* Setting up and registration with the state register of the pawnbrokers offices

As prescribed with the law of Ukraine, a pawn broker's shop is a financial institution the only activity of which is provision of financial loans at bearing interest at their own risk to individuals at the expense of own or raised funds, against the security of property, for a definite term, and also the associated pawn broker's shop’s services.

Household microlending via a pawn broker's shop network is performed only for consuming purposes. Though this type of lending is significantly more expensive than bank loans, the advantage of pawn broker's shops, however, is the speed and simplicity of loan provision. A pawn broker's shop gives loans to people faster than banks, besides, it accepts - as a security – a property which, as a rule, is not accepted by the bank institutions. Loan terms set by pawn broker's shops are the simplest across the financial market. Risks are relatively low, as pawn broker's shops give loans against the security of highly-liquid property.

The first stage of opening a pawn broker's shop is a state registration of a legal entity.

However, the legislation sets special requirements – as compared to any other financial institutions - to corporate form and name of a pawn broker's shop. A pawn broker's shop must be established as an unlimited company. Full name of the pawn broker's shop must contain a word combination ‘pawn broker's shop’.

The second stage is registration of a legal entity with the financial institution register.

To obtain a status of a financial institution, a legal entity intending to operate as a pawn broker's shop must comply with the legal requirements.

In particular, the following requirements are mandatory for establishment of a pawn broker’s shop:

• availability – as of the last day of the month preceding to application submission – of equity capital to the amount of not less than UAH 200 000;
• availability of premises (owned or leased) sized at least 5 sq.m. intended for provision of financial services and associated pawn broker's shop’s services, and of special storage place;
• availability of rules or provisions regulating the pawn broker's shop’s operation, and a template agreement on financial loan, approved as stipulated with the incorporation documents and legal requirements;
• availability of special technical equipment, accounting and recording system necessary for provision of financial services, which ensure proper and timely accounting of financial services and related financial and business transactions in accordance with the law (software, computer equipment, telecommunication means, Internet, e-mail);
• compliance of the pawn broker's shop’s head and chief accountant with the Professional Requirements to a Head and Chief Accountants of Financial Institutions.

A pawn broker's shop may provide financial and associated services to consumers. Financial services provided by a pawn broker's shop include:

• provision of financial loans at the expense of own funds;
• provision of financial loans at the expense of raised funds.

Activity related to financial loans provided at the expense of raised funds is subject to licensing.

Associated services rendered by a pawn broker's shop include:

• appraisal of pledged property in accordance with the applicable law and/or agreement terms;
• intermediary services related to insuring the pledged item based on an agency agreement concluded with an insurance company;
• sale of pledged property in accordance with the applicable law and/or agreement terms.

Further on, in the course of successful operation of a pawn broker’s shop there often arises a necessity to establish detached divisions – branches, other structural subdivisions of a financial company – which are located beyond the legal entity’s location and perform all or a part of financial services on its behalf. A pawn broker’s shop is entitled to provide financial services via its detached divisions only if relevant information on such detached divisions is entered to the register and if the pawn broker’s shop and its detached divisions comply with the legal requirements concerning operation on financial service markets related to provision of financial loans and associated pawn broker’s shop’s services.

KD CONSULTING law & consulting firm  firmwill provide a full range of service related to opening of a pawn broker’s shop: starting from establishment of a legal entity and its registration with the financial institutions register and ending with licensing and entering of information on detached divisions into the register. We provide consultancy and prepare a required package of documents fully complying with the legal requirements and regulations of the National Financial Service Commission.

Large experience of our specialists in establishment of various financial institutions and confidence in our legal position allow for avoiding risks of refusal and dismiss of your documents submitted.