Debt collection in Ukraine
A company may fail to meet its financial obligations for a variety of reasons like bad financial performance, insolvency (bankruptcy) or bad faith intentions, etc. The things become even more complicated when we are talking about international trade activities since counterparties are located in different countries and communication as well as enforcement of obligations seems to be impossible due to distance and different legal regulations. This is why our law firm made collection of debt in Ukraine a special service within litigation practice.
We provide exclusively B2B services which allow a foreign company to recover the money that Ukrainian business owes to it. While providing debt collection services we act as a law firm rather than collection agency in Ukraine which means that we use legal remedies of debt collection like litigation and arbitration. However, our practice shows that in some situations it is acceptable and even more efficient to use out of court remedies like mediation.
- Identify the debtor in Ukraine (company’s name, legal and actual address, other contact details);
- File claims regarding Ukrainian company’s financial obligations;
- File complaints and represent foreign clients in commercial litigation and arbitration;
- Cooperate with the Enforcement Service of Ukraine in regard to enforcement of court decision and recovery of debt (e.g. seizing and disposing of debtor’s property);
- Use out of court remedies of dispute resolution like mediation;
- Provide legal advices and other services related to debt recovery in Ukraine.
When speaking about reliability of legal remedies regarding recovery of debt in Ukraine, litigation seems the best option. You can sue your counterparty by filing a complaint to Ukrainian court. Outcome of a commercial case depends on many factors but if your company is able to provide sufficient documentary proof of the debt (invoices, official letters, other documents) the chances are high that you can win the case. As soon as you have decision of the court in this regard the debtor has certain term to execute the court ruling voluntarily. If he fails to do so, you can apply to the Enforcement Service of Ukraine that can use coercive methods like searching for and garnishing debtor’s bank accounts, real estate or other assets that belong to the company in Ukraine. The real property can be either sold from an auction (in this case creditor gets the money) or awarded to the foreign company as it is. There are some legal limitations regarding awarding of the real property though.
The most complicated debt collection in Ukraine is the one resulting from insolvency and bankruptcy procedures but in situations with big companies involved it is absolutely reasonable and usually allows to recover at least part of debt or even the whole amount owed. This type of debt collection is achieved through court proceedings.
Court dispute settlement may not be always possible which among other things depends on the statute of limitations and other factors. Also, litigation, especially commercial one , may require some expenditures on the creditor’s side. Taking this fact into consideration, we offer out of court solutions for small business owners. This also applies to relatively small amounts of debt in Ukraine.
One should keep in mind that the most popular form of business organization in Ukraine is limited liability company. The liability of such company is limited by the amount of its charter capital and other assets it owns. Owner cannot be financially liable for the debts of his company. And since Ukrainian legislation allows to form this kind of company with insignificant charter capital, foreign companies should be very careful when doing business with Ukrainian partners. In order to avoid any unpleasant situations, including those related to inability to collect debt in Ukraine, we recommend to conduct due diligence of company in Ukraine that you want to do business with. Our law firm in Kiev regularly provides comprehensive due diligence services for majority of our foreign clients.
Attorneys of our law firm act based on power of attorney which allows our foreign clients to stay in their own country while we solve all the issues in Ukrainian jurisdiction.
Our lawyers strictly comply with the ethical principles and never use off limit practices like harassment, false statements, threats, unfair practices, etc.
To learn more about our services related to collecting of debts in Ukraine contact office of our law firm in Kiev.