INSIDE THIS ISSUE: Unified Data Base: main aspects of its creation Restructuring practitioners, Unite Seminar in Kharkiv
Dear reader,
It has been a year since the Law of Ukraine "On Restoration of Solvency of the Debtor or Declaring It Bankrupt" came into effect. Over this year the Law found its new supporters, many businesses used it for restoring their solvency. At the same time, this one year’s experience unearthed the need for changes and amendments that would be based on experience of arbitration judges, Ministry of Economy, arbitration managers, practising lawyers and other experts.
At this stage the issues of the Law’s further application acquire special importance. In this issue we would like to offer to your attention the materials that are being reviewed and considered at the moment, and therefore we are extremely interested to find out your opinion.
In the previous issues we started to tell the interested audience about the Project’s operations in different parts of Ukraine, its successes, achievements and main tasks for the future. We will continue publishing such materials in the future. But this issue is a special one: we decided to seek advice from our readers and ask them to share their experiences.
The main subjects of this issue are creation of the Unified Database of Bankruptcy Cases and Bankrupt Enterprises as well as the idea of creating an Self-regulating Organization (SRO) of restructuring practitioners. These issues are interrelated and are key components of the common infrastructure for implementation of the Law.
Material on the database includes a proposed complete list of information to be included in it. The database should become a transparent monitoring tool for bankruptcy procedures necessary for achieving goals of the legislation. In the next article readers can learn of the opportunities provided by an independent association of financial restructuring practitioners.
We would like to tell you about our new web-site address. The new address is http//www.bkrtcy.kiev.ua. The site has constantly up-dated special sections, questionnaires, and the visitors can join the chat group on bankruptcy-related subjects.
We will be very thankful for your suggestions regarding subjects of the next issues.
Good luck,
Olga Makara
PR and Media Coordinator
UNIFIED DATABASE: MAIN ASPECTS OF ITS CREATION
Deloitte&Touche Financial Restructuring Project, funded by the Unites States Agency for International Development, in conjunction with the state bankruptcy agency is involved in creation of a unified database of bankrupt enterprises and bankruptcy cases. This database will be open to public use and should ensure the following:
objective basis for policy formulation to enable Ukrainian authorities to assess efficiency of the law in practice, as well as to develop standard forms, procedures, methodologies, regulations, and amendments required for improving the efficiency of the Ukrainian bankruptcy system.
accurate statistical and financial data on specific debtors, including data on liquidation value of debtors’ assets so that judges, arbitration managers, and investors, as well as the main participants in the proceedings, can have access to the information required for making properly substantiated decisions.
greater transparency thanks to objective and reliable data on the progress of bankruptcy cases and the efficiency of the courts and arbitration managers.
The database is planned to contain the information given in the table below. The information is broken down into main subsystems (enterprises, events, measures for preventing bankruptcy and out-of-trial procedures, debtors, investors and a debtor’s finances). Availability of authentic and reliable information is necessary for substantiated decision making by judges, arbitration managers, investors and main participants of proceedings. Integrated monitoring of bankruptcy system would assist in achieving the goals of the Law of Ukraine "On Restoration of Solvency of the Debtor or declaring It Bankrupt".
It would be extremely useful if potential users of the database could send their requirements and suggestions for the content of the database and access procedure.
At the roundtable discussion held by the Project on February 8, 2001, representatives from the Ministry of Economy, the State Bankruptcy Agency, banks, as well as arbitration managers and managers of enterprises discussed the problems of availability and public access to the database information.
We are planning to offer you the main views of participants of the round table in our next issues. Hopefully, you will also join our discussions.
INFORMATION TO BE CONTAINED IN UDBBEBC
Subsystem Enterprises
Enterprise
1. Data in conformity with the form on inclusion of the debtor enterprise in Unified State Register of Enterprises, Organizations and Entities (USREOE) as well as data on the form of ownership:
ID code
Organizational and legal form of entity
Location
Management body
Form of ownership
Share of the state ownership
Who holds the majority shares (if there is such holder)
Types of business activity
The debtor’s taxpayer ID code
Subject of business activity – natural person or legal entity
Type of enterprise
Is a debtor an association of enterprises (e.g. association, corporation, consortium, concern, etc)
Name of enterprise
Legal address of enterprise
Postal address of enterprise
ID code of the court of arbitration that hears the case – reference to Codifier of courts of arbitration
ID code of the Bankruptcy Agency branch in charge of the case (enterprise).
