THE CONCEPT OF NON-INSOLVENCY CHALLENGE OF FRAUDULENT TRANSACTIONS IN UKRAINE: CURRENT STATE AND DEVELOPMENT PROSPECTS

Abstract

This article examines the concept of the non-insolvency challenge of fraudulent transactions, a doctrine relatively novel to Ukrainian civil law that has emerged in the case law of the Supreme Court since 2018. The author traces the evolution of judicial doctrine from an initial, narrow approach (which recognised the fraudulent character of transactions only within bankruptcy proceedings, the insolvency of banks, and enforcement proceedings) to the current position, according to which any transaction concluded with the intent to harm the creditor may be qualified as fraudulent. The purpose of the study is to analyse domestic and foreign approaches to the regulation of such transactions outside of special (insolvency) proceedings, and to substantiate the need for their normative consolidation in the course of the ongoing recodification of the Civil Code of Ukraine. Based on the Roman actio Pauliana and a comparative analysis of German and Italian doctrines, the article reveals the subjective and objective elements of a fraudulent transaction and systematises the markers of fraudulent character developed in judicial practice. Particular attention is paid to the legal position of the bona fide acquirer, which remains insufficiently protected under Ukrainian law, and to the problem of the legal consequences of fraudulent transactions, in particular to the retention of the model of absolute invalidity, as opposed to the European model of relative ineffectiveness (non-opposability) of the transaction. The author argues that the Ukrainian doctrine of non-insolvency challenge has emerged as a result of the extensive expansion of insolvency-based avoidance mechanisms, which has led to the conflation of instruments of ta different legal nature. The article substantiates the need for a functional delimitation of these legal institutions: the consolidation of the non-insolvency challenge in the Civil Code of Ukraine, and of the insolvency-based one in the Code of Ukraine on Bankruptcy Procedures. Proposals are formulated for the introduction of new remedies for the protection of the creditor (the claim following the asset, provisional attachment, the rearrangement of the order of satisfaction of claims, and the defeat of the priority of the new creditor in cases where the debtor pledges or mortgages the asset), as well as for the normative consolidation of the presumption of the acquirer’s awareness of the prejudicial nature of the fraudulent transaction and the determination of the status of the bona fide acquirer.