A law easing the debt pressure on businesses affected by Russia's armed aggression has entered into force
On 10 August 2025, the Law of Ukraine "On Amendments to the Section "Final and Transitional Provisions" of the Civil Code of Ukraine Regarding the Specifics of Lending and Financial Leasing During Martial Law" dated 27 March 2025 No. 4340-IX (the "Law") became effective. The Law is intended to support small and medium-sized businesses, which assets and business activity have been significantly affected by Russia's armed aggression, by offering a temporary deferral of debt repayment and a prohibition of security enforcement.
Terms and conditions for introduction of a moratorium in respect of loan agreements
The Law stipulates that during the period of martial law, a borrower (legal entity or individual entrepreneur) may apply to a lender for a moratorium on accrual and payment of debt (principal amount, interest, fees and other payments) under a loan agreement. The borrower must meet all the following criteria in order to benefit from such moratorium:
- the borrower's total annual revenue for 2021 (including related counterparties determined according to the criteria of the National Bank of Ukraine) does not exceed the equivalent of EUR 50 million at the average annual exchange rate of the NBU)
- the loan agreement with the borrower was concluded before the Law came into force, i.e. before 10 August 2025
- the loan is secured by a pledge/mortgage of:
- immovable property, equipment and/or machinery (fixed assets), which is located in the territories of active hostilities or territories of Ukraine temporarily occupied by the Russian Federation as of the date of application; and/or
- vehicles, which have been destroyed, lost, stolen and/or are out of the possession against the borrower's will in the above-mentioned territories. This fact may be confirmed by a statement of criminal offence and an extract from the Unified Register of Pre-trial Investigations regarding criminal proceedings initiated within certain time limits established by the Law
- on the date of conclusion of the loan agreement, the assessed value of the above-mentioned property exceeded 50% of the assessed value of the total pledge/mortgage securing the loan
- (i) the borrower's total annual revenue for the previous accounting year (including the counterparties described above) does not exceed 75% of its annual revenue for 2021; or (ii) the total area of agricultural land used by the borrower as of the date of application and not included in the above-mentioned territories does not exceed 50% of the total area of agricultural land used by the borrower in 2021
- the total amount of dividends paid by the borrower from the date when the pledge/mortgage received the above status until the date of application does not exceed 20% of the principal amount of the loan agreement. This provision shall not apply to dividends paid in total amount of less than UAH 150,000.
To introduce a moratorium, the borrower shall send the lender a respective application, specifying the information and indicators described above, and attaching supporting documents. Within 20 business days from the date of receipt of the application, the lender shall decide whether to introduce the moratorium or refuse it, providing justification for such refusal. The borrower may appeal against the lender's decision on refusal to the commercial court. If the lender has not made any decision within the above-mentioned period, the moratorium shall be deemed to be in effect.
Consequences of introduction of a moratorium
For the term of the moratorium (i.e., from the date of receipt of the application for the moratorium during the term of martial law and one year from the date of its termination):
- the borrower is discharged from the obligation to make payments under the loan agreement
- enforcement proceedings relating to the pledge/mortgage securing the loan and debt collection from the borrower and surety/security provider are suspended
- the accrual of interest, penalties and other amounts under the loan agreement is suspended
- the term of the loan agreement and security agreements is prolonged
- the statute of limitations on claims for payment of debt under the loan agreement or enforcement of security, as well as the term for submitting claims to the surety/security provider are suspended
- the term for the presentation of enforcement documents for execution, the performance of enforcement actions and measures for the enforcement of court decisions relating to the recovery of debt under the loan agreement or the enforcement of security against the borrower and the surety/security provider is suspended
Moratorium in respect of financial leasing agreements
Similar to the introduction of a moratorium under loan agreements, a lessee may apply to a lessor for a moratorium on accrual and payment of lease and other payments under a financial leasing agreement. Similarly, the lessee must meet a set of criteria for submitting an application, which duplicate the above conditions for the borrower regarding total annual revenue for 2021, the date of conclusion of the agreement, total annual revenue for the previous accounting year/total area of agricultural land in use, and total amount of dividends paid.
However, among the conditions specific to the lessee are:
- carrying out business activities by the lessee on the date of conclusion of the financial leasing agreement in a territory that, as of the date of application, belongs to the territories of active hostilities or territories of Ukraine temporarily occupied by the Russian Federation
- the financial leasing object has been destroyed, lost, stolen and/or are out of the possession against the lessee's will in the above-mentioned territories
The procedure and consequences of introducing a moratorium under financial leasing agreements are also similar to those for loan agreements, taking into account the specific nature of leasing operations as provided by the Law.
Prospects and impact of the Law
Due to the ongoing full-scale invasion, the number of businesses that have lost or continue to lose their property and do not have the resources to properly fulfil their obligations under loan or financial leasing agreements is growing. The Law specifically focuses on and protects small and medium-sized businesses, particularly farmers, who are not part of large holding structures and do not have an extensive pool of assets. It may be beneficial to entrepreneurs, enabling them to stabilise their financial situation, identify new directions for development, and, consequently, continue to effectively service their debts.
It should be mentioned that after the full-scale invasion began, most lending banks agreed to restructure their borrowers' debts, as evidenced, in particular, by the gradual and steady decline in the share of non-performing loans in Ukraine granted to small and medium-sized businesses. Therefore, it seems that the Law, by establishing a fairly detailed and objective set of criteria for introducing a moratorium, is rather a backup guarantee for affected businesses, which they can use in any scenario of their relations with the lenders. The implementation of the Law in practice will show how it will affect the balance in the "borrower-lender" system and what further adjustments will be needed (for example, regarding revision of the moratorium in connection with changes in the borrower's financial indicators, regarding regulation of additional requests from the lender/communication with the borrower for making a decision on introduction of the moratorium, etc.).
For further information, please contact Asters' Partner Iryna Pokanay and Senior Associate Inna Bondarenko
