The Law of Ukraine "On Financial Restructuring",
adopted on 14 June 2016 (the "Financial Restructuring
Law"), came into force on 19 October 2016. The market
has long awaited introduction of legislation enabling the use of
commonly known contractual restructuring instruments without
commencing the debtor's rehabilitation proceedings in
Under the Financial Restructuring Law, the other provisions of
Ukrainian legislation shall apply to the rights and liabilities of
the creditors and debtors to the extent they are in line the
Financial Restructuring Law.
The creditors involved (the "Involved
Creditors") in the financial restructuring procedure
(the "Procedure") shall be determined by
the debtor. The Procedure is commenced upon petition of the debtor
and Involved Creditors' consent if at least one financial
institution unrelated to the debtor is involved in it.
Upon commencement of the Procedure, a moratorium on satisfaction
of Involved Creditors' claims (the
"Moratorium") for a period of 90 days
shall be introduced. The Moratorium can be extended to 180 days or
discontinued upon Involved Creditors' decision.
The Procedure is deemed completed upon the approval of the
restructuring plan by the Involved Creditors' unanimous vote.
The terms of the restructuring plan are binding on all the Involved
Creditors and supersede any agreements between the Involved
Creditors and the debtor, its sureties and security providers
referred to in the restructuring plan.
In case the Moratorium is discontinued by the resolution of 2/3
of the Involved Creditors, the debtor and one or several Involved
Creditors can enter into a standstill agreement. Under the
Financial Restructuring Law, such standstill agreement must
provide, inter alia, for terms and conditions of
prohibition of enforcement of the creditors' claims both
extra-judicially and in court.
Overall, implementation of the commonly known contractual
(extra-judicial) restructuring instruments in the Ukrainian
legislation can be deemed a significant regulatory breakthrough.
However, certain provisions of the Financial Restructuring Law may
still need attention. For example, the Involved Creditors'
unanimous vote required for approving the restructuring plan may be
difficult to achieve in practice, as well as the priority of a
standstill agreement over any bilateral arrangements should be
expressly envisaged by the Financial Restructuring Law. Notably,
there are still no tax incentives for writing off indebtedness or
sale of collateral within the frameworks of the financial
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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