Law), Mirage's an attempt at management can initiate pre-insolvency restructuring proceedings, but it needs BizBank's reorganization) consent. BizBank is likely not to agree to such proceedings, because it would be more interested in recovering its loan through foreclosure as soon as possible. Therefore, in order to prevent the foreclosure by BizBank against Mirage's property (and, as a result, an immediate sale of Mirage's property piecemeal), Mirage will initiate insolvency proceedings. According to Article 19 of the Bankruptcy Law, once Mirage's management initiates insolvency proceedings, all enforcement actions for claims which arose prior to filing for insolvency will be stayed for the entire duration of the proceedings and no penalties will be added to the existing claims. However, it is unlikely that Mirage's solvency can be restored and restructured during the reorganization proceedings. As a result, the commercial court will declare Mirage bankrupt and initiate liquidation proceedings. Outcome piecemeal sale As part of the liquidation proceedings, the insolvency administrator will attempt to sell the hotel's assets in order to satisfy the creditors' claims. It is very unlikely that a purchaser can be found willing to buy the hotel as a whole and continue operating it. Therefore, the assets of the hotel will most likely be sold piecemeal at an auction and the buyer will take possession of them. Time (in years) 2.9 Mirage’s management will initiate insolvency proceedings, which will stay all enforcement actions for claims which arose prior to filing for insolvency filing (Art. 19 of the Bankruptcy Law). The court will notify the creditors through a public announcement. Creditors will file their claims within a 30- day period (Art. 23 of the Bankruptcy Law). The court will appoint an insolvency administrator who will review the creditors’ claims and submit a report with the results of the review to the court’s approval. After the decision by the court, the insolvency administrator will notify the creditors whether their claims were accepted or rejected and the list of creditors’ claims will be composed. After the list of creditors’ claims is finalized, the first meeting of the creditors will be held, where the creditors will decide whether to liquidate Mirage or to proceed with restructuring proceedings. If the creditors cannot agree on the course of action, the court will make a decision to liquidate the company. After the decision to liquidate the company is made, an evaluation of the assets will be made and the assets will be sold piecemeal. Reorganization procedure is limited to 6 months, but can be extended on the request of the administrator for up to 12 months. The liquidation phase can take 12-24 months. The main delays in liquidation will be caused by multiple challenges of procedural acts. Cost (% of 40.5 The cost associated with the entire proceedings would amount to approximately 40.5% of the estate) value of the debtor's estate. The major expenses are comprised of court's fees (2.5%), attorneys’ fees (11%), fees of the insolvency representative (10%), fees of other professionals involved in the case (around 8%), and auctioneer's fees (9%). Recovery rate 9.6 (cents on the dollar) Page 56 Doing Business 2019 Ukraine Details – Resolving Insolvency in Ukraine – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 8.5 Commencement of proceedings index (0-3) 2.0 What procedures are available to a DEBTOR when commencing insolvency proceedings? (b) Debtor may 0.5 file for liquidation only Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a 0.5 creditor may file for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (a) Debtor is 1.0 insolvency framework? generally unable to pay its debts as they mature Management of debtor's assets index (0-6) 4.0 Does the insolvency framework allow the continuation of contracts supplying essential goods Yes 1.0 and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome Yes 1.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit after No 0.0 commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.5 Which creditors vote on the proposed reorganization plan? (c) Other 0.5 Does the insolvency framework require that dissenting creditors in reorganization receive at No 0.0 least as much as what they would obtain in a liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, No 0.0 does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 2.0 Does the insolvency framework require approval by the creditors for selection or No 0.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial Yes 1.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request information No 0.0 from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to decisions Yes 1.0 accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice.” Page 57 Doing Business 2019 Ukraine Labor Market Regulation Doing Business presents detailed data for the labor market regulation indicators on the Doing Business website (http://www.doingbusiness.org). The report does not present rankings of economies on these indicators or include the topic in the aggregate ease of doing business score or ranking on the ease of doing business. The most recent round of data collection was completed in May 2018. