On 14 June 2016 the Verkhovna Rada of Ukraine adopted the Law “On Financial Restructuring” (the Law), which aims to solve many conflicts and assist in debt restructurings in Ukraine.

The Law provides a new procedure for restructuring financial debt of Ukrainian corporate debtors (the Restructuring).

Special features of new Restructuring procedure include:

• Restructuring may be commenced by a debtor only (not creditors).
• It is an out-of-court procedure of negotiations between a debtor and its creditors.
• Joint Restructuring of several debtors–members of the same group is allowed, provided that such debtors have at least one common creditor.
• Creditors participating in the Restructuring are selected by the debtor (Selected Creditors.)
• There shall be at least one financial institution (Ukrainian financial institution, or foreign financial institution or international financial organisation, who provided a loan under agreement registered with the NBU) among the Selected Creditors.
• Status of various types of creditors (e.g. financial institutions, related parties and other creditors) differs. Generally, financial institutions have more rights compared to other creditors; rights of related parties of a debtor are substantially limited.
• The debt subject to the Restructuring shall comprise at least 50 percent of the total amount of claims of creditors-financial institutions towards a debtor (excluding related parties.)
• The term of the Restructuring shall not exceed 180 days.
• Partial moratorium on settlement of creditors’ claims is imposed on the day the Restructuring commences.
• The Restructuring Plan shall be approved by 100 percent of votes of all of the Selected Creditors or at least 2/3 of votes of all of the Selected Creditors and the arbitrator. The Restructuring Plan is binding on all of the Selected Creditors.

The Law provides for special bodies to be established – the Supervisory Board, the Secretariat and the Arbitrage, which will perform administrative functions in the Restructuring and arbitrate disputes.

The Law is yet to be signed by the President of Ukraine and officially published. The Law will enter into force in three months after its official publication and will remain effective for three years (except for certain provisions).

All the Restructurings commenced under the Law shall continue in accordance with the framework provided for in the Law.

Should this matter be of interest to you, please let us know, and we will revert with a more detailed analysis.

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