Unofficial translation (c) Soyuzpravoinform LLC

LAW OF UKRAINE

of July 14, 2023 No. 3254-IX

About credit unions

Section I. General provisions

Article 1. Determination of terms

1. In this Law terms are used in the following value:

1) contribution (deposit) - means which are placed by the credit union member under percent on its account in credit union on a contract basis for certain storage duration or without specifying of such term and are subject to payment to such credit union member in accordance with the terms of the agreement;

2) equity - difference between assets and liabilities of credit union;

3) the admission fee - the compulsory nonrefundable money contribution paid one-timely in the amount of procedure and the terms determined by the charter of credit union for the purpose of the accession of person to credit union is also one of conditions of acquisition of membership in credit union;

4) the main internal auditor - the division manager of internal audit or person to who accomplishment of function on implementation of internal audit is assigned;

5) main komplayens - the manager - the division manager on control of observance of regulations (komplayens) or person to who accomplishment of function on control of observance of regulations is assigned (komplayens);

6) the chief risk manager - the division manager on risk management or person to who accomplishment of function on risk management is assigned;

7) additional share - the voluntary money contribution of the credit union member paid according to the procedure and on the conditions determined by the charter of credit union;

8) significant credit union - the credit union answering to the criteria established by regulatory legal acts of the Regulator;

9) credit union - the financial institution created on the basis of cooperation for the purpose of requirements satisfaction of her members in mutual lending and provision of the financial and other services provided by this Law and also implementation of other activities determined by this Law due to consolidation of money contributions of credit union members and other sources determined by this Law;

10) obligatory share - the obligatory money contribution of the credit union member, irretrievable during membership of person in credit union, which is paid in the amount of procedure and the terms determined by the charter of credit union and the decision of general meeting of credit union members on increase in the size of obligatory share and is one of conditions of acquisition and prolongation of membership in credit union;

11) share - obligatory share and additional share fees of the credit union member;

12) the worker responsible for carrying out financial monitoring, - person to who according to the Law of Ukraine "About prevention and counteraction of legalization (washing) of income gained in the criminal way to financing of terrorism and financing of distribution of weapons of mass destruction" function of the ranking officer for carrying out financial monitoring is assigned;

13) risk profile - assessment of level of risks of credit union for certain date before accounting of measures for risk minimization, and also taking into account such measures by each of types of risk and in aggregative type;

14) Regulator - National Bank of Ukraine;

15) the Register of credit unions (further - the register) - system of obtaining, accumulating, storage, use and distribution of information (data) on credit unions and their separate divisions which is conducted by the Regulator in the procedure established by it.

2. The terms "financial accounting", "microcompany", "company which is of public interest", "financial reporting" are used in this Law in the values given in the Law of Ukraine "About financial accounting and the financial reporting in Ukraine".

The terms "subject of auditor activities", "statutory audit of the financial reporting", "auditor services", "working documents of the auditor", "audit report", "international standards of audit" are used in this Law in the values given in the Law of Ukraine "About financial records audit and auditor activities".

The term "associated person" is used in this Law in the value given in the Law of Ukraine "About banks and banking activity".

3. Other terms are used in this Law in the values given in the Civil code of Ukraine, the Economic code of Ukraine, the Law of Ukraine "About financial services and finance companies" and the Law of Ukraine "About payment services".

Article 2. Law coverage

1. This Law determines legal status of credit unions, procedure for creation, activities and termination of credit unions and their associations, the basic principles of protection of the rights and legitimate interests of members of credit unions, and also procedure of state regulation and supervision of activities of credit unions.

2. The relations arising in connection with functioning of credit unions are regulated by the Constitution of Ukraine, the Civil code of Ukraine, the Economic code of Ukraine, the Law of Ukraine "About financial services and finance companies", this Law and other laws of Ukraine, and also regulatory legal acts of the Regulator.

3. If provisions of this Law concerning functioning of the market of credit unions, activities of credit unions, procedure of state regulation and supervision of activities of credit unions, and also protection of the rights of members of credit unions contradict provisions of other legal acts of Ukraine, provisions of this Law are applied.