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions about the (i) whether fixed-term contracts are prohibited for worker and the business are used. permanent tasks; (ii) maximum cumulative duration of fixed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether - Operates a supermarket or grocery store in the economy’s largest business city. nonpregnant and nonnursing women can work For 11 economies the data are also collected for the second largest business city. same night hours as men; (v) length of paid annual - Has 60 employees. leave. - Is subject to collective bargaining agreements if such agreements cover more than 50% of the food retail sector and they apply even to firms that are not party to them. Redundancy rules - Abides by every law and regulation but does not grant workers more benefits than (i) whether redundancy can be basis for terminating those mandated by law, regulation or (if applicable) collective bargaining workers; (ii) whether employer needs to notify agreements. and/or get approval from third party to terminate 1 redundant worker and a group of 9 redundant workers; (iii) whether law requires employer to reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of five fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Page 58 Doing Business 2019 Ukraine Labor Market Regulation - Ukraine Details – Labor Market Regulation in Ukraine Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study (US$/month) 123.3 Ratio of minimum wage to value added per worker 0.4 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 5.5 Premium for night work (% of hourly pay) 20.0 Premium for work on weekly rest day (% of hourly pay) 100.0 Premium for overtime work (% of hourly pay) 100.0 Restrictions on night work? No Whether nonpregnant and nonnursing women can work the same night hours as men No Restrictions on weekly holiday? Yes Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 18.0 Paid annual leave for a worker with 5 years of tenure (working days) 18.0 Paid annual leave for a worker with 10 years of tenure (working days) 18.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 18.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? No Third-party approval if one worker is dismissed? No Third-party notification if nine workers are dismissed? No Third-party approval if nine workers are dismissed? No Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? Yes Priority rules for reemployment? Yes Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 8.7 Notice period for redundancy dismissal for a worker with 5 years of tenure 8.7 Notice period for redundancy dismissal for a worker with 10 years of tenure 8.7 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 8.7 Severance pay for redundancy dismissal for a worker with 1 year of tenure 4.3 Page 59 Doing Business 2019 Ukraine Severance pay for redundancy dismissal for a worker with 5 years of tenure 4.3 Severance pay for redundancy dismissal for a worker with 10 years of tenure 4.3 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 4.3 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 126.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? Yes Minimum contribution period for unemployment protection (months)? 6.0 Page 60 Doing Business 2019 Ukraine Business Reforms in Ukraine In the past year, Doing Business observed a peaking of reform activity worldwide. From June 2, 2017, to May 1, 2018, 128 economies implemented a record 314 regulatory reforms improving the business climate. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are reforms implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more difficult to do business. DB2019 Dealing with Construction Permits: Ukraine made construction permitting more costly by increasing the contribution fee to the city social and engineering-transport infrastructure. On the other hand, Ukraine made dealing with construction permits easier by eliminating a requirement that investors obtain clearance from the State Service of Ukraine for Emergency Situations. Protecting Minority Investors: Ukraine strengthened minority investor protections by increasing the requirements for the disclosure in annual reports of related-party transactions. Trading across Borders: Ukraine made trading across borders easier by eliminating the verification requirement on auto parts from the State Service of Export Control. Enforcing Contracts: Ukraine made enforcing contracts easier by introducing a simplified procedure for small claims and pre-trial conferences as part of the case management techniques used in all commercial courts. DB2018 Dealing with Construction Permits: Ukraine made dealing with construction permits easier by reducing fees. Protecting Minority Investors: Ukraine strengthened minority investors protections by requiring detailed immediate public disclosure of related-party transactions. Paying Taxes: Ukraine made paying taxes easier by reducing the rate for the unified social contribution tax. DB2017 Protecting