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News

New Insolvency Legislation in Ukraine: Strengthening Transparency and Preventing Asset Misappropriation
In addition to introducing preventive restructuring procedures, Law No. 3985-IX ("On Amendments to the Bankruptcy Code of Ukraine and Certain Other Legislative Acts of Ukraine Regarding the Implementation of EU Directive 2019/1023 and the Introduction of Preventive Restructuring Procedures") has also brought important changes aimed at preventing the misappropriation of debtor assets in insolvency proceedings through so-called "related parties". 
 
Although such parties may not have a formal legal influence over the debtor, they effectively control its fate. The law amends Article 1 of the Bankruptcy Code of Ukraine, introducing new categories of persons deemed related to the debtor, including: 
  • A legal entity established with the participation of the debtor; 
  • A legal entity that currently controls or has controlled the debtor within the last three years; 
  • A legal or natural person that is or was controlled by the debtor within the last three years; 
  • A legal entity that, together with the debtor, is or was under the control of a third party within the last three years; 
  • The owners (shareholders, participants) of the debtor; 
  • The CEO, management board members, chief accountant, and other executives of the debtor, including those who left their positions within three years prior to the initiation of bankruptcy proceedings; 
  • Persons with whom or for whose benefit the debtor has concluded transactions for the alienation of assets that do not meet the criteria of reasonableness (economic feasibility, business purpose) and good faith; 
  • A party to a fraudulent transaction made by the debtor or a transaction declared invalid under Article 42 of this Code; 
  • Family members of the above-mentioned persons, including spouses, children, parents, siblings, grandchildren, and other individuals who can be reasonably considered related parties. 
Key Change: Restriction of Voting Rights for Related Creditors 
The most significant innovation in this section of the law is that if a creditor is recognized as a related party to the debtor, they lose their decisive voting rights in creditors' meetings. This measure limits opportunities for unfair actions that could harm other creditors. These changes are expected to increase transparency in bankruptcy proceedings and strengthen protections against fraudulent schemes. 
 
Other Legislative Updates 
Additionally, the Ukrainian Parliament has extended the moratorium on bankruptcy for: 
  • State Enterprise "Eastern Mining and Processing Plant" until January 1, 2026; 
  • State-owned coal mining enterprises. 
This measure aims to prevent the bankruptcy of state-owned enterprises in the energy sector, ensuring stability in the energy industry, which has suffered significant damage due to massive attacks on energy infrastructure. 
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