Today Ukraine continues to reform its bankruptcy system, aimed at improving the business environment and increasing the country’s attractiveness for investment. Bankruptcy proceedings seem to be a major challenge for a creditor as it is usually a tedious and time consuming process. In order to speed it up and make it more efficient, the Bankruptcy Code of Ukraine was adopted in 2019 (hereinafter the “Code”). One of the objectives of the Code is to satisfy the claims of creditors. But it also aims to protect the rights of debtors. The main features of bankruptcy proceedings in Ukraine are as follows.
Bankruptcy of a legal person
Bankruptcy of a legal person can be initiated both by the creditor and by the debtor of the legal person itself. However, creditors can attach their claims and file a joint petition with the court.
Previously, only a creditor whose uncontested debts amounted to at least three hundred times the minimum wage could file a request to open bankruptcy proceedings. This put creditors with smaller claims at a disadvantage.
Today, this limitation has been lifted. The mere existence of a pecuniary claim against the debtor is sufficient to make a claim. In addition, the creditor does not need to attach any proof of collection of the amount of the debt from the debtor.
Upon request, however, the creditor incurs expenses such as court costs and an advance payment to the trustee in bankruptcy.
When bankruptcy proceedings start, the relevant information is published on the Ukrainian justice website, which is open and free. This gives all creditors the opportunity to learn about the relevant case and file their claims within 30 days of its publication.
At the same time, a moratorium on creditors’ claims is imposed. This means that the debtor’s monetary obligations, even those that were due before the moratorium, are suspended.
It should be noted that the bankruptcy proceedings of a legal person cannot be suspended, which has an undeniable impact on its duration. The Code provides a limited list of court judgments that can be appealed against. This obviously has a positive impact on the speed of procedures. Thus, “bad faith” debtors are deprived of the opportunity to unreasonably delay the process by filing unreasonable complaints.
Protection of creditors’ rights in the bankruptcy proceedings of a legal person
The Code provides for a number of legal mechanisms enabling creditors to actively participate in bankruptcy proceedings.
After the opening of the proceedings, the court may, at the request of the creditor, take measures to secure its claims, such as prohibiting the debtor from carrying out transactions without the consent of the commissioner-commissioner; and compel the debtor to transfer securities and property to third parties for safekeeping.
A precise auction procedure in the electronic trading system ensures transparency and reduces the risk of corruption. In order to satisfy as many creditors as possible, the Code provides that the first auction will take place without the possibility of an initial price reduction. Subsequent auctions can only be held with the option of an initial price reduction with the consent of the secured creditor or the creditors committee.
Unfortunately, the property administration procedure highlights cases where the debtor fails to take measures to preserve his property, obstructs the actions of the administrator of the property, undermines the rights and legal interests of the creditor. In such a case, the obligee has the right to request the court to terminate the powers of the principal or the management body of the obligor and to entrust the execution of his functions to the administrator of the property.
The creditor can also initiate the revocation of the curator if the latter fails or does not fulfill his duties or abuses his rights. In addition, once the creditors’ committee has filed a claim, the court can remove the liquidator for any reason.
In addition to the above options, in bankruptcy proceedings, a creditor may seek the annulment of a transaction in which the debtor, for example, has disposed of the property free of charge or donated it to a third party. price above market value. This applies not only to the debtor’s operations after the opening of bankruptcy proceedings, but also to the debtor’s operations during the three years preceding it.
Insolvency of an individual
The brand new legal provisions have been introduced to regulate the re-establishment of the individual’s solvency. This option allows a debtor in difficulty to initiate his own insolvency proceedings. The creditor is not allowed to make such a request.
The advantage of this procedure is that after the end of the procedure, the court decides to release the individual from his debts. However, this does not apply to compensation for injuries, damage to life health, alimony and other claims related to the individual.
Despite the positive developments, it is important to remember that the following limitations and consequences are imposed on the person declaring bankruptcy:
- lack of the right to initiate new bankruptcy proceedings within five years;
- the need to inform creditors of the bankruptcy in writing within the next five years;
- loss of an irreproachable corporate reputation for the next three years.
Thus, Ukrainian bankruptcy legislation aims not only to speed up proceedings in bankruptcy, but also to increase the effectiveness of the mechanisms for protecting companies in such cases. The Code provides for a number of measures enabling creditors to control bankruptcy proceedings. These innovations have taken this procedure to a new level of quality and transparency.