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The Realities of Preventive Restructuring

Andrii Spektor
Date: 21 July , 6:37
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The current realities of preventive restructuring are somewhat ambiguous, as the initial cases of its application highlight both the promise and complexity of this legal instrument. The first practical steps in this area have exposed a number of challenges, mostly related to institutional inertia, lack of legal precedent, and incomplete regulatory frameworks.


The main issue that has emerged in practice is the absence of a unified approach to the role of the court at the stage of initiating proceedings. Although the law clearly stipulates that the court should only assess whether the formal requirements of the application are met, in practice some creditors demand that the court conduct an in-depth analysis of the feasibility and viability of the restructuring plan at this early stage. This raises the question of the so-called “heightened standard of proof” — an idea that may seem attractive from the perspective of protecting creditors’ interests, but contradicts the very logic of a preventive mechanism. If access to the procedure is burdened by complex evidentiary requirements before it even begins, the entire concept of early intervention and bankruptcy prevention loses its meaning.


This imbalance is particularly dangerous in the absence of established case law from the Supreme Court, which could serve as an arbiter in defining the proper scope of judicial analysis at the opening stage of the procedure.


Another major issue is the legal uncertainty surrounding the inclusion of tax claims in the restructuring plan. The law requires inclusion only of claims whose due date has arrived or will arrive.

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If a tax notice-decision is under judicial appeal, its legal status becomes ambiguous. Involving the tax authority in the procedure may not only conflict with the principle of legal certainty but could also have negative consequences for the debtor in the parallel administrative process. However, the tax authorities’ position — that they are entitled creditors even in such cases — adds further tension to the system.


A separate set of problems relates to technical and procedural matters. For example, when there is a joint obligation between two debtors, current legislation does not allow for a joint restructuring procedure and instead requires separate cases to be initiated in different regional courts. This calls into question the feasibility of effective coordination and implementation of a unified plan aimed at resolving the shared obligation. The lack of legislative mechanisms for group restructuring in such scenarios is a clear legal gap.


By its nature, preventive restructuring is a flexible, discretionary, and negotiation-based tool. It requires a shift in mindset, a willingness to cooperate between debtors and creditors, and the ability to operate under conditions of legal uncertainty.


Nevertheless, despite all these challenges, the potential of the procedure is undeniable. It represents an important alternative to bankruptcy, allowing companies to preserve their operations, jobs, and productive capacity.

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Andrii Spektor

Andrii Spektor

Bankruptcy and Taxation Attorney

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