LAW OF UKRAINE

ON LEASING OF ASSETS OF STATE-OWNED ENTERPRISES AND ORGANIZATIONS

The purpose of this law is to provide an increase in the effective
use of the assets of state-owned enterprises and organizations by
granting a lease to individuals and legal entities and to create
the  preconditions for possible privatization of this property. 

Article 1. The missions of the law 

This law regulates: 

- relations between organizations, connected with the granting of
lease of property of state-owned enterprises, organizations and
their structural branches; 
 
- property relations between lessors and lessees with respect to
the economic use of the state-owned property. 
 
The lease of other forms of property is regulated by the provisions
of this Law, if nothing else is foreseen either by the legislation
of Ukraine or by lease agreement. 
 
Article 2. Lease 
 
A lease is based on an agreed upon fee for a set period of time
necessary for a lease holder to carry out entrepreneurial and other
activities. 
 
Article 3. The legislation on leasing property of state-owned 
enterprises and organizations 
 
The leasing of property of state-owned enterprises and
organizations are regulated by this Legislation and other
legislative acts of Ukraine. In special cases stipulated by such
acts, relations are regulated by either the resolutions of the
Cabinet of the Ministers of Ukraine or the State Property Fund of
Ukraine. 
 
Article 4. The asset suject of a lease 
 
1.According to this Law the asset subject of a lease is: 
 
-Integrated property systems of the state-owned enterprises,
organizations or their structural branches (affiliates, shops,
divisions), with the exception of those, which carry out their
activity according to the first part of Article 4 of the Law of the
Ukrainian SSR on "Entrepreneurship". The integrated property system
is an economic facility providing a complete cycle of production
(works, services); 
 -separate, individually specified property of the state-owned
enterprises, organizations. 
 
2. The list of the state-owned enterprises and organizations whose
property systems may not be leased may be expanded by legislative
acts of Ukraine. 
 
Article 5. Lessors 
 
Lessors include: 
 
-The State Property Fund of Ukraine as far as integrated property
systems, enterprises, organizations and structural branches are
completely owned by the state; 

-the bodies empowered by the Supreme Soviet of the Republic of
Crimea or by the local Soviets of People's Deputies to manage the
property, which is correspondingly owned by the Republic of Crimea
or by its municipal bodies; 
 
-the state enterprises, organizations (with the permission of the
lessors specified in the second and third paragraph of this
Article) - as far as integrated property systems and their
structural branches (affiliates, shops, divisions) are concerned; 
 
-the state enterprises, organizations as to separate, individually
and identified property as set out in the legislative acts of
Ukraine and their statutes. 
 
Article 6. Lessees 
 
1. According to this Law the organizations of lessees, may be
formed by the members of a working collective of a state
enterprise, organization or structural branch; citizens and legal
entities of Ukraine, foreign states, international organizations
and individuals without citizenship can act as lessees. 
 
2. The particular features of a leasehold of the state-owned
property to citizens and legal entities of foreign states or
individuals without citizenship are set by the legislation of
Ukraine. 
 
Article 7. Initiative in concluding a lease agreement 
 
The conclusion of a lease agreement is initiated by the members of
working collective of enterprise, organization or their structural
branches; individuals and legal entities. 
 
If concluding a lease agreement is initiated by the physical or
legal entities the lessor must explain to the working collective
within three days what the lease of the integrated property system
of the state-owned enterprise or organization entails. 
 
Article 8. The right of the working collective to decide on the
matter  of the lease of the property of the state-owned enterprise, 
organization. 
 
The decision of the working collective of the state-owned
enterprise, organization on the matter of lease of the property of
the state-owned enterprise, organization is considered to be
adopted by a majority vote of the working collective. 
 
Article 9. Lessees organization 
 
1. In the case that the decision on concluding lease agreement is
adopted by the members of the working collective the individuals,
who wish to become lessees form an association of lessees. 
 
2. The general meeting or the meeting of the representatives of the
association of lessees elects its managing bodies and approves the
regulations of the association of lessees, which have to be
registered by the state in the executive committee of the Soviet of
People's Deputies or in the local administration of the state
according to the location of the object of the lease. 
 
3. Before the registration of the regulations of the association of
the lessees in the executive committee of the Soviet of People's
Deputies or local administration of the state every member of the
working collective of the enterprise or organization has the right
to enter the association of the lessees according to personal
application. 
 
