A foreign investor with a Ukrainian subsidiary faces a stark choice when that entity becomes unable to meet its obligations: act within the available statutory windows or watch the situation deteriorate past the point where any meaningful recovery is possible. Under Ukraine's insolvency legislation, timelines are short, procedural requirements are strict, and the consequences of inaction can extend to personal liability for directors and controlling shareholders. For international clients unfamiliar with Ukraine's civil law tradition, the gap between what the statute says and what courts and administrators actually require in practice is wide – and costly to misread.
Insolvency and restructuring in Ukraine is governed by a dedicated body of insolvency legislation administered through the Commercial Court system. Proceedings may take the form of a formal restructuring procedure, a court-supervised sanation, or full liquidation, depending on the debtor's financial position and the creditors' collective decision. Timelines from petition to outcome vary considerably but formal restructuring phases typically run for periods measured in months, with court-supervised stages subject to extension on judicial discretion.
This page explains the principal instruments available to debtors and creditors in Ukraine, the procedural steps involved. The practical pitfalls that affect international participants. Additionally, the cross-border considerations that arise when Ukrainian insolvency intersects with EU or other jurisdictions.
The regulatory environment for insolvency proceedings in Ukraine
Ukraine's insolvency legislation establishes a unified system for commercial entities facing financial distress. The legislation applies to legal entities registered in Ukraine, including subsidiaries and branches of foreign companies. Natural persons engaged in business activity are also subject to dedicated provisions within the same legislative body.
The Hospodarskyy sud (Commercial Court) holds exclusive jurisdiction over insolvency matters. Cases are initiated either by the debtor itself or by a creditor whose claim meets the statutory threshold. Courts at the regional level handle first-instance proceedings; appeals go to the Appellatsiynyy hospodarskyy sud (Commercial Court of Appeal), and cassation review lies with the Verkhovnyy sud (Supreme Court of Ukraine).
Ukraine's insolvency regime distinguishes between several procedural tracks. The primary distinction is between a restructuring-oriented path – designed to preserve the business as a going concern – and a liquidation path, which leads to the orderly wind-down and distribution of assets. A third track, known as sanatsiya (sanation), allows for court-supervised rehabilitation under a plan approved by creditors and the court. Each track carries different implications for the rights of secured and unsecured creditors, the powers of the administrator, and the timeline for resolution.
The legislation was substantially modernised in the years preceding the current armed conflict. The updated rules introduced stronger protections for secured creditors, clearer procedures for the appointment and oversight of the arbytrazhnyy keruyuchyy (insolvency administrator), and a more structured approach to creditor voting. International practitioners note, however, that enforcement of these provisions remains uneven. Commercial Courts in different regions apply procedural rules with varying degrees of consistency. Additionally. The conduct of the administrator. whose role combines elements of both the administrator and liquidator functions familiar to common law practitioners. has a disproportionate effect on outcomes.
The ongoing armed conflict has introduced additional complications. Martial law provisions have modified certain procedural deadlines and created a temporary moratorium on specific categories of enforcement action. International clients should assume that any timeline stated in pre-conflict guidance requires verification against current martial law measures before reliance.
Key instruments: restructuring, sanation and liquidation procedures
Ukraine's insolvency legislation provides three principal instruments for addressing financial distress. Understanding which instrument applies – and when – determines the strategy available to both debtors and creditors.
Restructuring proceedings are initiated when the debtor is unable to satisfy its obligations but remains a viable enterprise. The court appoints an administrator to oversee the debtor's operations and facilitate the development of a restructuring plan. The plan must address all classes of creditors and specify the treatment of each claim. Creditors vote on the plan at a zbory kredytoriv (creditors' meeting). Approval requires a qualified majority of creditors by value. Once approved by the court, the plan binds all creditors, including dissenting minorities within an approving class.
