LAW OF UKRAINE

of November 18, 2003 No. 1255-IV

About providing requirements of creditors and registration of burdenings

Section I General provisions

Article 1. Law coverage

This Law determines legal regime of regulation of the burdenings of personal estate established for the purpose of ensuring accomplishment of obligations and also legal regime of origin, promulgation and realization of other rights of legal entities and physical persons of rather personal estate.

Article 2. Determination of terms

For the purposes of this Law the stated below terms are used in the following value:

the debtor - person who shall fulfill for benefit of otyagotitel the obligation provided with burdening, or the property guarantor on such obligation; person in whose ownership there is property belonging to otyagotitel; person who shall fulfill agreement obligations for benefit of otyagotitel, based on whom there was contractual burdening; person which yielded right to claim which is burdening subject;

authorized body (person) - public authority or its official, other persons who according to the law are given authority to encumber the personal estate belonging to legal entity or physical person;

otyagotitel - authorized body (person) in case of public encumbrance; the creditor according to the obligation provided with personal estate; the owner of the personal estate which is in ownership of the debtor; any other person for benefit of whom contractual burdening is established; person exercising control of personal estate for the benefit of the creditor;

priority - the privilege of otyagotitel concerning the right of other person to the same personal estate;

the highest priority - preferential priority of one otyagotitel concerning priority of other otyagotitel to receipt of satisfaction of the rights or requirements for the same personal estate;

the lowest priority - the priority of one otyagotitel subordinated to priority of other otyagotitel to receipt of satisfaction of the rights or requirements for the same personal estate;

personal estate - separate movable thing, set of movable things, money, currency values, securities, and also property rights and obligations including property rights on the money which is on the bank account;

the address of collection regarding burdening - acceptance by otyagotitel of the measures provided by the law concerning burdening subject for satisfaction of the rights or requirements following from burdening content;

the judgment - the decision, the resolution, determination of court, economic court, reference tribunal, foreign court or arbitration;

property rights on the money which is on the bank account - the right of the client (account holder) to give orders about transfer and issue of the amounts from the bank account following from bank account agreement; the right of the investor or person for benefit of whom the bank deposit is placed, to require payment of sum of money (contribution) and percent on it or the income in other form according to bank deposit agreement; the right of the beneficiary or account holder of conditional storage (eskro) to require money transfer, being on the account of conditional storage (eskro) that follows from the agreement of the account of conditional storage (eskro).

Section II Burdening of Personal Estate

Article 3. Concept of burdening

Burdening is the right of otyagotitel to personal estate of the debtor or restriction of the right of the debtor or otyagotitel to the personal estate arising based on the law, the agreement, the judgment or from other actions of physical persons and legal entities with which the law connects emergence of the rights and obligations of rather personal estate.

According to burdening the otyagotitel and the debtor have rights and obligations established by the law and/or the agreement. In the cases established by the law, the rights and obligations connected with encumbrance, arising at the third parties.

Requirements to the transaction based on which there is burdening are established by the law.

Article 4. Types of burdenings

Burdenings share on public and private.

The burdening of personal estate arising according to the law or the judgment is public.

Private burdenings can be security and others contractual.

The burdening established for ensuring accomplishment of the obligation of the debtor or the third party before otyagotitel is security.

Others contractual are the private burdenings which are not referred to security and resulting from transfer of personal estate, the property right to which belongs to otyagotitel, in ownership to the debtor, or on other bases which limit the right of otyagotitel or the debtor to dispose of personal estate.

Article 5. Burdening subject

The personal estate which is not withdrawn from civil circulation on which according to the legislation collection can be turned can be subject of burdening. Depending on burdening content the subject of burdening shall belong to the debtor or otyagotitel on the property right of direct trust or on the right of economic maintaining. The relations concerning the personal estate belonging to person on the right of economic maintaining are regulated by the rules established for relations management concerning the personal estate belonging to person on the property right.

In case of restriction of the right of the order with personal estate with the consent of other person the same consent is necessary for its burdening.

Subject of burdening can be the personal estate which will become and/or can become property of the debtor in the future.

The personal estate can be subject of several burdenings if other is not established by the law or the transaction based on which there was the previous registered burdening. The agreement based on which there was private burdening cannot forbid establishments of public burdening.

Article 6. Burdening coverage

If other is not established by the law or the agreement, burdening extends on:

1) the integral accessories of movable thing which are burdening subject;

2) the products, fruits and the income made, got, received from use of subject of burdening;

3) any personal estate which replaces initial subject of burdening and can be identified as such;

4) the income from alienation of subject of burdening if they can be identified as such;

5) insurance indemnity in case of loss occurrence concerning burdening subject if the burdening subject according to the law or the agreement is subject to insurance, or any other compensation received by the debtor as a result of withdrawal or loss of subject of burdening.

Passes the right on burdening to the third party who fulfilled the debtor's duty according to the obligation provided with personal estate if other is not established by the law or the agreement.

Article 7. Description of subject of burdening

In the transaction based on which or in connection with which there is burdening the description of subject of burdening shall be designated. In the absence of the description of subject of burdening or if the available description does not allow to identify burdening subject, such burdening is invalid.

If subject of burdening is separate object, its description is made on individual signs. If subject of burdening is set of objects of personal estate, its description can be also made on patrimonial signs. In both cases the description of subject of burdening shall allow to identify personal estate as burdening subject.

The description of subject of burdening of patrimonial signs can specify, in particular, on:

1) all existing and future assets of personal estate or separate type of personal estate of certain person;

2) all or separate part of inventory items of business entity;

3) receivables of business entity.

Article 8. Use and preserving subject of burdening

If other is not established by the law or the transaction based on which there was burdening, the debtor in whose ownership there is burdening subject can use it according to purpose, and also receive products, fruits and the income from burdening subject. When using of burdening subject the debtor not allow deteriorations in its condition and unreasonable reduction of cost over depreciation rates (depreciation).

The debtor shall notify otyagotitel on threat of loss, damage, spoil or deterioration in condition of subject of burdening timely. In case of loss, damage, spoil, deterioration in condition or shortage of subject of burdening because of the debtor the last shall for own means recover or replace it. If the debtor did not recover or did not replace burdening subject, the otyagotitel has the right to demand compensation of the caused losses and/or early accomplishment of the obligation provided with burdening.

Otyagotitel has the right during burdening effective period on condition of the prior written notice of the debtor at any time to check documentary and in nature availability, condition, conditions of preserving and use of subject of burdening.

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