How to register real estate as a part of authorised capital in Ukraine

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Reform of real estate ownership registration system results in many questions answers to which cannot be given even by the very registrars. Procedure of registration of ownership rights to real estate that was contributed to charter capital of a legal entity (in particular limited liability company) is one of the questions that interest businesses the most.

Ability to contribute real estate to charter capital is provided by Section 2 of Article 115 of the Civil Code of Ukraine. A requirement about registration of rights to it is based on Section 4 of Article 334 of the Civil Code of Ukraine which provides that rights to real estate that are subject to the state registration occur since the day of such registration. In accordance with Section 1 of Article 115 of the Commercial Code of Ukraine property contributed to charter capital of a limited liability company by one of its members is considered to be owned by the company and according to Article 4 of the Law “On state registration of property rights to real estate and their encumbrances” such rights are subject to the state registration.

The legislation does not provide the procedure of formalization of property contribution to charter capital.

In practice such contribution is performed by means of signing act of property acceptance which includes in particular its price that is defined upon agreement of members or founders of a company. Within the procedure of state registration of rights to real estate such document was previously recognized as a document which confirms transfer of ownership from a member to the LLC.

But current procedure of registration of rights to real state that is approved by the resolution of the Cabinet of Ministers of Ukraine number 703 dated 22.06.2011 requires provision of act of acceptance as an addition to the document which confirms occurrence, transfer or termination of rights to real estate. Due to this it is possible to form different sets of documents which are required to provide for the state registration. Some think that act of acceptance should be added with ownership certificate which confirms rights of a member to real estate that is contributed to charter capital while others support the position according to which one should provide sale contract of corporate rights based on which real estate is obtained by a LLC as payment for corporate rights which are transferred by the LLC to its member. In practice the first approach is more popular but everything can change at any time.

Regulatory inconsistencies occur also regarding issue about necessity of real estate technical specification certificate provision. On the one hand Subsection 29 of the Procedure of state registration of rights to real estate and their encumbrances requires provision of technical specifications certificate only for the purposes of state registration of rights to new buildings and reconstructed objects. On the other hand Subsection 50 of the Procedure requires provision of documents that are in particular provided by Subsection 29 of the Procedure. Most likely technical specifications certificate is required only in case when one contributes rights to a new building. But since methodic instructions of the State Registration Service of Ukraine that are approved its decision dated 11.12.2012 include technical specifications certificate  to the list of documents that are required for such registration without any remarks then its provision will be required during all times of registration of rights to real estate contributed to charter capital.

Besides, based on requirements of the resolution of the Cabinet of Ministers of Ukraine number 703 dated 22.06.2011 registration of rights to real estate requires submission of:

• Application for state registration that is in compliance with the form approved by the Order of the Ministry of Justice of Ukraine number 595/5 dated 17.04.2012;
• Copy of passport or other document which confirms identity (original is shown directly);
• Receipt of payment for provision of an extract from the State register of property rights to real estate (120 UAH);
• Receipt of the state fee payment (119 UAH).

Also it may be required:

• Copy of document which confirms authorization of a representative if a petition is filed by such representative;
• Decision of legal entity’s body about contribution of real estate to charter capital if the contribution is made by a legal entity;
• Written consent of all co-owners for contribution of real estate object to charter capital by one of co-owners if contributed property is jointly owned;
• Written consent of mortgagee or a body of the State Tax Service for transfer of real estate to charter capital if it is under mortgage or tax lien;
• An extract from the State land cadastre about a land plot if a land plot is contributed and its state certificate includes no information about cadastre number.

Besides the abovementioned documents that are required by provisions of the Resolution of the Cabinet of Ministers of Ukraine number 703 dated 22.06.2011 one should consider a list of documents that is provided by Methodical recommendations of the State Registration Service of Ukraine dated 11.12.2012. The state body requires provision of a decision made by a body of a legal entity or a decision of an individual that contributed real estate to charter capital about membership in company and contribution of an object including its name, address and area. The legislation does not provide any requirements regarding such decision (as mentioned above it is required to provide only a decision of an entity’s body about contribution of real estate to charter capital) but in practice it can be required by a state registrar and/or notaries.

State registration of ownership rights to real estate that is contributed to charter capital can be performed either at an office of registration service of justice department at the location of property or at notary’s office. Registration by the latter one is possible in case if a legal entity and its member decide to enter into sale contract of corporate rights and decide to notarize it.

Term of ownership state registration at a body of state service equals to 14 business days since the day of petition submission. A notary will be able to perform the registration within several hours but it costs more.