4. The association of the lessees should be registered within
thirty days by the executive committee of the Soviet of People's
Deputies or local administration of the state starting from the day
the application for the registration was submitted with presence of
advanced consent of the lessor about concluding the lease
agreement. 
 
5. The association of lessees are granted the right of a legal
entity from the day of its registration by the state. 
 
The payment for the state registration of the association of the
lessees should not exceed the minimal salary. 
 
6. The association of lessees formed by the working collective has
a right of preference over other individuals and legal entities
with respect to concluding a lease agreement of the property of the
state-owned enterprise, organization, where the association is
formed. 
 
7. The following is indicated in the regulations of the association
of the lessees contain the following: the location of the
association, objectives of its activity, conditions of joining and
leaving the association, rights and obligations of the members of
the association, its bodies of management, order of distribution of
income (profit), conditions of termination of the activity of the
lease association. 
 
Article 10. The order of consideration of application and draft of 
agreement of the lease 
 
1. The association of lessees, other physical and legal entities,
who wish to conclude an agreement of the lease of a property of
state-owned enterprises or organizations, submit an application and
a draft of agreement to lease to the appropriate lessor, specified
in Article 5 of this Law. 
 
2. The body, to which was submitted the application and the draft
of agreement of lease, must consider it and provide its response
within the period of thirty days. 
 
3. Where the association of lessees do not make an application for
an agreement to lease the property of the state-owned enterprises
and organizations, other individuals or legal entities may conclude
an agreement to lease the state-owned property provided such an
application is formed by the working collective of the said
enterprise or organization within a period of twenty days of the
date of the declaration of intent to lease the integrated property
system. 

4. In case of obtaining an improper refusal to conclude the
agreement or no response within the determined period, the
association of the lessees, interested individuals or legal
entities have the right to apply to the court or to the arbitration
tribunal to protect their interests. 
 
5. Any of the interested parties have the right to apply to the
court or the arbitration tribunal in case of failing to reach
agreement as far as content of the agreement of lease is concerned.

 
Article 11. Essential conditions of the agreement of lease 
 
1. The essential conditions of the agreement of the lease are as
follows: the object of the lease (structure and value of the
property), the duration of the lease, rent, use of depreciation,
deductions, renovation of leased property and conditions of its
returning, fulfillment of commitments. 

2. Upon the mutual consent of the sides other conditions of the
lease can be included into the agreement. 

3. The conditions of the agreement of lease are valid for the whole
period of the agreement and in cases which the legislation sets up
the regulations, after the agreement is concluded (brought into
conformity with this Law), which will worsen the conditions of
lessee. 
 
4. Reorganization of the lessor can not be a reason for changing of
the conditions or breaking of the agreement. 
 
5. In case of failure to fulfill or improper fulfillment of the
terms of the agreement of the lease the parties bare responsibility
therefore according to the legislation of Ukraine and the agreement
of lease. 
 
Article 12. Moment of concluding the agreement to lease 
 
1. The agreement of the lease is considered concluded from the
mutual consent as to all the substantial conditions are reached and
the text of the agreement is signed by all the sides. 
 
2. In case a dispute with respect to the agreement is submitted to
the court or arbitration tribunal for resolution, the agreement is
considered concluded from the moment the decision of the court or
arbitration tribunal along with its conditions are released. 

Article 13. Granting of the lease 
 
Granting the lease to the lessee is done within the terms and under
the conditions specified in the agreement of lease. 
 
Article 14. Evaluation of the asset subject of the lease 
 
The evaluation of the asset suject of the lease is performed
according to the appropriate value and according to the methods
approved by the Cabinet of the Ministers of Ukraine and the Fund of
the state property of Ukraine. 
  
Article 15. The right of the lessee for the option of
organizational and legal forms of carrying out of entrepreneurial 
activity 
 
1. The lessee is free to chose the organizational form of
entrepreneurial activity to take place on the leased property, to
approve its statute and to appoint (to elect) the manager. The
statute may not contradict the agreement of lease. 
 
2. The procedure of forming an enterprise, economic association
etc. and their activity is regulated by the appropriate legislative
acts of Ukraine. 
 
