Chember news

The Draft Act On Financial Restructuring is an important and necessary step that will speed up the recovery of Ukraine’s economy. This conclusion was made after numerous expert discussions at the American Chamber of Commerce in Ukraine after the Ministry of Finance of Ukraine presented the Draft. An opportunity to carry out proper voluntary financial restructuring, as envisioned by the Draft Act, is generally-accepted world practice which has proved to be an effective tool to overcome the financial turmoil and difficult economic situation in many countries.

Adoption of this Draft will enable creation of the prerequisites to restore financial and corporate sector of the country through the financial and operational restructuring of companies. The Draft creates reliable and effective mechanisms which allow the restructuring of a business quickly and successfully, restoring companies’ liquidity and business crediting and resolving the banking issue of troubled debts. It will certainly have a positive impact both on the financial system of Ukraine and its economy in general.

According to Ihor Olekhov, co-chair of the Chamber Banking & Financial Services Committee, partner at the Kiev office of Baker & McKenzie, this Draft is economically advantageous and useful both for companies that find themselves in financial difficulties and banks which are experiencing a constant rise in the number of problem loans, which results in an increase in the insolvency of banks. “Debtors which faced financial difficulties and liquidity problems and are already on the verge of bankruptcy will be able to restructure their debts and business. The Draft creates prerequisites for financial recovery, stabilization and development of viable companies. Saving viable companies will help to keep jobs. In case of adoption of this Draft Act, banks will have an opportunity to restructure problematic debts and reclaim their money in the short or medium term. This will bring stability to the banking system and create the necessary conditions for banking financing of business on comprehensible and favorable terms.”

The most notable feature of this Draft is the revised Article 6 of the Bankruptcy Act, which will effectively allow Ukrainian businesses to do pre-packaged restructurings or schemes of arrangement. “In particular, so as to achieve restructuring it would be necessary to receive approval of 75% of involved secured creditors and more than 50% of involved unsecured creditors. This would allow the binding of minority dissenting creditors to the restructuring terms agreed by the majority creditors and allow the restructuring to go ahead”, Olexander Droug, senior associate at Sayenko Kharenko, said.

The mechanisms put forward by the Draft allow the restructurings to be conducted in an organized and efficient manner, ensuring equal treatment of all creditors. To achieve this, the Draft provides for the possibility to impose a moratorium or enter into a standstill agreement during which involved creditors will not be able to enforce their claims but instead would negotiate and agree the restructuring plan. According to Mr. Droug, another benefit is that it is not necessary to restructure all debts. The businesses would be in a position to pre-select the creditors that would be involved in the financial restructuring. Thus, the Draft Act On Financial Restructuring will speed up the growth of the Ukrainian economy, improve banking and financial system and preserve viable companies that are important components of successful development.