Particularities of registration of a factoring company and entering it in the register of financial institutions

A factoring company is a financial institution whose purpose is to carry out operations to acquire rights of claim to fulfill obligations in cash.

The process of creating a factoring company has a large number of pitfalls and possible obstacles. We will explain what to look for and how to avoid refusals from the National Financial Services Commission.

Creation of a factoring company

In order to start a factoring business, you should first of all establish and register a separate legal entity for this purpose.

At this stage, special attention should be paid to the constituent documents of the future factoring company. In particular, its charter must clearly state the activities that such a legal entity will carry out. Also note that the authorized capital in any case should be formed solely in cash, and not property or property rights.

In addition, for this type of legal entities, increased requirements are established for the size of their authorized capital, namely:

• no less than three million hryvnias - if the company will deal only with factoring;
• no less than five million hryvnias - if the company will be engaged in other types of financial services (for example, leasing services, the provision of loans, etc.) [2].

The legislation also establishes certain professional requirements for persons who are appointed to the position of a director and a chief accountant of any factoring company.

Entering a factoring company in the register of financial institutions

After your factoring company is registered in state bodies as a legal entity in a proper way, it is subject to entry in a special register of banks. For this purpose, it is necessary to collect and submit to the National Financial Services Commission a package of documents confirming the company's compliance with all the requirements stipulated for financial institutions.

It should be noted that this stage is often accompanied by a refusal from the National Financial Services Commission due to improper execution of the required package of documents by the applicant, its incompleteness or noncompliance of the information provided about the factoring company with established requirements.

In the practice of our lawyers, there have been several cases when the Client turned to us for help with a request to check the compliance of the documents collected by him/her with the requirements of the law and submit them to the National Financial Services Commission. We have successful experience in including factoring companies in the register of financial institutions, not only thanks to the professionalism of lawyers, but also because we can coordinate the correctness of documents in advance with the National Financial Services Commission.

Within 30 days from the date of filing the documents, the National Financial Services Commission makes a decision on including the applicant company in the register of financial institutions or refusing such inclusion.

Submission of unverified documents can significantly delay the process of creating your factoring company.

You can prepare your documents through your own effort, using our checklist for checking documents.

Registration of a factoring company in the State Financial Monitoring Service of Ukraine

Financial institutions, according to the law, are the subjects of initial monitoring and, accordingly, are required to register with an authorized state body [3].

In this regard, factoring companies are additionally subject to mandatory registration with the State Financial Monitoring Service of Ukraine.

Registration of a factoring license

The next important step on the path to organizing a factoring business is to issue an appropriate license at the National Financial Services Commission.

To obtain such a license, the applicant must fully comply with the requirements of the License conditions [4] and submit a package of documents to the licensing authority.

At this stage, in our practice, there have been cases when the Client applied for a preliminary check of a package of documents to submit or after a refusal was received.

To save time, we provided a preliminary verification of documents by the licensing authority and the further processing and submission of the entire package of documents. The Client only had to sign the ready-made documents and get his/her license within 10 days.

If you want to submit documents yourself, you can use our Checklist to verify documents before submitting.

Findings

Thus, the registration of a factoring company is a rather complicated process that requires sufficient professional knowledge in the provision of financial services, and in addition, successful experience in preparing documents for entering into the register of financial institutions and obtaining a license.

Our company is ready to provide you with full support for the registration of your factoring company, including the development of constituent and internal documents, registration of  a sole trader, inclusion of it in the register of financial institutions, registration with the State Financial Monitoring Service of Ukraine and obtaining a license.

Our lawyers will professionally solve possible problems at any stage of registration of your factoring company.

[1] Article 1077 of the Civil Code.

[2] Clause 1 of Section XI of the Regulation on the State Register of Financial Institutions, approved by order of the Financial Services Commission of 08.28.2003r. Number 41.

[3] Section 6 of the Law of 10/14/2014 No. 1702-VII.

[4] License conditions for the implementation of economic activities for the provision of financial services, approved by the Cabinet of Ministers dated 07.12.2016.