Pretrial rehabilitation

Many companies are currently in a difficult financial situation. An effective solution to improve the situation and prevent bankruptcy is to carry out pre-trial rehabilitation. Sanitation allows to settle debts, optimize expenses, improve management and restore the company's solvency. Since the reorganization takes place before the court proceedings, the company has more opportunities to save its business.

Definition of pre-trial remediation

Pre-trial rehabilitation is a set of measures to restore the company's solvency, which allow to restructure debts and improve the financial condition without officially opening a bankruptcy case in court.

Such rehabilitation can be initiated by the owner of the company, the founder or the authorized management body in order to prevent the liquidation of the business and bring it out of the crisis. Sanitation involves a number of measures to restore the company's solvency at the pre-trial stage.

Innovations of the Code regarding pre-trial rehabilitation

The new Code of Ukraine on Bankruptcy Procedures contains positive changes regarding pre-trial rehabilitation, which may increase interest in its application. One of the key innovations is the abolition of term limits. Previously, the legislation provided that the rehabilitation plan was calculated for a maximum of 12 months, and debts could be restructured for a period of no more than one year.

Instead, the new Code does not establish a rigid time frame. The company itself determines the period necessary for financial recovery and repayment of debts in the rehabilitation plan. Thus, the possibility of a flexible approach appears, and the business gets more time to restore solvency and get out of the crisis within the framework of pre-trial rehabilitation.

Additional benefits in accordance with the Code

The Code of Ukraine on Bankruptcy Procedures also provides companies with additional advantages within the framework of pre-trial rehabilitation. In particular, there is an opportunity to write off bad debts to the state. If the restructuring plan provides for the restructuring of the tax debt, it is automatically considered agreed with the controlling authorities. At the same time, the tax debt for 3 years before the meeting of creditors can be recognized as hopeless and written off.

As for other creditors, the debtor can independently determine convenient conditions for restructuring, installments or write-off of debts, as well as divide creditors into categories with different repayment schemes. Such opportunities allow a flexible approach to the settlement of debts within the framework of pre-trial rehabilitation.

Stages of pretrial rehabilitation

Pre-trial remediation takes place in several stages:

• First, the owners or management of the debtor company decide to start the pre-trial rehabilitation procedure instead of declaring bankruptcy. A detailed plan of measures to improve the financial health of the business is being developed.
• The reorganization plan is submitted for consideration by the meeting of creditors participating in the reorganization.
• Within 5 days after the approval of the plan by creditors, the company applies to the commercial court at the place of registration with a request for approval of rehabilitation.
• The court makes a decision to accept the application and start the remediation procedure or to refuse to approve the plan.
• The debtor carries out rehabilitation in accordance with the plan approved by the court.
• After the implementation of the plan, a report on the results and completion of rehabilitation is submitted to the court.

Why should you choose pre-trial rehabilitation?

Pre-trial rehabilitation gives a real chance to financially restore the company and has significant advantages over official bankruptcy. In particular, it allows you to avoid reputational losses, protracted legal proceedings and minimize costs. This is important for owners and management interested in keeping the business going. Therefore, pre-trial rehabilitation is an effective way of financial rehabilitation compared to formal bankruptcy procedures.

Our law firm "Prykhodko and Partners" is always ready to provide professional support in carrying out pre-trial rehabilitation of the enterprise. Our specialists will help to understand all the intricacies of this procedure and guarantee its successful completion. Ask for a consultation!