The Ministry of Economic Development has proposed a new mechanism for preventing bankruptcy

08 jun 2022
The Ministry of Economic Development has proposed a new mechanism for preventing bankruptcy

The Ministry of Economic Development has prepared a bill that involves the introduction of a new mechanism for preventing bankruptcy of debtors — this is an agreement on pre-trial rehabilitation, writes RBC. The agency believes that this measure will help to avoid the costs associated with the insolvency procedure, and will also provide an opportunity to receive a tax deferral.

The conclusion of such an agreement can be initiated by the debtor himself — both a citizen and a legal entity. The arbitration court will approve the agreement. Mandatory conditions: creditors participated in the conclusion of the agreement, the debt to which exceeds 75% of its total amount, the agreement is aimed at restoring the debtor's solvency, and he has no outstanding obligations to pay salaries, severance payments or alimony.

An agreement on pre-trial rehabilitation may apply to creditors who did not participate in its conclusion, with the exception of those whose claims are secured by a pledge of the debtor's property, as well as creditors whose claims arose after the conclusion of the agreement. The arbitration court may refuse to approve the pre-trial rehabilitation if it proves that the absent creditors will be put in a worse position compared to if the debtor was declared bankrupt and his property was sold during bankruptcy proceedings.

After the conclusion of the pre-trial rehabilitation, the debtor and creditors will be able to change the procedure and deadlines for fulfilling the debtor's obligations or cancel them altogether, for example, by providing compensation, converting claims into shares in the authorized capital (shares) or securities of the debtor. The document may contain conditions that creditors undertake not to demand bankruptcy of the debtor for a certain time.

According to the Ministry of Economic Development, during the validity of the agreement on pre-trial rehabilitation, enforcement proceedings initiated against the debtor should be terminated and a ban on the initiation of new ones introduced. In addition, the debtor will be able to avoid the costs directly related to the bankruptcy procedure.

The authors of the document called the mechanism of pre-trial settlement of debt through a settlement agreement imperfect. The Ministry of Economic Development believes that pre-trial rehabilitation gives a chance to reconcile and avoid risks on compromise terms.