Vol 17 (2020) - Issue 6

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Ukraine: Civil Liability for Causing Bankruptcy – Myth or Reality?

Synopsis
This article aims at shedding light on the topic of civil liability for causing bankruptcy that is much discussed and in demand nowadays in Ukraine.
The application of the legal rules on civil liability is relatively new in this jurisdiction. It started developing only since 2018, when courts began to 're-shape' their approach in deciding such cases.
Previous court practice associated the possibility of holding a person liable for causing bankruptcy with the existence of a criminal conviction in a separate criminal proceeding. As such, a formal judgement of guilty was a 'pre-requisite' for civil liability. Given that the proof of all elements of a criminal offence would pose a problem in practice, the prospect of imposing civil liability on the persons at fault for causing bankruptcy within a bankruptcy proceeding was more of a myth than a reality.
Recent court practice in Ukraine signals a change to the former approach in deciding such cases, by underlining the need to 'differentiate' civil and criminal liability cases by contrasting the standards of proof and presumptions for each type of case.
In this article we therefore re-open the debate as to the possibility of imposing civil liability for causing bankruptcy on the persons at fault for causing bankruptcy (such as the director, shareholders or other persons in position to influence decision-making processes) outside of any criminal proceedings, and provide insight into the current court approaches in considering such cases.
Banks and other financial institutions are excluded from the scope of this paper, only debtors that are ordinary legal entities and are non-financial institutions are considered.