The restructuring plan may provide for debt rescheduling, partial debt forgiveness, asset transfers, capital injections by third parties, or a combination of these measures. The debtor retains its legal personality throughout. Directors may remain in post if the court and administrator consent, though the administrator supervises all significant decisions. Restructuring phases typically run for periods of up to one year at first instance, with judicial extensions possible in complex cases.
A common mistake by international debtors is treating the restructuring period as a breathing space without actively developing a credible plan. Courts have broad discretion to convert restructuring proceedings to liquidation where the debtor fails to demonstrate genuine progress. The conversion can occur at short notice and removes the debtor's ability to manage the rehabilitation process.
Sanation is a form of court-supervised rehabilitation that predates the modern restructuring regime and continues to operate alongside it. Under sanation, an investor – which may be a third party – takes control of the debtor's assets and operations under a plan approved by the creditors' meeting and the court. The sanation investor assumes responsibility for satisfying creditor claims in accordance with the agreed plan. Sanation is frequently used where a strategic acquirer is prepared to assume the debtor's business in exchange for a negotiated settlement of creditor claims.
For international investors, sanation offers a structured acquisition mechanism that is less exposed to the disruption of a contested liquidation. The key risk lies in the creditor approval process: a proof of debt filed late or incorrectly will result in the creditor being excluded from the voting process, which can shift the outcome materially. Practitioners in Ukraine note that creditor list disputes – challenges to the validity or quantum of admitted claims – are among the most actively litigated aspects of insolvency proceedings.
Liquidation is initiated where restructuring or sanation is not viable or has failed. The court appoints a likvidator (liquidator) who takes full control of the debtor's assets, ceases trading activity, and realises assets for distribution to creditors in the statutory priority order. Secured creditors are satisfied first from the proceeds of their collateral. Preferential unsecured creditors – including employees for wage arrears and certain public-law creditors – rank next. Ordinary unsecured creditors rank last, and shareholders receive distributions only after all creditor claims are satisfied in full, which rarely occurs in practice.
The liquidator is required to conduct an inventory of assets, challenge transactions that were entered into at an undervalue or in fraud of creditors, and file periodic reports with the court. Insolvency proceedings in the liquidation phase can extend over periods of one to three years in complex cases, particularly where asset recovery litigation is involved. International clients holding claims against Ukrainian entities in liquidation should file their proof of debt promptly and monitor the liquidator's actions closely. Passive creditors who rely solely on the liquidator to protect their interests frequently find that their claims are subordinated or disputed.
For a detailed perspective on how corporate disputes in Ukraine interact with insolvency proceedings, see our practice on corporate disputes in Ukraine, which addresses shareholder claims and director liability in distressed situations.
To discuss how insolvency instruments apply to your specific situation in Ukraine, contact us at info@ferrazwhitmore.com.
Practical pitfalls for international creditors and debtors
Ukraine's insolvency system presents specific challenges for participants who are accustomed to common law jurisdictions or to the more predictable procedural environments of Western Europe. Several recurring issues affect international clients in particular.
Administrator conduct and oversight. The insolvency administrator holds broad powers and is subject to court supervision, but in practice the level of judicial oversight varies. An administrator who fails to challenge preferential transactions, delays asset realisations, or mismanages the creditors' meeting agenda can cause material prejudice to creditors without necessarily triggering formal sanctions. International creditors should engage local counsel to monitor administrator conduct from the outset of proceedings, not only at the stage when distributions are being made.
Creditor registration deadlines. The deadline for filing a proof of debt in Ukrainian insolvency proceedings is strict. A creditor who misses the registration window is treated as a late creditor and ranks after all timely creditors in the distribution order. This applies equally to foreign creditors, regardless of the distance between the creditor's jurisdiction and Ukraine. The court does not routinely notify foreign creditors individually. International creditors relying on press publications or Commercial Register notices to learn of proceedings may find they have already missed the registration deadline.
Transaction avoidance. Ukrainian insolvency legislation contains provisions enabling the administrator or liquidator to challenge transactions entered into within a defined look-back period before the insolvency petition. Transactions at undervalue, gratuitous disposals, and payments to connected parties during the suspect period are all vulnerable to challenge. For international groups that have restructured intercompany balances or transferred assets between Ukrainian and foreign entities in the period before insolvency, this risk requires careful assessment before proceedings are initiated.
