ࡱ> >@=` bjbj 4, $  RTTTTTT$hx x ^^^"  R^R^^:V, 9B   R0R&.t L0 6^f , h xxT  RUSSIAN INSOLVENCY LAW: A BROAD OVERVIEW OF LEGISLATION By Ekaterina Sjostrand Barrister 13 Old Square The legislative framework governing corporate and personal insolvency in Russia comprises primarily Part I of the Civil Code and the Law on Insolvency (Bankruptcy) of the Russian Federation dated 26 October 2002, as well as a number of other laws relating to insolvency of enterprises in specific industries. The Law on Insolvency (Bankruptcy) 2002 (the Law) applies to all legal entities, except certain unitary state entities (Federal Treasury entities), political parties and religious organisations. It equally applies to individuals. Insolvency (bankruptcy) proceedings fall within the exclusive jurisdiction of the Russian commercial courts (called the Arbitration courts). A legal entity may become subject to insolvency proceedings if it has failed to satisfy monetary claims of its creditors and/or to make mandatory payments (such as taxes, duties, etc) within 3 months of their due date(s) where the amount owed is at least 100,000 roubles (just under 2,000), i.e. the cash-flow test applies. Individuals may be subject to insolvency proceedings if their debts/ liabilities exceed the value of their assets and the overdue amount is 10,000 roubles or more (just under 200), which is a combination of the cash-flow test and the balance-sheet test. Insolvency proceedings may be initiated by a creditor, a public body or the debtor. It is required that, before initiating any such proceedings, a creditor should (i) obtain judgment for the debt, and (ii) issue proceedings for execution of the judgment (through the bailiffs service). There is no requirement of service of a statutory demand. The Law provides that the court must make a decision whether or not to accept a petition initiating insolvency proceedings within 5 days of it being filed and, if accepted, has to hold a hearing to determine validity of the creditors claim(s) no earlier than 15 days and no later than 30 days thereafter. Article 51 provides that a case must be considered/ heard by the court within 7 months from the date of issue of the proceedings. The meaning of this provision is somewhat unclear. During the course of and/ or as a result of insolvency proceedings, legal entities may be subject to the following measures: (i) supervision, (ii) financial rehabilitation, (iii) external management, (iv) winding-up (liquidation) and (v) voluntary (amicable) arrangement. Individuals may be subject to: (i) bankruptcy or (ii) voluntary (amicable) arrangement. The Law quite flexibly provides possibilities for switching from one type of measure/ remedy to another (e.g., from liquidation to external administration, etc). Supervision If the court determines that the petitioning creditors claims are valid, it may appoint a provisional manager to review the debtors financial situation, draft a register of claims, call the first creditors meeting and ensure preservation of the debtors assets. The regular governing bodies of the debtor entity retain their decision-making powers but certain restrictions apply. Financial rehabilitation The court may apply this measure either upon a resolution passed by the creditors meeting or upon a request of the debtors shareholders or third parties, with the view to restore the debtors solvency. It may last no longer than 2 years. Again, the regular governing bodies of the debtor entity retain their decision-making