Bankruptcy of an enterprise: personnel matters of the procedure were analyzed by Yulia Stusenko

On April 21, 2019, the Bankruptcy Code of Ukraine (hereinafter - the Code) entered into force, which will be enacted on October 21, 2019. The circle of personnel issues in the bankruptcy procedure in accordance with the Code can be divided into two categories: issues related to the employees of the debtor and the question regarding the management bodies/officials of the debtor. In particular, the Code settles the procedure for the participation of employees of the debtor in bankruptcy cases, the exercise of the rights of the employees of the debtor as participants in the judicial process, the procedure for dismissing and appointing the management bodies of the debtor in bankruptcy proceedings and some other issues.

Participation of employees of the debtor in bankruptcy proceedings

In accordance with the provisions of the Code, the interests of the employees of the debtor in bankruptcy cases are represented by a representative of the employees of the debtor, who is a person authorized by the general meeting (conference), where at least two thirds of the staff of the debtor are present, or by the relevant decision of the debtor's primary trade union organization debtor during bankruptcy proceedings with an advisory vote.

The decision on the election of a representative of the employees of the debtor shall be drawn up by the minutes of the general meeting (conference) of the employees of the debtor or by the relevant decision of the primary trade union organization of the debtor (if there are several primary organizations, their general decision).

Note, according to the Code, the representative of the employees of the debtor can participate in the meeting of creditors of the debtor only with the right of an advisory vote. The decisive vote right is granted by the Code to bankruptcy creditors recognized by the economic court at a preliminary meeting and entered by the property manager into the register of creditors' claims.

Creditors on claims for the payment of wages, as well as claims for compensation for harm caused to life and health of citizens, payment of insurance premiums for obligatory state pension and other social insurance are eligible for 30 days from the date of the official publication of the announcement of the opening of proceedings on bankruptcy submit to the economic court written applications with requirements to the debtor, as well as supporting documents.

Accordingly, taking into account the fact that the interests of the employees of the debtor must be represented by their representative, it is he who will have to submit such a written application to the economic court.

It is worth remembering that the statements of creditors regarding claims for the payment of wages, as well as claims for compensation for harm caused to life and health of citizens in respect of which there are objections of the debtor, are considered according to the Code. At the same time, the property manager is obliged to separately inform the court about the claims for the payment of wages and claims for compensation for harm caused to the life and health of citizens, according to the statements of such creditors and/or debtor accounting data.

Readjustment

The Code establishes that if the economic court approves the reorganization plan and issues a resolution on the introduction of the reorganization procedure, members of the executive body (head) of the debtor are dismissed from office in the manner prescribed by law, and the debtor will be in charge of the reorganization manager.

Thus, in the case of the introduction of the economic court for the debtor's reorganization procedure the debtor's executive body (the head) is dismissed in accordance with the labor legislation of Ukraine, and its functions were assigned to the control of reorganization.

It is the reorganization manager, who has the right to conclude employment contracts on behalf of the debtor in the event of hiring staff in the reorganization procedure.

The Code provides that, among other things, measures to restore the debtor’s solvency, which the redevelopment plan contains, may include: enterprise restructuring; reshaping production; the closure of unprofitable industries; dismissal of employees of the debtor who cannot be involved in the process of implementation of the reorganization plan; obtaining a loan for the payment of severance pay to employees of the debtor who are dismissed according to the redemption plan, which is reimbursed in accordance with the requirements of the Code out of turn due to the sale of the debtor's property.

Such measures as the restructuring of the enterprise, the conversion of production, the closure of unprofitable production, lead to the release of workers and, accordingly, to their dismissal on the basis of paragraph 1, part 1, article 40 of the Labor Code of Ukraine.

If the reorganization plan provides for the dismissal of workers whose work cannot be involved during its implementation, the manager of the reorganization prior to the proposed dismissal must submit to the primary trade union organization relevant information, as well as consult with the trade unions about taking measures to prevent dismissal, reducing the number of dismissed workers to minimize or mitigate the effects of dismissal. The severance pay in this case is paid at the expense of the debtor or funds from the sale of the property of the debtor, or a loan obtained for this purpose.

The novelty of the Code is that the reorganization manager is allowed to receive a loan from banks specifically for the purpose of paying severance pay to the debtor’s dismissed workers, and also provides for the procedure for subsequent reimbursement of such a loan.

Liquidation procedure in case of bankruptcy

In cases provided for by the Code, the court at a court session with the participation of the parties decides on declaring the debtor bankrupt, opens a liquidation procedure and appoints a liquidator.

From the day of its appointment, the liquidator shall exercise the following powers related to labor relations:

- fulfills the authority of the head (governing bodies) of the bankrupt;

- has the right to receive a loan for the payment of severance pay to employees dismissed due to the liquidation of a bankrupt, which is reimbursed in accordance with this Code out of turn at the expense of funds received from the sale of the bankrupt's property;

- from the date of recognition of the debtor bankrupt and the opening of the liquidation procedure, informs the bankrupt employee about his dismissal and carries it out in accordance with the labor legislation of Ukraine. Payment of severance pay to dismissed bankrupt employees is carried out primarily by the liquidator at the expense of funds received from the sale of the bankrupt's property or a loan received for this purpose.

The issue of employment of dismissed workers is decided in accordance with the legislation on labor and employment. The laid-off workers of the debtor are subject to the guarantees established by the legislation on labor and employment of the population.

Moreover, the Code provides that, first of all, from the funds received from the sale of the bankrupt's property, the requirements are met regarding:

- payments of wage arrears to employed and dismissed bankrupt employees;

- cash compensation for all unused days of annual leave and additional leave for employees with children;

- other funds belonging to employees in connection with paid absence from work (payment of idle time through no fault of the employee; guarantees for the period of state or public duties; guarantees and compensation in the case of business trips; guarantees for employees sent to improve their skills; guarantees for donors; guarantees for employees sent for examination to a medical institution, social benefits due to temporary disability at the expense of the enterprise, etc.);

- severance pay due to employees in connection with the termination of the employment relationship;

- accrued on these amounts of insurance premiums for obligatory state pension insurance and other social insurance, including the repayment of the loan received for this purpose.

CONCLUSION:

In general, the provisions of the Code regarding personnel issues are aimed at protecting the interests of the employees of the debtor-bankrupt and contain novels that make it possible to fulfill the obligations of the debtor-bankrupt to employees as a matter of priority.

The implementation of a significant number of the novels contained in the Code will depend on the practice of application, and it will be possible to evaluate their effectiveness only after some time of the law-enforcement practice of the provisions of the Code.

                                                                                                                   Yulia Stusenko, associate partner of Skliarenko, Sydorenko and Partners,

                                                                                                                                                   especially for the publication "LAWYER & LAW" № 20