Fields for "Specific features of bankruptcy of some categories of subjects of business activity" – 12 specific features – 12 fields (each field YES/NO), such specific features as:
"Town-forming enterprise",
"Highly hazardous enterprise",
"Agricultural enterprise",
"Insurer",
"Professional participant of securities market",
"Individual entrepreneur",
"Private family farm",
"Sanation of the enterprise by the debtor’s manager",
"Absent debtor",
"Bankruptcy of the debtor liquidated by its owner".
Explanations regarding specific features – 1 field.
Date excluded from USREOE
Subsystem Arbitration proceedings
Petitions requesting initiation of proceedings
Date of petition filing
Who filed the petition: debtor or creditor
Creditor’s name
Postal address/place of residence of the creditor – if filed by a natural person
Creditor’s taxpayer code (if petition is filed by the creditor)
Amount of the creditor’s claims, UAH (if filed by the creditor), including amount of fines and penalties – 2 fields)
Description of circumstances that prove the debtor’s insolvency
Note on rejection of petition – date and No of ruling
Note on dismissal of petition – date and No of ruling
Note on withdrawal of petition – date and No of ruling
Note on acceptance of petition that was ruled to be dismissed or rejected before
Appointment of judge
ID code of the judge
Date of judge’s appointment
Initiation of proceedings
Number and date of ruling on initiation of proceedings
Case number
Were the proceedings initiated under the old Law? (3 options: old, new, old→new)
If the proceedings were initiated under the old Law – number and date of ruling on conversion to the new Law
Date of receipt of the debtor’s response
Contents of the debtor’s response – the debtor acknowledges/does not acknowledge the of creditor(s) claims in full/in part, the debtor satisfied the creditor’s claims in full, amicable settlement agreement was concluded). See the Law – it says what should be in the debtor’s response.
Filing of petition requesting initiation of proceedings – name of the publication, date and number of issue.
Termination of proceedings
Date of termination of bankruptcy proceedings
Grounds for termination
Result (the enterprise is considered not to have any debts, reorganization, the enterprise is excluded from the stet register (liquidation), other (specify)
What has been done according to the sanation plan (restructuring, created X legal entities, enterprise changed its line of business, other – specify)
Complications during the proceedings
Type of complication: termination of proceedings/postponement of the case
Reason for complication
Resumption of proceedings
Appointment of arbitration manager
Functions performed by arbitration manager (trustee, sanation manager, liquidator – only 3 options)
ID code of arbitration manager – reference to Codifier of arbitration managers
Termination of powers of arbitration manager
Functions performed by arbitration manager (trustee, sanation manager, liquidator)
ID code of arbitration manager – reference to Codifier of arbitration managers
Reason for termination of powers (perhaps, he was found to be involved in fraud)
Brief characteristic of results of work of the arbitration manager
Court hearing
Type of hearing (preliminary, preparatory, final, other – specify)
Number of ruling
Contents of ruling/determination (paying off the debt, sanation, continuation of sanation, amicable settlement agreement, liquidation)
Date the ruling was executed
Information on appellation: was the ruling appealed(YES/NO), who filed appellation, date and result of consideration of appellation
Creditors meeting/Meeting of creditors committee
Creditors meeting or meeting of the creditors committee ( only 2 options)
Who summoned
Decision of the meeting
Commencement of sanation
Date of ruling
Number of ruling
Completion of sanation
Date of ruling
Number of ruling
Results of sanation
Commencement of liquidation
Date of ruling
Number of ruling
Date of commencement
Completion of liquidation
Date of ruling
Number of ruling
Date of completion
Results of liquidation: several options:
the assets were not sufficient to satisfy all creditors’ claims – then liquidation;
the assets after satisfaction of the creditors claims are insufficient for normal operation – then liquidation;
there were enough assets for everything, no debts – the business carries on its operations.
