Bankruptcy of a legal entity
Is there a corporate bankruptcy law?
There is no separate law on the bankruptcy of a legal entity. The bankruptcy procedure of a legal entity is regulated by the Bankruptcy Code of Ukraine.
Pre-trial rehabilitation of a legal entity
What is the pre-trial reorganization of a legal entity?
Reorganization of the debtor before the commencement of bankruptcy proceedings is a system of measures to restore the debtor’s solvency, which can be carried out by the founder (participant, shareholder) of the debtor, the owner of the property (the body authorized to manage the property) of the debtor, other persons in order to prevent the bankruptcy of the debtor by taking organizational -economic, managerial, investment, technical, financial and economic, legal measures in accordance with the legislation before the commencement of bankruptcy proceedings.
Who can initiate the reorganization of a legal entity?
The debtor, by decision of the founders (participants, shareholders) of the debtor, has the right to initiate the rehabilitation procedure before the commencement of bankruptcy proceedings.
What is indicated in the rehabilitation plan?
– the size, procedure and terms of repayment of the claims of creditors participating in the resolution;
– measures for the implementation of the rehabilitation plan and supervision over the implementation of the rehabilitation plan;
– scope of powers of the reorganization manager.
What does the rehabilitation plan include?
– separation of creditors.
– conditions for satisfying creditors’ claims.
– the possibility of obtaining loans.
– requirements of the first and second stages of satisfaction of creditors’ claims are not included.
What does it take to approve a remediation plan?
The debtor calls a meeting of creditors (held no earlier than 10 days after the announcement of the meeting is posted on the official website of the judiciary), which must approve the resolution plan.
Separately, each creditor is notified in writing by the legal entity of the meeting.
If the remediation plan is approved, what to do next?
The debtor within five days submits an application to the economic court for the approval of the rehabilitation plan.
What is included in the remediation plan?
– rehabilitation plan.
– documents confirming the approval of the rehabilitation plan.
– a list of creditors.
How is the remediation manager elected?
The bailout manager is elected at the general meeting of creditors whose claims in aggregate amount to more than 50 percent of the total amount of claims included in the bailout plan.
Why can the court refuse to approve the rehabilitation plan?
– When approving the rehabilitation plan, violations of the law were committed.
– a creditor who did not vote will prove that his claims would have been satisfied in a larger amount than according to the rehabilitation plan.
– the debtor provided false information.
Who is a bankruptcy commissioner?
An arbitration manager (property manager, reorganization manager, liquidator) is a citizen of Ukraine who has a higher legal or economic education of the second (master’s) level, general work experience in the specialty of at least three years or at least one year after receiving the relevant higher education in leadership positions , completed training and internship for six months in accordance with the procedure established by the state bankruptcy authority, who speaks the state language and passed the qualification exam.
A person cannot be an arbitration manager:
– recognized by the court as limited in civil capacity or incapacitated.
– who has a conviction that has not been removed or canceled in accordance with the procedure established by law.
– who is not able to fulfill the duties of an arbitration manager for health reasons.
– which is prohibited from holding leadership positions.
The bankruptcy administrator has a certificate and seal, the description and procedure for use of which shall be established by the state body for bankruptcy.
Opening bankruptcy proceedings of a legal entity
How are bankruptcy proceedings opened?
To start production, you need to submit an application to the economic court.
An application for the commencement of bankruptcy proceedings shall be submitted by a creditor or a debtor.
What is attached to the creditor’s petition to initiate bankruptcy proceedings?
– evidence of the payment of the court fee.
– evidence of advance payment of remuneration to the arbitration manager.
– evidence of sending a copy of the application with attachments to the debtor.
– evidence confirming the existence of creditor claims.
What are the terms for the debtor’s appeal?
1 (one) month.
What is attached to the debtor’s petition to open bankruptcy proceedings?
– evidence of the payment of the court fee.
– evidence of advance payment of remuneration to the arbitration manager.
– evidence of a threat of insolvency.
– constituent documents of the debtor – a legal entity.
– the balance sheet of the debtor as of the last reporting date.
