Land reform adopted

It is commonly known that, on November 13, 2019 the Verkhovna Rada of Ukraine adopted in first reading the draft law No. 2178-10 “On Amending Certain Legislative Acts Concerning the Turnover of Agricultural Land”. This draft law, in particular, provided for the repeal of the ban on the sale of land from October 1, 2020.

On March 31, 2020, the Verkhovna Rada of Ukraine adopted secondly and in general the indicated draft law, but taking into account many amendments (4000 amendments were proposed) made to the original document. However, individual deputies who opposed the Draft law used tactical tricks to suspend its entry into force and, for this purpose, the deputies submitted five draft resolutions on the abolition of voting results.

Procedurally, in the case of registration of a decision on revocation of the decision of the Verkhovna Rada on the approval of the Draft law, its signing by the speaker of the Verkhovna Rada becomes impossible until the Verkhovna Rada considers all registered resolutions. However, these actions can only temporarily suspend the entry into force of the Law, but not cancel it, as at the next meeting of the Verkhovna Rada, all these draft resolutions will be put to a vote and canceled, which will give the right to the speaker and the President to sign the Law.

Herewith, “the Opposition Platform – For Life” party decided not to artificially prevent the entry into force of the Law, but stated that after the law was signed by the President and published, the party would appeal to the Constitutional Court of Ukraine with a request to declare the Law unconstitutional.

The official text of the document has not been signed by the President of Ukraine and has not been published, therefore, in this legal advice we will briefly dwell on the main points of the land reform, using the text of the Draft law prepared for the second reading. We will provide more detailed legal advice after the publication of the official text.

The opening date for the land market was postponed from October 1, 2020 to July 1, 2021. At the same time, the Cabinet of Ministers of Ukraine, within six months from the date of publication of the Law, is instructed:

– to develop and approve the procedure for providing financial support to citizens and legal entities (including farm holdings) for the acquisition of the land plots for agricultural designation;

– to develop and submit to the Verkhovna Rada of Ukraine a draft Law of Ukraine on amendments to the Budget Code of Ukraine regarding the establishment of the Rural Development Fund as part of special funds of state and local budgets, the funds from which are allocated to development expenditures: infrastructure, energy saving, education and medicine in rural areas and implementation of state programs for the development of small and medium agricultural producers;

– to bring their legal acts in accordance with this present Law;

– to ensure the review and bringing the regulatory legal acts by the relevant central executive bodies in accordance with this Law.

The ownership right on land plots for agricultural purposes may be acquired:

a) until January 1, 2024 only individuals-citizens of Ukraine and the concentration of agricultural land plots owned by one citizen cannot exceed 100 hectares (the right to acquire land after January 1, 2024 also remains);

b) from January 1, 2024, legal entities of Ukraine created and registered under the legislation of Ukraine, whose participants (shareholders, members) are only citizens of Ukraine and/or the state, and/or territorial communities and concentration of agricultural land plots owned by one person cannot exceed 10 000 ha;

c) territorial communities;

d) the state.

Foreigners, persons without citizenship and legal entities are prohibited to acquire shares in the authorized capital, shares, units, membership in legal entities (except in the authorized capital of banks) that are owners of agricultural land. This condition becomes null and void after a referendum is held in case of a decision to lift the ban on the sale of land to the above categories.

The acquisition of ownership right on land plots for agricultural designation by legal entities created and registered under the laws of Ukraine, whose participants (founders) or ultimate beneficial owners (controllers) of which are non–citizens of Ukraine, may be subject to approval by referendum.

Underanyconditions, includinginthecaseofapprovalofadecisionbyreferendum, itisprohibitedtoacquireownershipright onagriculturalland by:

– legal entities whose participants (shareholders, members) or ultimate beneficiaries are persons who are not citizens of Ukraine – on land plots for agricultural purposes of state and communal ownership, land plots for agricultural purposes allocated in kind (on the ground) to land shares (units) owners, andwhicharelocatedcloserthan 50 kilometerstothestateborderofUkraine (except for the state border of Ukraine, which passes over the sea);

– legal entities whose participants (shareholders, members) or ultimate beneficiaries are citizens of a state recognized by Ukraine as an aggressor state or an occupying state;

– persons belonging or previously belonging to terrorist organizations;

– legal entities whose participants (shareholders, members) or ultimate beneficiaries are foreign states;

– legal entities in which it is not possible to establish a beneficial owner (controller);

– legal entities whose beneficial owners (controllers) are registered in offshore zones included in the list of offshore zones according to the List of the Cabinet of Ministers of Ukraine;

– individuals and legal entities in respect of which special economic and other restrictive measures (sanctions) have been applied in accordance with the Law of Ukraine “On Sanctions” in the form of a ban on concluding transactions for the acquisition of land plots, as well as related parties;

– legal entities established under the laws of Ukraine, controlled by individuals and legal entities registered in the states included in the list of states that do not cooperate in the field of combating money laundering through crime by the International Financial Action Task Force on Money Laundering (FATF).

In the new version of the draft law, the sale of land plots of agricultural purpose of state and municipal property is prohibited.

Until January 1, 2030, the sale price of land plots cannot be lower than their normative assessment. Payments for the acquisition of land should be exclusively in non-cash form, and the purchaser must provide documents that confirm the source of funds.

Banks are not given the right to buy land, but only to take as collateral. At the same time, such land should be sold for two years.

Part of the proceeds from the sale of state and communal property will go towards the creation of a Rural Development Fund.

The Law shall enter into force on July 1, 2021, except for clause 2 of this section, which shall enter into force on the day the Law is published (clause 2 relates to the duties of the CMU in preparing the regulatory framework).