Preventive Restructuring Plan: How Cross-Class Cram-Down Works

As of January 1, 2025, amendments to the Ukrainian Code of Bankruptcy Procedures (CBP) came into force, introducing a new mechanism — the preventive restructuring procedure.

These changes result from the adoption of Draft Law No. 10143 and the implementation of Directive (EU) 2019/1023 of the European Parliament and of the Council on restructuring and insolvency.

The key document in this procedure is the Preventive Restructuring Plan, which must be approved by creditors and subsequently confirmed by the commercial court.

Classical Bankruptcy Procedure: Risks for the Debtor

The traditional bankruptcy procedure gives decisive power to the creditors’ meeting and committee. They hold the key authority to:

• approve or reject a rehabilitation (sanation) plan;
• decide on the further course of the proceedings;
• effectively exercise a “veto” over the debtor’s fate.

In practice, this often leads to situations where even a viable rehabilitation plan is rejected by creditors without sufficient grounds. The result is the debtor being declared bankrupt and the initiation of liquidation proceedings.

Thus, in the classical model, creditors hold disproportionate influence, while the debtor remains highly vulnerable.

The new procedure introduces a different balance of interests.

Preventive Restructuring Plan.

The plan must be considered by the creditors’ meeting and approved within each class:

• Secured creditors: the plan is deemed approved if creditors with voting rights holding at least two-thirds (2/3) of the total secured claims included in the plan vote in favor;
• Unsecured creditors: the plan is approved if creditors holding more than 50% of the total unsecured claims in that class vote in favor;
• if the plan provides for full repayment of a class’s claims immediately after confirmation, that class does not vote and is deemed to have approved the plan automatically;
• tax authorities: if the plan’s conditions are no worse than those for ordinary unsecured creditors, the class is also deemed to have approved the plan without voting.

Re-submission of the plan.

If the creditors’ meeting does not approve the plan, the debtor may continue negotiations and resubmit it for a vote.

Cross-Class Cram-Down by the Court.

If creditors reject the plan, the debtor may apply to the commercial court for confirmation of the plan under the procedure established by Article 33-23 CBP.

The court may override creditors’ veto and confirm the plan if:

• the creditors’ meeting and voting complied with statutory requirements;
• the principle of equality of creditors within the same class (Article 33-18(4) CBP) is respected;
• any new financing envisaged by the plan is necessary and does not prejudice creditors’ rights;
• the plan meets the best interest of creditors test;
• there is a reasonable prospect of implementation and avoidance of insolvency;
• the debtor did not provide false information.

Important: the grounds concerning lack of viability or prejudice to creditors (items 4 and 5 of Article 33-23(1) CBP) may only be applied by the court if raised in a reasoned objection by a dissenting creditor, submitted no later than seven days before the final court hearing.

Minimum requirements for cross-class cram-down:

• the plan must be supported by the majority of classes, including secured creditors;
• alternatively, by at least one voting class (excluding shareholders or classes that would receive no recovery in liquidation);
• dissenting classes must be treated no worse than other creditors of the same rank and more favorably than junior classes;
• no class may receive more than the amount of its admitted claims.

For the debtor:

• preventive restructuring is an effective tool to preserve the business and avoid bankruptcy;
• it provides an opportunity to overcome creditor deadlock through court confirmation.

For creditors:

• they must adopt a more reasoned approach in approving or rejecting plans;
• the ability to abuse veto power is limited.

For the system as a whole:

• no successful cases have yet been reported in H1 2025, which is expected given the novelty of the mechanism;
• time is required to establish consistent case law and practical standards.

Preventive restructuring represents a fundamentally new instrument that changes the balance between debtor and creditors. It prevents situations where businesses are liquidated due to unjustified creditor refusals.

Now, it is up to commercial courts, insolvency practitioners, and lawyers to determine whether this innovation becomes an effective restructuring tool or remains a mere formality.

Debtors should actively utilize this procedure, while creditors must adapt to the new reality where the “veto” is no longer absolute.