Second chance for small business: Government prepares legislative changes

The Cabinet of Ministers of Ukraine has approved a draft law developed by the Ministry of Justice “On Amendments to the Code of Ukraine on Bankruptcy Procedures to Introduce Simplified Procedures for Micro-Enterprises and Small Enterprises”.

The document was prepared in fulfilment of step 3.7 of the Ukraine Facility and aims to create a more effective, accessible and European-oriented mechanism for overcoming insolvency for small businesses.

The draft law proposes to supplement the Code of Ukraine on Bankruptcy Procedures with Book Six, which for the first time at the legislative level introduces simplified bankruptcy procedures for micro- and small enterprises.

Two separate procedures are envisaged:

• a simplified rehabilitation procedure – for conscientious debtors who intend to restore solvency and continue their activities;
• a simplified liquidation procedure – for enterprises and entrepreneurs who lack sufficient assets and wish to close their business in a civilised manner with minimal costs.

The proposed changes will have a practical and tangible impact for businesses and include, in particular:

• abolition of the mandatory asset management procedure, significantly reducing the duration and cost of proceedings;
• optional involvement of an insolvency practitioner – engaged at the request of the debtor or creditor;
• no requirement to hold general meetings of creditors or form a creditors’ committee;
• short and clearly defined deadlines for simplified procedures, with the possibility of a one-time extension;
• introduction of standard document forms.

Separate criteria for access to simplified procedures are established, including the amount of debt, number of creditors, and absence of wage arrears, in line with European standards for protecting workers’ rights.

Adoption of the draft law will create conditions for the rapid recovery of economically active small enterprises, ensure a civilised and predictable exit from the market for entities that objectively cannot continue operations, and contribute to improving the business climate and increasing Ukraine’s investment attractiveness.

The Ministry of Justice is consistently working to ensure that bankruptcy procedures are not a punitive tool but an effective mechanism for economic reboot.