The Law of Ukraine
On Restoring a Debtor's Solvency or Recognizing It Bankrupt
Date of Entry into Force:
July 1, 1992
The Law of Ukraine “On Restoring a Debtor's Solvency or Recognizing It Bankrupt” is stated in a new wording by the Law of Ukraine N 784-XIV of June 30, 1999.
The Law of Ukraine “On Restoring a Debtor's Solvency or Recognizing It Bankrupt”, hereinafter the Law, sets conditions and procedure of restoring solvency of a subject of entrepreneurial activity, recognizing it bankrupt and applying to it liquidation procedure.
State policy concerning bankruptcy prevention, as well as ensuring the conditions of procedures of debtor's solvency restoring or recognizing it bankrupt in relation to state enterprises shall be performed by the state body on bankruptcy issues.
Founders (participants) of a debtor - a legal entity, a property owner, central bodies of executive power, bodies of local self-government within the limits of their authorities shall take timely measures in order to prevent bankruptcy of enterprise-debtor and provide to it financial aid.
Bankruptcy cases are within the jurisdiction of commercial courts and shall be considered by them at debtor's location. Either a creditor or an enterprise itself may initiate bankruptcy case. In order to perform bankruptcy procedure or restore a debtor's solvency the court appoints the head of this organization - an arbitral supervisor who performs the respective duties (of property manager, sanation managers or liquidator). One of arbitral supervisor's main tasks are to manage enterprise-debtor and to determine the circle of creditors of the enterprise.
One of the efficient measures of restoring a debtor's solvency is sanation. Sanation is a system of measures directed at full recovery of a debtor's financial economic condition, as well as full or partial satisfaction of creditor's requirements by crediting, restructuring of enterprise, debts, capital and (or) change of a debtor's organizational legal and manufacturing structure. Term of sanation shall be 12 months. Pre-trial sanation of state enterprises shall be performed at the expense of funds of state enterprises and other sources of financing including the State Budget of Ukraine. The Law prohibits initiating bankruptcy procedure in relation to a special government enterprise.
The Creditors' committee shall be elected by the meeting of creditors. The Committee shall:
- prepare and conclude peaceful agreement on enterprise debts;
- apply to the commercial court for sanation procedure, recognize a debtor bankrupt and open liquidation procedure, give permission to conclusion by the arbitral supervisor of the debtor's significant deals or the deals concerning which there is there is their interest;
- perform other authorities.
The liquidation procedure shall be opened in case, if the commercial court adopts decision on recognizing a debtor bankrupt. Starting from this moment the enterprise shall be managed by the liquidator. Liquidation of the enterprise means that:
- a bankrupt's entrepreneurial activity ends by finishing a technological cycle on products manufacturing;
- term of all bankrupt's monetary obligations fulfillment and obligations concerning taxes and duties (obligatory payments) payment is considered as such that has come;
- counting forfeit (penalty, fine), interest and other economic sanctions on all types of a debtor's insolvency is stopped.
The liquidation procedure shall not exceed 12 months. The commercial court may prolong this term for six months.
After conducting inventory and debtor's property evaluation a liquidator starts sale of debtor's property at the open auction. The funds obtained from sale of debtor's property shall be directed at satisfaction of creditor's requirements. The Law provides for six queues of creditor's requirements satisfaction. Satisfaction of one queue requirements is possible only after full satisfaction of the requirements of the creditors of the previous queue.
The norms of the Law cover the questions referring to the peculiarities of bankruptcy procedure of city creating especially dangerous, agricultural and insurance enterprises, as well as professional participants of security market, subjects of entrepreneurial activity - a citizen, a country (farmer) economy and at absence of debtor-bankrupt.