Peculiarities of Credit Union Bankruptcy: Analysis of New Judicial Practice

Recent judicial practice regarding the insolvency of credit unions demonstrates the gradual formation of a special legal regime for this segment of the financial market. Following amendments to the Code of Ukraine on Bankruptcy Procedures (Article 93-3) and the adoption of Law No. 3254-IX of July 14, 2023, credit unions have been provided with a clear legal mechanism for forced market withdrawal.

The Role of the National Bank of Ukraine in Bankruptcy Proceedings

Under the updated legislation, the National Bank of Ukraine (NBU) is officially recognized as a participant in bankruptcy proceedings involving a credit union. The NBU has a decisive vote in the creditors’ committee (Part 8, Article 48 of the Code), may veto committee decisions (Part 9, Article 48), and receives from the liquidator both reports and the liquidation balance sheet (Article 65).

The NBU may file for bankruptcy only upon the simultaneous occurrence of two legal facts:

1. a resolution by the NBU declaring the credit union insolvent;
2. a resolution revoking the union’s license.

In such cases, the regulator may introduce temporary administration, and liquidation is then carried out in accordance with the Bankruptcy Code.

Who May Initiate Bankruptcy Proceedings

According to Part 3, Article 93-3 of the Code, a bankruptcy petition may be filed by:

• the liquidator of the credit union, appointed by the court at the request of the NBU (Part 3, Article 105 of the Civil Code of Ukraine);
• or the NBU itself.

The debtor-initiator must file with the court within one month of the onset of insolvency (Part 6, Article 34). The petition must include proof of court fee payment, the representative’s authorization, advance remuneration for the insolvency practitioner for three months, and copies of the NBU’s decisions on insolvency and license revocation.

Court Consideration of the Case

The commercial court issues a ruling recognizing the credit union as bankrupt and opening liquidation proceedings if insolvency or insufficiency of assets to satisfy creditors’ claims is proven. If bankruptcy is not substantiated, the court refuses to open the case.

Applicable Procedures for Credit Unions

Only two judicial procedures may be applied to insolvent credit unions:

1. asset management (administration);
2. liquidation.

Procedures of reorganization or rehabilitation are not permitted. When the NBU recognizes a credit union as insolvent, it must be liquidated through court proceedings, while preventive restructuring (Law No. 3985-IX of September 19, 2024) is explicitly prohibited.

Asset Management in Credit Unions: Judicial Approach

Courts increasingly refuse to apply the asset management procedure to credit unions. In a ruling of the Zakarpattia Commercial Court dated September 15, 2025 (Case No. 907/930/25), the court held that the temporary administration introduced by the NBU effectively serves as an analogue of insolvency administration.

Therefore, appointing a separate insolvency practitioner instead of the NBU-appointed administrator contradicts the nature of bankruptcy law. The court applied the principle of procedural economy (Part 4, Article 6 of the Code) and qualified the process as a simplified bankruptcy liquidation procedure.

Simplified Liquidation Procedure

This procedure combines both the opening of the case and the immediate declaration of bankruptcy. The court applies general provisions of the Bankruptcy Code and the Commercial Procedural Code of Ukraine by analogy of law and right, since no special regulation exists for these specific circumstances.

Criteria of Insolvency for Credit Unions

According to Article 50 of the Law “On Credit Unions”, the NBU must declare a union insolvent if:

• its regulatory capital decreases by more than 50%;
• liquidity ratios remain unfulfilled for over 180 days;
• a recovery plan is not submitted or is rejected repeatedly;
• capital adequacy requirements are violated again within 270 days.

In such situations, the NBU simultaneously revokes the license and may impose temporary administration. The only possible next step is liquidation.

Conclusion

The reformed Article 93-3 of the Bankruptcy Code has established a distinct legal regime for credit unions, combining elements of financial regulation with bankruptcy mechanisms. This model streamlines liquidation procedures, eliminates overlapping powers between courts and the NBU, and ensures swift removal of insolvent credit unions from the market while maintaining a balance between the interests of depositors, creditors, and the state.