1. Repayment and Restructuring of Accounts Receivable Related to Taxes and Mandatory Payments
1.1 Use of Treasury Bills
As stated in Item 2.1 hereof, payments to the State Budget and payments under State Budget liabilities effected in a non-pecuniary form, should have been made solely in accordance with the “The Order of Redemption of Accounts Payable and Collection of Accounts Receivable of the State by Means of Treasury Bills”. Approved by Resolution of the CMU of 6 March 1999 No 321. However, the above resolution was abolished by Edict of the President of Ukraine of 24 December 1999 No 1618/99. Therefore, use of treasury bills in the course of mutual setoffs was undetermined. Forasmuch as recommencement of use of treasury bills in business practice is rather probable, below presented is a brief explanation of procedure of treasury bills application for repayment of the budget debts to taxpayers.
1.2 Bills of Local Authorities
By the current legislation of Ukraine “Procedure of Issuance and Circulation of Bills of the Councils of Ministers of the Autonomous Republic of Crimea, oblast, Kyiv and Sevastopol City State Administrations” approved by Resolution of the CMU No 871 of 20 May 1999. oblast-level local authorities were allowed to act as issuers of bills. For instance, a respective financial body acted as the promissor for bills of the Council of Ministers of the Autonomous Republic of Crimea, oblast, Kyiv and Sevastopol City State Administrations (hereinafter referred to as the bills).
1.3 Mutual Set-Off with the Budget
The issue of repayment of budgets’ indebtedness to enterprises has been already considered in Item 2.4.1 Use of Treasury Bills and Item 2.4.2 Bills of Local Authorities. Below indicated are additional options.
2. Redemption of Accounts Receivable under Economic Liabilities
2.1 Arbitration Procedure for Redemption of Accounts Receivable
If a debtor fails to pay its debt under a contract, the creditor is in the position to collect the amount due in the course of the court procedure. At that, a written claim for fulfillment of obligation (complaint), the form and the content of which are established legally, should be served prior to application to the court. That is, the creditor should attempt the pre-arbitration dispute settlement.
2.2 Use of Promissory Notes
Due to the simplified procedure of transfer of ownership, promissory notes have a higher capacity for circulation and can therefore be used for improvement and facilitation of settlements. In comparison with a regular debt, the debt registered in the form of a promissory note has a substantial advantage, because it can be used as a settlement instrument, the object of sale or purchase and the object of pledge.
2.3 Debtor’s Bankruptcy as a Means of Accounts Receivable Recovery
Bankruptcy may be an efficient method of recovery of the accounts receivable in some cases. The major difficulties for the creditor arise in the process of institution of the bankruptcy proceedings. After institution of the proceedings, the bankruptcy is implemented by the liquidator, which does not require active involvement of the creditor. This section will dwell on the problem-bearing issues of institution of bankruptcy proceedings
2.4 Other Methods
The legislation of Ukraine provides businesses with several options for meeting their contractual obligations even in case of lack of current assets.
The offset of counterclaims under Articles 217 and 218 of the Civil Code of Ukraine. For instance, “the liability shall be terminated by the offset of the uniform counterclaim that matured or whose maturity is not indicated or is determined at the moment of origination of claim”. The offset of claims, whose period of limitation of action lapsed, is not allowed.