On 30 July 2026, the Law of Ukraine No. 4466-IX “On Factoring” (the Law) entered into force. This is the first Ukrainian law to comprehensively regulate factoring as a separate financial service, changing the approach to how monetary claims are assigned in Ukraine. In practice, the Law provides for a transition from a predominantly contractual model of assigning monetary claims to a more formalised system, in which the status of the factor, the registration of the assignment, and the timing of such registration are of material importance.
1. Factoring as a financial service: what the Law regulates
The Law defines what factoring is, who may engage in it, and what its subject matter may be. The subject of a factoring agreement may be an existing or future right to a monetary claim arising from contracts for sale, supply, lease, contract work, or services, as well as transfer of intellectual property rights.
A factor may be a financial institution authorised to provide the relevant service, as well as a non-resident that has the relevant authority under its national law. A client under a factoring agreement, meanwhile, may be a legal entity or an individual entrepreneur that assigns the right to a monetary claim to the factor.
A factoring agreement must be concluded in writing, including in electronic form, and may provide for the conclusion of separate transactions on assignment of claims within the framework of a master agreement.
2. What is not factoring
The Law sets limits on the application of the new regulations. Specifically, such regulations do not apply to assignments of rights to monetary claims arising from contracts for other financial services, nor to assignments for which the new creditor does not receive any remuneration. Furthermore, factoring cannot relate to claims whose term of performance has already expired, nor to claims for payment of a penalty (e.g. a fine, late payment interest) separately from the principal monetary claim.
As such, not every assignment of a right to a claim will fall under the new factoring regulation: the nature of the claim, as well as the conditions of its assignment, are both important in determining where the regulations do or do not apply.
3. Types of factoring
A factoring agreement must specify the type of factoring:
In practice, this means that the choice of the type of factoring determines who will bear the risk of non-payment by the debtor.
4. Invalidity of prohibitions on assignment of the right to a monetary claim
The Law expressly provides that:
- any contractual provisions that prohibit or restrict the client’s right to assign the right to a monetary claim to the factor are void
- a factoring agreement is valid regardless of whether the base agreement contains a prohibition or restriction on assignment of the right to a monetary claim.
Consequently, a prohibition on assignment in the base agreement in itself no longer prevents the conclusion of a factoring agreement.
5. Distinction between factoring and consumer credit
The Law distinguishes factoring from consumer lending and restricts the ability of factoring companies to work with rights to claims under consumer credit agreements. Such rights may only be acquired by financial institutions defined in the Law that are authorised to extend funds and bank metals in credit.
For market participants, this means there is a need to review portfolios of rights that have already been acquired and examine the structure of future transactions. Specifically, persons that acquired such rights before the new Law entered into force and do not meet the prescribed requirements must assign such rights to an appropriate financial institution within 30 days from the date the Law enters into force.
6. Register of assignments of rights to monetary claims and electronic factoring system
The Law introduces a Register of Assignments of Rights to Monetary Claims under Factoring Agreements (the Register), including:
- a public electronic register for recording and publishing information on assignments of rights to monetary claims
- an electronic factoring system for registering participants and exchanging information and documents.
Registration of assignment of the right to a monetary claim under a factoring agreement (other than a confidential factoring agreement) is mandatory and is carried out on the basis of an electronic application submitted by the factor within three business days following the conclusion of the factoring agreement. Registration results in the creation of a record with a registration number and with the date and time of registration.
A registered assignment of a right to a monetary claim has priority over an unregistered assignment. This is also designed to reduce the risk of double assignment of one and the same monetary claim.
Following registration of the assignment, the factor must send the debtor a notice of the relevant assignment within three business days (via the electronic factoring system, if the debtor is registered in the Register, or alternatively in electronic or paper form).
The debtor must pay the factor the monetary amount to perform the monetary claim if:
- the assignment of the right to the monetary claim is registered in the Register, and
- the debtor has received a notice in accordance with the requirements of the Law.
If these conditions are not met, payment by the debtor to the original creditor is deemed proper performance of the obligation under the base agreement.
At the same time, the Law also provides that the Procedure for Maintaining the Register must enter into force, and the Register itself must be created, no later than the date the Law enters into force, i.e. 30 July 2026. As of now, the relevant Procedure has not been approved and the Register is not yet functional. This creates practical uncertainty as to the implementation of the mandatory registration of assignments envisaged by the Law.
7. Temporal application of the Law and transitional provisions
The Law applies to factoring agreements concluded after 30 July 2026 and does not change the regulation of relationships arising from factoring agreements concluded before that date, i.e. such relationships continue to be governed by the previous legislation.
Financial companies with a valid factoring licence are obliged to:
- within one month from the date the Law enters into force: notify the National Bank of Ukraine of their intention to carry out factoring activities, and
- within six months from the date the Law enters into force: bring their activities into compliance with the requirements of the Law and the regulatory acts adopted for its implementation.
It is therefore important for market participants to already start reviewing internal procedures, contracts, and the structure of factoring transactions in light of these new requirements.
KPMG Law Ukraine has a team of qualified specialists with extensive experience in advising clients on financial regulation matters, including:
- analysing the impact of the new Law of Ukraine “On Factoring” on client activities
- supporting financial companies in bringing their activities into compliance with new legislation
- structuring transactions involving assignment of rights to monetary claims in line with legal requirements
- drafting and adapting factoring agreements and other necessary documentation
- participating in negotiations with counterparties.
