Ukraine: new hope for the creditors as the debtors’ concern grows

On 6 January 2022 Ukraine finally cancelled almost a two-year long moratorium for the creditor-trigged insolvencies. The moratorium was imposed in the late spring 2020 as a part of the nation’ response to first wave of COVID pandemic.

In a nutshell, the moratorium prohibited creditors from requesting insolvency action against those debtors whose obligations matured after 12 March 2020. A separate set of measures also lifted an early warning duty obliging directors of the companies in distress to file for insolvency within one month from a moment when the distress appeared.

The moratorium was heavily criticized by both domestic and international creditors, who legitimately blamed it for a non-selective approach.

As further 2021 statistic shown, the moratorium never seemed to reach a goal proclaimed by it authors and made no increase for insolvency relief requests by the debtor companies.

Instead, the country has been facing a steady increase in “zombie” companies having little to none liquidation value — and their owners clearly intending to get away with no creditor repayment.

With the moratorium being lifted off the creditors do expect to show no mercy to their Ukrainian debtors. This particularly worries those debtors potentially involved in wrongful trade or fraudulent action. Even with the moratorium in place in 2021 Ukrainian courts confirmed more than UAH 150 mln in creditors loss to be paid by the insolvent companies’ management and owners themselves. This number is expected to triple in 2022 – and there already were Supreme Court’s 2021 judgements confirming liability of the real owners standing behind opaque shareholder company and nominal directors.

As the creditors’ agitation grows, so do the debtor company owners’ concerns. As the owners\management liability process is extremely bespoke and often requires swift action, it is of crucial importance to get a throughout legal advise on either side – and much better to do that before the actual claim has been brought.