On 18 January 2013 the Law of Ukraine on Introducing Changes to the Law on Restoring Debtor Solvency or Declaring Bankruptcy (the “New Bankruptcy Law”) became effective. The new Bankruptcy Law introduces a number of important changes to the bankruptcy procedure in Ukraine.
Under New Bankruptcy Law, secured creditors will have better protection. The Law also changes the framework for starting and carrying out a bankruptcy procedure in the Ukrainian commercial courts. It further introduces changes to the out-of-court debtors’ rehabilitation procedure which may be followed before starting bankruptcy proceedings at a commercial court. Moreover, the New Bankruptcy Law introduces new rules on international cooperation in cross-border bankruptcy procedures.
A significant change concerns the previous restrictions on when unsecured creditors could join ongoing bankruptcy proceedings at a commercial court. Previously an unsecured creditor wishing to join proceedings had to file its claim within thirty days from the date of official publication of the start of proceedings. This period could not be extended, which meant that if an unsecured creditor missed the deadline, it could not join the proceedings regardless of the significance of its claims against the debtor. Now commercial courts handling bankruptcy cases will be obliged to accept the claim even if it was filed after the expiry of the thirty-day period. Such claims, however, may only be satisfied after those claims, that were timely filed by unsecured creditors have been considered.
In addition, the New Bankruptcy Law requires that if a creditor files a claim expressed in foreign currency, the value of the claim must be specified in Ukrainian hryvnias according to the National Bank of Ukraine’s official exchange rate on the date the claim is filed with the court.
The New Bankruptcy Law requires that an out-of-court debtors’ rehabilitation procedure be established and approved at a general creditors’ meeting. It should then be filed with the relevant commercial court for final approval. The term of the rehabilitation procedure may not exceed twelve months from the day the plan is approved by the commercial court. During this term, it is not possible to start bankruptcy proceedings.
Another significant change is that secured creditors are now protected even if they are excluded from the creditors’ committee. The debtor’s secured assets are isolated from the main asset pool and reserved for settling secured creditors’ claims. Secured creditors now also have the right to reject a reorganisation plan approved by the creditors’ committee and to withdraw from bankruptcy proceedings by having their claims settled by selling the pledged assets or by a direct purchase of the debt by other creditors.
Under the New Bankruptcy Law, official publication of the start of bankruptcy proceedings must be made on the official website of the High Commercial Court of Ukraine. However, this rule will come into effect only on 19 January 2014. At the moment publication can take place only in a number of state newspapers, which makes it more difficult for creditors to learn about the start of proceedings and file their claims against the debtor within the thirty-day period.
Overall, the New Bankruptcy Law provides for more comprehensive and progressive regulation of the bankruptcy procedure and the changes introduced by this law reflect current economic and legal developments.
Law: Law of Ukraine on Introducing Changes to the Law on Restoring Debtor Solvency or Declaring Bankruptcy No. 4212-VI dated 22 December 2011 available at: http://zakon1.rada.gov.ua/laws/show/4212-17 (in Ukrainian).