Bankruptcy procedure adapted for martial law

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Bankruptcy procedure adapted for martial law

Law of Ukraine “On Amendments to the Bankruptcy Code of Ukraine on the Application of Bankruptcy Procedures during the Period of Martial Law” No. 3249-IX dated 13 July 2023 (“Law”) entered into force on 29 July 2023.

This Law aims to adapt specific bankruptcy issues to the realities of martial law. For the period of martial law and within six months from the date of its termination or cancellation, the Law:

  • allows the courts to extend procedural deadlines (particularly for preliminary hearings, applications for invalidation of transactions, a moratorium on satisfaction of creditors’ claims, the announcement of auctions, rehabilitation or restructuring, management of debtor’s property, liquidation proceedings, or repayment of debts)
  • restricts the possibility to initiate bankruptcy proceedings against debtors who have existing defence contracts or cannot satisfy creditors’ claims due to armed aggression
  • exempts the debtor’s management bodies from liability for late notification of the threat of insolvency if a debtor did not file an application due to armed aggression
  • allows to hold meetings and committees of creditors via video conference or survey
  • suspends accrual of interest and penalties on the debtor’s restructured obligations to creditors
  • establishes instalment plans for overdue obligations under the debtor’s rehabilitation plan or debt restructuring plan
  • exempts the insolvency officer from disciplinary liability for failure to perform actions and duties due to hostilities

The Law also introduces several permanent amendments to the Bankruptcy Code of Ukraine. Most notably, the Law entitles an insolvency officer to make requests to a wide range of entities and institutions, including banks and other financial organisations. The recipients of such requests must provide insolvency officer with the requested information, including the bank secrecy information.

The Law provides that a creditor whose assets are frozen due to economic or other sanctions may participate in a creditors’ meeting or committee only in an advisory capacity.

We will be happy to discuss these and other changes to the bankruptcy procedure to help you assess the impact of the Law on your projects.

Authors

ANNA VLASENKO

Managing Associate

avlasenko@avellum.com

Posted on July 31, 2023

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