Procedure for Providing State Guarantees

According to the part one of the Article 17 of the Budget Code of Ukraine, state guarantees may be provided exclusively within the limits and directions determined by the Law on the State Budget of Ukraine, based on:

decision of the Cabinet of Ministers of Ukraine – to ensure partial fulfillment of debt obligations of business entities – residents of Ukraine;

international agreements – to ensure full or partial fulfillment of debt obligations of business entities – residents of Ukraine.

According to the part three of the Article 17 of the Budget Code of Ukraine, state guarantees are provided on terms of payment, timeliness, and enforcement of obligations in the manner prescribed by law, and part fourth of this article establishes that state guarantees cannot be provided to secure debts of business entities, if the direct source of repayment of loans provides for the state budget funds (except for debt obligations arising from loans provided by international financial institutions).

According to the Article 121 the Law of Ukraine «On investment activity», state support for the implementation of investment projects is provided, in particular, by providing state guarantees.

Selection of investment projects for the implementation of which is provided by state support is carried out on a competitive basis on the basis of data from the State Register of investment projects and project (investment) proposals, as well as expert conclusions based on the results of expert evaluation of their economic efficiency.

Procedure of selection of project (investment) proposals and investment projects, for the development or implementation of which state support is provided, approved by the Regulations of the Cabinet of Ministers of Ukraine № 835 dated 13.11.2013 and № 571 dated 22.07.2015.

Moreover, the Law of Ukraine «On state support of business entities» provides that the authorized body (Antimonopoly Committee of Ukraine) makes a decision on recognition of state aid (in particular, in the form of a state guarantee) admissible.

Therefore, provision of state guarantees in the form of lending surety must be preceded by the preparation of the relevant investment project, the passing of the state examination and obtaining an opinion of the Antimonopoly Committee regarding the admissibility of state aid.

According to the point 2 of the Procedure of approval of involvement by state enterprises, including economic partnerships (except banks) in the authorized capital of which 50 and more percent of the shares belong to the state, loans, the provision of guarantees or surety for such obligations, approved by the Regulation of the Cabinet of Ministers of Ukraine № 809 dated 15.06.2011, involvement of loan,  provision of guarantees or surety for such obligations by an enterprise should be agreed by:

• the Ministry of Finance – on domestic long-term (over one year) and external loans;
• an executive body that carries out the functions of management of state property, or the Ministry of Economic Development and Trade, if the functions of management of state property are exercised by the Cabinet of Ministers of Ukraine – for domestic short-term loans (up to one year)

In order to agree involvement of a loan, provision of a guarantee or surety on obligation, an enterprise submits to the Ministry of Finance or an authorized body an application, to which, in addition to other documents, should be added a copy of a decision of an appropriate management body of an enterprise, whose competence according to an Articles of association includes adoption of decisions on the approval of credit (loan) terms.