Section II. Activities of credit union

Article 3. Legal status of credit union

1. The credit union is legal entity of the private law created according to the law.

2. The credit union acquires the status of financial institution and the right to perform activities for provision of financial services after receipt of license for activities of credit union (further - the license) according to the procedure, provided by this Law.

3. The credit union can have the standard or simplified license.

If this Law does not determine other, action of provisions of this Law on issue, cancellation of the license extends also to the standard license, and for the simplified license.

4. The credit union can be referred to category of significant credit unions, on condition of its compliance to the criteria established by regulatory legal acts of the Regulator.

5. For goal achievement of the activities determined in this Law and the charter of credit union, the credit union on the conditions determined by the law can establish and be the member (participant) of the joint credit unions, associations (associations) of credit unions, bureau of credit histories, charitable organizations, public associations, cooperative banks, operators of payment service providers, not entrepreneurial societies, and also to be member (participant) of payment service providers.

6. The credit union cannot be the founder or the member of another, than is specified in part five of this Article, the subject (subjects) of managing, except the cases provided by the law.

7. The credit union on its own behalf can sign contracts and make other transactions which are not contradicting this Law, the legislation of Ukraine and the Charter of credit union, to acquire the property and non-property rights, to have the obligations following from the legislation and agreements signed by credit union, to be claimant and the defendant in court.

8. The credit union performs economic activity without the profit earning purpose (non-commercial managing). The credit union for the purpose of the taxation treats the non-profitable organizations in case of compliance to the requirements established by the Tax code of Ukraine.

9. The credit union answers for the obligations all the property according to the legislation.

10. Credit union members answer for obligations credit union in the limits set by this Law.

Article 4. Activities of credit union

1. Activities of credit union are based on the following basic principles:

1) voluntariness of the introduction and freedom of exit from Credit Union (nobody can be forced to enter into Credit Union, and the exception of credit union members is performed only in the cases determined by the Charter of credit union);

2) equality of credit union members (all credit union members have the equal rights, including during the vote on general meeting of his members, irrespective of the size equity and other fees (one credit union member - one voice);

3) self-government which is provided with participation of credit union members in management of credit union;

4) publicity in case of which the credit union shall provide complete and timely informing the members concerning activities of credit union, acquaint credit union members at their request with protocols of general meeting and meetings of other governing bodies of credit union, to provide copies of documents and endurance from them according to the procedure, determined by the charter of credit union. All credit union members have equal information access about its activities;

5) ensuring availability and fair value of financial services to the members.

2. The credit union provides the following types of financial services:

1) based on the standard license:

a) provision of means and bank metals on credit;

b) attraction of financial resources and the bank metals which are subject to return;

2) based on the simplified license - provision of means and bank metals on credit.

3. The regulator has the right to make the decision on inclusion in the license of credit union based on the statement of credit union, on condition of observance of requirements of the Law of Ukraine by it "On financial services and finance companies", this Law and regulatory legal acts of the Regulator concerning procedure and conditions of provision of the corresponding financial services, the right to provision of such types of financial services:

1) provision of guarantees;

2) financial payment services (except service in release and accomplishment of payment transactions with electronic money).

4. The credit union has the right to provide financial service in trade in currency values and/or to provide financial payment services on money transfer without opening of the account if such services are currency transactions, based on the license of the National Bank of Ukraine for implementation of currency transactions according to the requirements established by the Law of Ukraine "About currency and currency transactions".

5. The credit union has the right to provide services (to express their cost), to undertake and fulfill the obligations, is exclusive in national currency of Ukraine (except service in trade in currency values and service in money transfer without opening of accounts).

