Reform Index 233: Simplification of changing the purpose of the land plot and electronic agrarian receipts

The law simplifying the procedure for changing the purpose of the land plot to attract investments, +0.75 points

Law 3563-IX simplifies the process of changing the designated use of land plots from agricultural to industrial during the period of martial law and for five years after its termination. By the law, for such lands located outside settlements and not reflected in approved urban planning documentation at the local level, a request to change the designated use can be submitted without urban planning and land administration documentation

The law immediately falls into two categories of the Index: “Fight against Corruption” (0 points) and “Business Regulation” (+0.75 points). However, it received low ratings from experts. On the one hand, it could be a useful step in accelerating the reconstruction of Ukraine by removing some bureaucratic procedures when changing the designated use of land for infrastructure and industrial purposes. On the other hand, it contains risks of misuse of such simplifications for land seizure and reducing the influence of local authorities on decisions regarding land use within communities. 

The procedure for transforming budgetary unitary enterprises into state limited liability companies, +1 point

The government has adopted a resolution outlining the procedure for determining unitary budgetary enterprises that need to be transformed into LLCs, as well as the process of such transformation.

To prevent abuses during this procedure, it is determined that from the moment the decision to terminate the enterprise is made until this information is entered into the Unified State Register (USR), the enterprise is prohibited from obtaining loans, issuing loans and financial assistance, pledging the enterprise’s property, and providing property for free use without the consent of the founder (government authority).

The law introducing electronic agrarian receipts, +1 point

In March, the President signed a law on agrarian receipts, introducing a new financial instrument for farmers — electronic agrarian receipts (agrarian notes), which will exist in electronic form in the Register of Agrarian Notes. They will operate concurrently with traditional paper warrants.

An agrarian note is a non-emissive security that allows owners and users of agricultural land to obtain funds against a future commitment to deliver agricultural products to the creditor (commodity agrarian note) or to pay money in the amount specified in the agreement (financial agrarian note). Collateral from the debtor may include future crops, livestock, animal and plant-derived products, and their primary processing products. 

Before the “redemption” of an agrarian note, the debtor who issued it is not entitled to dispose of property rights to the land plot specified in the details of the agrarian note without the creditor’s permission. Specifically, it is prohibited to sell, terminate lease, or sublease such a plot without consent.