An insolvency moratorium first introduced during the COVID-19 pandemic applies to nearly all Russian legal entities, individuals, and sole entrepreneurs, and bans the commencement of insolvency proceedings against Russian obligors.
Readers will recall, on April 1, 2020 the RF President signed RF Law No. 98-FZ, amending RF Law No. 127-FZ On Insolvency (Bankruptcy) of October 26, 2002 (the Law) and authorising the Government to impose a moratorium on creditors’ initiation of bankruptcies to stabilize the economy in exceptional cases (a Moratorium).
Immediately thereafter, by Decree No. 428 of April 3, 2020 as part of the COVID-19 relief program, the Government adopted such a Moratorium until 7 January 2021 (the COVID Moratorium).
Президиум Верховного Суда Российской Федерации за первое полугодие 2021 г. утвердил два Обзора судебной практики № 1 и 2. Обзоры содержат ряд важных позиций, на которые стоит обратить внимание руководителям компаний, а также юридическим службам компаний.
1. Исключение компании из Единого государственного реестра юридических лиц (ЕГРЮЛ)
1. Introduction
As in other jurisdictions, Russia’s insolvency legislation is based on the pari passu principle. However, this principle is subject to certain exceptions, specifically with respect to shareholders and other non-arm’s length creditors, such as the controlling persons of an insolvent company (“Affiliated Creditors”).
In practice, Affiliated Creditors use other instruments (e.g. loans, intergroup supplies etc.) to have their claims listed in the creditors’ register of an insolvent company.
The scope of enforcement immunity for the sole home of a debtor has been determined in a recent Ruling* of the Constitutional Court of the Russian Federation.
The Constitutional Court has considerably limited the immunity from enforcement on the sole residence of a bankrupt individual. Such immunity will not apply if a debtor is found to have abused his rights (e.g. by withdrawing assets from bankruptcy proceedings to secure their immunity by purchasing a “luxury” home).
Конституционный Суд РФ в своем недавнем Постановлении определил границы исполнительского иммунитета единственного жилья должника.
Notwithstanding the moratorium for bankruptcy, the number of applications for bringing subsidiary liability in the course of bankruptcy proceedings is not decreasing in recent times. The courts extend and specify the range of persons against whom the creditors may successfully assert their claims.
List of persons is being enlarged
In response to the coronavirus (COVID-19) pandemic, Russia has changed its bankruptcy laws to provide for a moratorium on bankruptcies and a freeze on certain transactions. While the situation is dynamic, these amendments are relevant for ongoing or potential transactions in Russia, as well as a party’s ability to enforce pledges and other types of security interests or to seek other remedies against Russian companies.
In collaboration with our foreign law firm partners, we continue to update our chart of COVID-19 measures taken by governments around the world. Today’s update includes new information for many countries as indicated in the chart: Global Government Measures Taken in Response to COVID-19.
In light of the coronavirus pandemic, the Russian Federal Law "On Insolvency (Bankruptcy)" (the "Bankruptcy Law") has been amended to allow the Russian Government to introduce a moratorium on filing of insolvency claims.