The Decision of the National Commission for Securities and the Stock Market (No. 950, dated 27 September 2016), effective since today, indicates that outstanding corporate debts accumulated by joint stock companies (JSCs) after the 2008 financial crisis, and in some cases aggravated by the ongoing economic situation in Ukraine, may be effectively restructured.

In essence, Decision No. 950 provides for a mechanism to allow a JSC to convert debt to equity by increasing its share capital. The newly issued shares of the JSC can be paid either by setting off the claims between the JSC and the creditor or by transferring the rights of claim under the loan agreement. In this respect, Decision No 950 amends the procedure for the increase (decrease) of share capital of JSCs approved by Commission Decision No. 822 of 14 May 2013.

Unsurprisingly, the debt-to equity conversion under the new rules cannot be made with respect to salary debts or overdue taxes or duties and does not apply to banks.

The Decision also modifies the procedure for the registration of share issues approved by Commission Decision No. 1073 of 31 July 2012, including by listing the documents that would be considered as valid proof that the new shares were paid in full.

Of note, the foreign currency control regulations of the National Bank of Ukraine also allow for the implementation of debt-to equity swaps, though careful structuring and consideration of various aspects of the transaction would be required to be fully compliant with them.