BACKGROUND
On 3 June 2025, the Verkhovna Rada adopted Law of Ukraine No. 12306 “On Factoring’’(initiated on 11 December 2024). The law comes into force on 3 June 2026. A new Law brings together the rules governing factoring and contributes predictability and transparent mechanisms for protection of market actors and compliance with the international practice. The new Law focuses on implementing the provisions of the UNIDROIT Model Law on Factoring. Harmonisation of Ukrainian legislation to these standards makes local market more understandable and attractive to foreign investors and financial institutions, and simplifies international factoring operations. Ukraine is already a party to the UNIDROIT Convention on International Factoring (1988), and the new law facilitates this tendency.
REFLECTIONS
On 29 April 2026, the Verkhovna Rada has passed the Law of Ukraine No. 4863-IX “On Amendments to the Civil Code of Ukraine Regarding the Regulation of Relations in the Field of Factoring’’ (Draft Law No. 12307). This Law updates the regulatory framework for factoring and transfers its regulation from the Civil Code to separate, dedicated legislation. On 14 May 2026, the President of Ukraine signed this Law.
KEY TAKEAWAYS
- The aim of the changes is to eliminate overlapping provisions and prevent legal conflicts in this area.
- The new approach allows for a clear definition of the legal nature of a factoring agreement, the requirements for its conclusion and the rights of the parties.
- Following the adoption of the special Law No. 4466-IX of 3 June 2025 “On Factoring’’, the document proposes replacing the content of Chapter 73, “Factoring’’, of the Civil Code—which comprises 10 articles (covering the definition of a factoring agreement, the subject matter of a factoring agreement, the parties to a factoring agreement, etc.)—with a single article.
- This article stipulates that under a factoring agreement, one party (the client) assigns or undertakes to assign to the other party (the factor) the right to a monetary claim against a third party (the debtor) in return for remuneration, and the factor acquires or undertakes to acquire such a right and pays or undertakes to pay the client a certain sum of money (the price of the right to a monetary claim).
- At the same time, ‘relationships in the field of factoring are governed by the Law of Ukraine “On Factoring”.
- Consequently, to avoid a potential conflict of laws arising from the simultaneous regulation of factoring legal relationships by two different laws, this regulation has been excluded from the Civil Code of Ukraine.
- The amendments introduced will help regulate the factoring market in Ukraine, as the presence of similar provisions in the Civil Code could lead to a conflict of laws and inconsistent application of the rules.
- The amendments clearly define: the factoring agreement as a distinct type of civil contract; the requirements for its conclusion; the rights and obligations of the parties and participants in factoring relationships.
- Factoring is a quick way to obtain the financing needed to ensure the continuous operation of a business. Factoring contributes to the more efficient operation and development of businesses, as it enables companies to offer customers favorable payment terms (trade credit), increase sales volumes and balance sheet liquidity, accelerate asset turnover, replenish working capital and avoid cash flow gaps.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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