Bankruptcy During War: Supreme Court Case No. 910/18228/23

The ruling of the Commercial Cassation Court within the Supreme Court of February 24, 2026, in case No. 910/18228/23 clarified the application of special restrictions on opening bankruptcy proceedings during martial law. The Court confirmed that before examining whether a creditor's monetary claims are substantiated, it is necessary to determine whether any statutory prohibition prevents the proceedings from being opened.

This approach is particularly important for companies whose production facilities are located in occupied territories or areas affected by hostilities. At the same time, it does not mean that debtors are automatically released from liability for unfulfilled obligations.

Special Restrictions on Bankruptcy: What the Law Provides

The general rules governing the commencement of bankruptcy proceedings are set out in Article 39 of the Code of Ukraine on Bankruptcy Procedures (CUBP). The commercial court examines the existence and validity of the creditor's monetary claims, whether those claims remain unpaid, and whether there is a dispute over a substantive right that must be resolved through ordinary claim proceedings.

However, paragraph 1-6 of the Final and Transitional Provisions of the CUBP establishes special restrictions that apply during martial law and for six months following its termination or cancellation.

In particular, a commercial court must refuse to open bankruptcy proceedings upon a creditor's application if, before the preparatory hearing, the debtor proves that creditors' claims have not been satisfied as a result of armed aggression against Ukraine, including where the debtor's integral property complex is located in an area affected by hostilities or in temporarily occupied territory.

Another ground provided for by this provision concerns debtors with the relevant status as participants in state defence contracts who have an active contract with a government customer in the defence sector.

The Supreme Court emphasised that these restrictions take priority over examining the amount of creditors' claims or determining whether a dispute over a substantive right exists. However, their application depends on proof of specific circumstances rather than a mere reference to martial law.

Accordingly, the special prohibition is conditional and temporary. It does not extinguish a monetary obligation but restricts the use of a particular legal remedy available to creditors — initiating bankruptcy proceedings.

Occupation of Production Facilities and the Causal Link to Debt

Case No. 910/18228/23 concerned an application by Olttrade 2016 LLC to open bankruptcy proceedings against Energomash-Invest LLC.

The creditor based its claims on outstanding debt under a scrap metal supply agreement dated June 29, 2021. It had acquired the right of claim from the original creditor. The amount claimed exceeded UAH 30 million, although the court proceedings revealed inconsistencies regarding the actual amount of the debt.

Under the agreement, the goods were to be collected by the buyer from the premises of the Tokmak Forging and Stamping Plant in Zaporizhzhia Oblast. The debtor used the relevant property complex under a lease agreement.

Following the occupation of Tokmak on February 26, 2022, access to the production complex was lost. The case materials also included a certificate issued by the Ukrainian Chamber of Commerce and Industry confirming force majeure circumstances affecting the performance of obligations under the supply agreement.

At the same time, the agreement had been concluded before the full-scale invasion, and the agreed delivery deadline fell in 2021. The courts also examined the buyer's conduct, including the absence of evidence that it had taken steps to collect all the goods under the agreed collection arrangements within the contractual deadline.

They examined the contractual terms, when the obligations arose, actual performance, and the circumstances affecting the possibility of satisfying the creditor's claims.

Following this examination, the courts established a direct connection between performance of the disputed obligation and the property complex in Tokmak, as well as the impact of the occupation on that performance.

The conclusion concerning the debtor's other assets was particularly significant. Energomash-Invest LLC also owned real estate outside the occupied territory. However, the Supreme Court agreed that the mere existence of those assets was not decisive, since performance of the specific contract was directly linked to the operations of the complex in Tokmak.

Thus, when applying the special prohibition, what matters is not merely whether the debtor formally owns property in other regions, but whether that property is functionally connected to the debtor's business operations and the obligation that gave rise to the creditor's application.

What the Parties Must Prove

In its ruling, the Supreme Court identified the circumstances that a commercial court must establish when deciding whether paragraph 1-6 of the CUBP applies.

First, it is necessary to examine when the commercial relationship arose, the reasons the debt was incurred, and the company's actual financial and property position. Accounting and tax records, documentation concerning assets, their location, and their actual use in business operations are particularly important.

The existence of property in territory controlled by Ukraine requires separate assessment. The court must determine whether such property constitutes an independent production complex or merely individual assets that cannot ensure performance of the disputed obligation.

A fundamental requirement is establishing a direct causal link between the consequences of armed aggression and the inability to satisfy the creditor's claims.

Therefore, it is insufficient for a debtor merely to provide a certificate confirming that the enterprise is located in occupied territory. The debtor must demonstrate precisely how those circumstances affected performance of the specific obligation.

For creditors, in turn, it is important to analyse not only the existence of a debt but also the nature of the debtor's business, the contractual terms, the location of its assets, and whether the obligation could be performed independently of the property to which access has been lost.

Furthermore, the status of a territory is not permanent. The court must consider the relevant official list of territories affected by hostilities or temporary occupation, as well as the circumstances existing at the time the issue of opening bankruptcy proceedings is considered.