Wartime modifications. Martial law provisions in force since 2022 have introduced temporary modifications to insolvency procedure. Certain enforcement actions have been suspended, specific categories of debtor have received temporary protection, and procedural timelines in some courts have been extended informally due to capacity constraints. The interaction between martial law provisions and standard insolvency legislation is not always resolved by clear statutory language, and practitioners in Ukraine note significant divergence in how different Commercial Courts are applying the rules. Any strategy built on pre-conflict procedural assumptions should be reviewed.
Enforcement of foreign judgments and awards. A foreign creditor holding a judgment or arbitral award against a Ukrainian debtor faces additional procedural steps to have that claim admitted in Ukrainian insolvency proceedings. The exequatur (recognition of a foreign judgment in Ukrainian law) process must ordinarily be completed before the claim can be filed as a proof of debt. In the current environment, recognition proceedings can take several months, further compressing the window available for creditor registration.
Cross-border asset tracing. Where a Ukrainian debtor has transferred assets abroad before insolvency, Ukrainian courts have limited direct enforcement reach outside the country. The liquidator may initiate proceedings in foreign jurisdictions, but this requires local counsel, funding, and time. International clients with knowledge of offshore asset movements should engage counsel early to assess whether interim measures – such as asset freezes in foreign courts – can be obtained in parallel with Ukrainian insolvency proceedings.
Cross-border and strategic considerations
Ukraine does not currently participate in the EU's cross-border insolvency regime. The European Insolvency Regulation, which governs recognition and coordination of insolvency proceedings between EU member states, does not apply to Ukrainian proceedings. This creates a meaningful gap for international groups with operations in both Ukraine and EU member states.
Recognition of Ukrainian insolvency proceedings in EU jurisdictions depends on the bilateral treaty framework between Ukraine and each member state, supplemented by the domestic private international law rules of the relevant EU country. In practice, recognition is not automatic. A creditor or liquidator seeking to enforce the effects of Ukrainian insolvency proceedings in Germany, France, or another EU state must initiate separate recognition proceedings in each jurisdiction. The outcome is not guaranteed and the process adds cost and delay.
For groups with Ukrainian and Russian entities simultaneously in distress, the combination of insolvency proceedings in both jurisdictions presents particular complexity. Neither Ukraine nor Russia currently participates in a multilateral cross-border insolvency framework that would allow automatic coordination. The practical consequence is that parallel proceedings must be managed independently, with the risk that asset realisations in one jurisdiction are not recognised by courts in the other. Our analysis of the restructuring environment in Russia provides a comparative perspective: see our overview of insolvency and restructuring in Russia for the key distinctions in procedure and creditor treatment.
For EU-based creditors of Ukrainian debtors. The current conflict also raises questions about the practical enforceability of Ukrainian court decisions and the ability of the liquidator to realise assets that may be located in conflict-affected regions or under occupation. These are not purely legal questions – they require a combined legal and commercial assessment of what recovery is realistically achievable, at what cost, and within what timeframe.
Where a Ukrainian debtor is part of an international group, the place of the centre of main interests is a critical threshold question. Courts in EU member states may accept jurisdiction over the insolvency of a Ukrainian entity if it can be demonstrated that the entity's centre of main interests is located within the EU. for example. There. The entity's principal management decisions are made from an EU-based holding company. This analysis requires careful preparation and early engagement with counsel in both the Ukrainian and EU jurisdictions.
Detailed background on setting up and managing Ukrainian entities – relevant context for understanding the corporate structure that precedes insolvency – is available in our guide to company formation in Ukraine.
For a tailored strategy on restructuring or insolvency proceedings in Ukraine for your organisation, reach out to info@ferrazwhitmore.com.
