Bad debts recovery: our best strategies

In time of financial instability and quite weak legislation in sphere of court decision enforcement, the proper implementation of economic obligations is not a rule now for many contractors.

All commercial disputes, arising from the breakage of the terms of payment, sale or delivery conditions according to the contract provisions can be possibly divided into:

• Disputes with a contractor, who has stable financial status There is turnover means for debt liquidation but there is a certain dispute (about quality of commodity, completeness, necessity of receipt of documents from a salesman, confirmation documents)
• Disputes regarding the recovery of large debts More than 1 million US dollars, as well as recovery of debts from persons with connections in public authorities, bodies of local self-government
• Cases, which are considered hopeless In future a court decision cannot be enforced because of absence of monetary resources and assets on which a debt recovery can be turned over (also it can be dispute with a contractor who is not having liquid assets)

Depending on every certain situation the question can be solved by different approaches:

• Traditional way Business is examined within one lawsuit includes, if necessary, also includes representation of interests of client in an appeal court, ending with the execution of court decision after entering into legal force.
• File of more, than one claim File of several claims to court against Contractor, if necessary realization of securing of a claim demands
• Development of complex strategies It is used mostly in difficult cases or at recovery of great amounts of money (starting from a few millions of ukrainian hryvnias about 200 thousands of US dollars)

In our work we use the next instruments of the bad debts recovery:

• Searching for the hidden assets of debtor Finding of the hidden assets of debtor on territory of the CIS countries or in the countries of far abroad and offshore jurisdictions (including filing claims to the recorders of offshore companies-debtors about disclosure of information)
• Arrest of debtor/guarantors assets Application of security measures both in Ukraine (arrest of monetary resources/of property, prohibition on alienation) and abroad (including the receipt of Freezing order, Worldwide freezing order, Mareva injunction, Temporary restraining order and others)
• Transfrontal arbitration The use of transfrontal schemes of debts recovery from eventual beneficiaries by filing claims to international arbitrage institutions (especially, in case of bankruptcy or liquidation of legal persons-debtors on territory of Ukraine)
• Recovery debts from affiliated persons Transfer of responsibility for obligations from debtor on affiliated persons offshore (doctrine of Alter Ego). It is used mostly through filing claims in the competent court of the state of a company registration (for example, the USA, United Kingdom, Republic of Cyprus, British Virgin Islands)
• Counteraction to the judicial diversions/bankruptcy Suppression of debtor/the third persons attempts to “split a cause” by filing of technical claims and appeal of judicial determinations; operative receipt of decisions about a penalty and executive documents; stopping of “technical” procedures of bankruptcy
• Bringing to the criminal responsibility of management or owners of companies Initiation criminal proceeding of guilty persons (as a rule, it is owners and/or top-management), and also check of debtor and bounded companies by supervisory organs