Arbitration Manager in Bankruptcy Cases: Powers, Duties, and Key Role in the Procedure

When an enterprise or an individual can no longer timely fulfill their financial obligations to creditors, the legislation provides special mechanisms to resolve such situations. One of the key figures in bankruptcy and insolvency procedures is the arbitration manager. He ensures the conduct of procedures defined by law, controls the observance of the rights of all participants in the process, and performs a number of important powers aimed at restoring the debtor's solvency or satisfying creditors' claims. The Ministry of Justice explained who can become an arbitration manager, what functions he performs, and what requirements are established by law.

In case an enterprise or an individual becomes unable to fulfill monetary obligations to creditors after the established deadline, Ukrainian legislation provides special legal mechanisms to regulate such relations.

The main normative legal act that defines the conditions and procedure for restoring the solvency of a debtor – a legal entity or recognizing them bankrupt to satisfy creditors' claims, as well as the conditions and procedure for restoring the solvency of an individual, is the Bankruptcy Procedure Code of Ukraine.

The arbitration manager plays a key role in this process. His activity is aimed at ensuring the proper conduct of procedures provided by the Code, protecting the rights and legitimate interests of the debtor and creditors, as well as exercising powers defined by law during bankruptcy (insolvency) proceedings.

What is an arbitration manager

An arbitration manager is a natural person who has obtained the appropriate certificate and is entered into the Unified Register of Arbitration Managers of Ukraine. He is a subject of independent professional activity.

According to Articles 10 and 13 of the Bankruptcy Procedure Code of Ukraine, any illegal influence, pressure, or interference in the activities of the arbitration manager is prohibited.

This means that while performing his powers, the arbitration manager acts independently and autonomously from the debtor, creditors, state authorities, and other persons, guided by the requirements of legislation and court decisions in a specific bankruptcy or insolvency case.

A component of the system organizing the professional activity of arbitration managers is their self-governance. It is based on the principles of election, transparency, accountability, and mandatory execution of decisions of the self-regulatory organization's bodies.

The self-regulatory organization of arbitration managers is the National Association of Arbitration Managers of Ukraine – an all-Ukrainian non-governmental non-profit professional organization that unites all arbitration managers in the country and ensures the implementation of their self-governance tasks.

The functions and powers of this organization are defined by Article 33 of the Bankruptcy Procedure Code of Ukraine.

What functions does an arbitration manager perform

An arbitration manager is a participant in a bankruptcy or insolvency case appointed by the commercial court to carry out the relevant judicial procedures.

Depending on the stage of the proceedings, he may perform the functions of:

• manager of the debtor's property;
• sanation manager;
• liquidator of the bankrupt;
• debt restructuring manager;
• manager of the sale of the debtor's property.

Additionally, for the preventive restructuring procedure, the commercial court may appoint a preventive restructuring administrator from among arbitration managers.

Each of these statuses provides a separate scope of powers defined by the Bankruptcy Procedure Code of Ukraine, in particular Articles 33-3, 44, 50, 61, and 114.

At the same time, the same person may perform the powers of an arbitration manager at all stages of the bankruptcy proceedings according to the requirements of the legislation.

For performing his functions, the arbitration manager receives monetary remuneration, the procedure for which is defined by Article 30 of the Code.

Rights of the arbitration manager

Article 12 of the Bankruptcy Procedure Code of Ukraine defines a number of rights of the arbitration manager.

In particular, he has the right to:

• appeal to the court;
• convene creditors' meetings and creditors' committee sessions and participate in them with an advisory vote;
• engage other persons and specialized organizations on a contractual basis to perform his powers;
• receive documents and information necessary for work;
• use information from state registers;
• exercise other powers provided by law.

Duties imposed on the arbitration manager

Among the main duties of the arbitration manager, the law defines:

• strict compliance with legislative requirements;
• taking measures to protect the debtor's property;
• conducting an analysis of the financial and economic condition, investment, and other activities of the debtor and submitting the results of such analysis to the commercial court;
• entering information about the financial condition of debtors and the course of proceedings into the relevant register;
• preventing conflicts of interest and immediately notifying the court about their presence;
• informing law enforcement agencies, anti-corruption bodies, and the Security Service of Ukraine about detected violations of the law that may contain signs of criminal or administrative offenses;
• non-disclosure of information obtained during the performance of professional duties;
• ensuring the protection of state secrets;
• compliance with anti-corruption legislation;
• conscientious and prudent execution of the granted powers.

Who can become an arbitration manager

The requirements for candidates are defined by Article 11 of the Bankruptcy Procedure Code of Ukraine.

An arbitration manager may be a citizen of Ukraine who:

• has a higher legal or economic education of the second (master's) level;
• has a total work experience in the specialty of at least three years or at least one year of experience in managerial positions after obtaining the relevant education;
• has undergone special training, internship, or worked as an assistant to an arbitration manager for six months in the prescribed manner;
• is proficient in the state language;
• has successfully passed the qualification exam.

Who cannot be an arbitration manager

The legislation also establishes a list of restrictions.

A person cannot be an arbitration manager if he/she:

• has been declared legally incapable or partially capable by a court;
• has an unexpunged or outstanding criminal record;
• cannot perform professional duties due to health reasons;
• has been deprived of the right to hold certain positions or engage in relevant activities;
• has been deprived of the right to perform arbitration manager activities as a disciplinary sanction within the last three years.

Thus, the arbitration manager is one of the central figures in bankruptcy and insolvency procedures. The effectiveness of restoring the debtor's solvency or conducting the bankruptcy procedure considering the interests of all parties largely depends on his professionalism, independence, and compliance with legislative requirements.

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