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Universal Bank increases its statutory capital

Universal Bank increases its statutory capital

Decision of international Eurobank EFG group as for Universal Bank development

On April, 22 in Greece the strategic group committee on business development of affiliated parent company Eurobank EFG took the decision to increase Universal Bank’s capital on 20 million euro, UAH 200 million in national currency equivalent. It is planned to enroll the capital partly already in the 2d quarter of 2009 after passing of all procedures. As of January 1 of the current year in obedience to NBU report the size of the statutory capital made up UAH 837,712 million.

The increase of Universal Bank reserves will promote bank’s solvency and also will be instrumental in strengthening of its reliable and stable activity at the country internal market.

Taking into consideration the NBU set norm on capital adequacy ratio 10% for the Ukrainian banks, as of April, 1, 2009 this index of Universal Bank made up 16,7%, that is 2,4% higher than the index as of January of the same year.
«The decision of Universal Bank shareholders’, international Eurobank EFG group, to increase  Universal Bank’s capital allows our bank to provide additional financial solidity, in order to responsibly carry out the obligations towards our clients. Our financial group stably follows its strategy of developing banking in Ukraine and believes in the future of the country» - comments Miltiadis Papanikolaou, CEO of Universal Bank.
Bank profile
OJSC Universal Bank belongs to the group of banks Eurobank EFG, which is a part of an international financial organization EFG Group, the third largest Swiss-based banking group. EFG Group has an established presence in over 30 countries of the world.

Eurobank EFG Group is a European banking organization with total assets of €79.4 bn. The Group employs more than 24,000 people and offers its products and services both through its network of over 1,700 branches and points of sale, and through alternative distribution channels.
Eurobank EFG is highly recognized by international rating agencies (Standard & Poor’s, Fitch and Moody’s) for its high level of service, professionalism of bank management and staff, financial potential and scaled investments in modern technologies.
History of the Ukrainian bank began 15 years ago with its foundation in 1994, and in 2006 it became the part of the international group of banks Eurobank EFG and received the new name OJSC «Universal Bank».
Universal Bank provides full range of banking services for private individuals and legal entities. The bank operates with such business segments as small and medium entrepreneurs as well corporate clients. Universal Bank has the branches network of national scale.
In September 2008 Universal Bank received one of the highest long-term credit rating in Ukraine – «uaAA» with prognosis “stable” that was affirmed on April 3, 2009 by the national rating agency «Credit-Rating».
Also on March, 2009 the agency «Credit Rating» appropriated Universal Bank the greatest rating of the bank reliability holdings with a mark «5». Rating represents long-term financial stability of bank and reliability of the deposit programs, which characterized ability of establishment in time and in full to make payments on deposits.
Financial indexes testify to the positive dynamics of Universal Bank growth. According to the financial statements report on 01.01.2009 Universal Bank showed growth on all indexes: the level of bank capital made up UAH 866, 7 mln., due to the bank capital indicator the bank entered Top - 30 of Ukrainian banks (according to the information of National Bank of Ukraine as of 01.01.2009),
the assets volume - UAH 8100, 9 mln., volume of attracted funds from legal and private entities - UAH 713, 0 mln. and UAH 1714, 8 mln. correspondingly, the size of credit portfolio is UAH 6710, 4 mln., total volume of credits of legal entities is UAH 1737, 8 mln.; of private entities is UAH 4972, 6 mln., and the net income of the bank - UAH 4,179 mln.

The bank is recognized by the banking experts. Thus on results of annual competition «MasterCard: Bank of the Year 2008» Universal Bank occupied the 2d place in two nominations simultaneously: «The Most Dynamic Bank of 2008» and «The Best Bank Product of 2008».

The complex communication campaign of Universal Bank (March-August 2008) was awarded with silver on the prestige competition of marketing efficiency «EFFIE Awards Ukraine 2008» in a category «Financial Services».

Starting Agricultural Production in Ukraine / Frishberg & Partners

With food prices rising across the globe, adventurous foreign investors can find excellent business opportunities in Ukrainian agricultural sector despite (or perhaps due to?) the global economic crisis. Known as "the breadbasket of Europe", Ukraine still boasts enormous land reserves that can grow various grains, seeds, fruits and vegetables. Plus livestock. And due to the crisis, at last everything and everyone is available for sale or rent at rock-bottom prices.

Immediately below we discuss the key issues involved in starting agricultural production in Ukraine, including: a) obtaining land rights; b) importing equipment; c) obtaining financing assistance during these difficult economic times; and (d) miscellaneous issues.

  1. Land Rights
The main question for foreign investors is whether there is any profit in buying Ukrainian farmland to start a farm business. Thus, at first glance land rights may appear to be a sore topic for investors since the current legislation temporarily prohibits the sale of agricultural land.

