The Commercial Cassation Court of the Supreme Court ruled on a retrospective challenge to the decision to open bankruptcy proceedings by a bankruptcy creditor whose monetary claims were recognised after the challenged decision was issued

After acquiring the procedural status of a participant in bankruptcy proceedings, bankruptcy creditors are not deprived of the right to appeal against the decision to open bankruptcy proceedings within a reasonable period of time from the date of recognition of their pecuniary claims against the debtor, provided that the commercial court extends the time limit for appeal.

When filing an appeal, they, as parties to the case, do not have to prove that the challenged court decision affects their rights, interests or obligations. This conclusion was reached by the Judicial Chamber for Bankruptcy Cases of the Commercial Cassation Court of the Supreme Court.

In the case at hand, the company, having obtained the status of a bankruptcy creditor, appealed against the decision of the local commercial court to open bankruptcy proceedings against a state-owned enterprise.

The court of appeal initially opened proceedings in this appeal, but later closed them on the grounds that the contested decision did not address the issue of the rights, interests and/or obligations of the appellant. In addition, the company had not acquired the status of a creditor participating in the bankruptcy proceedings at the time of the adoption of the contested decision, and the company's creditor claims against the debtor were not recognised until later, so the creditor had the right to appeal against the court decisions in the bankruptcy proceedings from that time.

After considering the company's cassation appeal, the Commercial Cassation Court of the Supreme Court overturned the decision of the court of appeal and remitted the case for a new appeal hearing.

The Commercial Cassation Court of the Supreme Court stated that bankruptcy creditors with respect to claims that arose prior to the commencement of bankruptcy proceedings acquire the legal status of a participant in bankruptcy proceedings in accordance with the set of actions provided by the Code of Ukraine on Bankruptcy Procedures: filing of monetary claims; proof of the right to claim before the court; consideration of monetary claims by the court (verification of the creditor's right to claim, legality of its acquisition, non-loss of this right due to the statute of limitations, etc.) and recognition of monetary claims in the relevant court decision. Thus, the bankruptcy creditor is granted the procedural powers of a participant in the case, including the right to challenge court decisions in a bankruptcy case on appeal, starting from the court's recognition of his claims against the debtor.

Under this legal mechanism, the time limit for appealing against the decision to open bankruptcy proceedings expires before the court considers the claims submitted by creditors in the preliminary hearing, but this cannot be an obstacle to the exercise of the right of appeal against this decision by a bankruptcy creditor.

Therefore, a systematic analysis of the provisions of Articles 42, 254, 255 of the Commercial Procedural Code of Ukraine and Articles 1, 9, 45 of the Code of Ukraine on Bankruptcy Procedures leads to the conclusion that bankruptcy creditors, having acquired the procedural status of a party to a bankruptcy case, are not deprived of the right to appeal against decisions on the opening of proceedings in this case within a reasonable period of time from the date of recognition of their pecuniary claims against the debtor, provided that the commercial court extends the time limit for appeal.

When considering the extension of the time limit for a bankruptcy creditor to lodge an appeal against the decision to open bankruptcy proceedings, the courts should consider the reasons for not complying with this time limit to be valid if the creditor has lodged monetary claims against the debtor within the time limit and in the manner specified in Article 45 of the Code of Ukraine on Bankruptcy Procedures and, after having his claims accepted in a preliminary court hearing, has exercised his right to appeal against the said decision within a reasonable time not exceeding the time limit specified in part 1 of Article 256 of the Commercial Procedural Code of Ukraine.

The Commercial Cassation Court of the Supreme Court also concluded that the parties to the case, as opposed to persons who did not participate in the case, have the right to appeal against court decisions in such a case pursuant to clause 5, part 1, Art. 42 of the Commercial Procedural Code of Ukraine (with the exception of restrictions established by law), and therefore, when filing an appeal, they do not have to prove that the challenged court decision affects their rights, interests and/or obligations, as the above is presumed by procedural law due to the status of the appellant.

The court of appeal did not take the above into account and did not take into account the fact that the company had acquired the status of a participant in the bankruptcy proceedings, and therefore erroneously concluded, when closing the appeal proceedings, that the contested decision did not concern the rights, interests and/or obligations of the appellant.

In view of the foregoing, the Commercial Cassation Court of the Supreme Court considers that the conclusions of the court of appeal that the company is not entitled to appeal against the decision to open bankruptcy proceedings against the state-owned company and to close the appeal proceedings are premature.

The Resolution of the Commercial Cassation Court of the Supreme Court of 12 July 2023 in case No. 915/1097/20 - https://reyestr.court.gov.ua/Review/113738386.

This and other legal positions of the Supreme Court can be found in the Database of Legal Positions of the Supreme Court - https://lpd.court.gov.ua.