On 17 October 2020 the coronavirus amendments1 came into effect after being signed by the President of Ukraine. The amendments temporarily change the Code on Bankruptcy Proceedings to protect Ukrainian businesses and mitigate the impact of the COVID-19 pandemic.
With effect from 17 October 2020, throughout the quarantine period and 90 days thereafter, the following changes will apply to the bankruptcy process:
- Creditors are restricted from commencing bankruptcy proceedings against corporates under their applications filed for claims arising after 12 March 2020.
- The deadline (a one-month period) for debtors to file for bankruptcy petition with a court will be extended. However, a debtor must prove that their failure to comply with the original statutory period was caused by the COVID-19 outbreak.
- Creditors' committees and secured creditors are entitled to suspend sale auctions in respect of the debtors' property. To that end, creditors who have voted for such suspension will incur all expenses related to maintenance and storage of the debtor's property, as well as risk of its loss.
- No interest shall be accrued on the debtor's liabilities that have been restructured under the rehabilitation plan and no penalties for non-performance of such debtor's liabilities shall be charged. The overdue liabilities under the rehabilitation plan shall be subject to deferred payment for the whole term of such plan.
In addition, with effect from 17 October 2020 and during the quarantine period only:
- creditors' meetings and creditors' committees can be held remotely either by videoconference or by a poll (subject to proper identification and verification of the powers of the creditors' representatives). A record of the videoconference and all creditors' decisions taken by a poll must be attached to the minutes of such meeting;
- insolvency practitioners will be relieved from liability for a failure to perform their obligations, provided that such performance was impossible due to the quarantine measures in place and the creditors' committee and secured creditors were duly notified; and
- the procedural periods of a bankruptcy procedure will be extended (including term of the preliminary court hearing, review period for clawback of antecedent transactions, moratorium protection, announcements on electronic auctions, implementation of the rehabilitation plan, assets administration and liquidation procedures).
The protracted quarantine placed a huge burden on many businesses which continue to face difficulties with their payment obligations. These new measures should provide debtors that have been affected by COVID-19 temporary relief from immediate legal actions by creditors for their inability to perform obligations.
At the same time, it is important to ensure the balance in protection of the distressed debtors and rights of creditors.