Amendments to the legislation on insolvency (bankruptcy) in relation to increasing the liability of the debtor’s CEO and governing bodies, disputing debtor transactions and imposing secondary liability on its controlling entities.
LEGAL UPDATE No. 36.
Goltsblat BLP advises that Federal Law of 28 April 2009 No. 73-FZ “On Amendments to Individual Legislative Acts of the Russian Federation” (the Federal Law) came into effect on 5 June 2009.
The Federal Law introduces changes into the federal laws on banks and banking, on insolvency (bankruptcy) of credit institutions and on insolvency (bankruptcy). These amendments are designed to improve regulation of bankruptcy procedures in relation to increasing the liability of the debtor’s CEO and governing bodies, disputing debtor transactions and imposing secondary liability for debtor obligations on controlling entities that have or had the right to issue instructions binding on the debtor or the possibility of otherwise determining its actions.
The signs of insolvency (bankruptcy) of a credit institution are specified by the Federal Law, which also introduces for bankruptcy in general the concepts of: debtor’s controlling entity; harm caused to the property rights of creditors; asset insufficiency; inability to pay. The obligations of the CEO of an organisation, given signs of insolvency, are set out in detail. The bounds for imposing secondary liability on accessories to bankruptcy are broadened. Entities belonging to the same group as the debtor, its affiliates in accordance with the anti-monopoly legislation and other categories of person named by the Federal Law are recognised as interested parties in relation to the debtor.
The provisions on disputing a debtor’s transactions according to the Federal Law “On Insolvency (Bankruptcy)” have undergone serious reworking and a whole new chapter has been added to this Law. In addition, its text now embodies the legal position developed in recent years by state arbitration courts regarding application of the provisions on disputing transactions to disputing the debtor’s actions in performance of civil law obligations and, especially, obligations established by other branches (labour, family, tax, customs, etc.) of the legislation.
The concept of a “suspicious transaction” has been formalised. Such a transaction concluded by the debtor in the absence of equivalent reciprocal discharge of obligations by the other party may be recognised as invalid by a state arbitration court if dated less than one year before or after the debtor’s bankruptcy filing is accepted. If the debtor concludes such a suspicious transaction with the intention of causing harm to the property rights of creditors, it may be recognised as invalid if dated within three years before or after the debtor files for bankruptcy. Debtor transactions entailing claim satisfaction preferences for one creditor over the other creditors may be recognised as invalid if they are concluded within the month before or after a state court of arbitration accepts the bankruptcy filing from the debtor and some such transactions – only if concluded within the six months preceding acceptance of the given filing.
The Federal law also introduces other specific aspects of disputing individual debtor transactions, determines the consequences of invalidation of a transaction, indicates specific features of judicial examination, limits the range of parties authorised to submit applications to dispute transactions, and establishes the order of priority in which claims with respect to individual invalid transactions are to be satisfied.
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