To save the business: for the first time in Ukraine, the possibility of preventive restructuring was used
21 March 16:49
For the first time in Ukraine, the owners of a Ukrainian company have decided to apply a preventive restructuring procedure that allows a company in a difficult situation to stay afloat and not close. This is reported by the Opendatabot platform, Komersant ukrainskyi reports.
The use of this procedure became possible only on January 1, 2025, when Law No. 3985-IX came into force, which changed the bankruptcy rules in Ukraine and introduced a preventive restructuring mechanism that became part of the Bankruptcy Code.
The implementation of the preventive restructuring procedure into Ukrainian law is part of the Ukraine Facility Plan, which is necessary for the implementation of the EU’s financial support program for Ukraine.
What is preventive restructuring and who will benefit from it?
The adopted law contains the following definition of preventive restructuring: it is “a system of organizational, economic, managerial, investment, technical, financial, economic, and legal measures aimed at preventing or averting insolvency of the debtor, which may include changes in the composition, terms, or structure of the debtor’s assets and liabilities, as well as any necessary operational changes or a combination of these elements, which are carried out in accordance with the preventive restructuring plan.”
The preventive restructuring procedure may be initiated by a debtor – a legal entity or an individual entrepreneur, except for legal entities whose bankruptcy proceedings are not allowed under the Bankruptcy Code, as well as legal entities that provide financial services.
The subject of preventive restructuring may be monetary claims against the debtor under obligations that have become due, as well as monetary claims against the debtor under obligations that will become due during the preventive restructuring procedure and as a result of which the debtor may become insolvent. Employee claims related to labor relations with the debtor cannot be subject to preventive restructuring.
Oleksiy Movchan, Deputy Chairman of the Parliamentary Committee on Economic Development, explained why the new procedure is needed.
“Preventive restructuring is needed to identify the risks of insolvency of enterprises at early stages, when the situation is not yet critical, and to prevent bankruptcy,” the MP said.
He also said that the adopted law provides for the creation of a web portal for insolvency prevention, where entrepreneurs will be able to find information on tools and procedures for preventive restructuring adapted for small and micro businesses.
What other legal procedures help owners resolve financial problems
Since the beginning of this year, according to the Supreme Court of Ukraine and the Ministry of Justice of Ukraine, a total of 1,087 businesses have begun the process of shutting down their operations. This is reported on the Opendatabot platform. Of these, more than a thousand companies:
– 66.7% or 725 companies ceased operations on their own without bankruptcy proceedings, which means that the company has no debts, but its owners decided to close the business;
– 164 companies are in bankruptcy proceedings, which is 22% more than at the beginning of last year;
– 118 companies are in the process of judicial liquidation, i.e. closure due to inability to pay debts – in this case, creditors are paid for the sold business property;
– 80 other businesses are currently at the stage of reorganization (transformation) into another project. This is 63.5% less than last year. Such a process can be launched to hide dubious businesses or partners by merging, joining, dividing, and transforming companies.
According to Denys Lykhopiok, insolvency receiver, independent business closure has recently lost popularity: this year’s figure is 23% lower than last year. This is due to the increased responsibility of owners and managers in terms of debts and potential creditors.
According to the expert, only 5-10% of all procedures are rehabilitated, i.e., restored to solvency. This is due to the fact that companies turn to judicial mechanisms to restore solvency too late.
“Most businesses are experiencing financial difficulties, but it is currently too difficult and risky for owners to resolve them through court procedures. If you have already become bankrupt, then reorganization is unlikely to help change anything. In fact, it is only a reflection of the general state of the business and the economy as a whole,” says Insolvency Practitioner Denys Lykhopiok.
According to him, the new preventive restructuring procedure makes it possible to save the business and avoid going bankrupt. It makes sense to do this when the owner sees that the business is facing serious financial difficulties and changes the terms of fulfillment of credit obligations without stopping work.