6. The credit union has the right to perform other economic activity, to provide other services only provided that such activities, services are connected with the main activities of credit union on provision of financial services or is necessary for credit union for ensuring bigger availability of financial services to his members, namely:

To pay 1) for the order of the members the cost of goods, works and services within the loans granted to them and/or within their deposits (deposits);

2) to render the intermediary services connected with provision of financial services by credit union or other supplier of financial services, the consulting and information services connected with provision of financial services;

To provide 3) in lease own property and/or in the sublease the property which is in its use;

4) to perform charity;

5) to perform right to claim concession on the loans granted to credit union members and/or other credit unions in case of overdue debt on such credits;

6) to perform property acquisition, transferred to credit union according to the procedure of the address of claim to property of the debtor or given to credit union by his debtors voluntarily and to exercise control of subject of pledge (mortgage) during the period before its alienation;

To acquire 7) in property the property necessary for implementation of activities by credit union and to alienate it;

8) to place available funds on deposit and other accounts in banks, the Commingled credit unions, and also to acquire government securities, bonds of international financial institutions placed in the territory of Ukraine and shares of cooperative banks;

9) to attract on contractual conditions the loans from banks, from the joint credit unions and/or other credit unions, means of other legal entities taking into account the restrictions set by regulatory legal acts of the Regulator;

10) to grant the loans to other credit unions;

11) to perform other constraint-based economic activity, established by regulatory legal acts of the Regulator.

Credit unions are forbidden to perform activities in the sphere of production of goods and trade.

7. The credit union taking into account amount of its license has the right to provide financial services:

1) only to credit union members - the financial services determined by the subitem "b" of Item of 1 part two and Items 1 and 2 of part three of this Article;

2) to credit union members and other credit unions - financial service in provision of means and bank metals on credit;

3) to any physical persons and legal entities - financial service in trade in currency values, on condition of availability of the license for implementation of currency transactions.

8. Services are provided to credit union members who are heads of credit union or employees of credit union on equal terms with other credit union members - physical persons with observance of requirements of the legislation on avoidance of conflict of interest.

9. For implementation of the activities the credit union has the right:

1) to accept share and other fees from credit union members. Acceptance (attraction) by credit union from credit union members of the share or other fees provided by the charter of credit union according to this Law is not financial service in attraction by credit union of the means and bank metals which are subject to return. Credit unions are forbidden to raise funds from physical persons, including from credit union members, in any manner, except attraction by credit union from the members of share or other fees, deposits (deposits);

2) to raise funds of other legal entities, than credit union members, in forms and the methods determined by part two of article 14 of the Law of Ukraine "About financial services and finance companies" as such which are not considered as provision of financial service in attraction of financial resources and the bank metals which are subject to return (except placement of issued debt securities), taking into account the restrictions set by regulatory legal acts of the Regulator;

3) to perform transfer of demands in reconvention, including counter claims of the same kind on the loans granted to credit union members in case of overdue debt on such credits, discharge by agreement (consent) of the parties;

4) to perform forgiveness of debt and/or restructuring of obligations on the credits;

5) to charge and draw interest on granted loans, and also to receive payment for provision of other services determined by this Law;

6) to charge and pay deposit interests (deposits), and also the income on additional shares of credit union members;

7) to share profit taking into account provisions of this Law;

8) to receive payment for provision of services, provided by this Law;

9) to make other transactions necessary for provision by credit union of financial services and implementation of other activities provided by this Law.

10. The credit union uses income gained by it for financing of maintenance costs of credit union, realization of the purpose (the purposes, tasks) and the activities determined by its charter and in other cases provided by this Law.

11. The credit union shall have own website and place on it information determined by the legislation.

12. The credit union has the right to participate in regulatory platform for testing of innovative services, technologies and/or tools in the markets of the financial services based on innovative technologies, according to the procedure, provided by the Law of Ukraine "About financial services and finance companies".

Article 5. Merging of credit unions

1. Credit unions for the purpose of coordination of the activities, provision of mutual assistance and protection of common interests have the right to create associations, other associations of credit unions taking into account the requirements provided by the Law of Ukraine "About financial services and finance companies".

Section III. Creation and licensing of activities of credit union

Article 6. Procedure for creation of credit union and its state registration

1. The credit union is created based on the solution of the Constituent assembly of his founders. Founders of credit union can be physical persons which correspond to signs of membership and do not fall under the membership restrictions determined by part three of article 14 of this Law. The number of founders of credit union cannot be less than 50 people.

2. The decision on creation of credit union is drawn up by the protocol of the constituent assembly which is signed by the chairman and the secretary of the constituent assembly.