Conclusion of amicable settlement agreement
Date of conclusion of amicable settlement agreement
Information on terms and conditions of the agreement
Cancellation of amicable settlement agreement
Date of cancellation of amicable settlement agreement
Implementation of measures to secure pecuniary claims of the creditors
Date of implementation of a measure
Type of measure/ procedure (incl. moratorium)
Description of implemented measure – what was done, on what conditions, what is the result
Sale of assets
Date of sale of assets
Book value of sold assets – 5 fields for 5 categories of assets – see field Active tables "Financial condition"
Amount of proceeds – also 5 fields
Payments to the creditors
Date of payments
Amount of debt paid off to the creditors – 6 fields for 6 priorities
Subsystem Events
Events/procedures
ID code of enterprise
Date of event/procedure
Code of type of event/procedure – reference to Codifier of events
Conformity of event/procedure to deadlines specified in the Law: field "Shall occur not later than the date" plus the field "Met the deadline yes/no"
Characteristic of event/procedure (its content, result or consequences)
Subsystem Measures for prevention of bankruptcy and out-of-trial procedures
Measures for prevention of bankruptcy and out-of-trial procedures
Date of commencement of event/procedure
Type of event/procedure: financial assistance, pre-trial sanation, other – specify
Brief content – what was done, on what conditions, what are the results (descriptively)
It would make sense to provide (as separate fields, like prompts) the date on:
measures for prevention of bankruptcy of the debtor;
size of financial assistance and conditions for its provision;
obligations undertaken by the debtor in this connection;
pre-trial sanation of the state-owned enterprise (conditions, the fact of it having been agreed with the body authorised to manage the debtor’s assets, sources of financing).
Subsystem Creditors
ID code
Organisational and legal form of entity
Location
Management body
Form of ownership – private, collective, state
Types of business activity
Taxpayer ID code
Subject of business activity – natural person or legal entity
Name of enterprise
Legal address of enterprise
Postal address of enterprise
Subsystem Debtors
ID code
Organizational and legal form of entity
Location
Management body
Form of ownership – private, collective, state
Types of business activity
Taxpayer ID code
Subject of business activity – natural person or legal entity
Name of enterprise
Legal address of enterprise
Postal address of enterprise
Subsystem Investors
ID code
Organisational and legal form of entity
Location
Management body
Form of ownership – private, collective, state
Types of business activity
Taxpayer ID code
Subject of business activity – natural person or legal entity
Name of enterprise
Legal address of enterprise
Postal address of enterprise
Subsystem Financial condition of the debtor
Financial condition of the debtor – accounting data
Date of report
Number of employees (those on payroll list and those actually working)
Assets – residual (balance) value, UAH thousand (total, fixed assets, other assets, inventory and costs, debtors, cash) – 6 fields; including pledged assets – 6 more fields with break-down into own assets, leased assets and assets in management
Accounts payable, UAH thousand, (total and breakdown into 6 priorities; category 1 has 3 subcategories), separately – those acknowledged by the debtor (6 more fields), and fines, penalties (6 more fields) – do we need that many?
Sales for previous period, UAH thousand, book and net profit (loss) for previous period, UAH thousand
Cash flow report: cash flow in the result of operational, investment and financial activity – revenues and expenditures – total 6 fields
Financial indicators according to the methodology of the Agency – 13 fields
Appraisal value of assets, UAH thousand (separately pledged and non-pledged assets) and separately – who did the appraisal
Subsystem Codifiers
Codifier of arbitration courts
Code of the court of arbitration
Name of court of arbitration
Address
Telephone number
Codifier of regional branches of the Bankruptcy Agency
Code of the regional branch of the Bankruptcy Agency
Name of the branch
Address
Telephone number
Codifier of regional branches of Ministry of Economy
Code of the regional branch
Name of the branch
Address
Telephone number
Codifier of judges
Code of the judge
Full name of the judge
Code of the court of arbitration where the judge sits
Place of residence, district, oblast, telephone number
Codifier of arbitration managers
Code of the arbitration manager
Full name of the arbitration manager
License number
Date of issue of license
Code of the Agency branch that issued the license
Place of residence, district, oblast, telephone number
Codifier of events
Code of event
Name of event
List of types of events:
Measures to prevent bankruptcy
Proceedings under the old Law
Filing of petition to initiate proceedings
Appointment of the judge
Initiation of case + conclusion of case
Complications during proceedings + resumption of proceedings
Appointment of arbitration manager (trustee, sanation manager, liquidator) + Termination of powers of arbitration manager
Court hearing/ruling
Creditors meeting/ meeting of the creditors committee (decision)
Commencement of sanation + completion of sanation (result)
Commencement of liquidation + completion of liquidation (result)
Conclusion of amicable settlement agreement = cancellation of amicable settlement agreement
Implementation of measures to secure pecuniary claims of the creditors
Sale of assets
Payments to the creditors
Financial condition of the debtor
RESTRUCTURING PRACTITIONERS, UNITE!
One of the main goals of FRP is to create a corps of independent solvency restoration practitioners that would assist insolvent enterprises in the debtor-led reorganization under the Law of Ukraine "On Restoration of Solvency of the Debtor or Declaring It Bankrupt". To achieve this goal, FRP regularly conducts theoretical and practical training of Ukrainian practitioners who are willing and capable of pursuing such a career. Since the law was passed, approximately 120 solvency restoration practitioners have been trained at seminars on application of restructuring techniques under the new law.
