To convey the portfolio (google auto translate)

The financial restructuring Secretariat (the Secretariat), established pursuant to the Law of Ukraine "On financial restructuring" (the Law) works for more than a year (start of work — April 3, 2017). Accordingly, there are first results of practical application of Law in Ukraine, analyzed in detail. And if you reduce everything to maximum effect, the result is as follows: 14 cases filed in the Secretariat (nine completed) worth over 21 billion. While in the existing "portfolio" of Law today 91 % (the sum case) are procedures where the debtor is a large corporate entity. It should be clarified that in the framework of the concept adopted in the development of the Law, the opinion was expressed that the Law is primarily aimed at the rehabilitation of large corporate debtors, which are clients of public banks. Indeed, it is difficult to argue that in this situation state owned banks are more constrained in the ability to take flexible measures in the framework of the negotiation process with the debtor. This legal conflict in the Toolkit for state banks and was intended to solve the Law. However, this "target audience", though particularly important, but not only for the scope of the Law. Moreover, various analytical materials, as well as during professional conferences repeatedly said that for large companies the Law substantially delayed. This factor really is one of the constraints that affect the prevalence of the procedure among the original "target audience" of the Law. However, it is not critical that, in fact, proved billions filed in the registry of cases. However, for the year of all the subjects of corporate business, are subject to the Law, as well as major creditors (state banks and commercial banks) was at least informed about the possibilities of application of the Law and in varying degrees involved in the process of its implementation.

Now we see an urgent need to deliver information about the effectiveness of treatments to a wider audience of small and medium businesses as well as banks and financial companies that often own distressed portfolio purchased from different banks. In such a situation when it is necessary to overcome the inertia of the huge mass market of small and medium businesses, it is clear that we must act promptly (the Law works until October 2019). According to experts, the Law is interesting for this market because the small and medium-sized businesses can overcome constraints affecting the distribution of treatments among the corporate sector. The interest is associated with the flexibility of decision-making within the company of the debtor and creditor, less administrative risk and legal risk, less regulation of financial companies (which can also apply the Law), the ability to use the full range of preferences, guaranteed by Law, both for the lender and for both groups of debtors.

Based on the above factors, it is obvious that the application of the Law for financial companies with a portfolio of distressed assets consisting of small and medium-sized businesses, provides an opportunity not only to solve the basic problem when you return a customer from a status of "problem", but to get more direct profit to both parties of a financial restructuring process through the use of benefits.

Because of these considerations, the main direction in the work of the Secretariat is to promote information about the possibilities of the Law for small and medium businesses among all players in the market of Ukraine. We have an objective vision about the possibility of significantly expanding the portfolio of clients of the procedure by subjects of small and average business, and we believe that 2018 will prove it in a practical way.

BOROVIK Andrey — Deputy Chairman of the Secretariat established pursuant to the Law of Ukraine "On financial restructuring", Kyiv

Views

Constructive dialogue

Sergey PAPERNIK
the head of the banking and Finance practice of law firm Evris

Unfortunately, the Law on financial restructuring took effect too late for many companies. First of all it concerns large business groups in an attempt to keep the asset and not having any outlet, is already very deeply involved in complex and lengthy trials, including multiple bankruptcy. However, as our experience shows, financial restructuring today is very interesting for medium and small business, while still able to engage in constructive dialogue with the banking institutions. Moreover, banks themselves realize how low the conversion from lawsuits by subjects of small and average business, and therefore strive to work with these troubled portfolios are less aggressive and are ready to meet.

 

The principle of legality

Ruslan KHARCHENKO,
CEO of FC "Morgan capital"

In our practical situation with the debtor, an agreement was reached to settle the debt that is the framework of the Law on financial restructuring, since it allowed larger debt due to the debtor's tax benefits as an additional source of debt repayment. Also been suspended all legal proceedings against the debtor and fully restored its solvency.

I note that in terms of tax benefits among the professional participants and consultants has been simmering debate regarding ambiguous definitions in the Tax code of Ukraine grounds for nancilee income tax of the debtor in the part of the forgiven debt. My position on this issue is unambiguous: in different interpretation of tax law the principle of legality of the taxpayer (paragraph 4.1.4 of article 4 of the Tax code of Ukraine).

Suppose, for example, the standard case for settlement of debt in the framework of the Law on financial restructuring. For example, under the credit agreement there is a debt in the amount of UAH 100 million. The result of the agreements reached by the debtor and the lender have signed and implemented a financial restructuring Plan, under which a portion of the debt in the amount of 60 million is repaid through the sale of the collateral, and the remaining $ 40 million — by agreement between the parties subject to forgiveness. The tax benefit for the debtor for VAT amounted to 10 million UAH, and the income tax of 7.2 million Saved by the debtor 17.2 million UAH secured debt in a bigger size and additional financial infusion into the borrower's business without the need to apply to the last complex procedures of liquidation and bankruptcy.