The bankruptcy of a legal entity is not always ‘the end’. For the debtor, it can be a means of defence: the commencement of proceedings halts the accrual of penalties, suspends enforcement proceedings, lifts asset freezes and imposes a moratorium on the satisfaction of creditors’ claims.
For a creditor, on the other hand, it is a means of recovery: when a debtor ignores a court ruling and divests assets, initiating bankruptcy proceedings often proves to be the only effective lever. Often, the mere threat of such proceedings is enough to compel payment.
And there is a third party that is often mentioned far too late: the director and owners. A company’s bankruptcy does not always mean that they will lose nothing — there is subsidiary liability, under which the company’s debts are recovered from them personally.
+38 095 554-54-24 — legal advice
Three positions — three different tasks
We defend the debtor: restoration of solvency, reorganisation, business preservation, protection of the director and owners from subsidiary liability, and challenging creditors’ claims.
We represent the creditor: initiating bankruptcy proceedings, registering claims, challenging the debtor’s transactions, appealing against the actions of the insolvency practitioner, and monitoring the sale of assets.
We defend directors and owners: against subsidiary liability and criminal risks.
These positions are incompatible — which is precisely why it is important to determine your own position before someone else initiates the proceedings.
What does the opening of proceedings mean for the debtor?
- a moratorium is imposed on the satisfaction of creditors’ claims;
- the accrual of fines, penalties and interest is suspended;
- enforcement proceedings are suspended, and attachments on accounts and assets are lifted;
- enforcement under enforcement orders is suspended;
- the possibility arises of reorganisation — restoring solvency whilst preserving the business.
For a company whose accounts have been frozen and operations suspended, this is often the only way to continue operating.
Procedures
Disposal of assets. An insolvency practitioner is appointed, a register of creditors’ claims is drawn up, and the financial position is analysed. At this stage, the key question is decided: is there anything worth saving?
Reorganisation. A plan to restore solvency: debt restructuring, sale of some assets, changes to the management structure, and attracting an investor. The business is preserved.
Winding up. Assets are sold, proceeds are distributed amongst creditors in order of priority, and the company is wound up.
Amicable settlement — possible at any stage, provided creditors agree to the debtor’s terms.
Subsidiary liability: the main risk for a director
This is something people do not think about until the very last moment.
If it is established that the bankruptcy was caused by the actions or inaction of the director or founders, the court may impose subsidiary liability on them — that is, recover the company’s outstanding debts from their personal assets.
Typical grounds include: the withdrawal of assets on the eve of bankruptcy, entering into knowingly loss-making transactions, failure to file for bankruptcy within the prescribed time limit, and the destruction or falsification of accounting documents.
Separately, there are criminal risks: driving a company into bankruptcy, fraudulent bankruptcy, and concealment of assets.
Therefore, defending the director is a separate task and must be conducted in parallel with the proceedings, rather than after them.
Challenging the debtor’s transactions
The creditor’s most powerful tool.
Transactions entered into by the debtor during a specified period prior to the commencement of proceedings may be declared void if they have caused harm to creditors: the sale of assets at an undervalued price, transfer of assets without consideration, early repayment of debt to a ‘connected’ creditor, or the conclusion of contracts on unfavourable terms.
Practical consequence: assets ‘sold’ to a relative or an affiliated company six months prior to bankruptcy are returned to the liquidation estate.
This is precisely why attempts to transfer assets prior to bankruptcy almost always backfire on the debtor — and give rise to subsidiary liability.
Costs of the proceedings
- court fee for filing the application;
- advance payment of the insolvency practitioner’s fee — this is mandatory, and without it the application will be returned. This is the main initial cost;
- costs of valuing and realising assets;
- solicitor’s fees.
We will calculate the exact amount during a consultation — it depends on who initiates the proceedings and at what stage you become involved.
When a solicitor is not required
If the company has no debts and you are simply closing down the business — this is winding up, not bankruptcy. This is a different, much simpler procedure.
A solicitor is required when:
- a petition has been filed against the company for bankruptcy;
- the company is unable to settle its debts with creditors;
- you are a creditor, and the debtor is ignoring a court order;
- the debtor is transferring assets;
- you are a director or founder — and there is a risk of subsidiary liability;
- you need to save the business through reorganisation.
How we work
- We determine your position — whether you are a debtor, a creditor or a director. Everything depends on this.
- We analyse the financial situation and transactions from previous periods — to identify what may be challenged.
- We prepare a claim or a response to it.
- We manage the proceedings — the register of claims, creditors’ meetings, and liaising with the insolvency practitioner.
- We defend the director against subsidiary liability — in parallel with the main proceedings.
- We challenge the debtor’s transactions — if we are representing a creditor.
Cost of services
| Service | Price |
|---|---|
| Consultation | from 1,500 UAH |
| Legal opinion: risk analysis and strategy | from 5,000 UAH |
| Preparation of a bankruptcy petition or response | from 5,000 UAH |
| Preparation of procedural documents and applications for inclusion in the register of claims | from 5,000 UAH |
| Participation in one court hearing | from 3,000 UAH |
| Court representation | from 10,000 UAH |
| Comprehensive ‘turnkey’ support for commercial cases | from 30,000 UAH |
Excluded: court fees, advance payment of the insolvency practitioner’s remuneration, and costs of valuation and realisation of assets.
Full price list · Commercial disputes
Questions and answers (Bankruptcy of a legal entity)
What are the benefits of bankruptcy for a debtor?
A moratorium on creditors’ claims, cessation of the accrual of fines and penalties, suspension of enforcement proceedings, and lifting of asset freezes. For a company with frozen accounts, this is often the only way to continue operating.
Can a creditor initiate bankruptcy proceedings?
Yes. And often, the mere threat of such proceedings forces the debtor to pay — especially if they continue to operate.
What is subsidiary liability?
This is when a company’s debts are recovered from the personal assets of the director or founders — if it was their actions that led to the bankruptcy: withdrawal of assets, loss-making transactions, destruction of documents.
Can a business be saved?
Yes, through reorganisation: a plan to restore solvency, debt restructuring, the sale of some assets, or bringing in an investor. The company is preserved.
Can the debtor’s transactions be challenged?
Yes. Transactions carried out during a specified period prior to the commencement of proceedings to the detriment of creditors are declared void — and the assets are returned to the liquidation estate.
What happens if assets are siphoned off before bankruptcy?
They will be recovered through the challenging of those transactions, and the director will additionally face subsidiary liability and the risk of criminal proceedings.
How much does the procedure cost?
Court fees plus an advance payment of the insolvency practitioner’s fees are the main initial costs. Plus the valuation and sale of assets, and the solicitor’s fees.
How does bankruptcy differ from liquidation?
Liquidation is the voluntary winding-up of a company without debts. Bankruptcy is a court procedure where it is impossible to settle with creditors.
What documents should I bring to the consultation?
Financial statements, a list of creditors and debts, title deeds, court judgements and enforcement orders, and contracts from recent periods.
Consulting a solicitor at Svarog regarding the bankruptcy of a legal entity
Determine your position before someone else does. Send us your financial statements and a list of debts — we will advise you on whether your business can be saved through reorganisation, whether there is a risk of subsidiary liability for the director, and which legal transactions may be challenged.
+38 095 554-54-24 · Kyiv, 7 Khoriva Street (Podil) · Mon–Fri 9:00–18:00