Amendments in the sphere of the state control of business in Ukraine

Corporate Alert

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On 30 December 2016 the Ukrainian President, Petro Poroshenko, rectified two significant laws adopted by Ukrainian Parliament earlier in 2016:

  • "On introduction of changes to the Law of Ukraine "On the main principles of state control in the sphere of business activity" in respect of liberalization of the state control system" dated 3 November 2016 No. 1726-VIII
  • "On temporary peculiarities of conducting state control in the sphere of business activity" dated 3 November 2016 No. 1728-VIII

The above legislation came into force on 1 January 2017. The main points to be noted are:

  • Prohibition for controlling authorities to conduct planned inspections of business entities until 31 December 2017.
  • Until 31 December 2017 the extraordinary inspections can only be conducted based on a grounded application of an individual approved by the state regulatory service, upon written request of a business entity, based on a court's decision and in case of emergency or causality caused by the company's business activity.
  • Introduction of a presumption of innocence of a business entity/private entrepreneur according to which all ambiguous provisions should be interpreted to the benefit of a business entity/private entrepreneur.
  • Limiting the maximum duration of planned inspections to 10 days per single inspection and 30 days per year for the large and mid-sized business entities, and 5 days per single inspection and 15 days per year for the small and micro business entities.
  • Limiting the frequency of planned inspections (once every two years, once every three years or once every five years depending on the risk level assigned to a business entity/private entrepreneur).
  • Limiting the grounds for initiation of extraordinary inspections (for example the time to correct a mistake is to be provided, and only if a mistake is not corrected is an inspection to be carried out).
  • Production, sales, conduct of works or provision of services can only be suspended or stopped based on a court decision.
  • Controlling authorities shall issue consultations (recommendations) of general (available on the web-site) or private nature. Such consultations can be relied upon during inspection and communication (with authorities) and in a court. Moreover, the business entity cannot be held liable if it acted on the basis of a consultation even if it has been subsequently amended or cancelled.
  • Establishing an integrated electronic database ("Integrated Automatized System of State Control") which will contain information on state control of businesses, information on every inspection that is planned or has already been carried out. All controlling authorities are obliged to upload information to the database based on the results of the inspections, as well as the inspection plans for the next calendar year.

For further details, please contact the authors.