What is the procedure for declaring a business bankrupt?

In Ukraine, the bankruptcy procedure provides a legal mechanism for both legal entities and individuals who are unable to meet their financial obligations to either restore solvency or liquidate their assets to satisfy creditors' claims.

Bankruptcy of Legal Entities

1. Initiation of Bankruptcy Proceedings

• Bankruptcy proceedings can be initiated by either the creditor or the debtor in the event of the debtor’s insolvency.
• The minimum debt threshold for initiating bankruptcy is 300 minimum wages.

2. Asset Management

• A property manager is appointed to oversee the debtor's activities and assess its financial status.

3. Rehabilitation (Solvency Recovery)

• A plan of measures is developed to restore the debtor's solvency and meet creditors' claims.

4. Liquidation

• If solvency cannot be restored, the debtor is liquidated, and its assets are distributed among creditors.

Bankruptcy of Individuals

1. Initiation of Bankruptcy Proceedings

• It is initiated solely by the debtor in the event of an inability to fulfil financial obligations.
• Grounds for initiation: the amount of overdue obligations exceeds 30 minimum wages, or there is a threat of insolvency.

2. Commencement of Proceedings

• The court decides to open proceedings and appoints an arbitration manager.

3. Debt Restructuring

• A debt restructuring plan is developed, which must be approved by creditors and the court.

4. Recognition of Bankruptcy and Debt Settlement

• If the restructuring plan is not implemented, the court declares the debtor bankrupt, and their assets are sold to settle debts.

Important Notes

• Claims that remain unmet due to the debtor's insufficient assets are considered settled, except for obligations related to the payment of alimony, compensation for harm caused by injury, other damage to health, or the death of an individual, contributions to mandatory state pension and social insurance, and other personal obligations.
• In the ruling to complete the procedure for settling the debtor’s obligations and close the insolvency case, the commercial court decides to release the debtor from further liabilities.
• If entrepreneurial activity ceases, the obligations of an individual under concluded contracts do not terminate because the individual continues to exist as a legal entity. An individual entrepreneur is liable for business-related debts with all their property, except for assets exempt from seizure under the law.