Bankruptcy during COVID-19: 7 key changes, which came into force

Due to the restrictive measures introduced by the state to prevent the spread of COVID-19, many business entities are facing the threat of bankruptcy. In Ukraine, it was decided to correct some procedures in order to protect the interests of debtors and creditors in the new business environment.

Law No. 728-IX "On Amending the Code of Ukraine on Bankruptcy Procedures (regarding the prevention of abuse in the field of bankruptcy for the period of implementation of measures aimed at preventing the emergence and spread of coronavirus disease (COVID-19)" entered into force on October 17, 2020 in connection with an official release.

The document contains a number of new rules that apply to the quarantine period established by the Cabinet of Ministers of Ukraine, namely:

- the meeting and the creditors 'committee are allowed to be held remotely by videoconference or by survey, provided that proper identification and verification of the credentials of creditors' representatives is ensured. For these cases, the procedural rules for organizing the event are determined;

- the bankruptcy commissioner is released from liability for failure to perform the actions provided for by the Code of Ukraine on the Bankruptcy Procedures, if they could not be performed under quarantine. The latter will have to be proved separately;

- the timing of a preliminary court hearing in a bankruptcy (insolvency) case continues (for the period of quarantine), applications in the framework of bankruptcy (insolvency) proceedings to invalidate transactions made by the debtor, moratoriums on satisfying creditors' claims, announcement of the first , repeated and (or) second repeated auction, fulfillment of the plan for rehabilitation or restructuring of debtor's debts, external management, liquidation, restructuring of debts of the debtor and repayment of debts of the debtor.

In addition, for the period of the quarantine, as well as within 90 days from the day the quarantine was canceled:

- it is not allowed to open proceedings in bankruptcy cases of debtors - legal entities at the request of creditors on claims against the debtor that arose after March 12, 2020;

- the debtor's monthly application period for filing a bankruptcy case is extended if he proves the impossibility of meeting this deadline due to the spread of COVID-19 and (or) measures to combat this disease;

- the creditors' committee and the secured creditor (in relation to the property that is the subject of security) are given the right to make decisions on the suspension of auctions for the sale of the debtor's property;

- the accrual of interest on the debtor's liabilities to creditors who have been restructured by the debtor's debt recovery or restructuring plan is stopped. Penalties for the debtor's failure to fulfill such obligations are not charged.

It is noteworthy that the Law, which was adopted on June 18, was signed by the President almost four months later, on October 13.