THE LAW OF UKRAINE
ON BANKRUPTCY
Dated May 14, 1992
(Vidomosti of the Supreme Rada, No. 31, item 440)
With Amendments and Additions Introduced by
the Following Laws of Ukraine:
Dated June 17, 1993,
No. 3292,
VVR No. 29 1993, p. 308;
Dated February 25, 1994, No. 4036,
VVR No. 27 1994, p. 224;
Dated March 14, 1995,
No. 90/95-VR, VVR No. 14 1995, p. 93;
This law determines terms and conditions, and procedures for
recognition of a legal entity which is a subject of business
activities as a bankrupt for the purposes of meeting creditors'
claims.
SECTION I
GENERAL PROVISIONS
Article 1.
Definition of Bankruptcy
Bankruptcy means the failure of any legal entity, subject of
business activities, to meet, within the term established for that
purpose, creditors' claims and its obligations to the budget due to
the lack of liquidity of its assets.
Article 2.
Subjects of Bankruptcy
Legal entities, subjects of business activities, unable to perform
in proper time their obligations to creditors or the budget may be
subjects of bankruptcy, which are subject to this Law and
hereinafter referred to as the debtors or bankrupts.
Article 3.
Creditors
1. In accordance with this Law, "creditor" means any citizen or
legal entity which have to the debtors property claims supported by
the appropriate documents, except for creditors whose property
claims are fully guaranteed by any mortgage.
2. If two or more creditors have property claims to the same
debtor, such creditors shall form a creditors' assembly. This Law
shall determined the rights of such creditors' assembly.
3. Decision of the creditors' assembly shall be deemed adopted if
it is voted upon by the creditors whose property claims constitute
not less than two thirds of the total number of claims.
4. If it is necessary, the creditors' assembly shall establish a
creditors' committee which is the operative body of such assembly
and shall determine its functions and powers.
5. A bankruptcy trustee, the head of liquidation commission and
a debtor shall be entitled to participate in the creditors'
assembly.
Article 4.
Jurisdiction of Bankruptcy Proceedings
Bankruptcy proceedings shall be governed by the Arbitration
Procedural Code of Ukraine taking into consideration provisions
hereof.
In addition, bankruptcy proceedings shall be governed taking into
consideration the requirements of the Law of the Ukrainian RSR "On
Banks and Banking Activities".
SECTION II
BANKRUPTCY PROCEEDINGS
Article 5.
Reasons to Initiate Bankruptcy Proceedings
1. Any written claim submitted to the arbitration court by any
creditor, debtor, state tax body or state control-auditing service
shall be deemed as a reason to initiate the bankruptcy proceedings.
(amended pursuant to the Law No. 3292 dated June 17,
1993)
2. The creditor may apply to initiate the proceedings regarding
bankruptcy of a legal entity when, within one month, such legal
entity is unable to meet the demand claims recognized by it or to
pay debts in accordance with acts of execution.
3. The debtor may, on its own initiative, apply to the
arbitration court in the event of its financial insolvency or if it
is jeopardized to be insolvent.
Debtor's application shall be attached by a list of its
creditors and debtors, balance sheets and other information
regarding its financial and property position. Authenticity and
completeness of the balance sheets and other information regarding
financial and property position of the debtor shall be certified by
an auditor (auditing firm) regardless reasons of the bankruptcy
proceedings.
the Law
Article 6.
(paragraph 2 point 3 Article 5 is added pursuant to
No. 90/95-VR dated March 14, 1995)
Withdrawal of Claims
The claim of any creditor or debtor may be withdrawn by the
applicant prior the arbitration court has adopted the decision on
recognition of the debtor as a bankrupt. The withdrawal of
debtor's claim shall be performed only under creditor's consent.
Article 7.
Institution of the Proceedings
Upon acceptance of the application, the arbitration court shall,
within five days of its receipt, adopt and send to the debtor,
creditors and banks providing settlement-cash services to the
debtor an award to institute proceedings which confirms the
acceptance of the application and time and place of the preliminary
hearing, and requires documents necessary for the proceedings which
evidence financial and property condition of the debtor.
Article 8.