– a list of creditors.
– a list of the debtor’s property.
– certificate of the presence / absence of property on the balance sheet.
– statements of all accounts.
– minutes of the general meeting of the debtor’s employees.
– the decision of the supreme governing body on filing a bankruptcy petition.
Is it possible to submit an application again if the court refused to open the proceedings?
Yes, the applicant can reapply.
What is noted in the decree on the opening of production?
– recognition of the creditor’s claims and their size.
– the introduction of a moratorium on the satisfaction of creditors’ claims.
– introduction of external management.
– taking measures to ensure creditors’ claims.
– the time period for the property manager to submit to the economic court information on the results of consideration of creditors’ claims (no more than 20 days after the preparatory court hearing).
– the date of the preliminary court session (no later than 70 days, in the case of a large number of creditors – no later than 3 months).
– the term of the inventory of the debtor’s property (no later than 2 months, in the case of a significant amount of property – no later than 3 months).
How are creditors identified and how do they find out about bankruptcy proceedings?
On the official web portal of the judicial authority of Ukraine, no later than the next day after the date of the court ruling on the opening of proceedings in the case, the court will publish a message on the opening of proceedings in the debtor’s case (official publication).
How are creditors’ claims secured?
The Economic Court has the right, at the request of the parties or participants in the case or on its own initiative, to take measures to secure the claims of creditors, namely:
– prohibit the debtor from making transactions without the consent of the receiver.
– oblige the debtor to transfer securities, property, other valuables for storage to third parties.
– commit or refrain from performing certain actions or take other measures to preserve the debtor’s property.
What is a moratorium on the satisfaction of creditor claims?
A moratorium on the satisfaction of creditors’ claims is the suspension of the debtor’s fulfillment of monetary obligations and obligations to pay taxes and fees (mandatory payments), the deadline for which came before the date of the moratorium, and the termination of measures aimed at ensuring the fulfillment of these obligations and obligations to pay taxes and fees (mandatory payments) applied before the day of the moratorium.
What are the advantages of a moratorium for debtors?
– collection on the basis of executive and other documents is prohibited.
– it is prohibited to fulfill the requirements to which the moratorium applies.
– no other financial sanctions are applied (forfeit, penalty, fine).
– the course of the limitation period is stopped for the period of the moratorium.
– the inflation index is not applied.
Does the moratorium apply to everything?
The moratorium does not apply to:
– claims of current creditors.
– payment of wages and insurance contributions accrued on these amounts for compulsory state pension and other social insurance.
– compensation for harm caused to the health and life of citizens.
– payment of royalties, alimony.
– requirements for executive documents of a non-property nature.
When does the moratorium end?
The moratorium is terminated from the date of termination of the bankruptcy proceedings.
Disposal of property
What is the disposal of property?
This is a system of measures for the supervision and control of the management and disposal of the debtor’s property in order to ensure the safety, efficient use of the debtor’s property assets, analyze his financial condition, and determine the next procedure (reorganization or liquidation).
How long does it take to dispose of the property?
Up to 170 days.
What is the property manager obliged to do?
– consider applications of creditors.
– keep a register of creditors’ claims.
– notify creditors of the results of consideration of their claims.
– take measures to protect the debtor’s property.
– to analyze financial and economic activities.
– to identify (if any) signs of fictitious bankruptcy, bringing to bankruptcy.
– to convene a meeting and a committee of creditors.
– to organize the holding of meetings and committees of creditors, their meetings.
– provide the economic court and the creditors’ committee with a report on its activities.
– to take an inventory of the debtor’s property and determine its value (no later than 2 months from the date of the opening of the bankruptcy proceedings)
– if possible, draw up a debtor’s recovery plan, submit it to the creditors’ committee for consideration.
When is the meeting of the creditors’ committee held?
Within 10 days from the date of the decision on the results of the previous session of the economic court
Who convenes the meeting of the creditors’ committee?
The property manager shall notify creditors in writing in accordance with the register of creditors’ claims, the authorized person of the debtor’s employees and the authorized person of the founders (participants, shareholders) of the debtor about the place and time of the meeting of creditors and organizes their holding.
