The procedure for recognizing a legal entity as bankrupt in Ukraine

When a legal entity cannot fully fulfill its financial obligations and is in a difficult financial situation, it may be declared bankrupt. For this, it is necessary to perform a certain sequence of actions.

According to what algorithm is a legal entity declared bankrupt?

1. Collection and preparation of documents
The bankruptcy procedure can be initiated by the legal entity itself, which is the debtor, or by a creditor who has financial claims against the debtor, by filing an insolvency petition with the court. The creditor and the debtor must collect the necessary documents and prepare them for submission to the court. The list of documents to be attached to the application is defined by the Code of Ukraine on Bankruptcy Procedures.

2. Submission to court and initiation of proceedings in the case
After preparation, the application together with the attachments is submitted to the commercial court at the place of registration of the legal entity. After reviewing the documents, if there are no deficiencies, the court makes a decision to open proceedings in the case. This initiates the property disposal procedure and provides grounds for the appointment of an arbitration administrator in the case, who is responsible for the process of repaying the debtor's debts. He ensures the preservation and accounting of the company's property and takes measures to restore solvency or liquidate it.

3. Property disposal procedure
The decision to open proceedings starts the procedure for disposing of property. This procedure lasts up to 170 days and has several important components.
During the proceedings of this procedure, the arbitration administrator considers the claims of creditors that have been submitted to the debtor, holds meetings with the committee of creditors to determine the possible restoration of the company's solvency or the need to open a liquidation procedure. Measures are also taken to preserve the debtor's assets, which have value and are important for carrying out further activities in case of stabilization of the enterprise.

The final stage of this procedure is the approval of the rehabilitation plan, which provides for the gradual restoration of the company's solvency or the submission to the arbitration manager of a petition to declare the legal entity bankrupt. If the plan is successfully approved, the debtor fulfills his obligations to creditors within a certain period of time in order to avoid being declared bankrupt. If the plan confirms the complete insolvency of the debtor, the arbitration administrator initiates the opening of the liquidation procedure in the bankruptcy case.

4. Sanitation procedure
Sanitation consists in restoring the debtor's financial stability by restructuring debts, selling assets and reorganizing operations. The rehabilitation plan approved by the creditors is submitted to the court, after which the debtor proceeds to its implementation. The plan is designed for a period of up to 5 years, during which the company stabilizes its activities and settles its debts.

5. Liquidation procedure
If it is impossible to restore solvency, the arbitration administrator evaluates the property of the bankrupt and sells it to satisfy creditors' claims. The received funds are distributed among creditors in accordance with the established order of priority. After the settlement, the liquidator reports to the court and submits all attributes of the enterprise to the registration authorities for its exclusion from the Unified Register of Legal Entities.

To receive a detailed consultation, legal support in the bankruptcy procedure and calculation of the cost of services, leave a request on our website, Prikhodko&Partners specialists will provide feedback in the near future.