Seals on documents are no longer required for entrepreneurs. From now on, officials, tax authorities and bankers will be administratively sanctioned for requirements to certify contracts with a seal.
In March, the Verkhovna Rada supported the draft law No.4194, which abolishes mandatory seals of enterprises on official documents. In April, the President signed this law, and on April 19, it was published officially.
At the same time, in 2014, the Economic and Civil Codes were amended, and, accordingly, to have a seal became the right for entrepreneurs instead of being their obligation. That means that parties to a contract obtained the right to decide whether the contract should be sealed or it will be enough to sign it by authorized persons.
“Despite the legislative changes of 2014, in practice, the very few contracts between business entities were concluded without sealing the signatures,” the senior associate of the LLP “Alekseyev, Boyarchukov and partners” Inna Rudnyk says. “This is due, in particular, to the provisions of other legal acts. In most cases, fiscal authorities, banking institutions and others didn’t accept documents without any seal. It was easier for parties to seal and protect themselves from possible risks. As a result, the simplification of procedures on starting and doing business was exclusively declarative.”
In addition, despite the fact that since 2014 the use of seals has become voluntary, the Code of Administrative Offenses of Ukraine stipulated administrative sanctions for “violation of rules on producing and procedures on registering and storing seals and stamps”.
What is changing?
A business entity still has the right to use the seal in own activities, but its use is not mandatory. Whether documents contain a company’s seal or not – it does not create legal consequences.
“The loss of legal validity doesn’t imply a ban on the use of seals. Entrepreneurs will still be able to use the seals, but from a legal point of view, the seal will perform exclusively decorative functions,” the Deputy Head of the Better Regulation Delivery Office (BRDO) Denis Malyuska explains.
No state body or local government body can require a company’s seal (or entrepreneur’s seal) on a document submitted to it. This applies even to the cases, when the seals are stipulated by delegated acts (for example, by CMU’s Resolutions).
A copy of a document submitted by an enterprise to state bodies or local government bodies is considered to be certified in accordance with the established procedure if it has the signature of an authorized person or the personal signature of an individual entrepreneur. Officials do not have the right to demand notarization of a document’s copy (unless such a requirement is established by law).
However, the legislative changes did not affect the status of seals of persons, who are not considered to be the business entities (for example, state government and local government bodies, notaries, court-appointed administrators, etc.). “Therefore, these persons continue to use the seals without any changes,” Denis Malyuska says.
What are the sanctions for demanding requiring seals?
Officials can not continue to require entrepreneurs to have a seal on documents. Otherwise, officials can be brought to administrative responsibility. According to the law, a fine is from 50 to 100 non-taxable minimum incomes, that is, from 850 to 1,700 hryvnas.
“If any government agency refuses to accept a document without a seal from entrepreneurs, they have the right to file a claim in court to bring this agency to liability. It should be noted that the fine is paid to the state. And if this unjustified refusal caused you damages, you should initiate a separate lawsuit to recover them from officials,” Rudnyk explains.
Will there be any problems if documents do not have a seal?
“In many countries, seals have not been used for a long time,” the junior lawyer of the Investment Service Ukraine company Maksym Pirogov explains to Delo.UA. “When concluding external economic contracts, foreign counterparties are often surprised that contacts have seals. In Ukraine, nobody will take seriously contracts or warrants of attorney, which are not certified by seals,” Pirogov says.
According to him, it will be possible to persuade a counterpart company that the seal is not necessary without special problems. But it will be difficult to prove this fact to the state bodies. “You can appeal the decision on refusing to accept documents in court. But it is a waste of time and additional funds. It is much easier for enterprises to buy a seal and use it than to prove something to public servants,” the lawyer says. He assures that it is necessary to develop a new way of certifying documents for state bodies.
To protect yourself from fraud activities or raider attacks, the BRDO expert Denis Mayuska advises to require signing a contract by a counterpart in your presence when concluding important contracts, and signatures on such contracts should be notarized. In addition, the expert recommends to thoroughly study the data of the Unified State Register of Legal Entities, Individual Entrepreneurs and Public Associations.