In the course of close co-operation with practitioners and arbitration managers from different regions of Ukraine there surfaced the idea of creating an SRO (hereinafter – the Association) of restructuring practitioners, or improving the existing association of bankruptcy specialists created within the State bankruptcy Agency. FRP is involved in creation of the legal infrastructure for an active bankruptcy system in Ukraine, and therefore it is fully supportive of the idea of such independent practitioners’ organization.
The Association should unite economists, finance people and lawyers, scholars and practitioners involved in financial restructuring of Ukrainian enterprises and implementation of measures for restoration of their solvency through bankruptcy procedures.
Below we offer for your consideration a number of issues related to creation and operation of the Association.
WHAT ARE THE PURPOSE AND MAIN TASKS OF THE ASSOCIATION?
The purpose of the Association is to protect legitimate professional, social, economic and other common interests of members of the Association, assist in carrying out the needed economic reforms, establishing the idea of supremacy of law, establishing an open civil society in Ukraine and solving the crisis of payments of Ukrainian enterprises.
The main tasks of the Association are:
to unite and co-ordinate efforts of restructuring and solvency restoration practitioners and their organizations for facilitating economic reforms and development of the state ruled by law;
to assist in development of systemic mechanism for co-operation of members of the association and their organizations with Ukrainian state agencies of all levels;
to assist in training and re-training of restructuring practitioners;
to assist in implementation of efficient methods of rehabilitation of financial and economic condition of Ukrainian enterprises and restoration of their solvency;
to assist in improvement of Ukrainian legislation to bring it into conformity with international standards;
to promulgate international experience of anti-crisis management, enterprise restructuring and solvency restoration in Ukraine.
WHAT ARE THE MAIN AREAS OF ACTIVITY OF THE ASSOCIATION?
It is envisioned that the Association should become a forum of restructuring and solvency restoration practitioners, a place where a practitioner could go seeking an advice or help.
Therefore, the main arrears of activity of the Association should be:
Protection of rights and legitimate interests of members of the Association.
Research and expert assessment within the competence of the Association.
Development and ongoing updating of scientific and methodological materials for members of the Association.
Providing support to members of the Association in resolving complex practical situations.
Providing reviews of bankruptcy legislation and arbitration practice.
Organisation of seminars and conferences for members of the Association, publishing of methodological manuals.
Providing the information contained in the databases of the Association to members of the Association.
Development and implementation of professional standards.
3. WHAT POSSIBILITIES ARE PROVIDED BY MEMBERSHIP IN THE ASSOCIATION?
Protection of legitimate rights of members of the Association related to their professional activity.
Assistance in settlement of practical issues in the legislature, the executive and the judiciary.
Search and establishment of contacts with potential clients and investors.
Assistance in finding employment.
Assistance in training, licensing and training.
Providing recommendations in case of engagement in potential projects.
Assistance in bankruptcy procedures by members of the Association.
Information and support to members of the Association.
Use of training, methodological and scientific literature and reference materials of the Association.
Settlement of disputes that might arise between members of the Association in the course of their processional activity.
Participation in international and foreign non-governmental organizations of restructuring, insolvency and anti-crisis management practitioners.
Please, send your ideas and proposals regarding the purpose, tasks and activities of the Association to our address. We hope to find among our readers many restructuring practitioners interested in active participation in such Association.
Seminar in Kharkiv
For the period from January 29 through February 1, 2001, Intensive Training for Solvency Practitioners was held by the Financial Restructuring Project in Kharkiv for the total number of 30 trainees, including representatives of business community (law and auditing firms, banks) and arbitration managers.
The four-day seminar covered legal and economic issues using the case study method. The first two days were dedicated to teaching participants to develop an operational restructuring strategy for a hypothetical enterprise using the Corporate Restructuring Model (CRM) developed by the Project’s financial analysts from Kyiv office.
During the last two days, the Project’s specialists explained the structure and functions of Ukraine’s Bankruptcy Law, specific tools available at each stage of the Law, legal aspects of financial restructuring, legal features of the CRM. The participants then applied these tools to restructure the debts of the hypothetical enterprise under the Bankruptcy Law.
The seminar participants evaluated this training program highly. The majority of trainees will use the knowledge obtained during this seminar as well as a set of hand out materials (that included the CRM, the text of the Law "On Restoring the Solvency of a Debtor of Declaring It Bankrupt," and other training material on legal and financial issues) in their routine work.
