Improving Legislation in the Field of Insolvency: EU Project Pravo-Justice Joined the Online Consultation
On October 2, at the initiative of the Ministry of Justice of Ukraine, another round of online consultations on improving legislation in the field of insolvency took place. The event was attended by representatives of the Ministry of Justice of Ukraine, the Ukrainian National Insolvency Trustees Association, the Independent Association of Banks of Ukraine; judges; and experts of the EU Project Pravo-Justice.
The discussion of a number of issues related to the absence in the Code of Bankruptcy Procedures of Ukraine of the procedure for full or partial waiver, by a secured creditor, of security in bankruptcy cases was in the focus of attention of the participants to the meeting. They outlined the problems of preventing abuse by creditors in the case of waiver of security, and also spoke about the need to regulate that procedure.
In particular, it has been proposed to provide in law for the possibility of carrying out an inventory of the mortgaged property at the stage where a secured creditor decides on full or partial waiver of security. In addition, the announced initiatives include statutory-based definition of the deadline for the creditor’s complete or partial waiver of security, as well as consequences for a secured creditor in case of non-compliance with the relevant deadline.
The procedure for partial waiver of security was discussed separately: depending on the value of the collateral; in general regarding the available collateral; within the scope of one pledge agreement or part of the property; of certain collateral or any part of thereof.
The participants to the online consultation paid special attention to the problem of taking into account unsecured claims to determine the right to a decisive vote, depending on the stage at which the security was waived, as well as in the case of a collateral being sold.
At the event, Oleh Mykhaliuk, Key National Expert of the Protection of Property Rights and Enforcement of Court Decisions Component, EU Project Pravo-Justice, informed the attendees about best comparative practices on regulating the status of secured creditors in accordance with the materials of the European Bank for Reconstruction and Development and the World Bank. In particular, Oleh Mykhaliuk drew the attention of the attendees to the EBRD Core Principles of an Effective Insolvency System.
“Insolvency resolution procedures and their application shall be aimed at preserving the maximum value of assets. In addition, the insolvency resolution system shall ensure the same status for creditors with similar economic and legal interests in the debtor’s property, as well as protect secured creditors from a decrease in the value of the collateral they hold,” said Oleh Mykhaliuk.
The proposals voiced during the online discussion will be analyzed by the Ministry of Justice when developing amendments to insolvency-related legislation.