Insolvency Law at Russia
Russia's insolvency law is primarily governed by the Federal Law No. 127-FZ of 26 October 2002 "On Insolvency (Bankruptcy)", which outlines procedures for both corporate and individual debtors. Recent amendments, notably those enacted in May 2024, have introduced significant changes aimed at improving the efficiency and fairness of insolvency proceedings.
⚖️ Legal Framework
The Russian insolvency law provides for several procedures:
Supervision (Nablyudeniye): The initial stage where an interim manager is appointed to assess the debtor's financial situation and prepare for potential restructuring or liquidation.
Financial Rehabilitation (Finansovoye Ozdorovleniye): Aimed at restoring the debtor's solvency through a court-approved plan, though rarely used in practice.
External Management (Vneshniye Upravleniye): A reorganization procedure where an external manager takes control of the debtor's operations to restore financial stability.
Bankruptcy Liquidation (Konkursnoye Proizvodstvo): The liquidation of the debtor's assets to satisfy creditor claims.
Settlement Agreement (Mirovoye Soglasheniye): An agreement between the debtor and creditors to resolve the insolvency outside of court proceedings.
🆕 Recent Amendments (2024)
In May 2024, Russia enacted significant changes to its bankruptcy law:
Increased Debt Thresholds: The minimum debt required to initiate corporate bankruptcy proceedings was raised to RUB 2 million, and to RUB 3 million for agricultural companies and strategic enterprises. (Fundamental changes to the Law on Bankruptcy)
Electronic Filing of Claims: Creditors must now submit claims electronically, and these are considered without a court hearing unless objections are raised. (Main Changes in Bankruptcy Legislation)
Streamlined Procedures: Certain applications, such as those for extending procedures or releasing managers, are now considered without a hearing, simplifying the process. (Main Changes in Bankruptcy Legislation)
Enhanced Powers for Insolvency Managers: Managers can independently request information about the debtor's assets and those of related parties, improving the efficiency of proceedings. (Main Changes in Bankruptcy Legislation)
🧾 Insolvency Procedures
The insolvency process typically follows these stages: (Bankruptcy In Russia: Basic Framework, Recent Trends And Tips For Foreign Creditors - Insolvency/Bankruptcy - Insolvency/Bankruptcy/Re-Structuring - Russian Federation)
Initiation: A creditor or the debtor may file for bankruptcy.
Supervision: An interim manager assesses the debtor's financial situation.
Rehabilitation or Liquidation: Depending on the assessment, the debtor may undergo financial rehabilitation or liquidation. (Corporate insolvency & restructuring report 2021: Russia | IFLR)
Settlement Agreement: At any stage, a settlement agreement may be reached between the debtor and creditors.
Completion: The proceedings conclude once the court approves the final report and discharges the debtor.
📌 Key Considerations
Moratoriums: In response to economic challenges, Russia has implemented moratoriums on initiating bankruptcy proceedings, affecting all industries except certain real estate developers. (From April 1, 2022, Russia Introduces a Moratorium on Initiating Bankruptcy Proceedings Under the Claims of Creditors)
Priority of Claims: Claims are prioritized, with wages, compensation for harm to health, and alimony taking precedence. (Bankruptcy, Insolvency & Rehabilitation Proceedings in Russia (Updated) | International Lawyers Network - JDSupra)
Simplified Procedures: In cases where the debtor's assets are insufficient to satisfy all claims, simplified bankruptcy procedures may be applied. (The commercial laws of The Russian Federation. Part 21. Bankruptcy and Creditor’s rights - Insights - EPAM Law)
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