For the first time, a business in Ukraine is undergoing the preventive restructuring procedure

For the first time in Ukraine, a company has initiated the process of preventive restructuring. This approach is used when a business owner sees serious financial difficulties ahead and adjusts the terms of loan obligations without shutting down operations. This new procedure allows businesses to stay afloat and avoid bankruptcy, notes arbitration manager Denys Lykhopyok.

In total, 1,087 Ukrainian businesses have begun the process of closure since the beginning of the year. Of these, 66.7% — or 725 companies — have ceased operations voluntarily without going through bankruptcy proceedings. This means the company has no debts, but its owners decided to close the business.

Denys Lykhopyok notes that voluntary business closures have become less common recently: the current year’s figure is 23% lower than last year. This is due to increased responsibility among business owners and managers regarding debts and potential creditors.

Meanwhile, 164 companies that ceased operations are now undergoing bankruptcy proceedings in court, which is 22% more than at the beginning of last year.

Additionally, 118 companies have entered the judicial liquidation stage, meaning they are closing due to insolvency. In such cases, creditors receive payments from the sale of the company’s assets.

Another 80 businesses are currently in the reorganization stage, transforming into other projects. This number is 63.5% lower than last year. Reorganization may be used to hide questionable businesses or partners through mergers, acquisitions, divisions, or conversions.

Denys Lykhopyok also highlights that only 5-10% of all cases result in financial recovery (rehabilitation). This is because businesses often turn to legal recovery mechanisms too late.

In my opinion, most businesses face financial difficulties, but using legal procedures to resolve them is currently too complex and risky for owners. Once a company has already gone bankrupt, rehabilitation is unlikely to change much. Essentially, this just reflects the overall state of business and the economy as a whole, 

— commented Denys Lykhopyok, lawyer, insolvency practitioner, member of the Qualification Commission of Insolvency Practitioners, and bankruptcy expert.