Bankruptcy Code of Ukraine, passed by Parliament a year ago – October 18, 2018, comes into force on October 21. That is the reason why the Law “On Recovery of the Debtor’s Insolvency or Bankruptcy”, which has been regulating bankruptcy relations since 1992, is repealed.
There is no secret that the bankruptcy procedure in Ukraine was always long lasting and ineffective. That is why in the World Bank’s Doing Business 2019 rating in the category of “insolvency settlement” Ukraine occupies a critical 145th place out of 190 possible. This disappointing indicator means that the Bankruptcy Institute of Ukraine needs to be immediately reformed and improved. This is the Bankruptcy Code’s of Ukraine task, but we will see if it can cope with it. For now, we just propose to consider the main innovations of the code.
Change of the rules governing the initiation and duration of bankruptcy proceedings
Both a debtor and a creditor can initiate bankruptcy procedure of the legal entity. To do this, you must file a relevant application with its annexes to the Commercial Court, located on a legal entity’s area. At the same time, the new code significantly simplifies the requirements for initiating bankruptcy proceedings at the request of the creditor. Under the new rules, the minimum amount of debt of a legal entity to the creditor should not be 300 minimum wages (for today – 1 251 900 UAH). Moreover, it is irrelevant at all, as is the existence of a judgment on debt collection, on the basis of which enforcement proceedings are initiated. From now on, for a creditor to be able to initiate bankruptcy proceedings, only the presence of the debtor’s outstanding, recognized and uncontested obligations to the creditor is sufficient.
In addition, the duration of the bankruptcy procedure was reduced, primarily due to the fact that only certain types of court decisions are appealed in cassation, in particular, the resolution on the recognition of the debtor bankrupt and the opening of the liquidation procedure, as well as the decisions on:
- opening bankruptcy proceedings;
- the closure of bankruptcy proceedings;
- results of consideration of creditors’ claims.
At the same time, the debtor’s creditors are entitled to recover the property that is the subject of the mortgage agreement, outside of bankruptcy proceedings, if the issue of rehabilitation or transition to liquidation is not settled within 170 days. Thus, debtors lose the ability to delay the resolution of these issues deliberately.
The Code raises the minimum amount of an arbitration manager’s principal award and also stipulates the obligation of the debtor or creditor to prepay a reward to the arbitration manager for three months of work at the amount of 3 minimum wages (12 519,00 UAH), when initiate the bankruptcy proceedings.
The arbitration manager is selected by an automated selection system from the managers entered in the Unified Register of Arbitration Managers of Ukraine. Three candidates, selected on the principle of random selection, are invited to participate in the case. If neither of them has filed an application to participate in the case, the appointment of the arbitrator shall be at the discretion of the court. If several arbitration managers have filed an application, the court shall award the first one selected by the automated selection system.