Bankruptcy of legal entities on general grounds in Ukraine

Bankruptcy of legal entities is a complex and multifaceted phenomenon that directly affects the economic system of our country. This process can be the result of the company's financial difficulties, lack of competitiveness in the market, mismanagement or abuse of corporate power by the company's managers, etc. The topicality of the subject is manifested in the fact that, regardless of the reasons, the bankruptcy of legal entities affects various parts of society, including business owners, end consumers, creditors, as well as the state. In this article, we will consider the general grounds and signs of bankruptcy of legal entities that exist in Ukraine.

How is the bankruptcy process regulated in Ukraine?

The main normative legal act in the field of bankruptcy is the Code of Ukraine on Bankruptcy Procedures, which establishes the conditions and procedure for restoring the debtor's solvency, as well as regulates the process of meeting creditors' demands during the bankruptcy procedure. It is an important tool for ensuring the realization of the rights and interests of all participants in the bankruptcy process.

What are the most common causes of bankruptcy in Ukraine?

• Financial difficulties at the enterprise due to external factors (political conditions in society) and internal factors (inefficient management of the enterprise);
• Increased competition on the market;
• Corruption and unscrupulous activity of the enterprise;
• Unexpected changes in legislation that directly affect the activities of enterprises;
• Active hostilities throughout the country from February 24, 2022.

What are the general grounds and signs of bankruptcy of legal entities in Ukraine?

If we talk about the bankruptcy procedure, then in order to apply it in practice, legal grounds and signs established by legislation are required.

Regarding the signs of bankruptcy, the following should be noted. Currently, the legal doctrine of Ukraine does not define a clear list of signs of bankruptcy of legal entities. There are only methodological recommendations for detecting the insolvency of an enterprise in practice, namely Order of the Ministry of Economy of Ukraine dated January 19, 2006 No. 14, according to which an assessment of the enterprise's financial condition is carried out.

According to these recommendations, 3 types of insolvency of a legal entity are distinguished:

1. Сurrent;
2. Critical ((or state of potential bankruptcy);
3. Supercritical;

The concept of insolvency is defined by the KUzPB in Article 1, which states that it is the debtor's lack of sufficient financial resources or assets to meet the demands of creditors for previously unfulfilled obligations, which leads to the application of the procedures defined by this code.

Thus, a common feature and basis for applying bankruptcy to a legal entity in practice is its insolvency before creditors, which must be stable and not amenable to elimination despite pre-trial measures to restore the debtor's solvency. It also becomes one of the reasons for the bankruptcy of the business entity.

How is a bankruptcy case filed?

As a general rule, if there are signs of the insolvency of a legal entity, the creditor or debtor has the right to apply to the judicial authorities with a statement to open proceedings on the case. If a list of signs of bankruptcy is established, the court will open proceedings on the case. The case will be considered according to the location of the legal entity - the debtor.

If your company is in the stage of bankruptcy and you need help in paying off its debts to creditors, then in this case the Prikhodko and Partners law office will always come to your aid. Our team specializes and understands all aspects of the bankruptcy procedure in Ukraine, and therefore will help you quickly and efficiently with solving your problems. So don't delay and apply!