No. 62. The Supreme Arbitration Court of the Russian Federation provides important clarifications on topical aspects of applying the bankruptcy legislation

11.08.2009

Goltsblat BLP advises that the followingresolutionsofthePlenumof the Supreme Arbitration Court of the Russian Federation were published on 23 July 2009:

No. 59 “OncertainpracticalaspectsofapplyingtheFederalLaw “OnEnforcement Proceedings” in the event that bankruptcy proceedings are initiated (“Resolution No. 59);

No. 60 “Oncertain issuesarising following adoptionofFederalLawNo. 296-FZ dated 30 December 2008 “On Amendments to the Federal Law “On Insolvency (Bankruptcy)””(“Resolution No. 60), and

No. 63 “Oncurrentpaymentstowardsmonetaryliabilitiesin a bankruptcy case” (“Resolution No. 63).

All the above resolutions contain important clarifications on applying the bankruptcy legislation.

1. Resolution No. 59 provides a detailed explanation of the position regarding the future of enforcement proceedings and restrictions imposed on the debtor’s property after bankruptcy proceedings are initiated.

It clarifies, in particular, whether or not judicial acts ordering withdrawal of property from unauthorised possession by other persons should be executed if a writ of execution is received after a supervision procedure has been initiated. The Resolution indicates explicitly that, since, according to the meaning of the Federal Law “On insolvency (Bankruptcy)” (paragraph 4, clause 1, article 63), the requirements on disputes pertaining to protection of ownership and possession of property, including withdrawal of property from unauthorised possession by other persons, do not amount to levying execution on property, the enforcement proceedings should not be suspended.

The Resolution provides a number of interesting clarifications on challenging court bailiffs’ actions, preserving and lifting attachment orders, etc.

It is noted that, once a supervision procedure has been initiated, all attachments and other restrictions imposed during the enforcement proceedings aimed at levying execution on property should be lifted, while court measures (including attachments) for securing claims are to be preserved.

In general, the clarifications provided in the Resolution may be construed as being designed to secure creditors’ interests (including those of creditors with non-monetary claims).

2. Resolution No. 60 provides clarifications on quite a number of issues, ranging from the procedure for establishing creditors’ claims to procedural aspects of filing complaints and motions against actions of insolvency officers and self-regulating organisations.

The Resolution indicates that the only current monetary payments and mandatory fees are those charged after a bankruptcy case has been instigated, while those charged before this are not recognised as being current in any procedure, irrespective of their maturity dates.

Another interesting clarification is that:

the right to participate in the first meeting of creditors is granted to a creditor once the court issues a ruling that its claims be entered in the register - not when they are actually entered there by an insolvency officer;

the six month term within which decisions of the creditors’meeting may be challenged by persons not duly informed of its holding is preclusive and not subject to renewal;

at the same time, the twenty day term established for appealing against decisions of the creditors’ meeting may be renewed within the above six month term.

As for activities of insolvency officers, the Resolution contains a notable explanation that, although cancellation of a judicial act disqualifying an insolvency officer provides no grounds for the court to reinstate the officer in his/her position in order that the officer might proceed with his/her duties, nor is the creditors’ meeting forbidden to re-elect said insolvency officer nor the court – to approve the reelection.

3. Resolution No. 63 clarifies which types of creditor demand are considered to be current and which - non-current.

Thus, the Resolution indicates, in particular, that demands for payment for goods, services or work provided after instigation of a bankruptcy case, including under contracts signed before commencement of the bankruptcy proceedings, are considered to be current.

For contracts involving regular payments (rent, lease) or ones concluded for provision of on-going (storage, maintenance, etc.) services or services supplied through connection to a system (power, heat, gas, oil, oil products, water, etc.), current payments consist in payment demands for periods expiring after instigation of a bankruptcy case.

Demands for payment of interest charges for use of other persons’ money resulting from monetary liabilities undertaken before initiation of a bankruptcy case do not fall within the category of current payments, unlike those made under monetary liabilities arising after the bankruptcy is initiated.

The Resolution provides clarifications as to whether or not payments under bills of exchange, surety agreements and terminated contracts should be treated as current and considers a number of complicated cases resulting from demands for recovery of unjustified enrichment; application of relevant liability measures, etc.

For additional information, please contact:

Elena Trusova, Head of Group,
Dispute Resolution,
Goltsblat BLP;
E: info@gblplaw.com

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