Bankruptcy of a solvent debtor: myth or reality

In an article for the newspaper Yurydychna Praktika, Dmytro Tylipskyi, counsel at EQUITY, and EQUITY associate Oleksiy Kobal wrote: “The simplified procedure for initiating proceedings creates risks for debtors in the form of pressure from unscrupulous creditors who file for bankruptcy in the absence of signs of insolvency”.

In the article, the lawyers also set out the following proposals:

• proposals to amend Part 6 of Article 39 of the Code of Ukraine on Insolvency Proceedings (CUIP) to allow refusal if there are no signs of the debtor's insolvency;
• the negative consequences for solvent enterprises and the Ukrainian economy due to an increase in bankruptcy cases;
• they also discussed the absence in the Code of Commercial Procedure of Ukraine of the possibility to refuse to open a case due to the debtor's solvency, which creates room for abuse by creditors;
• the authors compared the Ukrainian approach with that in France, where the key criterion for bankruptcy is 'cessation of payments' and an asset test is conducted;
• the lawyers emphasised the need for a balance between the interests of creditors and debtors to avoid artificial and unjustified bankruptcies.

They emphasised that improving the legislative regulation of bankruptcy proceedings should ensure a fair balance of rights for all participants in the process and prevent bankruptcy proceedings being used as a means of pressuring financially stable enterprises.