powers with certain restrictions. External Management The court may rule that the debtors governing bodies be replaced with an external manager for a period of up to 18 months (which may be extended to a further 6 months), with a view to restore the debtors solvency. The external manager sets out a management plan which must be approved by the creditors meeting. Needless to say, the external manager has very wide powers. For example, he may lawfully terminate those contracts entered into by the debtor which preclude the restoration of solvency and/or cause the debtor to suffer loss. Once external management is in place, a moratorium is imposed on the creditors claims. Winding up If the court determines that the debtors solvency cannot be restored, it will declare the debtor insolvent and liquidate it. The debtors assets become part of the insolvency/ bankruptcy estate used to repay the debts. The following ranking applies to unsecured creditors claims: Claims for personal injury and moral damages Employees claims for unpaid wages and severance pay; payment of royalties to authors Other claims (including taxes and duties payable to the public bodies). Secured creditors take priority over unsecured creditors, except where the claims of the unsecured creditors of 1st and 2nd priority had originated prior to the execution of the relevant security. Voluntary (amicable) arrangement It may be entered into at any stage of insolvency/ bankruptcy proceedings if supported by a majority of all the creditors and unanimously approved by the secured creditors. It is also subject to the courts approval.  ()789ij ' ( - = > a l   5 6 ^ _ g ú}y}h`k:hbh*x hbhb hbh41hZw/h hbh{ hbh7Ah1Xh1X5h1X5CJaJh0[5CJaJhCDJ5CJaJh*5CJaJh}5CJaJhbh 5CJaJh }5CJaJhbh }5CJaJ/89P[ij j k JKd$ hdha$gd $dha$gd7Agd7A$a$gd       ? F I Z b d  " 3 4 7 M P h i j ./49qu@hh5MhWP+ hWP+hWP+h*=huhNhuhBbhmh?h;z h PhA3hhhb:Kh2hMh%5hGhhf0h h=<@Q`rsgzlv%PSKd.ٵլՠ٠h3nhF6h3nh3n6haxhBIhFhvphvp6hvp h-6h+h-6h6h Khhu#hBh3nhxl$h-h h hWP+hWP+h*=hGh~]-hWP+h5M4!/SUVWXbdqz@OXjJKLMN45S[κκζήhC* h=6hC*hC*6hHsh=h=H*h?hmhy1h=h1Wh*h~h~6 hBI6 ho-6huho-hhh~h+X+VWXd~LN5$ & F dh^`a$gd~ $dha$gd7A21h:p41/ =!T"T#$% @@@ NormalCJ_HaJmH sH tH DAD Default Paragraph FontRiR  Table Normal4 l4a (k(No List ,89P[ijjk J K d VWXd~LN5000000000000000000000000000000 0 0 0000000ijjk J K d VWd~LN0000000000000000000000000 0 0 0y00{00y00{00  @  u[[hh'':*urn:schemas-microsoft-com:office:smarttagsStreet;*urn:schemas-microsoft-com:office:smarttagsaddress_*urn:schemas-microsoft-com:office:smarttagscountry-regionhttp://www.5iantlavalamp.com/V*urn:schemas-microsoft-com:office:smarttagsplacehttp://www.5iantlavalamp.com/   j@~4W>0R*o1gfX[^`o(() ^`hH. pLp^p`LhH. @ @ ^@ `hH. ^`hH. L^`LhH. ^`hH. ^`hH. PLP^P`LhH.^`o(() ^`hH. pLp^p`LhH. @ @ ^@ `hH. ^`hH. L^`LhH. ^`hH. ^`hH. PLP^P`LhH.W>0Ro1g         dx        WVNHs}duThTf=k ;z W{1X6u#xl$+WP+K -~]-o-Zw/f0y141:S26`k:*=7AVBGBICDJb:K5M+X"YbBbYd jvp`qax*x9|C}3n- M2%5A3{-~u 0[ PB=$;m?* C* KF^ }1WS@SS\:''SS@UnknownGz Times New Roman5Symbol3& z Arial"qhLOfTL $ $!Tr4d 2QHX)? 29BASIC PRINCIPLES OF INSOLVENCY LAW AND PRACTICE IN RUSSIAkatyakatya  Oh+'0 ( 8D d p | <BASIC PRINCIPLES OF INSOLVENCY LAW AND PRACTICE IN RUSSIAkatyaNormalkatya76Microsoft Office Word@n@ 9@(h@>՜.+,0( hp   SJOSTRAND$  :BASIC PRINCIPLES OF INSOLVENCY LAW AND PRACTICE IN RUSSIA Title  !"#$%&'()*+,./012346789:;<?Root Entry FkCBAData 1TableWordDocument4,SummaryInformation(-DocumentSummaryInformation85CompObjq  FMicrosoft Office Word Document MSWordDocWord.Document.89q