“Shortened” order of the bankruptcy procedure in case if debtor is not able to repay its debts is summarized as follows (Chapter VІ of the Law on Bankruptcy):

1. Adoption of a decision on liquidation of a debtor company by the general meeting of its owners and submitting the resolution to the state registrar.

2. Two months upon filing of application of enterprise to commercial court referring its declaring a bankrupt for the reason of ascertained lack of property value to repay creditors’ requirements (see Resolutions Nr. B26/195-08, No.24/479-b of the Supreme Commercial Court of Ukraine).

The debtor petition, in particular, shall provide proves of its insolvency, stating the total amount of creditors requirements as well as term for their repayment, fine for undue payments (penalties and fees). The debtor petition shall also include the total amount of creditors’ requirements for monetary obligations in the amount, which is not contested by the debtor, amounts of other types of indebtedness, as well as information and data about available assets/property of the debtor.
It should be noticed that debtor shall submit its petition to Commercial court after the following circumstances accrual (stipulated by part 5 of Article 7 of the Law on Bankruptcy):

– satisfaction of one or several creditors’ requirements will cause non-fulfillment by the debtor of its monetary obligations in a full scope to other creditors;
– management body of the debtor, which is authorized per foundation documents or legislation, passed a resolution on declaring a debtor bankrupt or decided to bring an action before the commercial court with a relevant petition of the debtor to commence proceedings in bankruptcy;
– in case of liquidation of debtor, not caused by procedure of bankruptcy, the debtor insolvency to satisfy creditors’ requirements in a full scope was identified;

– in other cases, stipulated by the Law on Bankruptcy.

3. Commencement of proceedings on bankruptcy by the court. Starting from the day of the commercial court ruling on declaring a debtor bankrupt any further payments of sanctions (penalty, fee), interest payments, other economic sanctions on all types of indebtedness of a bankrupt, as well as fulfillment of any liabilities and conduction of any payments under contracts (including bank loans) are stopped.

4. Appointment of the debtor liquidator by the court decision (since the day of its appointment, the liquidator acquires the rights of manager (management bodies) of the legal entity-bankrupt and liquidation procedure starts.

5. Fulfillment of the liquidation procedure (making an inventory and appraisal of the property value in compliance with provisions of Articles 29, 30 of the Law on Bankruptcy, identification of creditors and audits to be conducted by tax inspectorate and state social security and insurance funds. Ascertainment of total amount of indebtedness to creditors. In accordance with Article 26 of the Law on Bankruptcy all types of bankrupt’s assets (property and proprietary rights), which are owned by debtor based on its right of property as of the date of commencement of the liquidation proceeding, revealed within the framework of the last, are included into totality of liquidation assets.

6. In the process of bankruptcy sale of the debtor property is organized at the price offered by the buyer. Hence, the sale of property during the process of bankruptcy can be conducted at the lower price too. This sort of property sale is not taxed.

In the process of liquidation of debtor a buyer can be represented by a third party or affiliated enterprise of the debtor, as well as any third or affiliated interested body/entity.

Financial resources, accumulated after sale of the debtor property to its purchaser, are allocated to the liquidation bank account of the bankrupt, and then are disbursed to the repayment of debts to creditors in order of their relevant claims satisfaction, defined by Article 31 of the Law on Bankruptcy (preferential payments – in the first and second places – to the bank being the pledge holder and employees; tax liabilities and fees – in the third place; other creditors – in the fourth place).

Payments aimed at partial settlement of debts are conducted from the liquidation bank account of the bankrupt.

Within the framework of the bankruptcy procedure the creditors requirements (including repayment of bank loans), which were not satisfied for the reason of lack of financial resources accumulated after sale of the bankrupt property, are regarded settled and in future shall not undergo any repayment.

Upon sale of the totality of property and repayment of debts the enterprise-bankrupt is liquidated based on the ruling of the court and is excluded from the State Registry of Enterprises in Ukraine and, hence, becomes an invalid legal entity.

The necessary assets are kept by the interested buyer for future activities. Purchased property can be used by buyers at their discretion.

If following the above mentioned plan and contents of actions, in a result of the bankruptcy procedure discharging from debts or their repayment in the amount much less than the current one can be achieved. But, anyway, prior to obtaining such a sort of privilege, i.e. to become free from repayment of the full amount of debts, the enterprise has to pursue/comply with the above mentioned procedures.

Procedure of bankruptcy takes at best 8-10 months (in compliance with part 2 of Article 22 of the Law on Bankruptcy duration of liquidation procedure shall not exceed 12 months, while Commercial Court can prolong this term for another 6 months, if otherwise is not stipulated by legislation).

After commencement of execution of a case on bankruptcy by the court, any new legally grounded claims or pretensions on behalf of the creditors, which might have arisen before the commencement of the bankruptcy case, shall not be accepted in addition to currently filed in the ongoing court proceeding.

Terms for the claim laying on behalf of creditors - 1 month since publication of announcement on bankruptcy in official mass media.

About winding up of legal entities in Ukraine and a full set of liquidation procedures read in this article.