To circumvent this legislation, many investors have been successfully leasing farmland either on a short-term (2-5 years), medium-term, (5-25 years) or long-term (up to 49 years) basis. In the process, they have saved millions of dollars in cash, which would otherwise be necessary to purchase the land, making their business more profitable. This is an excellent reason why investors prefer leasing Ukrainian farmland instead of owning it outright.

Note, however, that the sale of non-agricultural land (industrial property) does not fall under the same restrictions that apply to agricultural land (i.e., moratorium on sale). Thus, a foreign investor can build and operate a 100% foreign-owned processing facility on its own industrial land while leasing fields from agricultural landowners until the moratorium on the sale of agricultural land is lifted.

In the past, the validity of lease agreements was often questioned and this risk (of potential disruption or even termination of business activity due to a legal technicality) was too great for many investors. In today's harsh economic climate, however, very few landowners would breach their lease agreements and refuse to lease their fields to a paying client. In order to lease agricultural land, it is only necessary to enter into a land lease agreement with the landowner and simply comply with the terms of the agreement. Of course, the land lease agreement should be properly drafted, registered with the authorities, and notarized.

Obtaining land rights to start agricultural production is relatively simple in Ukraine. The legal framework is quite straightforward and the numerous examples of successful foreign-owned operations exist, including Cargill and Chumak (formerly known as "South Foods"). While owning farmland is temporarily out of the question, a foreign investor may lease the fields anytime. Of course, certain inherent business risks remain, like with any other type of investment throughout the world, but this should not serve as a deterrent to taking advantage of Ukraine's black, fertile soil.

  1. Importing Equipment
Importing foreign equipment is often a pre-requisite to starting agricultural operations due to the lack of quality machinery and/or outrageous prices in Ukraine. There are several ways in which foreign equipment can be imported, including:

      a) by contributing such equipment to a 100% foreign-owned company's share capital. This involves drafting and signing a founders' resolution, amending the company's charter, and registering amendments to the charter with the state authorities. In this case, no customs duties apply; however, 20% VAT will apply.
      b) via a leasing arrangement whereby the ownership of the equipment is retained by a non-resident, who receives regular payments for the use of the equipment. This arrangement is based on a financial leasing agreement, which complies with the requirements of the Law on Leasing and pursuant to which the ownership rights to the equipment will pass to the lessee upon full payment of the leasing agreement. Importantly, under a financial leasing agreement both the customs duty and a 20% VAT will apply to the imported equipment;
      c) by purchasing the equipment via a sale-purchase agreement. Such agreement must, at a minimum, provide for fundamental material conditions including the subject matter, price, payment schedule, title transfer, etc. Again, both the customs duty and a 20% VAT will apply to the imported equipment;
  1. Obtaining Financing
The current land-related legislation prohibits using agricultural land as collateral, precluding the possibility of obtaining much-needed financing. However, rights to future harvests can serve as liquid collateral, giving rise to the possibility of financing according to the Civil Code of Ukraine and the Law on Pledges. Thus, in order to obtain a commercial loan from a creditor, an agricultural producer can enter into a loan agreement and secure the repayment of the loan by a pledge (collateral) agreement using the rights to a future harvest(s) as collateral. Normally, such pledge agreements are notarized and registered with the relevant state registry of pledges.

  1. Other Considerations
Of course, as in any other jurisdiction, the Ukrainian government has a statutory right to regulate the market of agricultural products. It does so in the form of price regulation (e.g., setting minimum and/or maximum purchase price, when necessary), commodity and/or financial interventions, as well as the establishment of export and import quotas with respect to the agricultural products that are subject to regulation.

The list of agricultural products, subject to regulation, is established by law and includes certain grains and animal products. The measures that can be taken in respect of certain agricultural products are also established by law and can be used to avoid dumping, for example. It can also be abused: several years ago, Ukrainian authorities introduced a ban on the sale of grain, which caused alarm and anger among the grain traders.

Last, but not least, Ukrainian resident agricultural producers can enjoy a special VAT payment regime, provided they comply with the statutory requirements. According to this special regime, the producer retains the amount of VAT that it charges to the value of the supplied goods (services) instead of paying the tax to the budget. The producer uses the retained amount to compensate the tax paid or charged to a supplier in relation to the value of production factors. In cases when such amount of tax is in excess, the producer can use it for other production purposes. The relevant changes have been introduced to the legislation in order to support agricultural producers during hard times.

In conclusion, due to its enormous reserves of top-quality soil, Ukraine is undoubtedly one of the best places in the world for agricultural producers. And one day Ukraine will surely regain the long-standing status of being "the breadbasket of Europe." The brave investors who decide to set up production during these turbulent times will undoubtedly be rewarded in the future, as they corner the market before their competition even enters Ukraine.

Andrey Rozhnov is a senior associate with the Kiev-based law firm of Frishberg & Partners