Preliminary Arbitration Court Session
During the preliminary session held at least one month after the
institution of the proceedings, the arbitration court shall assess
submitted documents, hear explanations of the parties and banks,
consider their petitions. In a result of the preliminary hearing,
the arbitration court shall, by the award, if necessary, appoint
the debtor's bankruptcy trustee, and bind the applicant to submit
to the official press organ of the Supreme Rada of Ukraine or the
Cabinet of Ministers of Ukraine an information including the
following:
full name of the debtor, its legal address, bank information;
name and address of the arbitration court, case number.
The purpose of such information is to reveal all creditors and
possible [guarantors].
Article 9.
Bankruptcy Trustee
Under proposition of the debtor or creditors, the arbitration court
shall authorize the bank which provides settlement-cash services to
the debtor, State (Municipal) Property Fund, if the debtor is a
state-owned enterprise, organization, or other entity to be the
bankruptcy trustee and to control debtor's assets. Bankruptcy
trustee shall be liable for improper performance of the above
authorization.
Powers of the bankruptcy trustee shall become invalid as of the
date of the liquidation commission establishment.
Article 10.
Revealing Creditors and Guarantors
Within a one month period of the date of publication of the
information on initiating bankruptcy proceedings in the official
press organ of the Supreme Rada of Ukraine or the Cabinet of
Ministers of Ukraine, creditors shall submit to the arbitration
court their written applications along with property claims to the
debtor together with evidencing documents. In a result of the
consideration of such claims, the arbitration court shall, by its
award, accept or waive them. The above award may be reviewed in
order of supervision. Creditors' applications shall be paid by the
state duties.
Individuals and legal entities wishing to participate in the
[sanation] shall, within the same period of time, to submit to the
arbitration court applications with written obligation to assume
debts, and to specify terms and conditions for the [sanation] of
the legal entity-debtor.
Article 11.
Committee
Establishment of the Creditors' Assembly and
One month after the date of the publication of the information on
initiating bankruptcy proceedings in the official press organ of
the Supreme Rada of Ukraine or the Cabinet of Ministers of Ukraine,
the arbitration court shall make an award where it binds all
persons, which have submitted their applications with property
claims against the debtor, to call the assembly under their
participation where their authorized committee will be established,
if necessary.
The establishment of the committee shall be binding, if the number
of creditors shall exceed ten persons.
Powers of the committee shall be determined by the creditors'
assembly. The decision on its establishment and the powers
delegated to it shall be submitted to the arbitration court.
Article 12.
Adoption of the Decision on the [Sanation]
Upon expiration of the term specified in Article 10 hereof, the
arbitration court may adopt an award on the performance of the
[sanation] of the debtor, if certain entities gave their
propositions to meet claims of the creditors against the debtor and
to perform its obligations to the budget, provided that the
creditors' assembly (committee) shall provide its consent regarding
terms for the performance of such obligations and the transfer of
debts.
The debtor shall retain its option regarding terms and conditions
of the performance of the [sanation], if it itself applied to the
arbitration court with the application on bankruptcy. In doing so,
terms and conditions of the performance of the [sanation] for the
state-owned enterprises through their reorganization shall be
agreed upon the appropriate body authorized to manage the
state-owned property, and the Anti-Monopoly Committee of Ukraine
within the scope of its competence, and terms and conditions for
the performance of the [sanation] through the privatization - upon
the appropriate privatization organ. If several individual or
legal entities wish to participate in the [sanation] of the
enterprise-debtor, selection of [guarantors] shall be performed by
the appropriate bodies through tender;
If bankruptcy proceedings were initiated regarding the state-owned
enterprise, its working collective shall have the right to demand
the lease them the enterprise, provided that it shall assume debts
of the enterprise-debtor.
If creditors agree to transfer the debt and to change the debtor in
the event contemplated by the second part of this Article, the
arbitration court shall adopt an award regarding termination of the
proceedings. In its award the arbitration court shall determine
terms and conditions of the [sanation] of the legal entity-debtor
agreed by and upon the creditors, [guarantors] and debtors in the
event contemplated by the second part of this Article.
(amended pursuant to the Law No. 4036 dated February 25,
1994)
Article 13.
Bankrupt
Resolution on Recognition of the Debtor as a
The arbitration court shall recognize the debtor as a bankrupt in
the event of absence of propositions regarding performance of the
[sanation] or, if the creditors do not agree with the terms and
conditions of the [sanation] of the debtor.
The arbitration court shall adopt a resolution regarding
recognition of the debtor as a bankrupt.
