Ukranian Law on Financial Restructuring Adopted
Law of Ukraine "On Financial Restructuring", drafted to overcome the negative effects in financial sector, caused by the crisis in the economy of Ukraine, and for the purpose of Ukraine's obligations fulfilment towards international financial organizations came into force on October19, 2016. The law will be valid until October, 19 2019.
The Law provides for recovering of economic activity for debtors, who are in financial distress by means of restructuring their financial obligations and/or commercial activity. A familiar opportunity was implemented in Article 6 of the Law of Ukraine "On Restoring Debtor's Solvency or declaring it Bankrupt".
The Law, in particular, provides:
-- conditions for participation of the debtor and creditors in the procedure of financial restructuring as well as the participation of the Deposit Insurance Fund and state banks in such procedure;
-- basic principles of cooperation between the creditors in the process of financial restructuring;
-- debtor's obligation to provide information and to hold an inspection of its business activity;
-- conditions to the receipt of financing in the process of financial restructuring by the debtor.
The application features of the new Law are:
> restructuring is carried out without legal recourse by way of negotiations between the debtor, its affiliated parties and creditors involved;
> the debtor is exceptionally a legal entity with a debt to, at least one, financial institution, which is not related to the debtor and initiates the procedure of financial restructuring according to the Law. In this case, financial institution or public enterprise cannot be a debtor;
> a forfeit (fine, penalty) and other economic or financial sanctions (as opposed to the liability in bankruptcy) are included to financial obligation of the debtor;
> debtor has the right to enforce the law in case, if its activity is recognized to be perspective, that is, if the involved creditors have signed an agreement on restructuring. In addition, the report on financial and economic activity inspection confirms the prospects;
> the total duration of the procedure of financial restructuring should not exceed 180 days;
debtor is not entitled to apply for restructuring within 18 months after the beginning of the financial restructuring procedure, upon its preliminary statement, or after the initiation of financial rehabilitation of the debtor before proceedings commencement in the bankruptcy case;
> if the application for restructuring was submitted by several debtors who are related between each other and have at least one common creditor, a financial institution, the financial restructuring of such debtors can be performed in one procedure with written approval of involved creditors - financial institutions;
> signing of the Framework Agreement, which regulates the principles and basics of coordination between the financial institutions. By this, the Framework Agreement draft is developed and published by NBU and financial institutions are joined to it by a NBU notification;
> if several financial institutions are involved in the procedure, they have the right to establish a coordination committee. Other creditors have the right to establish a committee of creditors;
> if application for proceedings commencement in the bankruptcy case of the debtor was submitted to Commercial Court by the date of beginning of the procedure of financial restructuring, involved creditor or debtor have the right to apply for the court for suspension of bankruptcy procedure before the court made the decision on proceedings commencement in the bankruptcy case.
The Law provides for the establishment of Supervisory Board, which appoints and forms Registry, Arbitration Committee and approves the list of arbitrators.
AUTHOR: Igor Dykunskyy
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