In the light of COVID-19 dissemination in Russia, Federal Law “On Insolvency (Bankruptcy)” includes rules, governing introduction of moratorium on bankruptcy proceedings for certain economic branches and specific companies.
Changes are aimed at preventing bankruptcy of a huge number of companies in current economic situation.
We present main provisions of the bankruptcy moratorium.
1. Russian Government of the Russian Federation is entitled to freely determine specific industries / companies with respect to which moratorium will be extended.
2. Moratorium is entered on initiating bankruptcy cases at the request of creditors; the debtor retains his right to initiate bankruptcy case against himself.
3. List of grounds for introducing a moratorium is open, one of the reasons directly indicates significant change of ruble exchange rate.
4. Time limit of moratorium is not established and can be repeatedly extended by the Government.
5. Since introduction of moratorium, no penalties and other financial sanctions for late payment of monetary obligations are imposed on debtors.
6. Introduction of moratorium implies impossibility of initiating new procedures, but already initiated cases continue to be considered.
7. During moratorium, insolvency practitioner of any debtor, even if the moratorium does not apply to him, may decide to hold meetings of creditors and committee of creditors in absentia (remotely).
8. If bankruptcy proceedings are instituted within 3 months after the end of moratorium, transactions provided during the period of moratorium shall be deemed void, with exception of transactions that relate to ordinary business and which price does not exceed 1% of carrying amount of assets.
9. During moratorium, members are not allowed to leave the debtor company and to receive payment of actual share’s value, ban on payment of dividends and distribution of profits is introduced.
Thus, now any company needs to carefully monitor acts on introduction of moratorium, adopted by the Russian Government and to check whether such act extends to the company itself or to its counterparties.