Rada passes new factoring law: What it means for businesses

On Tuesday, June 3, the Verkhovna Rada adopted a new law on factoring, aimed at improving the regulation of this financial service and aligning Ukrainian legislation with international standards. The bill passed its second reading and was supported by 242 Members of Parliament.

Factoring is a financial transaction that allows a company to receive immediate funding by assigning to a factor its right to collect payments from debtors for goods or services already delivered but not yet paid for.

One of the key innovations of the new law is the establishment of a public electronic register for the assignment of monetary claims under factoring agreements. Registration in this database will be mandatory, helping reduce fraud risks and enhancing market transparency.

The law also distinguishes between trade factoring and financial debt operations. Companies providing services involving the assignment of claims under consumer credit agreements will be required to operate under a financial company license. Such a license allows the issuance of loans but is not compatible with offering trade factoring services.

Additionally, the legislation enables the conclusion of factoring agreements through competitive procedures on a national digital platform, including electronic auctions.

Factoring activities will be regulated and supervised by the National Bank of Ukraine.

The law will come into force one year after its publication, but not before relevant amendments to the Civil Code are adopted.

The bill’s authors believe the reform will help develop the factoring market and support economic growth in Ukraine.