Factoring Reform: Systemic Amendments Introduced to the Civil Code.

On 29 April, the Verkhovna Rada adopted in full draft law No. 12307, which fundamentally changes the regulatory framework governing factoring relationships.

Key innovations of the law include:

• Update to Article 1077 of the Civil Code of Ukraine: the factor acquires the claim right for consideration, while the client pays remuneration to the factor. This amendment will allow for a clearer distinction between a financial service and a standard assignment of claims.
• Simplification of the Civil Code: Articles 1078–1086 of the Civil Code are repealed. Detailed provisions relating to the subject matter of the agreement, liability, and procedural aspects will be transferred to the specialized Law of Ukraine “On Factoring.”
• Alignment with International Standards: the amendments harmonize Ukrainian legislation with the provisions of the UNIDROIT Convention, to which Ukraine acceded in 2006.

The law will enter into force simultaneously with the framework Law on Factoring. The reform is intended to eliminate inconsistencies in court practice and stimulate the development of the factoring market.