Preventive Restructuring as a Way to Prevent Bankruptcy

Abstract

The article aims to study the regulation of the preventive restructuring procedure recently introduced into Ukrainian legislation, to identify its strengths and gaps, and to develop proposals for improving the relevant mechanisms.
During the work, the regulation of preventive restructuring was studied, its main aspects were featured, and various stages of the procedure were analyzed. Based on the analysis, potential advantages and disadvantages of the procedure for legal practice were highlighted, and ways to solve the latter were proposed.
Thus, for more effective regulation of the fundamental aspects of preventive restructuring, it is proposed to develop a clear definition and list of «signs of insolvency», which are key for many internal mechanisms of this procedure. One of the possible options is to form them on the basis of specific negative indicators of the financial audit. At the same time, this issue should be approached not purely mathematically, but on the basis of a multilateral assessment.
In addition, in order to balance the mechanisms of preventive restructuring in the context of the rights of debtors and creditors, it is proposed to extend the effect of subsidiary liability to cases of the debtor's refusal to conduct the procedure at the request of creditors, if bankruptcy nevertheless occurs in the future.
The article also highlights the problem of potential abuses of preventive restructuring, to solve which it is proposed to complicate its initiation, in particular, by imposing on the debtor the obligation to disclose its own financial statements at the time of initiation of the procedure, increasing the requirements for the concept of preventive restructuring, and also establishing liability for the fictitious use of the procedure.
Finally, after both procedures had been compared, it was established that pre-trial rehabilitation and preventive restructuring are not mutually exclusive within the framework of the Code of Ukraine on Bankruptcy Procedures. At the same time, the issues of their applicability and incentives for the parties to use them remain open.