We managed to close the bankruptcy proceedings in Ukraine within 2 weeks and save multimillion business
We were addressed by a Client (leading enterprise in the field of agriculture in Ukraine) with the following issue: in September of 2010 the Commercial court initiated bankruptcy case against our Client, set moratorium on creditors’ demands satisfaction and seized property of the enterprise.
The bankruptcy case initiation was caused by a mistake of in-house counsel of the company during his work with claims of creditors. After he had lost litigation related to 300 000 UAH debt he decided to cause delays in enforcement of the decision which provided grounds for bankruptcy proceedings initiation (the enforcement proceeding had been lasting for more than 3 months) and resulted in consequences described above.
The complexity of the situation was caused by the fact that if bankruptcy notice had been published, 4 banks would have demand repayment of credits (about 20 million USD) and a great many of other creditors would demand fulfillment of debt obligations too. This would destroy the business. This is exactly why it was so crucial to close bankruptcy proceedings and terminate a seizure within shortest term.
Legal complexity of the situation was caused by the fact that even in case of debt repayment the continuation of bankruptcy proceedings or its closure would depend on the commercial court. And Ukrainian judicial practice was not in favor of our Client. Article 1, 12 of the Law of Ukraine “On recovery of debtor’s solvency or recognition of him as bankrupt” and Recommendations of the Higher Commercial Court of Ukraine contain provisions that prohibit termination of bankruptcy proceedings in such cases and recognize such repayment of debt as unlawful because it violates rights and interests of other creditors and parties of the bankruptcy case (Subsection 1.2., 8.2. of Recommendations of the High Commercial Court of Ukraine Presidium dated 04.06.2004 number 04-5/1193).
While providing legal support of the case in commercial court of first instance attorneys of our firm managed to close bankruptcy proceeding in less than 2 weeks.
Our attorneys proved two key points:
- The fact that the debt had been paid (despite unwillingness of a creditor to provide such information to the court and the fact that obtainment of the information in a different way was practically impossible due to bank secrecy);
- That fulfillment of all debt related requirements of initiating creditor prior to publication of notice about initiation of bankruptcy proceeding in official printed media is a ground for closure of bankruptcy proceeding. Such right of a debtor is not directly stipulated in the law but such interpretation can be derived based on content of Art. 40 of the Law of Ukraine “On recovery of debtor’s solvency or recognition of him as bankrupt”
Position of our lawyers and commercial court of first instance was later upheld by the decisions of court of appeal and court of cassation. Threat of bankruptcy and loss of multimillion business has been eliminated.
Later the Client had signed agreement of external legal support of his activities in Ukraine with our firm and did not have any such stresses in future.