On August 21, a Cabinet meeting will be held to decide on the fate of bankruptcy reform. Why is TI Ukraine insisting on the government not adopting the dubious regulation and what threats does this document involve?

In April this year, the Verkhovna Rada approved a new Bankruptcy Code. Finally, the sale of property of bankrupt entities in the electronic trading system at online auctions became possible. However, the Ministry of Justice has prepared a draft regulation for the Cabinet of Ministers, which may fail the bankruptcy reform.

It has rules for market participants to determine the procedure for the sale of property and to choose the administrator of the system in which everything will be sold.

On August 20, TI Ukraine participated in a roundtable discussion on the draft regulation of the Cabinet of Ministers on the sale of property of bankrupt entities, organized by the Ukrainian Bar Association.

It became clear that the professional community was worried about a possible failure of bankruptcy reform. In particular, because the Ministry of Justice played an obscure game in the preparation of the draft regulation. The ministry did not invite relevant ministries (Ministry of Economic Development and Ministry of Finance), experts and the public to participate. As a result, market participants say, the Cabinet of Ministers has received a low-quality document that cannot be approved in this form.

In short, the key stakeholders in bankruptcy reform have reached the following conclusions:

  • The order provides for the Ministry of Justice’s monopoly in this area.

In order to compete for the selection of the trade system administrator, the Ministry of Justice wants to create its own competition commission, appoint its chairman and determine the composition of the representatives of the Ministry of Justice.

  • The competitive conditions for selecting an administrator were discriminatory, at least in the most recent public version.

The prospective administrator of the trading system is required to have at least three years of auctioning experience, or to have three call center employees.

  • The definitions regarding the auctioning are not clearly defined

The proposed version of the Regulation improperly defined the procedures and terminology for the English (for the price increase) and Dutch (for the price reduction) auctions separately.

In the event, a representative of the Ministry of Justice assured that some of the experts’ comments were taken into account. However, none of the participants of the round table saw the latest version of the Regulation.

Earlier, the TI Ukraine Innovation and Expertise Center had already addressed the Secretariat of the CMU and the Ministry of Justice and called for the principles of transparency, public access, non-discrimination and guaranteeing access to information for all those wishing to select a future administrator.

In order to compete for the selection of the trade system administrator, the Ministry of Justice wants to create its own competition commission, appoint its chairman and determine the composition of the representatives of the Ministry of Justice.

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It became clear that the professional community was worried about a possible failure of bankruptcy reform. In particular, because the Ministry of Justice conducted a closed game in the preparation of the draft regulation. The ministry did not involve relevant ministries (Ministry of Economic Development and Ministry of Finance), experts and the public. As a result, market participants say, the Cabinet of Ministers has received a low-quality document that cannot be approved in this form!