BizCLIR

Ukraine’s bankruptcy law dates to the early days of the post-Communist period. The Law “On Bankruptcy” was adopted on May 14, 1992 (Law No. 2343-XII) and subsequently modified on June 17, 1993, February 25, 1994, and in March 1995. The law gives few rights and protections to creditors and does not allow for debtor-led reorganization. Also the law applies solely to legal entities, leaving untouched individual entrepreneurs and non-business bankruptcies.
In the area of creditors’ rights, the law is defective by unduly restricting the circumstances under which a creditor may file a bankruptcy petition. Creditors are only permitted to file bankruptcy petitions after their claims have been liquidated in the civil courts and they have been unable to collect on their judgments, which incurs extra costs for the creditor.
Under the law, notice is not given to other creditors until 30 days after filing of the bankruptcy petition. If the debt is paid before this notice is sent, the filing creditor may discontinue the case, leaving other creditors in the position of starting the process all over again. This delayed recourse to bankruptcy protection leaves much to be desired in the protection of creditors’ rights.
The second principal defect in the existing law is that it is completely devoid of any of the tools necessary to restructure an enterprise. Debtor-led reorganization does not exist because should a debtor file for bankruptcy, it would immediately lose control of the company.
Other significant defects in the current law are (i) the provision that allows legal entities to serve as trustees and liquidators, resulting in a lack of accountability, and (ii) the requirement that creditor decisions be made by creditors holding two-thirds of the total debt, rather than a simple majority.

(Note: This information was taken from the Bankruptcy chapter of the 1999 Ukraine BizCLIR report.  For more information, please see the report.)