| Zaiets O.M., Candidate of Law, Chief Research Fellow in the field of jurisprudence at IPE LLC, https://orcid.org/0000-0002-4426-5241 |
The use of derivative (forward) instruments is regulated by the legislation of Ukraine and is an integral part of the life of a modern person, since the acquisition, holding and sale of material assets are always associated with certain risks that may arise due to the economic situation (price fluctuations), political conditions, exchange rates and other factors. These instruments serve to minimize such risks by one’s own efforts or transfer them to another professional party. One of such mechanisms is hedging, the essence of which is to perform a transaction that allows a participant in the transaction to protect themselves from the risks of changes in the price of an asset.
Business entities have the right, in accordance with the legislation of Ukraine, namely: the Law of Ukraine “On Capital Markets and Organized Commodity Markets”, the Decision of the National Securities and Stock Market Commission dated 29.07.2021 No. 585, to choose different construction investment schemes and different methods (mechanisms) of selling property rights (tangible assets). Thus, a business entity has the legally established right to use such a financial instrument as concluding derivative (forward) contracts, the underlying asset of which are property rights in the Construction Facility.
The derivative contract is a forward within the meaning of the Law of Ukraine “On Capital Markets and Organized Commodity Markets”; by the type of underlying asset and the presence of an obligation to transfer the underlying asset – it is another mixed derivative contract, which provides for the possibility, at the will of one of the parties, to replace the obligation to transfer the underlying asset with an obligation to make settlements.
The process of transferring property rights to an apartment in a newly built Residential Complex from the CUSTOMER to the CITIZEN will be considered to have been carried out in accordance with the legislation of Ukraine using derivative (forward) instruments and a clear sequence of actions by the participants in this process, in compliance with the following sequence: (1) General Agreement concluded between the CUSTOMER and the INVESTMENT FIRM; (2) Derivative Contract concluded between the CUSTOMER (Issuer/Seller) and the ASSET MANAGEMENT COMPANY (Buyer); (3) Agency Agreement concluded between the AGENT and the CITIZEN (Principal); (4) Financial Instrument Purchase and Sale Agreement concluded between the ASSET MANAGEMENT COMPANY (Seller) and the CITIZEN (Buyer); (5) Payment order for payment under the Agreement for the purchase and sale of a financial instrument, payer: CITIZEN; (6) Agreement for the purchase and sale of property rights, concluded between the CUSTOMER (Seller) and the CITIZEN (Buyer); (7) Payment order for payment under the Agreement for the purchase and sale of property rights, payer: CITIZEN.
During the validity of the process of transferring property rights to an apartment in a newly built Residential Complex, there is no change in the price (value) of the apartment. This explains the advantage of buying and selling an apartment in a new building through the mechanism of forward contracts, in which the sale of the right to purchase property rights to the apartment in the future or the apartment itself takes place at a certain fixed price, which the developer forms independently and fixes it in the mechanism of forward contracts.
