Opinion of the Grand Chamber of the Supreme Court on Legal Nature of Investment Contract

Investment contract as a separate type of civil and legal contracts may include provisions of different types of civil and legal contracts, depending on the subject matter and aims of the investment (contract on joint activity, capital construction, lending, buying and selling, fiduciary management of assets). Therefore, the noted contract provides both monetary and proprietary rights (obligations) of the contractual parties.

Courts of previous instances found that a local court was dealing with the case on the bankruptcy of Pivdenbud LLC; the case was brought within general procedure provided by the Law of Ukraine No 2343-XII of 14 May 1992 “On Renewal of the Debtor’s Solvency or Declaring Its Bankruptcy”. Investors submitted to this very court their monetary claims to the debtor and requested to declare these monetary claims and to include them into the register of demands of the creditors of Pivdenbud LLC. They concluded investment contracts with Pivdenbud LLC, the subject matter of which consisted of the investment of construction of apartments built on the request of Pivdenbud LLC with the purpose of ownership of apartments pursuant to the noted contracts. The debtor failed to fulfill its obligations under these contracts, and the deadline for construction expired.

The grounds for transfer of the case for its consideration by the Grand Chamber of the Supreme Court are represented by the existence exclusive legal problem, which consists of the lack of unified approach to the solution of disputes and the establishment of legal nature of demands (monetary and proprietary) appearing in cases on bankruptcy, regarding individuals – depositors (investors) in a case on the bankruptcy of the property developer, while investment contracts concluded by debtor and creditor continue to act, and liquidation procedure as for the debtor in the case on bankruptcy was not started.

The special Law of Ukraine “On Renewal of the Debtor’s Solvency or Declaring Its Bankruptcy” regulates legal relations of monetary nature and provides an individual’s possibility to participate in the case on bankruptcy in the status of creditor, if he/she has demands of pecuniary nature to the debtor.

The SC GC did not confirm the opinions of previous courts as for the fact that due to the conclusion of investment contract by the debtor and claimants, exclusively property obligations had appeared, and their demands had material and legal nature. This fact is denied both by the claims on the recognition of demands and by the analysis of legal norms on the legal nature of the investment contract, which combines provisions of a range of different contacts provided by the Civil Code of Ukraine, and may be the grounds for appearing of monetary obligations of its parties.

Follow the link http://www.reyestr.court.gov.ua/Review/79684989 to see the full text of the Resolution of the Grand Chamber of the Supreme Court of 29 January 2019 in the case No. 916/4644/15 (proceedings No. 12-114гс18).