The Law’s key provisions are as follows:
- Enabling the use of a restructuring procedure by related debtors with no common creditors. This amends the previous position which required related borrowers to have at least one common creditor.
- Removing the need for merger clearance from the Anti-Monopoly Committee of Ukraine when a creditor receives title in assets or shares through a restructuring.
- Confirmation that a creditor’s claim survives if an out-of-court pledge or mortgage enforcement fails to generate sufficient proceeds.
- Clarifying that a creditor can assign its rights at any time in the course of the financial restructuring process to a third party.
The adoption of the Law follows the introduction by the Ukrainian parliament in 2016 of the Law “On Financial Restructuring” which sought to regulate the process of initiating a financial restructuring for distressed Ukrainian debtors. Since its inception, “On Financial Restructuring” has been used to restructure over UAH 30 billion worth of debt. Although it was originally set to expire in 2019, its application was extended to October 2022 by the passing of the Law.
The Law will further develop the legal framework created by “On Financial Restructuring” and in doing so simplifies the procedure available for out-of-court regulated workouts of Ukrainian debtors.
The National Bank of Ukraine welcomed the introduction of the Law and made clear its view that the next step for Ukrainian financial restructuring is to create a fully-functioning secondary market for distressed debt.
Authored by Tom Astle, Alex Kay and Jonathan Morris
With thanks to Anton Korobeynikov of Sayenko Kharenko for his contribution to this article