Bankruptcy during martial law

03/ 08/ 2023

On August 3, 2023, an online meeting Bankruptcy during martial law organized by the EBA Southern Ukrainian office was held. Together with the speakers of the event – senior senior associates of the GOLAW law firm Natalia Matviichuk and Anastasiia Klian considered the main issues and peculiarities of the bankruptcy procedure. In particular, the issue of judicial practice regarding the renewal of procedural terms and mechanisms aimed at preventing the prolongation terms of cases consideration was raised. In addition, new legislation in the field of bankruptcy was discussed. Among the important theses of the event: In 2022, 42 percent fewer bankruptcy cases were filed than in 2021. This, in particular, is due to the start of hostilities and the inability of some courts to work in full, however, for now the question of jurisdiction has been resolved, and on the website of the judiciary of Ukraine you can find information on which court the cases that were to be tried in the occupied territories or territories where combat operations. As of today, there is a moratorium on the fulfillment of monetary obligations in favor of creditors - the Russian Federation or persons associated with the aggressor state, and there is also a ban on the alienation of real estate in favor of such persons. The position of the Supreme Court is quite unambiguous regarding the renewal of missed deadlines: the statute of limitations can be renewed if the party submitting an application for the opening of bankruptcy proceedings proves the impossibility of submitting the application in time due to the introduction of martial law. In turn, the circumstances that may require proof are: the location of the court, the intensity of hostilities, whether the territory is occupied, and other factors that could affect the missed deadlines. As for charging penalties, the creditor has the right to charge fines for more than six months during the quarantine period. Regarding the specifics of presenting evidence, it is worth considering that it is quite difficult to collect evidence in occupied territories or in territories where hostilities are taking place. Therefore, the courts make concessions and themselves often call for submission of petitions for the demand of evidence. Only the liquidator has the right to claim the imposition of subsidiary liability on third parties. Subsidiary liability for bankruptcy is applied to the person whose actions and decisions led to the absence of both funds in the accounts and the property of the bankrupt. Such responsibility is not associated with the presence of convictions in criminal cases. Regarding innovations in the bankruptcy procedure, the list of decisions subject to cassation appeal was expanded. A provision was also added that specifies that a change in the debtors registered location/place of residence after the creditor/debtor has submitted an application to open bankruptcy proceedings does not affect the change in the territorial jurisdiction of the case. In addition, in order to optimize the terms of consideration of bankruptcy cases, applications (plaintiffs) in disputes in which the debtor is a party can be considered within the framework of the bankruptcy case under the rules of simplified legal proceedings. Therefore, it is necessary to recognize that not all businesses can survive financial shocks during military operations, so creating conditions that will allow Ukrainian enterprises to overcome them and preserve the countrys production potential is one of the primary tasks.

On August 3, 2023, an online meeting “Bankruptcy during martial law” organized by the EBA Southern Ukrainian office was held. Together with the speakers of the event – senior senior associates of the GOLAW law firm Natalia Matviichuk and Anastasiia Klian considered the main issues and peculiarities of the bankruptcy procedure. In particular, the issue of judicial practice regarding the renewal of procedural terms and mechanisms aimed at preventing the prolongation terms of cases consideration was raised. In addition, new legislation in the field of bankruptcy was discussed.

Among the important theses of the event:

In 2022, 42 percent fewer bankruptcy cases were filed than in 2021. This, in particular, is due to the start of hostilities and the inability of some courts to work in full, however, for now the question of jurisdiction has been resolved, and on the website of the judiciary of Ukraine you can find information on which court the cases that were to be tried in the occupied territories or territories where combat operations.
As of today, there is a moratorium on the fulfillment of monetary obligations in favor of creditors – the Russian Federation or persons associated with the aggressor state, and there is also a ban on the alienation of real estate in favor of such persons.
The position of the Supreme Court is quite unambiguous regarding the renewal of missed deadlines: the statute of limitations can be renewed if the party submitting an application for the opening of bankruptcy proceedings proves the impossibility of submitting the application in time due to the introduction of martial law. In turn, the circumstances that may require proof are: the location of the court, the intensity of hostilities, whether the territory is occupied, and other factors that could affect the missed deadlines.
As for charging penalties, the creditor has the right to charge fines for more than six months during the quarantine period.
Regarding the specifics of presenting evidence, it is worth considering that it is quite difficult to collect evidence in occupied territories or in territories where hostilities are taking place. Therefore, the courts make concessions and themselves often call for submission of petitions for the demand of evidence.
Only the liquidator has the right to claim the imposition of subsidiary liability on third parties. Subsidiary liability for bankruptcy is applied to the person whose actions and decisions led to the absence of both funds in the accounts and the property of the bankrupt. Such responsibility is not associated with the presence of convictions in criminal cases.
Regarding innovations in the bankruptcy procedure, the list of decisions subject to cassation appeal was expanded. A provision was also added that specifies that a change in the debtor’s registered location/place of residence after the creditor/debtor has submitted an application to open bankruptcy proceedings does not affect the change in the territorial jurisdiction of the case. In addition, in order to optimize the terms of consideration of bankruptcy cases, applications (plaintiffs) in disputes in which the debtor is a party can be considered within the framework of the bankruptcy case under the rules of simplified legal proceedings.

Therefore, it is necessary to recognize that not all businesses can survive financial shocks during military operations, so creating conditions that will allow Ukrainian enterprises to overcome them and preserve the country’s production potential is one of the primary tasks.