There are procedures in Ukraine which enable the company's debts to be collected at the expense of the own personal assets of the shareholders or managers

There are procedures in Ukraine which enable the company's debts to be collected at the expense of the own personal assets of the shareholders or managers

Creditors are often unable to collect debts from debtor companies. At the same time, they forget about a feature of the Ukrainian legal system whereby the responsibility for the company's debts falls on its managers and owners. This tool is borrowed from the American legal system and has been widely used in the USA for over 100 years. It is called “the rise of the corporate veil”. The curtain is raised to protect the interests of creditors in order to hold unscrupulous shareholders or managers responsible for the debts of the company. They could do this by transferring assets to another legal entity under their control in order to avoid paying debts to creditors, as an example.

In such cases, this legal entity is only a "facade" behind which the real owner is hidden. The manager or owner of such legal entity is therefore held liable if their instructions have led the debtor company to insolvency. Such bringing to responsibility is carried out on the basis of Part 2 of Art. 61 of the Code of Ukraine for bankruptcy procedures.

To collect the debt, it is necessary to file an application for bankruptcy of the debtor company to the Economic Court. Then, an authorized person - the bankruptcy commissioner - has the right to file a specific claim which enforces the manager’s or beneficiary’s financial responsibility for the debts of their company.

In this case, the court establishes the degree of guilt of the director or owner of the company, and the causal relationship between their actions and the consequences of the debtor's insolvency. The time period of management or ownership of shares in the authorized capital of such company is also taken into account. In case of a change in management or ownership of the company, the responsibility falls under those who purposefully defrauded their creditors by hiding company assets. So the Code of Ukraine for bankruptcy procedures enables the company's debts to be collected at the expense of the own personal assets of the shareholders or managers responsible for such fraud.