Article 16. Termination of the activity of the enterprise,
organization whose property has been leased 
 
The activity of the enterprise, organization, structural division
of the enterprise, which integrated property system has been
leased, is terminated as the activity of state-owned enterprise
from the moment 
judged as appropriate, according to the law, registration of the
statute of the formed by the lessees association, economic society
etc.. From this moment all the contracts with the workers of the
enterprise, organization, structural division are terminated. 
 
Article 17. Legal succession under lease 
 
1. The enterprise, economic association etc. formed by the lessees
becomes the legal successor of the right and responsibilities of
the state-owned enterprise, organization according to the lease
agreement. 
 
2. In case the integrated property system is the object of the
structural division, the enterprise, economic association formed by
the lessees becomes the legal successor of the rights and
responsibilities of the state-owned enterprise, organization
connected with the activity of this structural division. 
 
Article 18. Guarantee of rights for employees of the state
enterprises  and organizations, which ceased their activities 

The procedure for hiring employees of an enterprise by a
leaseholder or an association of lessees etc. is determined by
legislation. 
 
The employees of state enterprises, organizations, structural
subdivisions, which ceased their activities in accordance with
Article 16 of this Law and with whom no contracts have been signed,
are granted social-legal guarantees foreseen by the legislation of
Ukraine. 
 
Article 19. Term of lease agreement 
 
Term of agreement of lease is defined by mutual consent of sides. 
 
2. In case of absence of an application by one of the parties to
break or change of the agreement after its termination it
considered to be prolonged for the same term and on the same
conditions as stipulated by agreement. 

3. A lessee has generally has a primary right to prolong the term
of the lease. 
 
Article 20. Responsibilities of a lessee. 
 
1. According to lease agreement a lessee can be obliged to use the
object of leasing goal-oriented according to specification of
productive activity of an enterprise, organization, which property
was subject to lease. 
 
2. A lessee must take care of lease property according to terms and
conditions of agreement, preventing it from being damaged. 
 
3. A lessee must pay on the due date the entire rent. 
 
4. A lessee fulfills accounting of the results of his activities,
conducts statistical reporting and gives it in established volume
to the state organs dealing with statistics. 
 
Article 21. Rental 
 
1. Rent is defined as a fixed to be paid by the lessee to the
lessor regardless of results of economic activity, the rent is
determined as a part of payment from the profit gained by economic
use of leased assets. 
 
Rent is added to the special accounts and is used to finance
capital investments. 
 
2. The ways of calculating rent and the procedure of applying rent
are determined by the Cabinet of Ministers of Ukraine and the Fund
of State Property of Ukraine. 
 
3. The terms of calculating the rent are agreed to in the contract.

 
4. The lessors of non-profitable or of low efficiency state
enterprises, organizations can grant benefits with regards to rent
for the lessees of these enterprises, organizations. 
 
Article 22. The forms of rental 

Rent as a rule is paid in money. Depending on the peculiarities of
production activity of the lessee, the rent, according to agreement
of the sides can be paid in natural or money-natural forms. 
 
Article 23. Change in the amount of rent 
 
1. The amount of rent may be changed with the agreement of both
parties. 
 
2. The amount of rental may be changed by claim of a side in case
of change of prices and tariffs or in other cases stipulated by
legislative acts of Ukraine.  

3. The lessee has the right to claim appropriate reduction of rent
if due to the circumstances he is not responsible for change in the
conditions of economic activity stipulated by the contract or 
considerable deterioration has been caused to the asset subject of
the lease. 
 
4. Disagreements over these matters are settled by the designated
procedure. 

Article 24. Sublease 
 
1. The sublease of integrated property systems is not allowed. 
 
2. The lessor may grant sublease for the separate workshops,
equipment, means of transportation, non-residential premises etc.
, if nothing else is stipulated by the contract of lease. 
 
Article 25. The right of ownership of the lessee 
 
1. Granting of a lease for the property does not eliminate the
right of ownership for this property. Under transfer of the right
of ownership from the state to other persons the contract of lease
is valid for a new owner as well. 
 
2. According to the law of Ukraine "On ownership" an association of
lessees (lessee) has the right of ownership for the manufactured by
the leased property production, other property acquired by the
formed association (lessee) etc. , as well as for the income
(profit) acquired by the lessee. 
 
