Restructuring and Bankruptcy: Which Rules Actually Work in 2026

What was supposed to work

Until 2025, a company that lacked the funds to pay its debts had two options. The first was bankruptcy: a public court proceeding in which management loses control of the business and most of the assets are sold off. The second was pre-bankruptcy rehabilitation under the Code of Ukraine on Bankruptcy Procedures, which took effect in 2019. Over the six years from 2019 to 2025, commercial courts accepted 29 applications for approval of pre-bankruptcy rehabilitation plans and approved only eight (data released by one of the drafters of the new law in February 2026). That amounts to one or two businesses rescued per year nationwide, even though the Supreme Court noted growing interest in pre-bankruptcy rehabilitation in 2025. Everything else came down to informal arrangements with banks that depended on the goodwill of the parties.

Law No. 3985-IX, adopted on September 19, 2024, and effective as of January 1, 2025, added a separate book titled “Preventive Restructuring” to the Code. The law implements Directive (EU) 2019/1023, under which EU Member States have been reforming their insolvency laws, and is one of the requirements of the Ukraine Facility. The concept is simple: to give viable businesses the opportunity to reach an agreement with creditors under court protection even before insolvency sets in, while the company is still operating and paying salaries but can see that it will be unable to service its debts over the next twelve months.

Here is what the debtor actually gained. Control: unlike in bankruptcy, management is not removed, and the insolvency practitioner (in this procedure, the preventive restructuring administrator) oversees the process and issues an opinion on the plan but does not manage the business. Protection: once the procedure is opened, no bankruptcy case may be initiated against the company, fines and penalty interest stop accruing, and, at the debtor’s request, the court may stay enforcement proceedings and foreclosure on collateral. Deal safeguards: counterparties cannot terminate contracts solely because the procedure has been opened, and new financing provided for the restructuring is repaid on a first-priority basis if the company later goes bankrupt. Binding outcome: a plan approved by the required majority of creditors and confirmed by the court becomes binding even on those who voted against it. All of this comes without the public stigma of the “bankrupt” label and at a predictable cost: the administrator’s fee ranges from three minimum wages per month for small businesses to fifteen for large ones, that is, from UAH 26,000 to UAH 130,000 per month.

One thing was expected of businesses: that they would come forward early. The word “preventive” in the procedure’s name is not merely for show.

What the first twenty months have shown

In 2025, according to Opendatabot, eight preventive restructuring cases were opened concerning six companies. As of April 2026, there were nine procedures and three approved plans; as of July, according to the Ministry of Justice, nine companies were undergoing the procedure, and plans had been approved for six more. In that same year, 2025, 780 companies entered bankruptcy proceedings, and in the first half of 2026, commercial courts opened another 1,250 cases (including those involving individuals). Of the 6,107 cases pending in court in July 2026, three-quarters were in the liquidation stage and only 5% were in the rehabilitation stage, that is, attempting to restore solvency. In its analysis of the commercial courts’ work for 2025, the Supreme Court notes the same trend from another perspective: the number of bankruptcy-related cases and other filings in local commercial courts increased by 18.2%, to 18,600.

The ratio speaks volumes: for every attempt to reach an agreement before default, there are dozens of liquidations afterward. This does not mean, however, that the tool is not working. The number of approved plans doubled in a single quarter, and in its first year preventive restructuring produced more approved plans than pre-bankruptcy rehabilitation used to produce in two years on average. What did not work was the expectation that businesses would approach their creditors early and in large numbers. The reason lies in the very design of the procedure, and that design must be understood before the procedure is put to use.

Six months ss a time frame, not a shortcoming

Debtor protection measures last no more than six months and cannot be extended; the Code says so expressly. The final court hearing is scheduled no earlier than two months and no later than six months after the procedure is opened; if the plan is not approved within twelve months, the procedure is closed. These time limits are set by Directive 2019/1023 itself, which deliberately limits debtor protection: the procedure is designed for viable businesses with a nearly finalized plan, not as a shelter from enforcement.

Consider what “starting negotiations from scratch” means and why such negotiations cannot be fitted into this window. Restructuring is not a single conversation with the bank. It involves taking stock of debts and creditors; valuing the business and its assets; calculating a liquidation scenario, that is, how much each creditor would receive if the company were sold off at auction; developing a financial model; dividing creditors into classes; negotiating terms such as debt forgiveness, deferrals, debt-to-equity conversions, and the sale of non-core assets; and securing the votes. For a medium-sized company with a dozen significant creditors, this takes six to twelve months of work. The law recognizes this: it provides a simplified procedure for a debtor who comes forward with a plan already approved by creditors, and allows small businesses to submit a concept first and the full plan within two months. Six months of protection is sufficient to legally formalize the agreements reached prior to filing the petition. Starting with a debt inventory within this window means exiting protection with a half-finished plan.

There is also a second filter, the best-interest-of-creditors test: no creditor may receive less under the plan than it would have received in liquidation. This changes the logic of the negotiations. A debtor who comes asking for time has nothing to offer: in 2026, a creditors’ committee calculates the liquidation scenario faster than the debtor can finish its presentation. A debtor who brings a plan under which creditors recover more than they would in liquidation gets both time and signatures. In restructuring negotiations over the past two years, the most common mistake has been one and the same: asking for time instead of offering value.

Why bankruptcy no longer buys time

Some background is needed here. Under Article 41 of the Code, a moratorium on the satisfaction of creditors’ claims is imposed automatically from the day bankruptcy proceedings are opened: enforcement under writs of execution is stayed, penalties and fines do not accrue, and the debtor may not repay pre-existing debts other than in accordance with the Code. The moratorium remains in effect until the case is closed. It was precisely this provision that for years made bankruptcy a tool for buying time: the debtor would initiate the case, and every dispute within it, whether over the amount of claims, the invalidity of transactions, or property, would be heard under the general rules, taking three to four months at first instance, followed by appeals. The case dragged on for years, and the moratorium along with it.

