The problem of penalty on the debts of FEC enterprises will be solved despite the veto – Associate at «Spenser & Kauffmann»

President Petro Poroshenko vetoed the Act on Resorting to Levying Fines for District Heating Companies for Gas and Electricity Debts (Act No.1443-VIII).

How can adoption of the act affect the utility companies, – the Associate at «Spenser & Kauffmann» Volodymyr Voliansky explained to The Ukrainian Journal of Business Law.

– Act No. 1443-VIII did not solve problems in the industry. Its aim is to freeze the current situation and to prevent deterioration. An expected positive effect from the enactment of the draft is rather short-term, while in the long-term perspective its rules could cause much more negative consequences.

It is worth keeping in mind that the conditions of Act No. 1443-VIII contradict the agreement between Ukraine and IMF which aim to restructure Naftogaz of Ukraine in order to increase efficiency and improve governance. Naftogaz is the main creditor of companies, covered by the moratorium in Act No. 2706. On the eve of receipt of the IMF tranche, the President could not sign the act releasing Naftogaz the possibility of returning its debt of about UAH 20 billion.

Passing Act No. 1443-VIII would not dramatically affect the economic activity of companies in the industry. The arrest of companies accounts, imposed during enforcement proceedings initiated by creditors, do not cover special accounts protected by law. The majority of settlements are made through these accounts. That is why courts, considering these companies’ complaints against state enforcement officer’s (bailiffs) attachments, conclude that these arrests do not block the possibility of companies to do business.

By Act No. 1443-VIII, no forfeit shall be calculated for existing debt of companies in the industry. It seems to be an equitable decision seeing the cause of this debt objectively independent on the debtors and the amount of the penalty in some cases is more than half of the main debt. However, despite the fact that Act No. 1443-VIII was not passed, I expect the problem to be solved in another way in the near future.