Member Article

The amendments to Russian Federal Law “On the insolvency (bankruptcy)”, adopted and came into force in January, 2009, affected both general and procedural provisions of the Law.

We at ALRUD Law Firm provide full professional service at the highest level for our clients therefore we ought to analyze the impact and the consequences of these substantial changes of the procedure of bankruptcy. 

With regard to the general provisions, state bodies should now for free provide information on a debtor to a bankruptcy commissioner within a seven days' term since the moment of receipt of a query from the latter one.

The second and quite important amendment sets out that all liabilities of a debtor occurred prior to the date of entry of the first insolvency stage (procedure) should now be recorded into the creditor’s claims register. This rule brings the Law in line with the application practice existing in other European countries and provides for all creditor’s claims occurred prior to commencement of the first insolvency stage shall be satisfied by the debtor based on the pari passu principle.

With regard to procedural provisions, one should pass an introduced uniform procedure of consideration by arbitration court of the reasonableness of a bankruptcy petition and of establishment of an observation procedure. Such procedure shall be applied both while filing for bankruptcy by a debtor itself and while filing a creditor’s application (before the observation procedure could be applied only in case if claims of the applicant (including the debtor) deemed reasonable). Moreover, the amended Law provides for an option to any third party to fulfill the debtor’s obligations to repay the compulsory payments (obligations to pay taxes and fees) during any of existing bankruptcy stages without simultaneous satisfaction of the debtor’s obligations to other creditors  what was required by the previously effective revision of the Law.

The Law has substantially changed a position of the secured creditors. Now they have no right to vote within the certain insolvency procedures commencing after the observation stage (they take part in creditors’ meetings without vote) given that within the financial restructuring and external management stages of insolvency proceedings secured creditors are granted the right to choose either to enforce the secured claims or to participate in the corresponding proceedings with a right to vote at creditors’ meetings. According to the Law it is now possible to enforce the security (pledge) during all stages of insolvency save for the observation and winding up stages solely under the court decision issued within the frameworks of the insolvency case where the court may deny an enforcement provided that it leads to impossibility of debtor’s solvency recovery.

The order of debtor’s assets disposal has also been changed radically. The idea of electronic tenders where the most part of debtor’s assets shall now be sold has been introduced. Furthermore, the amended Law simplifies the procedure for sale of the debtor’s assets should the tender where such assets were announced to be sold fail.

 

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