AEQUO team acted as the legal advisor to the EBRD on the conceptualisation of the factoring reform and drafting the Law of Ukraine "On Factoring"
A consortium of AEQUO and renowned Washington-based International Law Institute was selected by EBRD back in 2023 to design the concept of the factoring reform and hold a pen on the draft Factoring Law, as well as amendments to the subordinate legislation.
Throughout 2023-2024, AEQUO worked in close cooperation with the experts of the International Law Institute, NBU, EBRD and representatives of the Ukrainian trade finance market to develop the new legal framework for factoring transactions in Ukraine in line with the UNIDROIT Model Law on Factoring. As a result of joint efforts, the draft Factoring Law was finalised and submitted by the NBU to the Verkhovna Rada of Ukraine on the 6th of December 2024 (draft law No. 12306). In fact, Ukraine is among the leaders of implementation of the best practices of UNIDROIT MLF into the local framework.
The Factoring Law will introduce a number of important changes, such as:
for the first time in Ukraine, there will be a clear legal differentiation between trade finance and sale of bad debts. Pursuant to the draft Law, trade receivables only will be eligible for factoring, while sales of financial receivables will be done based on cession;
considering that factoring has previously been often associated in Ukraine with the acquisition of bad debts rather than working capital financing, the draft Law establishes certain restrictions on the activities that can be pursued by non-bank factoring companies, especially as it relates to interaction with consumers;
the draft Law envisages launch of the register of factoring assignments of receivables, which will determine priority among competing assignments and will also help to prevent fraud stemming from double assignment of the same receivables;
the draft Law provides for overarching restriction in respect of anti-assignment clauses, declaring any such contractual prohibitions and restrictions on assignment of receivables null and void;
the draft Law sets a very solid ground for the upcoming implementation of the EU Credit Servicers and Credit Purchasers Directive in Ukraine. In particular, the Factoring Law will facilitate the secondary market of the NPL sales by allowing unregulated entities, other than financial institutions, to carry out such debt purchases.
AEQUO is committed to continue supporting the draft Law as it enters the legislative process in order to facilitate swift implementation of the factoring reform in Ukraine.
AEQUO project team included associates Dmytro Shudrenko and Konstantyn Dovhan, who worked under supervision of Yulia Kyrpa, executive partner and head of Banking&Finance practice group of the firm.