Ukraine – COVID-19 Update

Contacts – Vladimir Sayenko, Oleksandr Nikolaichyk, Tymur Enkhbaiar

On 30 March 2020, the Parliament of Ukraine adopted the Law of Ukraine No. 540-IX "On Amendments to Certain Legal Acts to Provide Additional Social and Economic Guarantees Due to the Spread of Coronavirus Disease (COVID-2019)” (the “Law"). The Law became effective as of 2 April 2020.

The Law amends several dozen legal acts with a set of measures to help businesses cope with the restrictive measures introduced by the government to stop the spread of COVID-2019 in Ukraine.

We have prepared a summary of the main amendments made by the Law to the national corporate and contract legislation.

Annual general shareholders / participants meetings 

The Law of Ukraine “On Joint-Stock Companies” No. 514-VI of 17 September 2008 (the “Law on Joint-Stock Companies”): 

• a temporary provision was introduced postponing the 30 April 2020 mandatory deadline for the general meetings of shareholders of the joint-stock companies (the “General Meeting”), and 
• an obligation to hold the General Meeting no later than three months after the end of quarantine was added. 

At the same time, if a joint-stock company holds the General Meeting during the quarantine, this will not be considered a violation of the law.

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Recommendations for the implementation of energy projects during the force majeure period

Contacts – Maryna Hritsyshyna, Natalia Hutarevych

On 17 March 2020, the Parliament of Ukraine amended the list of the force majeure events in the Law on Chambers of Commerce and Industry in Ukraine. It added to the list the quarantine approved by the Cabinet of Ministers of Ukraine (“CMU”). The force majeure event can have a significant impact on the fulfilment of contractual obligations in the energy projects both at the development stage and at construction stage. For this reason, in the process of implementing energy projects during a period of force majeure, it is important to understand the features of the force majeure event and take into account the following recommendations:

• Take into account constant changes in legislation

Since the beginning of the force majeure period, the Parliament adopted two legal acts amending Ukrainian legislation in connection with COVID-19. The Resolution of the CMU "On Preventing the Spread of COVID-19 coronavirus in Ukraine" No. 211, dated 11 March 2020, was amended three times within four weeks. The latest amendments to the Resolution were adopted by the government on 2 April 2020. These amendments include stricter rules for the movement of people, clarify the rules of work for electricity suppliers, distribution system operators and gas suppliers. These amendments cover all other aspects of the quarantine for the state authorities, business entities, and citizens.

Therefore, it is important to monitor all changes in the legislation and update the conditions of the work on energy projects in accordance with applicable requirements.
 

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The economic impact of COVID-19 on solvency

Contacts – Olena Sukmanova, Oleksiy Koltok, Olena Solonska

The economic impact of COVID-19 will be noticeable both in the world and in Ukraine. Not all companies will overcome these volatile times. Under such circumstances, an increase in bankruptcy proceedings is expected. Moreover, some companies may use bankruptcy procedures to erase their debts.

Check whether your company is ready to take advantage of your counterparties’ bankruptcy proceedings, and to recover the debt from them anyway.   
 

Is bankruptcy the only way to collect debt from an insolvent company? 

The 2019 Bankruptcy Code of Ukraine does not have a debt threshold required to be able to file for the relief. The main criterion is the inability for the debtor to fully fulfill its monetary obligations to the creditors.

At the same time, we do not recommend initiating bankruptcy in each case. The proceedings take a lot of time and may require considerable effort to obtain the desired result. In addition, the creditor(s) initiating bankruptcy proceedings will have to cover the remuneration of the insolvency manager for at least the first three months of their work.

Other options may be better suited for the creditor. Depending on the circumstances, we could recommend debt restructuring or novation, trying out-of-court rehabilitation or a voluntary restructuring procedure in accordance with the Law of Ukraine “On Financial Restructuring”.

Of course, the financial condition of your counterparts and the possibility of their bankruptcy should be monitored on an ongoing basis.

If the bankruptcy case of the debtor has already been initiated by themselves or by another creditor, we strongly recommend intervening in the case as soon as possible. The ability to participate in the decision-making process during the bankruptcy proceedings directly depends on a timely response to its initiation.

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Please, follow the links for other relevant updates:

• Test your contract for COVID-19. Legal implications of coronavirus COVID-19’s pandemic for contracts execution
• Legal implications of coronavirus for business: performance of obligations and judicial system
• COVID-19 outbreak in Ukraine: impact on competition law enforcement
• Amendments to the Tax Code of Ukraine in support of taxpayers during the COVID-19 pandemic