New wording of law on bankruptcy to force arbitration managers to leave profession, says expert

Kyiv, May 30 (Interfax-Ukraine) – From the moment of the passing of the new wording of the law on the resumption of solvency of debtors or declaring them bankrupt in January 2012, many arbitration managers, being the most important figures in bankruptcy procedures for companies, could leave the market, as they do not feel protected by the new law.

President of the Union of Crisis Managers Pavlo Mikhailidi gave his opinion at a press conference entitled "Who will benefit from a new bankruptcy law - the debtor or the creditor?" and held at Interfax-Ukraine on May 29, 2012.

"From January 2012 few arbitration managers who operate today see themselves on the market. The arbitration managers regulation system foreseen would not give a chance for professionals to come to the market. The law does not create conditions for this, while arbitration managers are the most important figures, as the result of the bankruptcy procedure depends on their professionalism and decency," he said.

The deputy head of the department for bankruptcy at the Justice Ministry of Ukraine, Yulian Khorunzhy, said that the new law on bankruptcy foresees the creation of self-regulating professional organizations of arbitration managers, which will participate in regulation of arbitration managers' operations on equal terms with the state."

"The terms of procedures have been considerably reduced, in particular, resolutions and readjustment. A readjustment plan should be composed in the property management procedure, when the debtor's head is not removed from the post and can give recommendations to arbitration managers in the designing of the readjustment plan. The liquidation procedure has been cut," Khorunzhy said.

Mikhailidi criticized the self-regulation system on the arbitration managers market.

"Actually, there wouldn't be any self-regulation. We do not see [in the new law] a model that could create the conditions for the development of the profession, we don't see the systemic protection of the interests of arbitration managers," he said.

He said that operation of arbitration managers is regulated by the state via licensing (in line with the law on licensing). If the state body cancels licenses for the non-observation of license conditions, arbitration managers have the right to apply to an expert council of appeals at the state committee for regulatory policy and entrepreneurship, and their rights could be protected. Mikhailidi said that he expects that from 2013 cases of pressure on arbitration managers by third persons will be seen more often, which will be aimed at replacing managers in bankruptcy cases if someone's interests were not satisfied.

He also said that the new law does not take into account the interests of arbitration managers regarding bonus policies.

"Arbitration managers are in one line with the workers of companies to which the company owes money. This is a scheme in which arbitration managers are forced to perform illegal payments. We should have a chance to earn money legally and not to agree to collusion, and not to depend on creditors and debtors," Mikhailidi said.

He believes that the requirement, according to which arbitration managers are not the first to obtain bonuses, is negative.

"If we look at the statistics for the 11 years when the law on bankruptcy was in effect, we are third [in line to receive bonuses]. Bonuses have never been paid in full," he said.

Mikhailidi said that the Union of Crisis Managers includes those who have been engaged in this type of activities as arbitration managers for a long period of time and have plans to operate on the market in the future.