Moratorium on bankruptcy
The purpose of the moratorium is to support citizens, individual entrepreneurs and companies which have found themselves in a difficult financial position after sanctions were imposed on Russia.
The period of the moratorium
The moratorium will be in force for 6 months from the date when the resolution is published, i.e. from 1 April 2022 until 30 September 2022.
In accordance with article 9.1 of the Federal Law “On insolvency (bankruptcy)”, any creditors, including the tax service and credit institutions, will be unable to initiate the bankruptcy of debtors for 6 months. Please be reminded that the tax service already announced that it was refusing to initiate cases on the bankruptcy of debtors in March 2022.
While the moratorium is in force, debtors will not be obliged to initiate, in accordance with article 9 of the Law on Bankruptcy, their own bankruptcy if there are elements of insolvency or insufficiency of property.
Nevertheless, debtors retain the right to file a bankruptcy petition with the court or to reject the status of a party that is subject to the moratorium. Article 9.1(1) of the Law on Bankruptcy establishes the right to reject the moratorium on bankruptcy. A rejection of the moratorium on bankruptcy is to be published in the Unified Federal Register of Information on Bankruptcy.
Who is covered by the moratorium?
We remind the reader about the principal consequences of the moratorium on bankruptcy being announced:
enforcement proceedings are suspended with respect to property foreclosures in accordance with the claims that had been raised before the moratorium was introduced (however arrests of the debtor's property are not lifted, and neither are other limitations lifted with respect to the disposal of the debtor’s property which were imposed during enforcement proceedings);
for the period of the moratorium on bankruptcy it is not allowed to:
- settle the claims of the members of the debtor for a share to be allocated owing to the termination of membership;
- debtors are not allowed to buy out or acquire the allocated shares and/or to pay the actual value of the share;
- set off mutual obligations in violation of the order of priority;
- pay dividends;
- assess financial sanctions
In accordance with clause 7 of Resolution No. 44 of the Plenum of the Russian Supreme Court “On certain issues of the application of the provisions of article 9.1 of Federal Law No. 127-FZ “On insolvency (bankruptcy)” dated 26 October 2020” dated 24 December 2020, during the period of the coronavirus moratorium financial sanctions were not assessed on monetary obligations only of persons who were affected specifically by the consequences of the limitations relating to COVID. We believe that the courts will apply a similar position in the current situation as well. In view of the above, companies that act in bad faith referring to an inability to perform their monetary obligations owing to sanctions and the resulting consequences, or who are unable to substantiate a causal link between such circumstances and the deterioration of their financial state, are unlikely to be able to count on not having penalties, fines, and interest assessed for them, or other financial liability not applied to them.