Self-assessment checklist before initiating insolvency proceedings in Ukraine
Insolvency proceedings in Ukraine are appropriate if the following conditions are met. Work through this checklist before deciding on a course of action.
Threshold conditions for initiating proceedings:
- The debtor is unable to satisfy monetary obligations as they fall due and this inability is not temporary.
- The total value of unsatisfied claims meets or exceeds the statutory minimum required to support a creditor petition.
- The debtor is a legal entity registered under Ukrainian law or a foreign entity with sufficient connection to Ukrainian jurisdiction.
- No prior insolvency petition in respect of the same debtor is currently pending before a Ukrainian Commercial Court.
For creditors – before filing a proof of debt:
- Confirm the registration deadline for the relevant proceedings and ensure the claim can be filed within that window.
- Assess whether any foreign judgment or arbitral award requires prior recognition before it can be filed as a proof of debt.
- Review the debtor's known asset base and determine whether any assets are secured in favour of your claim.
- Identify whether the debtor has entered into transactions with connected parties in the suspect period before insolvency.
Strategic decision points:
- Is restructuring or sanation commercially viable, or is the debtor's business not capable of generating sufficient value to support a plan?
- Are there cross-border assets that require parallel enforcement action in foreign jurisdictions?
- Does the group structure raise centre-of-main-interests questions that could support or complicate proceedings outside Ukraine?
- Have the implications of current martial law modifications to insolvency procedure been assessed against the specific facts?
Where the answer to any of these questions is uncertain, legal advice specific to Ukraine's current insolvency environment is essential before committing to a procedural path.
Frequently asked questions
Q: How long do insolvency proceedings in Ukraine typically take from petition to resolution?
A: Timelines vary significantly depending on the track. Restructuring proceedings have an initial phase that typically runs up to one year, with judicial extensions possible in complex cases. Liquidation proceedings in cases involving asset recovery litigation or disputed claims regularly extend to two or three years. Wartime conditions have introduced additional delays in some Commercial Courts due to capacity and accessibility constraints. Any timeline estimate should be verified against current martial law provisions before reliance.
Q: Can a foreign creditor file a proof of debt in Ukrainian insolvency proceedings?
A: Yes, foreign creditors may file a proof of debt in Ukrainian insolvency proceedings. However, a foreign creditor holding a judgment or arbitral award must ordinarily complete recognition proceedings in Ukraine before that claim can be admitted. The recognition process adds time and should begin as early as possible. Engaging a lawyer in Ukraine with experience in cross-border creditor matters is strongly recommended to manage the registration deadline and the recognition process in parallel.
Q: Is it possible to restructure a Ukrainian entity's debts without going through formal court proceedings?
A: Out-of-court workouts and creditor agreements are legally possible under Ukrainian commercial legislation and may be appropriate where the debtor's creditor base is manageable and creditors are willing to negotiate. However, out-of-court arrangements do not bind dissenting creditors and do not protect the debtor from individual enforcement actions during the negotiation period. A common misconception is that an informal standstill agreed with the main bank creditor prevents other creditors from taking enforcement action – it does not. Where the creditor base is diverse or creditors are uncooperative, court proceedings provide the only mechanism for binding all creditors to a restructuring plan.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions on insolvency, restructuring, and related cross-border matters. Our team combines Portuguese civil law expertise with English common law tradition to deliver integrated legal solutions for clients navigating financial distress in Ukraine and other emerging-market jurisdictions. As a law firm in Ukraine with an established cross-border practice, we advise international investors, creditors' committees. Additionally. In-house legal teams on restructuring plan development, creditors' meeting strategy, administrator oversight. Additionally, parallel enforcement across multiple legal systems. Our insolvency and restructuring practice covers jurisdictions across Eastern Europe, the CIS region, and the EU, supported by practitioners with experience before Commercial Courts, arbitral tribunals, and appellate bodies in civil law systems. The firm's Lisbon base provides direct access to EU regulatory and enforcement mechanisms relevant to recognition of Ukrainian proceedings. To discuss your situation with our team, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.