What is the competence of the creditors’ meeting?
– determination of the quantitative composition and election of members of the creditors’ committee.
– early termination of powers of the creditors’ committee or its individual members.
– approval of the debtor’s recovery plan and approval of amendments to it.
– an appeal to the economic court with a petition to introduce the following procedure in a bankruptcy case.
– election of an insolvency manager in case of dismissal of an insolvency manager.
What is the competence of the creditors’ committee?
– election of the chairman of the committee.
– calling a meeting of creditors.
– appeal to the economic court with the requirement to recognize the debtor’s transactions (agreements) as invalid at any stage of the bankruptcy procedure.
– appeal to the economic court with a petition for the appointment of an insolvency manager, termination of the powers of the insolvency manager and the appointment of another insolvency manager.
– granting consent to the sale of the debtor’s property (except for property that is the subject of security).
– making proposals to the economic court regarding the extension or reduction of the term for the procedures for the disposal of the debtor’s property or the debtor’s rehabilitation.
What transactions can be invalidated?
Transactions made by the debtor after the commencement of bankruptcy proceedings or within three years preceding the commencement of bankruptcy proceedings.
Transactions that have caused damage to the debtor or creditors on the following grounds:
– the debtor has fulfilled property obligations ahead of time.
– the debtor assumed obligations which led to insolvency.
– the debtor alienated the property at prices lower than market prices.
– the debtor has assumed pledge obligations to ensure the fulfillment of monetary claims.
– the debtor alienated the property free of charge.
– the debtor has entered into an agreement with the interested party.
– the debtor has entered into a donation agreement.
When does the disposal of property end?
At the final session of the court in the procedure for disposing of the debtor’s property, a transition is made to the next judicial procedure (the procedure of rehabilitation, liquidation) or the proceedings are closed.
At this point, the creditors’ committee must approve the resolution plan and submit it to the court or petition the court to proceed to liquidation.
Debtor recovery procedure
What is a sanitation procedure?
This is a system of measures taken during bankruptcy proceedings in order to prevent the debtor from being declared bankrupt and liquidated, aimed at improving the financial and economic situation of the debtor.
Who is involved in the refurbishment?
Reorganization manager (bankruptcy manager).
What is the resolution manager entitled to?
– apply to the economic court.
– to dispose of the debtor’s property in accordance with the rehabilitation plan and subject to the restrictions established by law.
– to conclude civil, labor and other transactions (agreements) on behalf of the debtor.
– submit applications for the recognition of transactions (agreements) concluded by the debtor as invalid.
What are the responsibilities of the rehabilitation manager?
– to take over the property of the debtor.
– open a special account for reorganization and settlements with creditors.
– to ensure that the debtor maintains accounting records, statistical reports and financial statements.
– to carry out measures to collect receivables in favor of the debtor.
– to carry out measures to collect debts from persons who, in accordance with the law or contract, bear subsidiary or joint liability with the debtor.
– consider claims of bankruptcy creditors.
– to declare in the prescribed manner objections to the claims of bankruptcy creditors filed against the debtor.
– notify within the 10th term from the date of his appointment, the end of the rehabilitation plan, release from duties.
– notify the body authorized to manage state property about the implementation of the rehabilitation plan in relation to the debtor – a state enterprise or a business company, in the authorized capital of which the share of state ownership is 50 percent or more.
– provide the economic court, upon its request, with information on the implementation of the rehabilitation plan.
– for the period of reorganization, act as a representative of the party (owner) in the collective agreement.
– to report on a quarterly basis to the creditors’ committee and the court on the implementation of the rehabilitation plan.
What is indicated in the rehabilitation plan?
The resolution plan must indicate the size of each class of creditors that would be satisfied if the debtor’s liquidation procedure was introduced.
What measures are being taken to restore the debtor’s solvency?
– enterprise restructuring.
– conversion of production.
– the closure of unprofitable industries.
– deferral, installment plan or forgiveness of a debt or part of it.
– fulfillment of the debtor’s obligation by third parties.
