In March 2001, under the grant agreement with Freedom House Partnership for Reform in Ukraine program CASE Ukraine launched the project "Comparative Analysis of the Bankruptcy Systems in Poland and Ukraine". Project was accomplished in October 2001.
The objective of the project was to analyze bankruptcy systems of Ukraine and Poland (procedures, institutional environment and legal context) in order to define major deficiencies in current bankruptcy mechanisms and to produce policy recommendations on how to improve bankrupcy procedures in Ukraine.
Effective bankruptcy mechanism is a necessary prerequisite of competitive market economies that ensures free entry exist of economic agents into/from the market. Companies that are in financial distress are enforced to leave the market, while the most successful businesses are motivated to take them over. Therefore, the liquidation or exit of these firms from the market could be considered as a by-product of the competitive process and natural selection.
Studies show that in market economies the number of firms in financial distress is relatively small and the number of those going bankrupt is even smaller. In transition economies, however, the number of financially distressed firms is very large. The situation becomes even more complicated since most of companies-bankrupts are large- and medium-sized firms, but no single large enterprise went bankrupt in Ukraine. Until now bankruptcy procedures were solely applied to small, private, trade or service businesses.
In contrast to Ukraine, Polish economy evidenced massive enterprise exits. Although Polish bankruptcy mechanisms could not be considered perfect and administrative capacity is recognized to be rather small, hundreds of state-owned enterprises (and thousands of other firms) were forced into restructuring or liquidation in Poland. Within this context, it becomes important to revise the experience of Poland and to draw practical lessons for Ukraine on how to enforce and implement bankruptcy procedures.
The project was focused at the analysis and the comparison of Polish and Ukrainian approaches towards the development of bankruptcy systems. The major emphasis was put at the incentives of all economic actors involved in bankruptcy cases, as well as identifying the weaknesses in legal and administrative capacities in Ukraine and Poland.
Based on conducted studies, our experts elaborated specific recommendations that were included into the State Program of Economic and Social Development in Ukraine 2002. The above recommendations, as well as project work-outs, were widely discussed during the seminar and working meetings with representatives of the Committee of Economic Policy of the Verkhovna Rada of Ukraine, the Ministry of Economy of Ukraine, State Committee on Support of Entrepreneurship, Agency of Arbitrage Managers, representatives of Ukrainian NGOs. The project resulted in the publication "Comparative Analysis of the Bankruptcy Systems in Poland and Ukraine".
- Enterprise restructuring