Minority Investors: Ukraine strengthened minority investor protections by requiring interested director or shareholder to be excluded from the vote, by requiring that proposed related-party transactions undergo external review, by introducing remedies in cases where related-party transactions are harmful to the company and also clarifying ownership and control structures. Enforcing Contracts: Ukraine made enforcing contracts easier by introducing a system that allows users to pay court fees electronically. DB2016 Starting a Business: Ukraine made starting a business easier by reducing the time required for VAT registration and by eliminating business registration fees. DB2015 Paying Taxes: Ukraine made paying taxes easier for companies by introducing an electronic system for filing and paying labor taxes. On the other hand, it increased the environmental tax. Page 61 Doing Business 2019 Ukraine DB2014 Starting a Business: Ukraine made starting a business easier by eliminating the requirement for registration with the statistics authority and by eliminating the cost for value added tax registration. Dealing with Construction Permits: Ukraine made dealing with construction permits easier by introducing a risk-based approval system, eliminating requirements for certain approvals and technical conditions and simplifying the process for registering real estate ownership rights. Getting Electricity: Ukraine made getting electricity easier by streamlining the process for obtaining a new connection. Registering Property: Ukraine made transferring property easier by streamlining procedures and revamping the property registration system. Getting Credit: Ukraine improved access to credit information by collecting data on firms from financial institutions. Paying Taxes: Ukraine made paying taxes easier for companies by simplifying tax returns and further improving its electronic filing system. Trading across Borders: Ukraine made trading across borders easier by releasing customs declarations more quickly and reducing the number of physical inspections. Resolving Insolvency: Ukraine made resolving insolvency easier by strengthening the rights of secured creditors, introducing new rehabilitation procedures and mechanisms, making it easier to invalidate suspect transactions and shortening the statutory periods for several steps of the insolvency process. DB2013 Starting a Business: Ukraine made starting a business easier by eliminating the minimum capital requirement for company incorporation as well as the requirement to have incorporation documents notarized. Registering Property: Ukraine made property transfers faster by introducing an effective time limit for processing transfer applications at the land cadastre in Kiev. Paying Taxes: Ukraine made paying taxes easier by implementing electronic filing and payment for medium-size and large enterprises. DB2012 Starting a Business: Ukraine made starting a business easier by eliminating the requirement to obtain approval for a new corporate seal. Paying Taxes: Ukraine made paying taxes easier and less costly for firms by revising and unifying tax legislation, reducing corporate income tax rates and unifying social security contributions. Trading across Borders: Ukraine made trading across borders more difficult by introducing additional inspections for customs clearance of imports. Enforcing Contracts: Ukraine amended legislation to streamline commercial dispute resolution and increase the efficiency of enforcement procedures. Resolving Insolvency: Ukraine amended its legislation on enforcement, introducing more guarantees for secured creditors. DB2011 Starting a Business: Ukraine eased business start-up by substantially reducing the minimum capital requirement. Dealing with Construction Permits: Ukraine made dealing with construction permits easier by implementing national and local regulations that streamlined procedures. Paying Taxes: Ukraine eased tax compliance by introducing and continually enhancing an electronic filing system for value added tax. DB2010 Protecting Minority Investors: Ukraine strengthened investor protections through a new joint stock companies law enhancing approval requirements for related-party transactions, increasing disclosure requirements in the annual report and making it easier to sue directors in cases where related-party transactions harm the company. Page 62 Doing Business 2019 Ukraine DB2009 Dealing with Construction Permits: Dealing with construction permits in Ukraine became more costly because of the introduction of an infrastructure tax and more time consuming because of an administrative backlog. Getting Credit: Ukraine improved access to credit information by creating a new private credit bureau. Paying Taxes: Ukraine made paying taxes less costly for companies by reducing employers’ contribution rate to the pension fund—though it also increased their contribution rates to the social security fund and social insurance for work accidents. Trading across Borders: Ukraine reduced the time for importing by improving port infrastructure and services. Page 63 Doing Business 2019 Ukraine Page 64