Saturday, May 2, 2015

Law of Ukraine “On Development and State Support of Small and Medium Business in Ukraine”

Date of entry into force:
April 19, 2012

(Abstract)

The Law determines the legal and economic grounds of state policy in the sphere of support and development of small and medium business.

Article 3 of the Law determines the objective and principles of state policy in the sphere of development of small and medium business in Ukraine.

According to Article 4 of the Law, the main directions of state policy in the sphere of development of small and medium business in Ukraine are:
·         improving and simplifying the tax accounting procedures;
·         implementing a simplified taxation, accounting and reporting system for small business entities that satisfy the criteria established by the tax legislation;
·         involving small business entities in scientific and technical, and social and economic programs, and in supplying products (works, services) for state and regional needs;
·         ensuring state financial support for small and medium businesses by implementing state credit programs, providing guarantees on credits, partially compensating loan interests, etc;
·         facilitating the development of the small and medium business support infrastructure;
·         guaranteeing the rights of small and medium business entities during state supervision (oversight) in the sphere of economic activity;
·         facilitating simplification of permit procedures, state supervision (oversight) procedures, procurement of permit documents for small and business entities, and decreasing the duration of such procedures;
·         organizing for training, retraining and advanced training of staff for small and medium business entities;
·         implementing mechanisms for facilitating and inciting small and medium business entities to use innovative technologies and quality-improving technologies in their production.


Development of small and medium business is provided for, within the scope of their authority, by the Verkhovna Rada of Ukraine, the Cabinet of Ministers of Ukraine, the specially authorized body in the sphere of development of small and medium business, other central bodies of executive power, the Verkhovna Rada of the Autonomous Republic of Crimea, the Council of Ministers of the Autonomous Republic of Crimea, local state administrations, and bodies of local self-government. The specially authorized body in the sphere of development of small and medium business is the central body of executive power providing for implementation of state policy in the sphere of development of business (Article 5 of the Law). Articles 6-10 of the Law determine the authority of the above bodies in the sphere of development of small and medium business.

According to Article 11 of the Law, consultative, advisory or other auxiliary bodies in the sphere of development of small and medium business are created with central, regional and local bodies of executive power.

Article 12 of the Law envisages that state support is granted to small and medium business entities that satisfy the criteria established by part 3, Article 55 of the Economic Code of Ukraine. State support entails creating programs that determine the mechanism for such support. State support programs are developed and implemented by the specially authorized body in the sphere of development of small and medium business, with involvement of other central bodies of executive power and civil organizations that represent the interests of small and medium business entities. State support programs are approved by the Cabinet of Ministers of Ukraine according to the procedure established by law.

According to Article 13 of the Law, state support cannot be given to small and medium business entities who:
·         are credit organizations, insurance organizations, investment funds, non-state pension funds, professional stock market players, or pawn brokers;
·         are not residents of Ukraine, except for cases provided for by international agreements of Ukraine;
·         produce and/or sell weapons, alcohol or tobacco products; or exchange currency;
·         lease immovable property as one of their main activities;
·         have been declared bankrupt or had the bankruptcy procedure initiated against them;
·         are in the state of termination of legal entity or termination of business activity of a natural person – entrepreneur;
·         submitted knowingly false information and documents when applying for state support;
·         have outstanding debts before the budget, the Pension Fund of Ukraine, or funds of mandatory state social insurance;
·         received state support with violation of conditions of such support, or violated the terms of use of the budget funds, which has been proven according to the established procedure;
·         receive similar type of state support, which is still effective.

The small and medium business support infrastructure are enterprises, institutions and organizations of any form of ownership that carry out work aimed at development of small and medium business entities and their investment and innovation activity, and at promotion of their products (work, services) and results of intellectual activity on the domestic and foreign markets. Objects of the small and medium business support infrastructure include business centers, business incubators, innovation business incubators, research and technology centers, technology transfer centers, small business support funds, leasing companies, consultation centers, and other enterprises, institutions and organizations whose main objective is facilitating the development of small and medium business. State support of objects of the small and medium business support infrastructure is carried out in the scope of state, regional and local programs for support of small and medium business development (Article 14 of the Law).
According to Article 15 of the Law, state support for small and medium business entities and objects of the small and medium business support infrastructure includes financial, informational and consultative support, including support in the sphere of innovations, science and industrial production, supporting small and medium business entities that carry out export activity, and support in the sphere of training, retraining and advanced training for business and management stuff. The Verkhovna Rada of the Autonomous Republic of Crimea and bodies of local self-government have the right to provide other types of state support at the expense of local budgets, in addition to the above types of state support.

According to Article 16 of the Law, financial state support is provided by the specially authorized body in the sphere of development of small and medium business, other bodies of executive power, the Verkhovna Rada of the Autonomous Republic of Crimea, bodies of local self-government, the Ukrainian Entrepreneurship Support Fund and other national funds, and regional and national funds for entrepreneurship support. The main types of financial state support are:
·         partial compensation of interest on loans granted to small and medium business entities for project implementation;
·         partial compensation of leasing payments, factoring payments, and payments for use of guarantees;
·         providing guarantees and sureties for loans of small and medium business entities;
·         granting loans, including microloans, for business start-up and maintenance;
·         granting loans for acquisition and implementation of new technologies;
·         compensating expenses on development of cooperation between small and medium business entities and large companies;
·         financial support for implementing energy-saving and environmentally safe technologies;
·         other types of financial state support not forbidden by legislation.

The Ukrainian Entrepreneurship Support Fund, and other national, regional and local funds for entrepreneurship support are legal entities. The procedure for creation and operation of the Ukrainian Entrepreneurship Support Fund and other national funds for entrepreneurship support is determined by the Cabinet of Ministers of Ukraine. Founders of regional and local funds for entrepreneurship support can be the Council of Ministers of the Autonomous Republic of Crimea, local bodies of executive power, bodies of local self-government, the Ukrainian Entrepreneurship Support Fund, other national funds for entrepreneurship support, legal entities or natural persons. Funds for entrepreneurship support are non-profit organizations whose main functions are facilitating the implementation of state policy in the sphere of development of small and medium business by attracting and efficiently using financial resources, and financing target-oriented programs and projects. Financial state support is carried out by funds according to Article 16 of the Law. Resources of the Ukrainian Entrepreneurship Support Fund, and other national, regional and local funds for entrepreneurship support are formed at the expense of budget resources and voluntary contributions of natural persons and legal entities, including foreign ones. Resources of the Ukrainian Entrepreneurship Support Fund, and other national, regional and local funds for entrepreneurship support are directed exclusively towards financing development and support of small and medium business. The procedure for using such funds is established by the Cabinet of Ministers of Ukraine (Article 17 of the Law).

Articles 18-20 and 22 of the Law, respectively, determine the terms for providing informational and consultative state support for small and medium business entities, as well as state support in the sphere of innovation, science, industrial production, training, retraining and advanced training of business and management staff.

Article 21 of the Law envisages state support for small and medium business entities that carry out export activity, and determines the terms and directions of such support.

State support for small and medium business entities in the sphere of training, retraining and advanced training of business and management staff is envisaged by Article 22 of the Law.

The Law also introduces appropriate amendments to Articles 55 and 63 of the Economic Code of Ukraine. Furthermore, it envisages that the Law of Ukraine “On State Support of Small Business” is declared ineffective.



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