New Law on Credit Unions Comes Into Force in Ukraine

Roman Marchenko, Attorney at Law, Senior Partner, Insolvency Receiver

Source: INSOL Europe

On 1 January 2024, the Law of Ukraine on Credit Unions entered into force, which brings forth amendments and supplements to the Code of Ukraine on Bankruptcy Procedures.

In essence, a credit union is a financial institution established on the basis of cooperative principles. Its purpose is to cater to the needs of its members through mutual lending and offering financial and other services provided for by this Law, as well as engaging in other activities specified therein.

This is made possible by consolidating the monetary contributions of the union’s members and other sources defined by this Law. Among the new features of the bankruptcy procedure of credit unions in Ukraine are as follows:

1. A claim to open proceedings in the case of bankruptcy of a credit union may be lodged to the economic court by the debtor represented by the liquidator of the credit union appointed at the request of National Bank of Ukraine according to Article 105(3) of the Civil Code of Ukraine, or by the National Bank of Ukraine itself (which is a mandatory participant in the bankruptcy proceedings concerning this debtor category).
2. A credit union may be subjected only to court procedures for asset distribution and liquidation, with no application to it of the financial rehabilitation procedure. Financial rehabilitation of a credit union before the opening of bankruptcy proceedings is not allowed.
3. A distinctive procedure for meeting the demands of creditors of a credit union in case of its liquidation, which is defined by Article 60 of the Law of Ukraine on Credit Unions.
4. The insolvency receiver overseeing the bankruptcy case of a credit union must successfully complete an examination based on the prescribed training program for insolvency receivers in bankruptcy cases of non-banking financial institutions.