3. The register of persons participating in the Constituent assembly (further - the list of founders) which does not change during the term of activities of credit union is attached to the protocol of the Constituent assembly. In the list of founders surname, the name and middle name (in the presence) of physical person, birth date, series and passport number of the citizen Ukraine/passport number of the citizen of Ukraine in the form of card or the residence permit of person living in Ukraine, or the national passport of the foreigner or the document replacing it, or other identity document, the residence, and also other data confirming availability of the signs provided by part two of article 14 of this Law are surely entered (in case of creation of credit union not on territorial sign). Data on the personality make sure its sign manual.

4. The constituent assembly approves the charter of credit union, elects its governing bodies, authorizes persons for carrying out state registration of credit union, resolves other issues connected with creation of credit union.

5. Founders of credit union acquire the status of credit union members after its state registration and complete payment of introductory and obligatory shares according to the procedure, established by this Law and the charter of credit union.

Powers of the founder of credit union expire after state registration of credit union according to the procedure, provided by the Law of Ukraine "About state registration of legal entities, physical persons entrepreneurs and public forming".

Article 7. Name of credit union

1. The credit union shall have full name in Ukrainian which consists of form of business "credit union" and names. The name of credit union shall conform to the requirements established by the law, taking into account the features established by this Article.

2. The credit union can have the abbreviated name in Ukrainian, the full and abbreviated name in foreign language (foreign languages) taking into account the requirements to writing of the name of the legal entity established by the Ministry of Justice of Ukraine.

3. Use in the name of credit union of the name which repeats the existing name of other credit union or misleads concerning types of activity which are performed by credit union is forbidden. The use in the name of credit union of the words "Ukraine", "tsentralnaya", "gosudarstvennaya", "natsionalnaya" and derivative of them is forbidden.

4. The credit union is forbidden to perform activities with use of the name, trademark or other designations which do not contain elements of its name and/or do not give the chance to distinguish such credit union from others, and/or mislead its rather authentic activities.

5. Words "credit union" and derivative of them are allowed to be used in the name to exclusively legal entities created according to this Law. Use of words "credit union" in oblique cases in the name of legal entities whose founder are credit unions and/or the Joint credit unions is allowed.

Article 8. Charter of credit union

1. The constituent document of credit union is the charter.

2. The charter of credit union approved by its constituent assembly is signed by person authorized on it by the constituent assembly of credit union.

3. Introduction of amendments to the charter of credit union is performed by his statement in the new edition. New edition of the charter of credit union affirms general meeting of credit union members, is signed by the chairman of the supervisory board of credit union or person authorized on it by general meeting of credit union members whose authenticity of the signature makes sure notarially, except the cases provided by the law.

4. In the charter of credit union are surely specified:

1) the complete and reduced (in the presence) name of credit union (official language and, in the presence, in other languages);

2) creation purpose, principles and activities of credit union;

3) sign (signs) of membership in credit union;

4) procedure for election, appointment and termination of powers of members of governing bodies of credit union;

5) procedure for education, quantitative structure, powers and competence of governing bodies of credit union, procedure for adoption by them of decisions, bases of activities of members of the supervisory board of credit union;

6) the minimum number of credit union members or the minimum share of total quantity of credit union members (specific weight of membership) which shall be provided on general meeting of credit union members for recognition their competent;

7) conditions and procedure for the accession to credit union, procedure for the termination of membership in credit union, including exception of credit union members;

8) types of the fees accepted by credit union from the members, procedure for determination of their size, and also payment;

9) procedure and terms of return to credit union members of shares;

10) procedure for education and liquidation of separate divisions of credit union;

11) rights and obligations of credit union members;

12) procedure for provision of information to credit union members;

13) procedure for forming and capital utilization of credit union;

14) the list of financial and other services which can be provided by credit union;

15) procedure for the reporting and control over activities of governing bodies of credit union;

16) procedure for introduction of amendments to the charter of credit union;

17) procedure for the termination of credit union and the solution of property questions in connection with its termination;

18) procedure for covering of possible losses of credit union;

19) directions and procedure for use of the income, procedure for profit distribution of credit union;

20) other provisions which obligation of availability in the charter of credit union is determined by this Law.

