Factoring in Ukraine: Current Problems and New Stage of Development

Abstract

Ukraine's movement towards the European community, driven by the granting to Ukraine a candidate status for EU membership, among others, sets the task of stabilizing and improving the economic situation in the country, including further development of market relations. This, in its turn, requires a significant speeding of commodity-monetary relations and requires better management of financial resources in the process of fulfillment by subjects their contractual obligations. In such circumstances, factoring as a way to change the creditor in a monetary obligation is of great importance. Factoring represents an effective financial and legal mechanism that provides its users with the significant advantages related to the management of receivables, raising capital by enterprises for the development and operation of their business in the long-term perspective. This article is devoted to the analysis of legal regulation of factoring in Ukraine, problems of harmonisation of legal regulation of factoring with international and foreign experience, legal positions of courts on the legal nature of factoring in Ukraine. The authors point out that currently there exists an issue of insufficient regulation of factoring in Ukraine, unequal approach to the regulation of factoring for banking and non-banking financial institutions (factoring companies). It is also noted that Ukrainian legislation does not contain definition of term "factoring" as a type of activity. Instead, in the literature and in practice, the term "factoring" is defined through a factoring agreement under the Civil Code of Ukraine. According to the definition and features of a factoring agreement, the main feature of factoring is "assignment of the right of monetary claim", which in practice often leads to the identification with assignment (cession). Taking into account mentioned problems, the article analyses the trends in the development and reform of factoring in Ukraine in the near future. In particular, the authors analyse the Concept of Reforming Factoring Regulation in Ukraine, which was presented by the National Bank of Ukraine (the Regulator for the Factoring Market), as well as the main approaches to the development of legislation. The main conclusion emphasises that the concept of factoring should be brought in line with international law, and factoring as a type of activity needs to be reformed as soon as possible. The best way to reform factoring legislation would be to adopt a separate law that would comprehensively regulate all aspects of factoring.