Law No. 3249-IX of July 13, 2023, effective as of July 29, 2023, for the duration of martial law and six months thereafter, changed this calculus. It neither introduced nor abolished the moratorium; instead, it moved disputes within bankruptcy cases into simplified proceedings with a time limit of up to two months. There are many such disputes: according to the Supreme Court, in 2025 commercial courts heard 4,700 lawsuits within bankruptcy cases, 1.5 times as many as a year earlier, with UAH 25.9 billion awarded. That same moratorium now buys the debtor weeks, not quarters: the case reaches liquidation faster.

Liquidation, in turn, means locking in losses. What I mean is this: by the time a company ends up in bankruptcy, its value has already been destroyed. Customers have left, key employees have resigned, equipment has become obsolete or been removed, and the assets are sold at auction at a discount. The court does not create value; it distributes what remains among creditors in order of priority. The statistics bear this out: according to Opendatabot’s analysis of court data, only 48 of the 780 companies that entered bankruptcy proceedings in 2025 (about 6%) opted for rehabilitation; 84% of the bankrupt companies were limited liability companies, with wholesale trade, agriculture, real estate, and construction as the leading sectors. A court proceeding merely records the outcome; it cannot create it.

That same 2023 law expanded the range of persons who can be held subsidiarily liable, that is, made to answer for the company’s debts with their own assets if the bankrupt entity’s assets are insufficient. Previously, this applied primarily to founders and executives; now it also applies to persons who entered into transactions with the debtor or took property-related actions in respect of its assets. Combined with the right of the insolvency practitioner and creditors to challenge the debtor’s transactions entered into within the three years preceding bankruptcy, this means one simple thing: asset stripping on the eve of insolvency is a 2019 strategy. In 2026, it carries a high personal cost for everyone whose signature appears on such documents.

The distressed debt market: a question not yet asked

The second storyline of 2026 is bank debt. According to the National Bank of Ukraine (NBU), the share of non-performing loans (NPLs, i.e., loans more than 90 days past due or loans to borrowers recognized as insolvent) stood at 12.1% as of August 1, 2026, 1.8 percentage points lower than at the start of the year and the lowest level in over fifteen years. At its wartime peak, in the first year of the full-scale war, the ratio stood at 39.1%. In December 2025, state-owned banks wrote off more than UAH 170 billion of legacy non-performing assets all at once; the NPL portfolio in the system decreased to approximately UAH 188 billion and has remained virtually unchanged since the beginning of 2026 (down UAH 0.8 billion), while the total loan portfolio grew by 14.3%. The ratio is falling because the denominator is growing: new, higher-quality lending.

For a decade, the distressed debt market operated on a simple logic: portfolios are purchased for a small fraction of their face value, and the deep discount covers any legal gaps, such as missing documents, questionable collateral, or missed deadlines. The question the market has not yet asked is what will happen to portfolio prices once banks finish cleaning up their balance sheets. My answer, based on negotiation practice, consists of three observations. First, supply is shrinking: old portfolios have been written off or sold, and new defaults are few because, as the NBU reports, new loans are of better quality. Second, demand is not shrinking: investors, factoring firms, and collection agencies have built capacity sized for the volumes of 2022–2024. Third, when supply falls faster than demand, the discount narrows and no longer covers weak documentation. Investor returns now depend less on the macroeconomic cycle and more on the quality of legal due diligence. The window for cheap entry into Ukrainian distressed assets is closing: buying “on a hunch” was already becoming expensive last year, and in 2027 it will be a luxury.

What to watch through the end of 2027

Only probabilistic forecasts are appropriate here, and each one rests on specific data.

Base-case scenario: the number of preventive procedures will double or triple over the next year and a half, reaching 30–45 in total, compared with the current fifteen. Rationale: the number of approved plans doubled within a quarter, from three in April to six in July 2026, and in the coming months the first fully implemented plans will emerge, precedents whose results creditors will be able to see in figures. At the January–July pace (a decrease of 1.8 percentage points over seven months, or about 0.26 percentage points per month), the NPL ratio would fall to approximately 10.8% by the end of 2026; at the slower May–July pace (about 0.17 percentage points per month), it would fall to 11.3%. In both cases, that means a ratio of around 11% and a further contraction of supply for investors in distressed debt.

Risk scenario: a military or energy shock worsens the quality of new loans, and banks once again accumulate non-performing debt. The window for discounted entry opens slightly, but only briefly and not for everyone: banks have learned to sell faster and at higher prices.

Three indicators will show which scenario is unfolding. The first is the number of new preventive procedures per half-year and the share of approved plans in the Ministry of Justice’s public statistics. The second is the monthly trend in NPLs relative to the pace of new lending: if the volume of non-performing loans begins to grow in hryvnia terms rather than merely declining as a percentage, that will be the first sign of a turn in the cycle. The third is the first procedure initiated at the instigation of creditors. Only the debtor itself can initiate preventive restructuring, but the Code grants creditors the right to raise this issue with the debtor, and the debtor is required to provide a reasoned response within 30 days. The day a major bank exercises this right will signal that the instrument has become creditor-driven.

There is only one rule for 2026, and it is simple: a court proceeding records the outcome, but the outcome is created in the negotiating room, six to twelve months before a liquidity crisis. The law has provided tools to those who prepare. To everyone else, it has left statistics.

The article was written by Valentyn Gvozdiy, Founding Partner of GOLAW, Attorney at law