Information provided by Items 12, of the 14 and 15 this part can contain in internal documents of credit union with the exclusive reference in the charter of credit union on such internal documents.

The charter of credit union may contain also other provisions which are not contradicting the legislation of Ukraine.

5. The credit union has the right to be created and perform activities from the model charter approved by the regulatory legal act of the Regulator. Provisions of parts two - the fourth this Article are not applied to the model charter of credit union.

The model charter of credit union can be multiple and provide possibility of election of its various editions, including edition "by default" which is created of the provisions recommended by the Regulator.

6. The credit union has the right:

1) to change edition of the model charter based on which it performs the activities, by election of other alternative provision of the model Charter from among the provisions provided by the Regulator. In case of acceptance by general meeting of credit union members of the decision on change of edition of the model charter, on the basis of which the credit union acts provisions of new edition of the model charter are applied from the date of state registration of corresponding changes;

To pass 2) from activities based on the model charter to activities based on the charter of credit union.

Article 9. Licensing of activities of credit union

1. The credit union obtains the license by introduction by the Regulator of the corresponding record in the Register.

2. The credit union shall address the Regulator for receipt of the license within 120 calendar days from the date of its state registration as legal entity.

3. In the license types of financial services which have the right to provide credit union are specified.

4. The credit union has the right to file to the regulator petition for inclusion in the current license of the right to provide the financial services provided by part three of article 4 of this Law or for exception of the license of the right to provide such financial services.

Such change of the list of types of the financial services having the right to provide credit union is not issue of the new license or replacement of the current license.

5. The credit union has the right not to file documents which were filed earlier to the regulator and are valid and drawn up according to requirements of the law and regulatory legal acts of the Regulator, and information which in them contains, is urgent. The credit union for the purpose of accounting of such documents by consideration of document package submits to the regulator the petition in which provides the list of earlier filed documents with indication of their name, date of representation, bodies (persons) which issued them, information on as a part of what document package such documents moved in the regulator earlier, and also assurances that such documents are valid, and information which in them contains, is urgent.

The regulator has the right to demand from credit union of submission of documents which were not submitted by it according to paragraph one of this part if the storage duration of earlier submitted documents expired or documents are transferred to archival organization.

Requirements of paragraph one of this part do not extend to the documents confirming the status of person for certain date and also the documents having limited effective period.

6. The credit union has the right to file to the Regulator petition for change of license type according to the simplified license for the standard license or according to the standard license for the simplified license according to the procedure, the stipulated in Clause 12 these Laws.

7. The credit union shall take measures for carrying out state registration of the termination of the legal entity if:

1) by results of consideration of document package which move credit union for receipt of the license (except representation of document package for expansion or narrowing of scope of license or change of license type) (further - document package), the Regulator makes the decision about:

a) the refusal in licensing, the bases for which were not eliminated with credit union within six months from the date of adoption of such decision and is not given new document package or if the new document package is given during the specified term, however by results of its consideration the Regulator repeatedly makes the decision on refusal in licensing;

b) leaving of document package without consideration and return to its credit union and such credit union did not eliminate the basis for leaving of document package without consideration and did not give within six months from the date of adoption of such decision new document package;

2) the credit union did not address in time, specified in part two of this Article, in the Regulator for receipt of the license.

8. The credit union shall take measures for carrying out state registration of the termination of the legal entity in time, not exceeding one month from the date of:

1) acceptance by the Regulator of the decision on repeated refusal in licensing;

2) the expirations of the terms provided by this part for repeated representation of document package after acceptance by the Regulator of the decision on refusal in licensing or decisions on leaving of document package without consideration;

3) the expiration specified in part two of this Article.

In case of failure to carry out by credit union of the requirements provided by this part the Regulator has the right to take a legal action with the claim for the termination of state registration of such legal entity.

9. The credit union has no right to transfer the license to the third parties. Involvement of the third parties on the terms of outsourcing according to the Law of Ukraine "About financial services and finance companies" is not considered transfer of the license.

10. The license is granted to credit union for unrestricted term.

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