On 22 September 2011, the Parliament of Ukraine adopted the Law of Ukraine No. 3795-VI “On Amendments to Several Legislative Acts of Ukraine regarding the Regulation of Legal Relations between Creditors and Receivers of Financial Services” (the “Law”). The Law, among other changes, introduced amendments to the Law of Ukraine “On Restoring Debtor’s Solvency or Recognising it Bankrupt”, No. 2343-XII, dated 14 May 1992, as amended (the “Bankruptcy Law”).

During recent years, Ukrainian court practice has developed in such a way that secured creditors in bankruptcy proceedings (i.e. creditors whose claims were secured by pledges/mortgages over the debtor’s assets) were deemed not to belong to either the debtor’s pre-bankruptcy creditors (konkursni kredytory) or its current creditors (potochni kredytory). Secured creditors were instead recognised as privileged in the sense that, regardless of whether they filed their claims to the debtor, their claims were, by default, to be included by the bankruptcy administrator in the register of creditors’ claims with first ranking priority (in accordance with the debtor’s records)*.

Amendments to the Bankruptcy Law have changed the definition of “konkursni kredytory” by extending it to include secured creditors. Although such amendments are likely to have certain positive impacts, there are also negative consequences for secured creditors: they are now subject to the same claim filing requirements as other (unsecured) pre-bankruptcy creditors. This means that unless a creditor’s claim is submitted to the relevant Ukrainian commercial court within 30 days of the publication of a notice on initiation of bankruptcy proceedings in the official Ukrainian press, such claim is deemed to be discharged.

In light of the above, it is crucial that companies (secured creditors) with business interests in Ukraine monitor the official Ukrainian press.  To make this process easier, computer programs are now available that monitor the official press and provide updates on companies that have entered bankruptcy proceedings.  It is possible to place certain companies that have a particular importance “on watch”.

Law: Law of Ukraine No. 3795-VI “On Amendments to Several Legislative Acts of Ukraine regarding the Regulation of Legal Relations between Creditors and Receivers of Financial Services”, dated 22 September 2011.

* Resolution of the Supreme Court of Ukraine (Commercial Cases Chamber) No. Б-31/10-04/ Б31/01-04, dated 11 October 2005; Resolution of the High Commercial Court of Ukraine No.23/324-б, dated 10 September 2003; Resolution of the High Commercial Court of Ukraine No. 15/257Б, dated 21 May 2003.