The resolution shall appoint liquidators from amongst the
representatives of the creditors' assembly, banks, financial
institutions, as well as the State Property Fund, if any
state-owned enterprise or organization has been recognized as the
bankrupt.
Liquidators shall undertake to carry out procedures to meet
creditors's claims.
SECTION III
DECLARATION ON BANKRUPTCY, ITS CONSEQUENCES AND
SATISFACTION OF CREDITORS' CLAIMS
Article 14.
Declaration on Bankruptcy
A copy of the resolution on the recognition of the debtor as the
bankrupt shall be sent to:
any founder of the legal entity recognized as the bankrupt;
the owner of the property or any organ authorized by it;
the bank which provided services to the bankrupt;
the National Bank of Ukraine (if the bankrupt is a bank);
the Ministry of Foreign Economic Relations of Ukraine (if the
bankrupt is registered as a participant of foreign economic
activities);
the organ which registered the bankrupt as a subject of
business activities;
the state employment service at the legal address of the
bankrupt;
the relevant trade-unions;
the procurator office (if materials of the case give the basis
to consider the bankruptcy as intended).
Article 15.
Bankrupt
Consequences of the Recognition of the Debtor as a
Upon the recognition of the debtor as a bankrupt:
business activities of the debtor shall be terminated;
the right to manage the debtor's property and all its property
rights and obligations shall be transferred to the liquidation
commission;
terms of all debentures of the debtor shall be deemed expired;
calculation of any penalty and interest for all kinds of the
debtor's debenture shall terminated.
Upon submission of the procurator office, petition of the debtor,
bankruptcy trustee or creditors, the arbitration court may:
to recognize as invalid any agreement on the debtor's property
sale carried out within three months prior to the initiating the
bankruptcy proceedings, if it was performed for the benefit of any
interested entity which represented the debtor;
to recognize as invalid any agreement executed by the debtor
regarding its property sale or undertaking any obligations by the
latter within one year prior to the beginning the bankruptcy
proceedings, if the sale of property was carried out in order to
hide that property or not to pay debts; if as a result of such
agreement the debtor have received much less than the actual price
of the agreement (property); as well as, if at the date of the
agreement the debtor was actually insolvent or became insolvent as
a result of the performance thereof.
Article 16.
Liquidation Commission
Liquidators appointed by the arbitration court shall establish a
liquidation commission. The liquidation commission shall also
include the bankruptcy trustee.
The liquidation commission shall:
manage the bankrupt's property;
perform inventory and assessment of the bankrupt's property;
recognize the liquidation mass and dispose it;
use all efforts to collect receivables;
sell the bankrupt's property and carry out other steps
directed to meet creditors' claims in accordance with the Law of
the Ukrainian RSR "On Enterprises in the Ukrainian RSR".
Actions of the liquidation commission may be claimed at the
arbitration court.
Article 17.
Removal of Employees. Benefits and Compensations
for Removed Employees
Removal of employees of the bankruptcy subjects shall be performed
in accordance with the requirements of the Labor Code of Ukraine.
Issues regarding an employment of the removed employees shall be
solved pursuant to the Law of the Ukrainian RSR "On Employment of
Population". The removed employees of the bankruptcy subjects
shall retain their benefits and compensations provided for in
Article 26 of the Law of the Ukrainian RSR "On Employment of
Population".
Article 18.
Property Which is Subject to Seizure
In order to repay any debt, all property of the bankrupt possessed
pursuant to the ownership right or which is at its full economic
disposal may be subject to seizure.
In the events contemplated by applicable legislation, upon
creditors' claims other property may also be subject to the
seizure.
Article 19.
Property Assessment
Property which is subject to the seizure shall be assessed by the
liquidation commission pursuant to the procedures established by
the Law of Ukraine "On Privatization of Small State-Owned
Enterprises (Small Privatization)". Assessed value of property
which is sold at the auction shall be equal to the original value.
Article 20.
Sale of Property
Decision on the sale of the bankrupt's property shall be made by
the liquidation commission under consent of the creditors' assembly
(committee).
The head of the liquidation commission shall, through mass media
organs, provide the information on procedures for the sale of the
bankrupt's property, its composition, terms and conditions to
purchase such property.
In the event of existence of two and more offers, the head of the
liquidation commission shall declare a tender (auction).