– satisfaction of creditors’ claims in another way that does not contradict the Code.
– liquidation of receivables.
– restructuring of the debtor’s assets in accordance with the requirements of the law.
– sale of part of the debtor’s property.
– fulfillment of the obligations of the debtor by the owner of the debtor and his responsibility for failure to fulfill the obligations assumed.
– alienation of property and repayment of creditors’ claims by replacing assets.
– dismissal of the debtor’s employees who cannot be involved in the implementation of the rehabilitation plan.
– obtaining a loan to pay severance pay to the debtor’s employees are exempt according to the rehabilitation plan.
– obtaining loans and credits, purchasing goods on credit.
What is enterprise restructuring?
These are measures aimed at reorganizing the enterprise, which will contribute to the financial recovery of the enterprise and increase production efficiency.
Is it possible to sell all the debtor’s property in the rehabilitation procedure?
Yes, in order to restore the debtor’s solvency and satisfy the creditors’ claims, the rehabilitation plan may provide for the sale of all or part of the debtor’s property if it constitutes a single property complex or several single property complexes.
The amount received from the sale of the debtor’s property as a single property complex is included in the debtor’s property assets.
What should be included in the resolution manager’s report?
The resolution manager’s report must contain:
– information about the implementation of the rehabilitation plan.
– the debtor’s balance sheet as of the last reporting date.
– calculation of the debtor’s profits and losses.
– information on the availability of funds in the accounts of the debtor and on the status of settlement with creditors.
– information about the debtor’s receivables on the date of filing the report and about the debtor’s unrealized rights of claim.
– information about the state of the debtor’s accounts payable as of the date of the report submission.
Proofs of satisfaction of the bankruptcy creditors ‘claims in accordance with the register of creditors’ claims are attached to the report of the resolution manager.
When is the sanitation manager’s report submitted?
15 days before the end of the rehabilitation procedure.
When is the remediation manager’s report reviewed?
It is considered by the meeting of creditors no later than 10 days from the date of its receipt and no later than the end of the rehabilitation procedure (which is specified in the plan).
What to do when the term of the sanitation procedure has expired?
In the event of the expiry of the terms of the resolution procedure provided for by the resolution plan, and in the absence of a petition from the meeting of creditors to extend the terms of the resolution procedure in connection with the approval of the relevant amendments to the resolution plan, the economic court recognizes the debtor as bankrupt and opens the liquidation procedure.
Liquidation procedure of a legal entity
What are the consequences of declaring a debtor bankrupt?
The economic activity of the bankrupt ends with the end of the technological cycle for the manufacture of products and their sale.
Within 15 days from the date of the appointment of the liquidator, the relevant officials of the bankrupt are obliged to transfer the accounting and other documentation, seals and stamps, material and other values of the bankrupt to the liquidator.
If the officials did not hand over the documentation and seals?
In the event of failure to fulfill these obligations, the relevant bankruptcy officials shall be held liable in accordance with the law.
The liquidator has the right to order the production of duplicate seals and stamps in case of their loss.
What are the functions of the economic court in the liquidation procedure?
In the liquidation procedure, the economic court considers applications with the claims of the current creditors that were received by the economic court after the official publication of the announcement of the debtor’s bankruptcy.
What powers does the liquidator have?
– takes control of the debtor’s property, ensures its safety.
– carries out the functions of managing and disposing of the bankruptcy property.
– conducts an inventory and determines the initial value of the bankruptcy property.
– analyzes the financial condition of the bankrupt.
– exercises the powers of the head (management bodies) of the bankrupt.
– forms a liquidation mass.
– lodges claims against third parties for the return of accounts receivable to bankruptcy.
– has the right to receive a loan to pay severance pay to employees.
– declares, in the prescribed manner, objections to the claims of current creditors filed against the debtor for obligations arising during the bankruptcy proceedings.
– submits an application to the court for the recognition of the debtor’s contracts (transactions) as invalid.
– takes measures aimed at finding, identifying and returning the bankruptcy property held by third parties.
– sells the bankruptcy property to satisfy the claims included in the register of creditors’ claims.