3. Amortization deductions remain with the lessee and are used for
the restoration of the main leased assets. 
 
The owner of the leased property possesses the right of ownership
for the acquired by the lessee at the expenses of amortization
deductions property if nothing else is stipulated by the contract
of lease. 
 
Article 26. The risk of accidental destruction or damage of the
assets  subject of the lease 
 
The lessor bears the risk of accidental destruction or damage of
the object of lease if nothing else is stipulated by the contract
of lease. 
 
Article 27. The right of complete management of the formed by the 
lessee enterprise, association 
 
The enterprise, association, etc. formed by the lessee is granted
the right of complete management over the leased property (within
the limits determined by the statute of the enterprise,
association), the manufactured products, other property acquired as
the result of economic activity or by other reasons not forbidden
by the law. 

Article 28. The right of redemption of the asset subject of the
lease 
 
1. The lessee has the right to redeem the object of lease in case
it is stipulated by the contract according to the legislation of
Ukraine. 
 
2. The organization of lessees (lessee) has the right to conclude
the contract with the condition of redemption of leased property
not later than three years from the date of the contract of lease
is concluded (brought into conformity with this law), if the
legislative acts of Ukraine allow to privatize the leased property
and it does not contradict the State program of privatization. 
 
The price for the leased property with further redemption, which
will be privatized is based on Article 20 of the law of Ukraine "On
privatization of the assets of state-owned enterprises" and is
included into the contract of lease. 
 
3. The conditions of the redemption (price, procedure, period and
means of payment) are determined in the contract of lease according
to legislative acts of Ukraine on privatization. 
 
4. The lessee has the right to turn down the stipulated right of
redemption in the contract. 

Article 29. Termination of the contract of lease 
 
1. The unilateral refusal of the contract of lease is unacceptable.

 
2. The contract of lease is terminated under following conditions: 
 
 - expiration of the period the contract was concluded; 
 
 - redemption of the object of lease; 
 
 - destruction of the object of lease. 
 
3. The contract of lease may be broken off by the mutual consent of
both sides. By the claim of one side the contract of lease may be
broken off before the date of termination by a decision the court
of law, arbitration tribunal in case of failure of one of the sides
to fulfill their responsibilities or other reasons stipulated by
the legislative acts of Ukraine. 
 
Article 30. Legal consequences of termination of the contract of 
lease 
 
1. In case the braking off the contract of lease, expiration of the
period of force of the contract and refusal to prolong it the
lessee must return to the lessor the asset subject of the lease on
the conditions specified in the contract of lease. 
 
2. If the lessee improved with lessor's consent the leased property
at the expense of own money the lessor must reimburse him the
expense if nothing else is stipulated by the contract of lease. 
 
3. In case the lessee improved the leased property without the
knowledge of the lessor, the lessor can reimburse the expenses of
the lessee. If the lessor refuses to reimburse the expenses the
lessee has the right to appropriate any improvements, which can be
separated from the leased property without any detriment to it. 
 
The value of the improvements of the leased property performed by
the lessee without knowledge of the lessor, which can not be
separated 
without any detriment to the property is not subject to
reimbursement. 
 
Article 31. Protection of the right of the lessee for the leased
property 

1. The lessee is provided with protection of his right for the
property acquired according to the contract of lease, which is
equal to the protection of the right of ownership stipulated by the
civil legislation. 
 
2. The lessee can claim for return of leased property from any
illegal owner, removal of obstacles used by him/her, compensation
for damage caused by citizens and legal persons including the
lessor. 
 
Article 32. Responsibility of the sides for failure to fulfil the
commitments according the contract of lease 
 
The sides bear responsibility for failure to fulfil the commitments
according to the contract of lease, including unilateral change or
breaking of the contract as stipulated by the legislative acts of
Ukraine and the contract. 
 
Article 33. Responsibility of the lessee in case of bankruptcy of
the formed by him enterprise, association 
 
In case of bankruptcy of the lessee leasing enterprise, association 
formed by him enterprise, association 
 
In case of bankruptcy of the lessee leasing enterprise, association
etc. the lessee bears responsibility for the debts of the
enterprise, association by the property which he owns according to
the rights of ownership as stipulated by Article 25 of this Law, in
accordance with the legislation of Ukraine. 
 
 President of Ukraine L. Kravchuk 
 Kiev, April 10 1992 
# 2269 - XII 
 
 




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