Procedures for the performance of such tender (auction) shall be
determined pursuant to the Law of Ukraine "On Privatization of
Small State-Owned Enterprises (Small Privatization)".
In doing so, the sale of property of the state-owned
enterprises-bankrupts shall be carried out taking into account
requirements contemplated by the Law of Ukraine "On Privatization
of Property of the State-Owned Enterprises" (2163-XII) and other
legislative acts of Ukraine connected with privatization issues.
4036 dated
Article 21.
(this Article is amended pursuant to the Law No.
February 25, 1994)
Priority of Creditors' Claims
1. Funds received from the sale of the bankrupt's property shall
be directed to meet creditors' claims. The priority shall be given
to cover expenditures arisen in connection with the bankruptcy
proceedings in the arbitration court, work of the liquidation
commission and bankruptcy trustee, as well as creditors' claims
guaranteed by mortgage shall be satisfied.
2. In first turn, obligations of the enterprise-bankrupt to its
employees shall be performed (except repayment of working
collective members' contributions to the charter fund of the
enterprise or any payment on shares of the working collective).
3. Secondly, state and local taxes and non tax payments due to
the budget, as well as claims of the state insurance and social
protection bodies shall be satisfied.
4. Thirdly, claims of creditors not guaranteed by mortgage shall
be satisfied.
5. Fourthly, claims regarding repayment of the working
collective members' contributions to the charter fund of the
enterprise and any payment on shares of the working collective.
6.
Fifthly, all remaining claims.
7. Claims of each following group shall be satisfied after
complete satisfaction of the preceding claims.
8. In the case of insufficient property to meet in full all
claims of the same group, such claims shall be satisfied in
proportion to the certain amount due to each creditor.
9. Claims submitted after expiration of a term established for
their submission shall not be considered, and relevant debts shall
be deemed paid.
10. Claims unsatisfied due to the insufficiency of property shall
be deemed paid.
11. Property (except funds of the state-owned
enterprises-bankrupts) remaining after the satisfaction of claims
of the creditors and members of the working collective shall be
transferred to the owner or the relevant privatization body in
order to be sold, if the arbitration court has adopted the award on
liquidation of the legal entity-bankrupt.
Funds remaining after the state-owned enterprise-bankrupt has
satisfied all claims of the creditors and members of the working
collective shall be credited to the relevant non-budget
privatization fund.
(this point is amended pursuant to the Law No. 4036
February 25, 1994)
dated
Article 22.
Termination of the Bankruptcy Proceedings
Under results of work carried out by the liquidation commission,
the latter shall, after hearing members of the liquidation
commission and the creditors' assembly or committee, adopt the
award on approval of the liquidation balance or appointment of new
liquidators.
If pursuant to the liquidation balance, no property remained after
satisfaction of the creditors' claims, the arbitration court shall
award on the liquidation of the legal entity-bankrupt.
If the bankrupt's property is sufficient to satisfy all claims of
the creditors, it shall be deemed free of debts and continue its
business activities. The arbitration court may adopt the award on
the reorganization (liquidation) of any legal entity free of debts
only if its remaining property assets are less than it requires for
its operation pursuant to legislation or petition of its property
owners.
Chairman of the Supreme Rada of Ukraine
The city of Kiev, May 14, 1992
No. 2343-XII
DECREE
I. PLYUSCH
OF THE SUPREME RADA OF UKRAINE
ON INTRODUCTION OF THE LAW OF UKRAINE "ON BANKRUPTCY"
The Supreme Rada of Ukraine hereby DECREES:
1. To introduce the Law of Ukraine "On Bankruptcy" as of July 1,
1992.
As for agricultural enterprises this Law shall be effective as
of January 1, 1993.
2. Prior to June 1, 1992 the Cabinet of Ministers of Ukraine
shall:
submit to the Supreme Rada of Ukraine propositions regarding
making certain applicable legislative acts of Ukraine compliant
with the Law of Ukraine "On Bankruptcy";
to provide decisions of the Ukrainian Government in compliance
herewith;
to ensure that ministries, state committees and departments of
Ukraine shall review and cancel their normative acts which are in
conflict herewith.
Chairman of the Supreme Rada of Ukraine
The city of Kiev, May 14, 1992
No. 2344-XII
??
I. PLYUSCH