Reform Index 270: the Factoring Law and ARMA Reform

The main development of this issue is the adoption of the factoring law, which received a score of +2.5 points from the Index’s experts. Among other notable reforms are changes in the anti-corruption sphere, including a law that launches the reform of ARMA. During the same period, the Verkhovna Rada also adopted a new law repealing Law No. 4555-ІХ, which had limited the independence of NABU and SAPO and became one of the most significant counter-reforms of the past decade.

Factoring law, +2.5 points

Law No. 4466-ІХ updates legislation in the field of factoring. Factoring is a financial service that allows a company to sell a client’s debt to a specialized factoring company (a factor) and immediately receive most of the funds — without waiting for the client to repay the debt. Previously, such transactions were regulated only by separate provisions of the Civil Code. These rules were outdated and no longer met international standards. Because there was no state register of assigned debts, disputes and fraudulent schemes arose in which the same debt could be sold to several companies.

To prevent the double sale of a single claim, an electronic public register of assigned monetary claims will now be created, recording every debt transfer. In addition, a national digital factoring platform will be launched—an online marketplace where companies can list their monetary claims for open auctions.

Monetary claims related to public procurement — for example, when a contractor seeks payment for goods or services before the client transfers the funds — may be sold to a factor only through an electronic auction.

The law specifies that a factoring contract must include the key terms of cooperation, including payment procedures and deadlines, terms of the assignment of claims, obligations of the parties, and procedures for notifying the debtor. The parties may conclude a contract either with recourse, where the client remains liable to the factor if the debtor fails to pay, or without recourse, where the factor assumes all risks of nonpayment.

The factoring law takes effect on July 30, 2026 — but not before amendments to the Civil Code are adopted. Specific provisions—such as those concerning the disclosure of banking secrecy in cases involving aggressor states and related persons, as well as those aimed at protecting Ukraine’s interests in international courts — have already entered into force. However, it is not entirely clear why these norms were included in the final provisions of the factoring law rather than passed as a separate act. 

Expert commentary

Ilona Sologoub, scientific editor at Vox Ukraine

Strengthening ARMA’s institutional capacity and new rules for managing seized assets, +2 points

In the summer of 2025, the President signed Law No. 4503-ІХ, which provides for the reform of the National Agency of Ukraine for the Detection, Search, and Management of Assets Derived from Corruption and Other Crimes (ARMA). The adoption of this law was one of Ukraine’s commitments under the Ukraine Facility. At the same time, it is worth noting that this step came later than planned — the law was to be adopted in the first quarter of the year, so the performance indicator for this commitment was effectively overdue.

The main innovations of the law concern the procedure for selecting and evaluating the head of ARMA. From now on, the head will be appointed through an open competition. The selection commission will include six members — three nominated by the Cabinet of Ministers and three by international partners, who will have a casting vote. The head will be appointed for a five-year term, without the possibility of reappointment.

Three years after the head’s appointment, the Commission for Independent External Evaluation of ARMA’s Effectiveness will conduct an audit of the agency’s performance. The commission will include three representatives from international partners approved by the Cabinet of Ministers — those that have provided Ukraine with technical assistance in the field of anti-corruption activities. At the same time, the agency will be required to publish quarterly data on the number, value, and condition of the assets it manages, as well as on revenues, expenditures, and management outcomes. Civil oversight will be exercised by the Public Oversight Council, consisting of nine representatives elected through online voting. Within ARMA, internal control units will also be established to conduct internal audits and identify corruption risks among employees.

The changes also affect the asset management system itself. The new provisions introduce an official process for identifying assets, preparing a preliminary management plan, and creating an asset pool. This means each asset must have an assessed value, a defined preservation procedure, and a clearly described management strategy. The transfer of assets to management will follow transparent procedures: all stages of the competitive selection process will be recorded in an electronic system, decisions will take into account companies’ financial capacity, experience, and reputation, and the results of competitions — along with the signed contracts — will be published on ARMA’s official website. Asset managers will be selected through an open and competitive procedure.

Expert commentary

Pavlo Demchuk, senior legal advisor at Transparency International Ukraine