Possible Change in State Registration Rights and Powers

On 6 November 2020, the Ukrainian Parliament registered a Draft Law prepared by the Ministry of Justice and approved by the Cabinet of Ministers, regarding  improvement of the corporate and real estate registries’ reliability and security.  The Draft Law No 4338 “On Amendments to Certain Laws of Ukraine concerning Regulation of Activities in the Sphere of State Registration of Real Property Rights and Encumbrances and in the Sphere of State Registration of Legal Entities, Individual Entrepreneurs and public formations ” (hereinafter the Draft Law).

According to First Deputy Minister of Justice Yevhen Horovets, the Draft Law proposes to deprive the Ministry of Justice, starting from 1 January 2022, of the power to make decisions on the cancellation of registration actions in the field of state registration of legal entities, individuals and public entities and cancellation of decisions on the state registration of rights. on real estate and their encumbrances. Instead, there will be only a court procedure for appealing against decisions, actions or omissions of state registrars and subjects of state registration in these areas.

The Draft Law  approved by the Government also proposes to implement some provisions aimed at preventing and combating raider attacks. For instance, some registration services will be transferred into electronic form, in particular registration actions based on court decisions received as a result of data interaction with the Unified State Register of Court Decisions, as well as refusal to store registration records on paper. Such innovations should exclude the possibility of state registrations on the basis of forged court decisions.

Due to the revision of approaches to the composition and powers of the subjects of state registration in the spheres of real estate and business, the Draft Law also provides for the exclusion of district state administrations from their number. At the same time, the relevant powers of the executive bodies of  local city councils for state registration remain unchanged.

Another significant innovation is the option for participants (shareholders) of a legal entity to set, as an extra security measure, a reservation that registration actions, if agreed by the respective shareholders, must be taken in electronic form and signed using electronic identification keys. It is expected that this reservation, if established, will act as an additional protection of legal entities.

Even though there is still a long way to go in the form of two parliamentary hearings, such a proactive and forward-looking initiative raised by the Ministry of Justice of Ukraine is a good sign for the corporate community, showing  that state officials are aware of the issues and are dealing with them.