The National Securities and Stock Market Commission (hereinafter NSSMC) supports the Draft Law of Ukraine on the Functioning and Circulation of Agrarian Receipts (№2805 dated 24.01.2020) and expects it to be finalized by the Finance, Tax and Customs Policy Committee for further adoption by the Verkhovna Rada in the second reading.

The Draft Law provides for improvement of legislation on agricultural receipts by defining the legal nature of agricultural receipts as a security, expanding the range of subjects entitled to issue agricultural receipts, clarifying the legal regulation of agricultural receipts, simplifying the issuance, circulation and termination of agricultural receipts;  increasing the turnover of agricultural receipts through the mechanisms of the stock market;  strengthening the guarantee of creditors’ rights in case of enforcement.

Agricultural receipts are one of the most effective and efficient financing tools in the agricultural sector of Ukraine.  Over the last three years, the agricultural receipts market has been developing dynamically: agricultural producers have issued more than 4,500 agricultural receipts and attracted more than 27 billion hryvnias in financing.  However, to support further growth, the legal framework needs to be improved.

“Improving access to finance for agricultural producers, especially micro and small enterprises, through reliable instruments that provide adequate protection of creditors’ rights, will stimulate productivity and productivity of farms, in turn ensuring the development of agriculture and the Ukrainian economy as a whole,” Timur Khromaev, Chairman of the NSSMC, commented.

Following the discussion of the Draft Law, the agricultural receipt was identified as a non-emission security that exists in the form of an electronic document in the Agricultural Receipts Register with the possibility of transferring its accounting to the depository system of Ukraine to ensure circulation of agricultural receipts on the organized stock market.

To simplify and reduce the cost of the tool, it was possible for agricultural producers and creditors to carry out transactions with agricultural receipts without notary certificate, instead ensuring proper protection of the instrument through integration of the Agricultural Receipts Register with four state registers and authentication of users with electronic digital signatures.  A significant reduction in the cost of agricultural receipts will expand access to finance in the segment of micro and small farms, which often face the limited access to finance.

At the same time, when preparing the Draft Law for the second reading, there is a need to finalize it to unify the systems of accounting for agricultural receipts maintained by the administrator of the Agricultural Receipts Register and the system of depository accounting of securities.  In addition, it is necessary to reconsider the approach to determining the state body that is the holder of the Agricultural Receipts Register.  The NSSMC sent these remarks to the authors of the Draft Law.

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