Sometimes legal entities-debtors, while being target of enforcement proceedings, in order to evade the enforcement of court ruling, use a trick in the form of a decision to liquidate the company. After this, according to the law “On enforcement proceedings” (hereinafter the Act) state executive office terminates enforcement proceedings and transmits the original writ to the head of the liquidation committee of the debtor (p.2-3 art.67 of the Act). After this point, enforcement of court ruling becomes impossible.

According to p.1.3 art.49 of the Act, termination of legal entity is one of the reasons of completion of enforcement proceedings, given that performance of their duties and other legal requirements during enforcement proceedings will results in obstruction of succession. In practice fundamental problem lies in use by the state executive office of regulations contained within abovementioned Act in isolation from other legislation that regulates termination of legal entities.

Art.104 of Ukrainian Civil Code provides that legal entity shall be terminated as a result of transfer of all its property and rights and obligations to other legal entities, i.e. to its successors (by merging, joining, separating or transforming) or due to its liquidation.

According to p.5 art.111 of Ukrainian Civil Code, legal entity shall be deemed liquidated from the day of entering the record on its termination to the Unified State Register. A similar notion is contained in art.33 of the Law “On state registration of legal entities and individuals – entrepreneurs”.

Articles 110-112 of Ukrainian Civil Code regulate liquidation procedure of legal entity by decision of the owner, but they do not provide for moratorium on execution of court rulings or payouts to creditors.

The Economic Code of Ukraine also does not provide for termination of execution of court ruling during procedure of voluntary liquidation. Therefore, enforcement proceedings should not be terminated unless requirements of p1.3 art.49 of the Act are met. That is liquidation of legal entity by entering the record on its termination to the Unified State Register. This leads us to the conclusion, that decision of state executive office to terminate enforcement proceedings was made without proper legal grounds and therefore is unlawful.

Law “On enforcement proceedings” and The Economic Code of Ukraine provide for possibility of appeal on decision of state executor to the head of respective state executive office or to the court that issued original writ. Such appeal can be filed within a limited timeframe of 10 days.

The High Commercial Court of Ukraine has repeatedly ruled in favor of creditors in cases similar to abovementioned situations, recognizing actions of state executive office illegitimate (rulings 06.02.2012 № 61/37; 05.09.2012 № 2/229; 06.06.2013 № 34/17-3358-2011; 06.06.2013 № 10/17-3202-2011).

Therefore appeals on such actions of state executors are quite effective in reaching an ultimate goal of debt collection.