The Russian Supreme court’s new explanations regarding bankruptcy

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On 30 April 2020, the Russian Supreme Court (the “Supreme Court”) approved additional Review No. 2 of selected issues of case law associated with the application of legislation and measures to prevent the spread of the new coronavirus infection (COVID-19) in the Russian Federation.

The following should be borne in mind in the context of court disputes and in litigating bankruptcy cases.

‘Non-working’ days are not excluded for the purpose of calculating time limits

As the Supreme Court has explained, days from 6 until 8 May, which by the Russian President’s Decree No. 294 dated 28 April 2020 were declared to be ‘non-working’ days, should be treated as working days from the perspective of calculating civil law and procedural time limits. Therefore, the clarifications set out in the Supreme Court’s Overview dated 21April 2020 apply when time limits which include these days are calculated.

During the moratorium, a bank cannot debit monies as repayment of a debt against a writ of execution

When a moratorium is applied to initiating bankruptcy cases with respect to certain companies (article 9.1 of the Law on bankruptcy), this implies that enforcement proceedings should be suspended with respect to claims that arose before the moratorium was introduced.

As banks where debtors’ accounts are open debit monies from their accounts against writs of execution, the moratorium regime also applies to such actions of credit institutions.

comment.jpgAlthough legislation on enforcement proceedings and departmental regulations on how credit institutions ought to enforce writs of execution do not contain provisions regarding the moratorium regime, we recommend that banks, in order to avoid any disputes with claimants when the banks return writs of execution that have not been executed, place a relevant mark that it was impossible to execute in view of article 9.1 of the Law on bankruptcy being applied to the debtor. Claimants should bear in mind that it might be impossible, with respect to a company that is subject to the moratorium, to enforce obligations that arose before the above regime started to be applied to the debtor.

The moratorium does not apply to debtors who are being liquidated

As noted by the Supreme Court, the essence of the moratorium is to support debtors who suffered from the spread of the new coronavirus infection by giving them an opportunity of surviving the crisis and returning to normal business activity.

If a debtor who is eligible to apply the moratorium decides to be liquidated, creditors do not have any obstacles to initiate its bankruptcy, so long as the will of its members (founders) is aimed at terminating the company’s operations.

comment.jpgA resolution of voluntary liquidation can be forwarded to ensure subsequent controlled bankruptcy. If a bankruptcy is initiated with respect to a debtor that is being liquidated, we recommend that both legal and other ties should be analysed between the debtor and the bankruptcy petitioner (its legal successors) and the provisional administrator who has been proposed in order to prevent abuse and protect the interests of your company as a creditor.

Pepeliaev Group’s specialists have extensive experience in litigating bankruptcy cases, including on the part of creditors, as well as in the proactive protection of any parties involved in cases of such category or in separate disputes under which transactions are invalidated and secondary liability is imposed.

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