LAW OF UKRAINIAN SSR ON ENTERPRENEURIAL ACTIVITY 07.02.91 This Law defines the general legal, economic and social principles for conducting emterpreneurial activity by citizens and legal persons on the ter- rytory of the Ukrainian SSR, and sets guarantees for tree enterprise and government support. SECTION 1. GENERAL PROVISIONS Article 1. Enterpreneurial Activity in the UkrSSR Enterpreneurial activity means independent initiative, systematic venture activity for products, servicses and trading for the purpose of pro- fit. Article 2. Subjects of Enterpreneurial Activity Subjects of enterpreneurial activity (enterpreneurs) can be: - citizens of the Ukrainian SSR and other states, whose competence or legal capacity are not restricted under the law; - juridical persons of all property forms established by the law of the Ukrainian SSR on "Ownership"; With respect to juridical person for whom enterpreneurial activity is not basic, this Law shall apply to that part of their activity which is defined as enterpreneurial. Enterpreneurial activity shall not be allowed for following categories of citizens: those who serve in the military; employees of a public prosecutor's office; employees of a court; employees of state security bodies; employees of internal affairs bodies; employees of state arbitration; employees of state notary; and also employees of state administrative bodies entitled to control activity of enterprises. Persons for whom certain activity is prohibited by a court shall not be registered as enterpreneurs having the right to carry out activity appro- priate to the form of enterprise until the period established by a court is expired. Persons with uncancelled convictions for theft, bribery or other merce- nary acts shall not be registered as enterpreneurs, or be co-founders of enterpreneurial organizations, or hold leading posts in business associations and partnerships or hold positions of material responsibility. Article 3. Freedom of Enterpreneurial Activity Enterpreneurs shall have the right to make decisions and independently conduct any busness activity not contrary to effective law. Regulatory procedures for specific businesses shall be determined by legislation of the Ukrainian SSR. The Supreme Soviet (Parliament) of the UkrSSR, by application of Council of Ministers of the UkrSSR, shall determine the list of enterprises subject to license and the list of business where enterpreneurial activity is not appropriate because of substantial requirement of work security and for centralized management functions. Article 4. Restrictions to Enterpreneurial Activity The production of narcotics, weapons and explosives, securities and currency notes can be carried out only by enterprises of public sector. Pawn operations can be carried out by associationa with extended responsibility. Without spesial permission (license) granted by the Council of Ministers of the UkrSSR, the following kinds of business cannot be carried out: - exploration and exploitation of mineral deposits; - repairs of sports weapons, shot-guns and other weapons; - production and realization of medicines and chemicals; - production of beer and wine; - manufacture of vodka, liqueur and cognac productions; - manufucture of tabacco products; - practice of medicine; - practice of veterinary medicine; - practice of law; - establishment and maintenance of gambling hourses, organization of grambling games; - hot-drinks trading. Permission (license) for conducting enterpreneurial activity shall be granted by the Council of Ministers of UkrSSR or its authorized body within thirty (30) days from the receipt date of application. Refusal to grant a permission (license) shall be issued in writing within the same period. Disputes concerning refusal to grant a permission (license) shall be examined by a court or arbitration. The responsibilities of an enterprise shall include environmental pro- tection measures, including land recultivation and reforestation after its exploitation, in order to reduce environmental damage caused by priduction activity. These measures shall be financed af the expense of the enterprise. The enterprise shall be responcsible for rational use of nutural resources, and shall indemnify the state for the expenses aimed at restoration and pro- tection of natural resources. Article 5. Principles of Enterpreneurial Activity Enterpreneurial activity shall be conducted according to the following principles: - free choice of business forms; - voluntary inclusion of the resources and property of legal persons and citizens for realization of enterpreneurial activity; - independent formulation of a program of activity and choice of suppliers and consumers of manufacturing production, fixing of prices in accordance with legislation; - free hiring of emloyees; - inclusion and use of material-technical, financial, labor, natural and other resources the usage of which are not limited by law; - free use of profit after making payments required by law; - independent realization by the enterpreneur-legal person involved in foreign economic activity, use by any enterpreneur of a part of the currency gains due to him, at his discretion. Article 6. Organizational Forms of Enterpreneurial Activity Enterpreneurial activity in the UkrSSR shall be carreid out by means of any organizational form chosen by any enterpreneur. Procedure of estalbishment, operation, reorganization and liquidation of any organizational form shall be determined by corresponding enacments of UkrSSR. In case of this procedure has not been established, an enterpreneur shall apply this law or its own statute (by-laws). Article 7. Legislation on Enterpreneurial Activity Relations, conmnected to carrying out of enterpreneurial activity, shall be regulated by this law or other enactments of the UkrSSR. SECTION 2. CONDITIONS FOR REALIZATION OF ENTERPRENEURIAL ACTIVITY Article 8. State Registration of Enterpreneurial Activity State registration of enterpreneurial activity shall be conducted by the executive committee of district, town (city) or urban Councils of People's Deputies according to place of activity or residence, unless otherwise provi- ded by enactments of the UkrSSR. For the purpose of state registration, the following documents shall be submitted to the appropriate Councils of People's Deputies: - application of an enterpreneur; - resolution of a founder and statute, if indispensable forestablishing this organizational form of enterpreneurial activity; - other documents where required by legislation for specific organiza- tional forms of enterpreneurial activity. A registration certificate shall be issued by a registration office within one (1) month. Simultaneously, this registration office shall send information concerning registered subject of enterpreneurial activity to the appropriate taxing body and state statistics agency. The state statistics agency shall determine codes fora subject of enter- preneurial activity. Denial of state registration of a subject of enterpreneurial activity may occur only on the basis of a violation of established procedure provided by the legislation of the