Fraudulent Transactions in 2026: How Creditors Can Recover a Debtor’s Assets

Ukrainian businesses have long faced situations where debtors formally act within the law while effectively preventing creditors from enforcing their claims. Assets are transferred to relatives, contributed to the charter capital of another company, sold to affiliated entities, or otherwise used to create preferential treatment for selected creditors.

Over the past several years, the Supreme Court has developed a comprehensive doctrine of so-called fraudulent transactions—transactions carried out to the detriment of creditors.

Particularly important are the Grand Chamber’s decisions in cases No. 369/11268/16-c (03 July 2019), No. 910/16579/20 (07 September 2022), No. 916/379/23 (18 December 2024), and No. 910/6654/24 (04 February 2026), which have effectively shaped the modern legal framework for combating the withdrawal of debtor assets.

Notably, the concept of a fraudulent transaction was formally incorporated into the Ukrainian Bankruptcy Procedures Code only in 2024. However, judicial practice had been developing this doctrine long before its legislative recognition.

From Gifts to Children to Multi-Million-Dollar Corporate Schemes

One of the most influential cases was No. 369/11268/16-c.

Following the initiation of enforcement proceedings for the recovery of more than UAH 580,000, the debtor transferred a residential property and a land plot to his children under a gift agreement. The Grand Chamber held that civil-law mechanisms cannot be used to evade the enforcement of court judgments or conceal assets from creditors. This decision laid the foundation for the doctrine: where a transaction is aimed at harming a creditor, it may be challenged even in the absence of a specific statutory provision. The doctrine was further developed in case No. 910/16579/20, which concerned the assignment of a USD 2.8 million claim to an affiliate of the debtor. The Grand Chamber emphasized that creditors may suffer harm not only through the direct transfer of assets but also through the creation of unlawful preferences benefiting selected creditors.

Another significant example is case No. 916/379/23, where real estate valued at nearly UAH 10 million was transferred to the charter capital of another legal entity in order to avoid settlements with a former participant of the company. In that case, the Grand Chamber directly linked fraudulent transactions to the concept of abuse of rights and the intention to harm a creditor.

The 2026 Decision: A Turning Point in Judicial Practice

The most significant developments emerged from the Grand Chamber’s decision of 4 February 2026 in case No. 910/6654/24. In essence, the Court revised an approach that had existed since 2019. Previously, judicial practice allowed courts to combine the concepts of a sham transaction and abuse of rights when assessing fraudulent conduct. The Grand Chamber has now clearly separated these legal categories.

The Court concluded that a transaction cannot simultaneously be classified as a sham transaction under Article 234 of the Civil Code of Ukraine and as a transaction violating the principles of good faith and the prohibition of abuse of rights under Articles 3 and 13 of the Civil Code. This distinction carries substantial practical consequences. Where assets have actually been transferred and legal rights have genuinely changed hands, it may be impossible to establish that the transaction was fictitious. However, this does not leave creditors without protection.

The Supreme Court confirmed that a transaction may be declared invalid solely because it contradicts the principles of good faith and constitutes an abuse of rights.

Why This Matters Beyond Bankruptcy Cases

One of the most important conclusions reached by the Grand Chamber is that the doctrine of fraudulent transactions extends far beyond insolvency proceedings. Today, creditors may challenge such transactions even when the debtor is not involved in bankruptcy proceedings.

The purpose of such litigation is to return assets to the debtor’s estate so they may become available for enforcement. The Court expressly stated that out-of-bankruptcy challenges are intended to ensure creditors’ access to the debtor’s assets, even when those assets have formally been transferred to third parties.

Equally important is another conclusion: the right to challenge a fraudulent transaction belongs not only to the parties to the transaction but also to creditors as interested parties. In practice, this means that legal protection should not depend on whether the creditor participated in the disputed agreement.

What This Means for Business

Recent Supreme Court case law demonstrates a clear trend: attempts to use formally lawful legal instruments to shield assets from creditors are increasingly likely to be scrutinized and invalidated by courts. Moreover, fraudulent transactions are not limited to gifts between family members. Risks may arise in connection with sales at below-market prices, transfers to affiliated companies, preferential treatment of selected creditors, contributions of assets to corporate capital, and other arrangements that reduce a creditor’s ability to recover its claims.

For creditors, this development significantly expands the available legal remedies. For debtors, it means that any transaction involving assets during the existence of outstanding obligations must be assessed with particular caution.

The emerging judicial approach is straightforward: a transaction may appear lawful on its face, but if its true purpose is to harm creditors or frustrate enforcement, it may be declared invalid regardless of whether the dispute arises within bankruptcy proceedings or in ordinary civil or commercial litigation.