Insolvency Law at Ukraine
In Ukraine, insolvency law governs the legal processes applicable when individuals or businesses cannot meet their debt obligations. The system focuses primarily on corporate insolvency, with limited application to individual bankruptcy. Ukraine has reformed its insolvency framework in recent years to align more closely with European Union standards, increase efficiency, and reduce corruption.
📜 Key Legislation:
Code of Ukraine on Bankruptcy Procedures (2019)
This is the principal piece of legislation governing insolvency in Ukraine. It replaced the earlier Law on Restoring Debtor's Solvency or Declaring it Bankrupt and introduced significant reforms to:
Streamline bankruptcy procedures
Strengthen creditor rights
Improve the prospects for business recovery and asset value maximization
🏢 Corporate Insolvency Procedures in Ukraine:
There are four main stages in corporate insolvency:
Pre-trial Restructuring (voluntary settlement)
A debtor and creditors may agree on a restructuring plan before initiating formal bankruptcy proceedings.
Initiation of Bankruptcy Proceedings
Creditors or the debtor may file a petition with the Commercial Court to open a case.
The court examines whether there is enough evidence of insolvency.
Asset Management (Moratorium and Supervision)
Once proceedings start, a moratorium on debt enforcement begins.
A provisional insolvency trustee is appointed to analyze the debtor's condition and oversee operations.
Rehabilitation or Liquidation
Rehabilitation: A plan is developed to restore solvency (restructure debts, reorganize business).
Liquidation: If recovery is not feasible, the company is liquidated, and assets are sold to pay creditors.
🧑💼 Individual Bankruptcy:
Since 2019, individuals (natural persons) can declare bankruptcy under specific conditions (e.g., debt exceeding 30 minimum wages).
This process allows for debt restructuring or a full discharge after liquidation of assets.
It's overseen by the Economic Court and handled similarly to corporate cases, with appointed insolvency practitioners.
👥 Roles of Key Players:
Arbitration Manager: Licensed professional who may act as administrator, restructuring manager, or liquidator.
Commercial Court: Has exclusive jurisdiction over insolvency matters.
Creditors’ Committee: Formed by major creditors to make key decisions during the process.
💡 Key Principles:
Creditor Protection: Creditors have substantial control over proceedings, especially through the creditors’ committee.
Priority of Claims: Secured creditors are paid before unsecured ones, followed by tax authorities and shareholders.
Business Rescue Focus: The law aims to preserve viable businesses through restructuring where possible.
🧱 Challenges and Reforms:
Corruption and delays in court processes have historically undermined insolvency proceedings.
Inconsistent enforcement of creditor rights and asset recovery has improved but remains a challenge.
Ongoing reforms aim to digitize procedures, strengthen the role of insolvency trustees, and improve judicial transparency.
🌍 International Alignment:
Ukraine’s insolvency regime is moving toward alignment with EU Directive 2019/1023 on restructuring and insolvency.
These reforms are especially important in the context of economic instability and wartime damage from Russia’s invasion, which has increased financial distress across sectors.
Summary:
Ukraine's insolvency law is governed by the 2019 Bankruptcy Code, which modernizes and streamlines procedures for both corporate and personal insolvency. While the legal framework is relatively robust and aligned with European practices, practical implementation still faces challenges due to systemic inefficiencies and ongoing economic disruption.
RELATED Blog
0 comments