– notifies the state body on bankruptcy issues about its appointment within ten days from the date of the decision by the economic court.
– provides the state registrar in electronic form through the portal of electronic services of legal entities, individuals – entrepreneurs and public formations of information.
– when the bankrupt is engaged in activities related to state secrets, takes measures to liquidate the regime secret body.
– maintains a register of creditors’ claims.
– takes actions to cancel the registration of the issue of shares provided for by law, if the organizational and legal form of the legal entity – bankrupt is a joint-stock company.
What is Liquidation Mass?
All types of property assets (property and property rights) of the bankrupt, belonging to him by right of ownership or economic management. Assets included in the mortgage coverage are not included in the bankruptcy estate.
What happens to the bankruptcy estate?
After taking an inventory and obtaining consent to sell the property, the liquidator sells the bankruptcy property at an auction.
The funds received at the auction are used to satisfy the claims of creditors.
What is the priority for satisfying creditors’ claims?
- First of all, the following are satisfied:
– claims for payment of wage arrears, monetary compensation for all unused vacations, severance pay, expenses related to bankruptcy proceedings in an economic court, creditors’ expenses for conducting an audit, if the audit was carried out by a decision of an economic court at their expense.
- Secondly, the following are satisfied:
– claims for obligations arising from harm to the life and health of citizens, including to the Social Insurance Fund of Ukraine for citizens.
- Thirdly, the following are satisfied:
– requirements for the payment of taxes and fees (mandatory payments).
- Fourthly, the claims of creditors not secured by a pledge are satisfied.
- Fifthly, the requirements for the return of contributions of members of the labor collective to the authorized capital of the enterprise are satisfied.
- Sixth, other requirements are satisfied.
If there is not enough money for everyone?
If the funds received from the sale of the bankruptcy estate are insufficient to fully satisfy all claims of one priority, the claims shall be satisfied in proportion to the amount of claims belonging to each creditor of one priority.
What happens after the creditors’ claims are satisfied?
After completing all settlements with creditors, the liquidator submits a report and a liquidation balance sheet to the economic court.
What is indicated in the liquidation balance sheet?
– information on the results of an inventory of the debtor’s property and a list of the liquidation estate.
– information on the sale of objects of the liquidation mass with reference to the concluded sales and purchase agreements.
– copies of documents confirming the alienation of the debtor’s assets in the liquidation procedure.
– register of creditors ‘claims with data on the amount of settled creditors’ claims.
– documents confirming the repayment of creditors’ claims.
– a certificate from an archival institution on the acceptance of documents that, according to the law, are subject to long-term storage.
What happens if the debtor’s property was enough to satisfy all the creditors’ claims?
If the property of a bankrupt legal entity was sufficient to satisfy the claims of creditors in full, it is considered to be out of debt and can continue its business.
When does bankruptcy closure occur?
the economic court shall terminate the bankruptcy proceedings if:
– the debtor – a legal entity is not included in the Unified State Register of Legal Entities, Individuals – Entrepreneurs and Public Organizations.
– a legal entity that is a debtor has been terminated in accordance with the procedure established by law, about which there is a corresponding entry in the Unified State Register of Legal Entities, Individuals – Entrepreneurs and Public Organizations.
– in the proceedings of the economic court there is a bankruptcy case of the same debtor.
– the debtor’s solvency has been restored or all creditors ‘claims have been settled in accordance with the register of creditors’ claims.
– the report of the reorganization manager or liquidator was approved in the manner prescribed by the Code.
– no claims have been made against the debtor after the official announcement of the commencement of bankruptcy proceedings.
– the case is not subject to consideration in the economic courts of Ukraine.
– the economic court established the signs of the debtor’s insolvency.
What is a bankruptcy company or firm for?
A bankruptcy company (firm) is needed to provide qualified assistance to a debtor or creditor in bankruptcy.
Also, the bankruptcy company (firm) can guarantee the maintenance of the bankruptcy procedure of a legal entity without abuse of procedural legislation by other participants, and in the presence of such abuses – on behalf of the client, carry out an appropriate response.