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Publication date: 24.05.2024
Implementation of the Institute of Preventive Restructuring: Legal Analysis
Introduction
Ukraine, like many other countries, faces problems in the economic sector related to the financial instability of enterprises. The lack of effective mechanisms for solving such problems often leads to bankruptcy, which negatively affects the country's economy. One of the ways to solve this problem is the introduction of the institute of preventive restructuring, which is currently being considered by Ukrainian legislators. This article examines the concept of preventive restructuring, its meaning, legal aspects and possible consequences for the economy of Ukraine.
What is Preventive Restructuring?
Preventive restructuring (pre-packaged restructuring or pre-pack) is a process that allows companies on the verge of bankruptcy to restructure their debts and obligations in advance, before they become unable to meet their financial obligations. The purpose of this approach is to prevent bankruptcy through an agreed restructuring involving the creditors and the debtor.
International Experience
In many developed countries, preventive restructuring has long been an effective tool for maintaining the financial stability of enterprises. Example:
US: Chapter 11 of the Bankruptcy Code allows companies to continue operating under court protection while they work on a restructuring plan.
EU: Directive (EU) 2019/1023 on restructuring and insolvency emphasizes the importance of early intervention to prevent insolvency.You may be interested in the following articles: lawyer's consultation, lawyer's consultation, document analysis, legal situation analysis, written consultation, document review by a lawyer, lawyers' documents, lawyer's help online, lawyer online, legal opinion, lawyer's legal opinion, lawyer online.
Legal Aspects of Preventive Restructuring in Ukraine
Legislative Initiatives
In Ukraine, legislators are working on the introduction of a set of norms that will allow enterprises to use the mechanisms of preventive restructuring. The main provisions include:
Possibility of submitting a restructuring application: Companies will be able to submit a restructuring application to the court even before bankruptcy.
Coordination of the restructuring plan with creditors: The process involves the active participation of creditors in the development and approval of the restructuring plan.
Judicial review: The court will perform a supervisory function, ensuring the legality and fairness of the restructuring process.
Advantages of Preventive Restructuring
Preventing bankruptcy: Preventive restructuring avoids formal bankruptcy, which helps save the company and jobs.
Cost reduction: The restructuring process is less costly than the bankruptcy procedure.
Preservation of reputation: Enterprises that successfully undergo restructuring preserve their business reputation, which is important for further operations.
Challenges and Disadvantages
Difficulty aligning interests: Aligning the interests of all stakeholders can be a complex and lengthy process.Need for effective judicial review: The need for a strong and independent judicial mechanism to ensure the fairness of the process.
Potential for abuse: There is a risk that companies may abuse preventive restructuring mechanisms to avoid legal obligations.
Conclusion
The introduction of the preventive restructuring institute in Ukraine is an important step in the direction of financial stability and economic growth. This mechanism can be an effective tool to prevent bankruptcy, save jobs and support businesses in difficult times. However, for the successful implementation of this institute, it is necessary to take into account all possible challenges and ensure proper legal and judicial control. Only then will preventive restructuring be able to fully reveal its potential and become an integral part of the economic system of Ukraine.
