Adoption of the Draft Law “On Financial Restructuring” is an important step of further recovery of Ukrainian economy
The Draft Law “On Financial Restructuring” is an important and necessary step that will speed up the recovery of the Ukrainian economy. An opportunity to do proper voluntary financial restructuring as envisioned by the Draft Law is a generally accepted world practice which has proved to be an effective tool to overcome the financial turmoil and difficult economic situation in many countries.
Adoption of this Draft Law will allow creating prerequisites to restore financial and corporate sector of the country through the financial and operational restructuring of companies. The Draft Law creates reliable and effective mechanisms which allow restructuring business quickly and successfully, restoring companies’ liquidity and business crediting as well as solve the banking issue of troubled debts. It will certainly have a positive impact both on the financial system of Ukraine and its economy in general.
According to Mr. Ihor Olekhov, Co-Chair of the Chamber Banking & Financial Services Committee, partner in the Kyiv office of Baker & McKenzie, the Draft Law «On Financial Restructuring» is economically advantageous and useful both for companies being under financial difficulties and banks which are experiencing a constant growth of the number of problem loans, that turns to increase of banks insolvency.
“Debtors which faced financial difficulties and liquidity problems and are already on the verge of bankruptcy will be able to restructure their debts and business. The Draft Law creates prerequisites for financial recovery, stabilization and development of viable companies. Saving viable companies will help to keep jobs. In case of adoption of this Draft Law, banks will have an opportunity to restructure problematic debts and reclaim their money in the short or medium term. This will bring stability to the banking system and create the necessary conditions for banking financing of business on comprehensible and favorable terms.”
The most notable feature of this Draft Law is the revised Article 6 of the Ukrainian Bankruptcy Law, which will effectively allow Ukrainian businesses to do pre-packaged restructurings or schemes of arrangement. “In particular, in order to achieve restructuring it would be necessary to receive approval of 75% of involved secured creditors and more than 50% of involved unsecured creditors. This would allow to bind the minority dissenting creditors to the restructuring terms agreed by the majority creditors and allow the restructuring to go ahead”, - stated Mr. Olexander Droug, senior associate at Sayenko Kharenko.
The mechanisms offered by the Draft Law allow the restructurings to be conducted in an organised and efficient manner ensuring equal treatment of all creditors. To achieve this, the Draft Law provides for the possibility to impose a moratorium or enter into a standstill agreement during which involved creditors will not be able to enforce their claims but instead would negotiate and agree the restructuring plan. “Another benefit is that it is not necessary to restructure all debts. The businesses would be in a position to pre-select the creditors that would be involved in the financial restructuring”, - said Olexander Droug.
Thus, the Draft Law “On Financial Restructuring” is a positive and important step for Ukraine, which will speed up the growth of the Ukrainian economy, improve banking and financial system and preserve viable companies that are important components of successful development.