UkrSSR. Denial of state registration may not be made on the basis of its unsuitability. Denial of state registration may be appealed in court. A fee shall be charged for state registration, the amount of which shall be determined by Council of Ministers of the UkrSSR according to the form of enterpreneurial activity and kind of business. Local Councils of People's Deputies shall have the right to determine privilege payments for state registration. The amount received shall be transferred to the budget of the local registration unit according to the place of registration of the enterpreneur. Article 9. Employment Rights for Workers and Their Social Securities For the purpose of carrying out enterpreneurial activity, an enterpre- neur shall have the right to conclude agreements with persons concerning use of their work. In the preparation of a labor conduct (agreement), an enter- preneure shall be obliged to assure conditions and protection of labor, re- muneration at a level not lower than the minimum in the republic, and other social guarantees including social and medical insurance in accordance with effective legislation. In the case of disability, an enterpreneur shall provide the injured party with compensation for expenses in accidents, according to the proce- dure determined by relevant law. Article 10. Responsibility of Enterpreneurs Enterpreneurs shall be obliged not to cause damage to enviroment, not to violate rights and interests of citizens, institutions, organizations and the state, which are protected by law. Enterpreneurs shall bear responsibility for injury and losses incurred, as determined by law. Upon application of a creditor, prosecutor or other authority provided by legislation, any enterpreneur can be declared bankrupt by a court or an arbitration if his resources are inadequate to cover debts and there is no possibility for financial improvement of the enterprise. Article 11. Cessation of Enterpreneurial Activity Enterpreneurial activity shall cease: - on the initiative of an enterpreneur; - on the basis of court or arbitration judgement; - in case of license expiration; - in case of bankruptcy. SECTION 3. ENTERPRENEUR AND STATE Article 12. General Guarantees of Enterpreneur's Rights The state guarantees to all enterpreneurs, regardless of chosen organi- zational of enterpreneurial activity, equal rights and creates equal condi- tions for acces material-technical, financial, labor, informational, natural and other resources. Material-technical and other resources subject to centralized state dis- tribution be made available to enterpreneurs, on the condition that enterpre- neur shall perform and delivery for state needs. In instances anticipated by law, an enterpreneur or a person employed by him be enlisted for performing state duties during their working time. Autho- rities undertake such decision shall cover losses incurred by an enterpre- neur. Disputies regarding compensation for losses shall be settled by a court arbitration of appropriate jurisdiction. Article 13. Guarantee of Property Rights of Enterpreneur The state guarantees the inviolability of property and protects property rights evterpreneur. The confiscation of basic and current assets and other property used enterpreneur shall not be permitted, except in cases identified by enactments of UkrSSR. Losses of an enterpreneur, arising from violation of his property rights cans any citizen, legal persons and state bodies, shall be covered in accor- danse with eft legislation. Article 14. State Support of Enterpreneurial Activity For the purpose of creating favorable organizational and economic con- dition development of enterpreneurial activity, the state shall: - allocate plots ofland, transfer state property (industrial premises, unitial accomodations, temporarily closed and unfinished units, unused equpmet required for enterpreneurial activity in accordance with con- ditions regulations determined by effective legislation; - in accordance with Article 12 of this law, assits in assuring the available of matrial-technical supply, information services, staff training a re-training; - realize primary installation of object of industrial and social infra- structure for undevelopment territories with eventual sale or credit for such facilities for the enterpreneurs; - stimulate modernization of technology, innovative activity, develop- ment of new production and services by economic means (purposive sub- sidies, tax privileges, etc); - grant purposive credits to enterpreneurs; - give other types of aid. Article 15. State Regulation of Enterpreneurial Activity The state shall secure, according to effective legislation, free compe- tition among enterpreneurs, protecting consumers from unfair competition and monopoly in any sphere of enterpreneurial activity. State administrative bodies shall establish their relation enterpreneurs utilizing: - tax and financial policy including establishment of tax rates and interest rates on state credits, tax privileges, prices and price formation rules, purposive subsidies, exchange rates, economic sanc- tions; - state property and amounts of reserves systems, licenses, concessions, leasing, social, ecological and other standards; - scientific-technical, economic and social republican and regional programs; - contracts for performing work and deliveries for the state. Intervention of state bodies in economic activity is not permitted, unless this activity does not affect the rights of state bodies for control- ling enterpreneurs' activity anticipated by law of the UkrSSR. State bodies and officers may give instructions to enterpreneurs only in accordance with the authority as determined by law. In the event that instructions are given by officials who are outside thier authority or the provisions of law, an enterpreneur has the right to refer to a court to invalidate these documents. Losses of an enterpreneur resulting from performance of the instructions of state, or other authorities or their employees, and whoch vioate the rights of the enterpreneur, also a result of improper fulfillment of duties, shall be compensated by such authorites. Article 16. Activity of Foreign Enterpreneurs Foreigh citizens or stateless persons who carry out enterpreneurial activity on the territory of the UkrSSR, on its continental shelf and in exclusive (maritime) zone, shall have the same rights and bear the same responsibilities as citizens of the Ukrainian SSR, unless otherwise required by the Constitution of the UkrSSR, this Law and other enactments of the Ukrainian SSR. Prosedures for carrying uot enterpreneurial activity on the territory of the UkrSSR, on its continental shelf and in exclusive (maritime) zone by foreign juridical persons, shall be determined by enactments of the Ukrainian SSR. Article 17. International Treaties If other regulations establishad by international treaty to which UkrSSR is a party come into conflict with those provided by legislation of the UkrSSR concerning enterpreneurial activity, the regulational treaty shall be applied. Chairman of the Supreme Soviet of the Ukrainian SSR L. Kravchuk Kiev, 7 February, 1991