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NBU Amends Martial Law Limitations Allowing Ukrainian Borrowers to Make Certain Payments on Cross-border Loans and Introduces Additional Restrictions

NBU Amends Martial Law Limitations

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On 2 September 2022, the National Bank of Ukraine (NBU) adopted a new slew of changes to the martial law restrictions introduced on 24 February 2022:

1. The NBU now allows Ukrainian borrowers—legal entities—to make interest payments under cross-border loans that became due and payable at any point between 24 February 2022 and 10 August 2022, inclusive (Allowed Interest Payment), provided that the following conditions have been met:

  • The borrower was not in payment default under the loan on or before 24 February 2022.
  • The maximum interest amount payable in one month does not exceed one-fifth of the Allowed Interest Payment amount.
  • The borrower must use its own funds for making the interest payments.
  • The borrower has no debts under payments, falling under the authorities’ oversight, as confirmed by a certificate whose form is set out in Ukrainian legislation; while the NBU regulations are silent on what that certificate should be, one may presume this could be the certificate from tax authorities on the absence of tax debts.
  • The borrower continues business operations after 23 February 2022 (including salary payments to its employees, other mandatory contributions, as confirmed by bank statements showing turnover in the borrower’s accounts).

The NBU regulations are silent on the evidence required from the borrowers on meeting the above criteria. Accordingly, Ukrainian servicing banks will determine this within their currency control and compliance functions.

Any other payments from Ukraine under cross-border loans (e.g. principal, interest) than Allowed Interest Payments and other permitted payments (please refer to our previous newsletters) remain prohibited. Ukrainian banks are also prohibited to proceed with amendments to cross-border loan agreements on rescheduling interest payment dates from other periods to the period from 24 February to 10 August 2022. 

2. Ukrainian companies are now prohibited from purchasing foreign currency on the Ukrainian FX market for cross-border payments if they already have own funds in the respective foreign currency available for making cross-border payments.

3. The NBU prohibited the Ukrainian banks to stop the currency control checks for the setoffs under transactions on exports/imports of goods, save for cross-border settlements under the operations related to the international telecom services.

In addition, the NBU now requires Ukrainian banks to recommend their clients (borrowers with cross-border loans) to request their foreign creditors to restructure their financial indebtedness on terms that are not worse than Ukraine sovereign financial debt restructuring. If you recall, this summer Ukraine had reached an agreement with its creditors to defer repayments.

No specific consequences are provided in respect of a failure to provide or follow such recommendations.

We advise that lenders consider with their counsels actions to preserve their rights under finance documentation, request Allowed Interest Payments and continue to monitor developments.

The above changes came into force on 6 September 2022.

By Natalia Selyakova, Partner, and Artem Lukyanov, Senior Associate, Dentons

Ukraine Knowledge Partner

AVELLUM is a leading Ukrainian full service law firm with a key focus on Finance, Corporate, Dispute Resolution, Tax, and Antitrust.

Our aim is to be the firm of choice for large businesses and financial institutions in respect of their most important and challenging transactions.

We build lasting relationships with our clients and make them feel secure in new uncertain economic and legal realities.

We incorporate the most advanced Western legal techniques and practices into our work. By adding our first-hand knowledge, broad industry experience, and unparalleled level of service we deliver the best results to our clients in their business endeavours. Our partners are taking an active role in every transaction and ensure smooth teamwork.

AVELLUM is recognised as one of the leading law firms in Ukraine by various international and Ukrainian legal editions (Chambers, The Legal500, IFLR1000, The Ukrainian Law Firms, and others).

Firm's website: www.avellum.com

 

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