Recovering a Debtor's Assets: Key Ukrainian Supreme Court Rulings for Businesses

The sale of property, the conclusion of an agreement with a related company, or the transfer of assets shortly before bankruptcy may become subject to legal challenge, even where the parties have properly documented the transaction. However, the mere existence of outstanding debts does not automatically invalidate every agreement. Ukrainian Supreme Court case law identifies the circumstances that may indicate a transaction was carried out in bad faith, when creditors may seek the recovery of assets, and why choosing an inappropriate legal remedy can undermine an otherwise well-founded claim.

When an Ordinary Business Transaction Becomes Potentially Fraudulent

In bankruptcy proceedings, particular attention is paid to transactions that may have reduced the debtor's assets or granted unjustified advantages to certain creditors. Both the general provisions of the Civil Code of Ukraine governing invalid transactions and the special mechanisms established by Article 42 of the Bankruptcy Procedures Code of Ukraine apply to such cases.

In its judgment of 16 May 2024 in case No. 925/1577/20 (925/291/23), the Supreme Court examined the validity of commission and vehicle sale agreements concluded while the debtor had outstanding obligations to creditors.

The Court highlighted the particular risks associated with transactions involving interested parties. Specifically, where two companies are controlled by the same third party, they may qualify as interested parties in relation to each other for the purposes of Article 42 of the Bankruptcy Procedures Code.

The Supreme Court also distinguished between the grounds for invalidity established by the first and second parts of that article. While the application of the first part requires establishing an infringement of the rights of the debtor or its creditors, the second part provides separate, independent grounds for challenging transactions, including agreements concluded with interested parties.

This distinction significantly affects the assessment of intragroup transaction risks. Even a commercially justified agreement requires careful consideration of the ownership structure, the timing of the transaction, and the applicability of the special provisions of bankruptcy law.

Invalidating an Agreement Does Not Necessarily Mean Recovering the Assets

One of the most important issues in bankruptcy disputes is choosing an effective legal remedy.

In its judgment of 14 November 2024 in case No. 916/3345/21 (916/4077/23), the Supreme Court distinguished between transactions that had not yet been performed and those under which property or funds had already been transferred.

Where an agreement merely creates an artificial obligation, declaring it invalid may eliminate the corresponding legal consequences. However, if assets have actually left the debtor's estate, a declaration of invalidity alone may be insufficient.

In such circumstances, legal remedies must be capable of genuinely restoring the debtor's financial position. Depending on the nature of the relationship, these may include restitution of property, recovery of funds, or other appropriate forms of relief.

A particularly illustrative example is the judgment of 19 September 2024 in case No. 921/672/21 (921/362/23), which concerned the sale of a 45% ownership interest in a company's share capital for one hryvnia.

The Supreme Court emphasised that invalidating a completed agreement without seeking the corresponding legal consequences does not provide effective restoration of the infringed right. Where the objective is to recover a corporate ownership interest, the chosen remedy must make it possible to restore the proper composition of the company's shareholders and register the relevant changes in the Unified State Register.

The Supreme Court applied similar reasoning in its judgment of 9 April 2026 in case No. 914/466/23 (914/893/25). The Court stressed that challenging a debtor's transactions should be directed towards the actual recovery of assets for the bankruptcy estate rather than merely establishing that a violation occurred.

For creditors and insolvency practitioners, this means identifying the intended financial outcome before initiating litigation. A claim should not simply establish that a transaction was unlawful; it should provide an effective mechanism for recovering the relevant assets.

Can Property Be Recovered from a Bona Fide Purchaser?

The situation becomes more complex where property transferred under a challenged agreement is subsequently acquired by another owner. In its judgment of 22 May 2024 in case No. 924/408/21 (924/287/23), the Supreme Court distinguished between the bad faith of the original purchaser and the legal position of a subsequent buyer.

The Court noted that invalidating a fraudulent transaction does not automatically provide grounds for recovering the property from the final purchaser. The circumstances of acquisition and the purchaser's good faith must also be established.

The original owner's intention is particularly important. If the debtor deliberately transferred the property, even to the detriment of creditors, this is not equivalent to the property leaving the owner's possession against their will. The subsequent invalidation of the agreement does not automatically justify applying Article 388 of the Civil Code of Ukraine, which governs the recovery of property that left an owner's possession without their consent.

The Supreme Court examined additional criteria for protecting bona fide purchasers in its judgment of 29 May 2024 in case No. 910/5808/20. When determining whether property may be recovered, courts must consider not only creditors' interests but also the proportionality of interference with the purchaser's property rights. This approach was further developed in the judgment of the Chamber of the Commercial Cassation Court of 11 February 2026 in case No. 917/1500/18 (917/1513/24).

How Businesses Should Assess Transaction Risks Before Bankruptcy

The case law discussed above identifies several issues that should form part of a legal risk assessment.

First, the company's financial position at the time the agreement was concluded should be established, together with any outstanding obligations to creditors. It is also important to determine whether the parties are under common control and whether the special provisions of Article 42 of the Bankruptcy Procedures Code may apply.

Equally important is documentary evidence that the transaction was genuine. For service agreements, this means evidence that the services were actually provided. For asset disposals, it includes justification of the purchase price, proper documentation of the transfer, and proof of payment.

Where a dispute has already arisen, the legal strategy must address not only the grounds for invalidating the agreement but also who currently holds the property, whether it has been transferred again, and which remedy can effectively restore the infringed right.