Draft Law of Ukraine

"On Pawnshops in Ukraine"

This draft determines foundation, economic and legal principles for creation, management, re-organization and liquidation of pawnshops, their associations, rendering pawnshop services, execution of regulating and supervising functions focused on activities in rendering such services.

This draft defines a pawnshop as a non-bank credit-financial institution, whose core activity is to grant loans (credits) at the own risk for the account of own or debt capital under collateral represented by property and rights of property.

Pawnshops may be founded in the form of:

• state-owned enterprise;
• full liability company;
• differentiated liability company;
• additional liability company.

Registration of a pawnshop is carried out by way of making a relevant entry in the State register of financial institutions by the Authorized body (special authorized body of executive power on regulation of financial services and markets)

Pawnshops have the right to set up their divisions provided that the registration thereof is not required.

Depending on the territory where a pawnshop operates the following minimum amounts shall be contributed into its authorized fund prior to state registration:

• within the limits of one town/city, district – EURO 50000
• within the limits of Kyiv and Sevastopol – EURO 100000
• within the limits of oblast – EURO 150000
• within the whole territory of Ukraine and abroad – EURO 500000

Pawnshops shall form reserve funds to cover unforeseeable losses.

This draft sets forth the procedure of re-organization and liquidation of a pawnshop.

A pawnshop is entitled to render the following services:

• to lend money, including on the terms of financial credit for the account of own or debt capital;
• to render any financial services requiring direct or indirect attraction of financial assets of natural persons;
• trust management of financial assets of legal entities and natural persons;
• to purchase items made of precious metals and precious stones from citizens.

A pawnshop can practice the above activity if a relevant license is available.

The basic method to secure obligations of pawnshop clients in transactions related to giving loans (credits) is pawning of property or rights of property.

There is no normative legal act in Ukraine to define legal status of pawnshops proceeding from the situation currently created in development of legal relationships in Ukraine.

This draft law, if adopted, will allow to eliminate this gap in current legislation of Ukraine.