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The Ministry of Agrarian Policy and Food took a step toward legalizing agricultural receipts. However, this financial instrument might not become effective


Authors: Maria Brovynska, Galyna Kalachova
Source: «Capital»

The Ministry of Agrarian Policy and Food developed the procedure for introduction of the electronic register of agricultural receipts. It is stated in the draft resolution, the text of which was provided to «Capital». The register will contain the information about agricultural receipts, pledged property and debtors. Entering into the register will be paid, but the price of registration is not specified in the document. All agricultural receipts must be notarized, so notaries who have no access to the register will have to send two copies of the document to the registrar.

The first step has been taken

Agricultural receipt is the document according to which the agrarians can obtain loans secured by the future crop. It fixes the amount of pledge, the obligation of the debtor, and data about the registrar, lender and borrower. Agricultural receipts are issued separately for each type of agricultural products. Previously, such receipts were used by the farmers on a contractual basis and were not regulated by law. It resulted in litigations, which were not easy to resolve.

Receipts as a financial instrument were legalized in November 2012, when the Parliament passed the relevant law. The document came into force in March of this year, but was of a framework nature, as it needed adoption of the supplemental regulations. In particular, the receipts still turn out of the legislative field without the register.

Pursuant to the law, the lender under the agricultural receipt can not only provide funds, but also supply goods and perform works. He also has the right to conduct round the clock monitoring of future crops and livestock being the pledged items. If the lender decides that the debtor grows the products incorrectly, it has the right to make the act and demand the elimination of violations. Moreover, the lender may engage in growing crops directly or through third parties, thus removing the debtor. The agricultural experiments of the lender shall be paid by the debtor.

If the lender does not return the receipt to the debtor, the latter will have to pay him a fine of 10 minimum wages (11.47 thousand hryvnias) and compensate for all losses. If the non-return period of the receipt exceeds one month, the fine will amount to 100 minimum wages (114.7 thousand hryvnias), when the delay is more than half a year – 300 minimum wages (344.1 thousand hryvnias).

It will not start working soon

The head of the Agrarian Union of Ukraine Gennadiy Novikov believes that agricultural receipts are additional means of raising resources in agri-business. The Deputy Director General of the Ukrainian Agrarian Confederation Oleksandr Yaroslavskyi agrees with him, but notes that the increase in loan growth will lead to an increase in defaults of loans. According to the NBU, in January-April of the current year as compared to the same period of 2012 lending to farmers increased by 4% – to 36.7 billion hryvnias. Thereto, the amount of arrears increased by 15% and reached 3.4 billion hryvnias.

The Partner of Ilyashev & Partners Law Firm Maksym Kopeychykov does not believe that agricultural receipts will become an effective financial instrument. «I do not think it will work, because our farmers treat any innovation with hostility», he said. According to the lawyer, small producers will not use these pledge instruments, because they will not allow themselves to risk the harvest. «A few people will want to bear the risks of loss of their land as a result of possible fraud», agrees with the lawyer the Head of private agricultural farm in Kyiv region.

The attorney of CMS Reich-Rohrwig Hainz Eugenia Novichkova makes a forecast that if all formalities are met, and notaries and registrars will be trained, the law will start working in a year. However, in her opinion it will be possible to apply receipts after the end of 2014 – beginning of 2015, because the creation and testing of the registry will take about half a year or a year.

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