As of 19 October 2020, the changes to the Bankruptcy Code of Ukraine became effective.
From 17 October 2020, and for the quarantine period, the following changes are introduced in the bankruptcy procedure:
- For the quarantine period and within 90 days from the date of cancellation of the quarantine:
- It shall be forbidden to commence bankruptcy proceedings under creditors’ applications for claims arisen from 12 March 2020;
- The term for debtor’s application for bankruptcy shall be extended;
- The auctions for the sale of the property could be suspended by the decision of the creditors’ committee (for the property that is a subject of collateral – by the decision of secured creditors);
- No interest or penalties shall be accrued on those liabilities, which are restructured by the rehabilitation plan;
- Overdue liabilities, provided for by the rehabilitation plan, shall be deferred for the term of such plan.
- The creditors’ meetings and the creditors’ committee can be held remotely via videoconference, as well as by survey (subject to duly identification);
- The insolvency officer shall be released from liability for failure to take actions in the bankruptcy procedure, if such actions cannot be taken in quarantine conditions (specific cases are not provided);
- A number of the procedural terms in the bankruptcy procedure shall be extended (in particular, holding a preliminary court hearing in the bankruptcy case, the moratorium on satisfaction of creditors’ claims).
On the one hand, the implemented changes are meant to establish additional guarantees for those debtors that may become insolvent as a result of quarantine restrictions. On the other hand, these changes may significantly limit the creditors’ rights with claims arisen until and after 12 March 2020. Moreover, the vagueness of the wording of the grounds for releasing the insolvency officer from liability creates opportunities for potential abuses.
From 19 October 2020 the following changes are introduced in the bankruptcy procedure:
- The creditor’s claims against the debtor must be proved by the court decision, which has entered into the legal force and is enforceable;
- Until the Unified Judicial Information and Telecommunication System starts operating, the court will appoint the bankruptcy administrator, nominated by the initiating creditor/debtor, when initiating the bankruptcy proceedings.
The necessity to prove the “indisputability” of the claims against the debtor in court, established by the new law, will complicate and delay the initiation of bankruptcy proceedings against the debtor.
Moreover, the appointment of the bankruptcy administrator nominated by the debtor may result in abusing procedural rights by the debtor.
Further news, law perspectives and other information can be viewed at Baker McKenzie’s Coronavirus Resource Center, which compiles key resources, legal alerts by jurisdiction and contacts in our offices who may provide any additional information.
This LEGAL ALERT is issued to inform Baker McKenzie clients and other interested parties of legal developments that may affect or otherwise be of interest to them. The comments above do not constitute legal or other advice and should not be regarded as a substitute for specific advice in individual cases.
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