The Supreme Council adopted a law on financial restructuring at June 14. The business community as well as the government agencies (primarily the NBU and the Ministry of Finance of Ukraine) greeted the adoption of this law, because it has a high hopes of resolving the situation with the problem loans and the recovery of the banking system as a whole.
Given law establishes a new mechanism of voluntary financial restructuring of debts of enterprises and the resumption of their liquidity. This mechanism provides for the procedure of financial restructuring on the basis of an agreement between the debtor and its creditors.
Some skeptics argue that this law duplicates the procedure provided by the law on bankruptcy (the Law of Ukraine “On the resumption of debtor’s solvency”), but there are some significant differences between them. For example, the extrajudicial procedure fully stipulated by the law on financial restructuring, while in bankruptcy law describes the procedure “by a court decision.” Moreover, the proposed procedure is more flexible on the issue of taking into account the minority interests of creditors. If in the bankruptcy law provided a strict requirement on the participation of all creditors, which makes the procedure very long and not flexible, in accordance with the new law, in case of lack of votes for approving the restructuring plan (if the creditors voted, which holds more than two-thirds of the requirements) for a final decision the dispute shall be referred to arbitration. And if the arbitrator will make a decision on approval of the restructuring plan, it will be considered approved by all creditors.
Talking about the arbitration – is a new procedure for resolving debt disputes established by the new law. For the organization and carrying out financial restructuring procedures, as well as the regulation of the process of solving disputes in arbitration, the law provides for the establishment of new bodies – interagency supervisory board (which will include representatives of the National Bank of Ukraine, the Ministry of Finance, the Ministry of Economic Development, the Ministry of Justice) and the secretariat. Arbitrators from a list, approved by the supervisory board, will be appoint by itself created an arbitration committee. The arbitration process will be governed by a special arbitration regulations, which will also be approved by the supervisory board.
For the purpose additional stimulation of enterprises participation in the procedure of the financial restructuring, the law provides a special tax regime for taxation of certain operations related to the procedure, as well as protection against invalidation of the transaction, as it provided by the article 20 of bankruptcy law.
The financial restructuring law also defines: the conditions of participation of the debtor, the creditors, and the Deposit guarantee fund of individuals and state-owned banks in the procedure; basic principles of cooperation of creditors during the procedures; the debtor’s obligation to provide information and the opportunity to inspect its business activities; conditions for obtaining financing by the debtor during the procedure and more.
It should be noted that the practice of restructuring debt to similar procedure has been long and successfully used in many European countries. And in order to take account of this world experience in the development of this law attended by experts of the World Bank and the EBRD. In addition, adoption of the law has become a part the implementation of commitments to the IMF.
The law will be valid for three years. Further ukrainian authorities plan to evaluate the success of the financial restructuring procedures and, in case of positive results, the validity of the law will be extended.