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Головна Legal advice Restrictions for citizens and legal entities of the Russian Federation in Ukraine

Restrictions for citizens and legal entities of the Russian Federation in Ukraine

Today many of our clients face with the issue of conducting compliance checks of counterparties for ties with the Russian Federation, as well as relations with citizens and residents of the Russian Federation. In this regard arise the following questions: when are such inspections necessary, what are the risks of establishing business relations with counterparties with ties to the Russian Federation, etc.

In this regard we have prepared for you this legal advice, which highlighted the main restrictions currently imposed at the legislative level on citizens and legal entities of the Russian Federation in Ukraine.

Restrictions imposed on citizens and legal entities of the Russian Federation in Ukraine:

  1. Regarding citizens / legal entities of the Russian Federation (except for citizens of the Russian Federation with a certificate for permanent / temporary residence in Ukraine), legal entities of Ukraine which have participants / beneficiaries from the Russian Federation (except for citizens of the Russian Federation with a certificate for permanent / temporary residence in Ukraine) the Resolution of the Cabinet of Ministers of 03.03.2022 № 187 “On ensuring the protection of national interests in future lawsuits of the state of Ukraine in connection with the military aggression of the Russian Federation” forbids the following:

– performance, in particular compulsorily, of monetary and other obligations (including provision / receipt of services, sale / purchase of goods, provision / receipt of loans, etc.), creditors of which are the above persons (for example, in accordance with this ban, Ukrainian telephone operators have stopped serving Russian citizens and Ukrainian companies whose participants and beneficiaries are Russian citizens);

– alienation, pledge, any other action which must or may lead to the alienation of immovable property, securities, corporate rights, vehicles, aircrafts and ships, inland waterway vessels (a) for the benefit of persons related to Russian Federation, or in favor of the Russian Federation or (b) the implementation of such actions by persons associated with the Russian Federation (except for free alienation in favor of Ukraine).

2. Notarial actions at the request of citizens / legal entities of the Russian Federation (including at the request of citizens of the Russian Federation with a certificate for permanent / temporary residence in Ukraine), legal entities of Ukraine which have participants / beneficiaries from the Russian Federation are restricted (Resolution of the Cabinet of Ministers of 28.02.2022 №164 «Some issues of notary in martial law»):

– incomplete notarial acts are stopped;

– in case of application, the notary is obliged to refuse to perform the notarial act.

That is, in fact, all transactions for the alienation of real estate of all citizens of the Russian Federation, change of participants / directors in legal entities of Ukraine (participants / beneficiaries in which are citizens / legal entities of the Russian Federation) are blocked.

3. Compulsory seizure of ownership of the Russian Federation, as well as legal entities (their branches, representative offices), the founder or ultimate beneficiary of which is the state of the Russian Federation is proclaimed (Law of Ukraine “On the Basic Principles of Compulsory Seizure in Ukraine of Objects of Property of the Russian Federation and Its Residents” of 03.03.2022).

The subject to withdrawal are: movable and immovable property, cash, bank deposits, securities, corporate rights, other property (assets) located (registered) on the territory of Ukraine.

The compulsory seizure does not occur automatically: the decision to seize specific property is made by the National Security and Defense Council of Ukraine and put into effect by a decree of the President of Ukraine.

4. Restrictions on banking operations (Resolution of the Board of the National Bank of Ukraine of 24.02.2022 №18 as amended):

– suspended expenditure transactions on the accounts of residents of the Russian Federation / Republic of Belarus, on the accounts of legal entities whose beneficiaries are residents of the Russian Federation / Belarus;

– it is prohibited to credit funds to the accounts of individuals on transfers initiated with the use of electronic means of payment issued by participants of international payment systems operating in the territory of the Russian Federation and / or the Republic of Belarus;

– it is prohibited to accept in Ukraine electronic means of payment (including transfers, settlements and cash withdrawals) issued by participants of international payment systems operating in the territory of the Russian Federation and the Republic of Belarus;

– it is forbidden to carry out foreign exchange transactions using Russian and Belarusian rubles;

– it is prohibited to carry out foreign exchange transactions, the participants of which are legal entities / individuals registered / permanently residing in the Russian Federation or the Republic of Belarus;

– it is prohibited to carry out foreign exchange transactions to fulfill obligations to legal entities / individuals registered / permanently residing in the Russian Federation or the Republic of Belarus.

Comment: if a citizen of the Russian Federation has a residence permit in Ukraine, and his location can be established in Ukraine, the bank should not block foreign exchange transactions with such a person.

5. Enforcement proceedings creditors in which are the Russian Federation, citizens / legal entities of the Russian Federation (except for citizens of the Russian Federation with a certificate for permanent / temporary residence in Ukraine), legal entities of Ukraine which have participants / beneficiaries from the Russian Federation are suspended. If a citizen of the Russian Federation is a debtor, from his salary in Ukraine, the employer must continue to withhold penalties under executive documents.

6. The import of Russian goods is prohibited (Resolution of the Cabinet of Ministers of 09.04.2022 № 426 «On the application of the ban on imports of goods from the Russian Federation»).