Challenging debtor transactions: new judicial trends

The concept of fraudulent transactions in Ukrainian law has emerged relatively recently; however, within just a few years, it has evolved from a doctrinal construct into a fully-fledged mechanism for creditor protection. Its formation is primarily associated with the Grand Chamber of the Supreme Court’s ruling of 3 July 2019 in case No. 369/11268/16-ц, where such transactions were defined as those executed by a debtor to the detriment of creditors.

This position immediately highlighted a key issue: a transaction may formally comply with legal requirements while simultaneously pursuing a single purpose — to make the fulfillment of obligations impossible. For this reason, the development of case law has shifted away from purely formal invalidity criteria toward the broader category of good faith.

In its rulings of 28 February 2019 (case No. 646/3972/16-ц), 3 July 2019 (case No. 369/11268/16-ц), and 24 July 2019 (case No. 405/1820/17), the Supreme Court established a fundamental principle: a civil law contract cannot be used to evade the performance of obligations or to avoid the execution of a court decision. Accordingly, a transaction with such characteristics may be declared invalid based on paragraph 6 of Article 3 of the Civil Code of Ukraine (general principles of civil legislation) and part 3 of Article 13 (prohibition of abuse of rights).

Subsequent case law has effectively shaped the criteria for determining fraudulent intent. In its ruling of 19 May 2021 (case No. 693/624/19), the Court identified three key groups of factors: the timing of the transaction, the identity of the counterparty (including affiliation or relatedness), and the economic substance of the transaction — specifically, whether the price reflects market value and whether payment was actually made.

Initially, judicial practice focused primarily on gratuitous transactions. In its ruling of 24 July 2019 (case No. 405/1820/17), the Supreme Court described a typical scenario: disposal of assets after a claim has been filed, transfer to a close relative, and the absence of other assets available to the debtor. Such a combination of factors allows the transaction to be qualified as fraudulent.

However, the next stage in the development of this doctrine involved extending it to onerous (paid) transactions. In its ruling of 7 October 2020 (case No. 755/17944/18), the Supreme Court explicitly stated that even a paid contract may be deemed fraudulent if it is concluded to the detriment of a creditor, particularly where there are signs of undervaluation or merely formal payment arrangements.

Moreover, in its rulings of 28 November 2019 (case No. 910/8357/18), 3 March 2020 (case No. 910/7976/17), and 3 March 2020 (case No. 904/7905/16), the Court made a significant doctrinal step: any transaction executed by a debtor after the obligation has arisen, which results in the debtor’s insolvency, must be scrutinized from the standpoint of good faith.

Thus, the key issue is no longer the type of contract, but its function — whether it creates obstacles to satisfying the creditor’s claims.

Supreme Court practice demonstrates that virtually all major civil law instruments may be recognized as fraudulent. This includes not only traditional transfer agreements — sale, gift, or exchange — but also loan agreements, mortgages, leases, property division arrangements, as well as corporate and family law instruments.

Particular attention should be paid to gift agreements. The Supreme Court clearly states that even a formally lawful gift agreement, concluded after creditor claims have arisen and aimed at removing assets from enforcement, constitutes an evident manifestation of bad faith and abuse of rights (ruling of 24 July 2019, case No. 405/1820/17).

Another important category concerns transactions linked to enforcement proceedings. In its ruling of 13 May 2022 (case No. 370/423/19), the Supreme Court emphasized that entering into agreements concerning a debtor’s assets after the initiation of enforcement proceedings, which render enforcement impossible, constitutes grounds for declaring such transactions invalid, taking into account Article 9 of the Law of Ukraine “On Enforcement Proceedings”.

Judicial practice has moved significantly beyond classical models. The Supreme Court has recognized the possibility of qualifying as fraudulent:

— agreements on satisfaction of a mortgagee’s claims (rulings of 31 October 2024, case No. 509/4936/17, and 4 December 2024, case No. 570/1951/23), where they create artificial advantages for one creditor;

— marital agreements (ruling of 6 August 2023, case No. 755/3563/21), where their effect is to remove assets from potential enforcement;

— unilateral transactions, including withdrawal of a claim or refusal to accept inheritance (rulings of 24 February 2021, case No. 757/33392/16, 4 October 2023, case No. 2-469/1997, and 11 October 2023, case No. 205/2053/22).

A separate line of case law concerns the so-called “creation of one’s own creditor”. In its ruling of 13 February 2025 (case No. 522/5637/16-ц), the Supreme Court held that transactions aimed at creating preferential treatment for one creditor over others, or at artificially generating debt, may also indicate fraudulent intent.

Equally important is the issue of procedural standing. In its ruling of 8 June 2022 (case No. 2-591/11), the Grand Chamber of the Supreme Court effectively confirmed that a creditor, even if not a party to the contract, has the right to challenge a fraudulent transaction, since this concerns the protection of their right to enforcement of a court decision.

Ultimately, a legal approach has emerged in which fraudulent intent is no longer an exceptional doctrine but a universal instrument for controlling debtor behavior. The key criterion is not the form of the transaction, but its economic substance and its consequences for the creditor.

This is where the fundamental boundary lies: contractual freedom is preserved only as long as it is not used as a tool to evade obligations. Once a transaction begins to function as a shield for the debtor’s assets, it becomes subject to scrutiny through the principle of good faith — with the very real consequence of being declared invalid.