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Bankruptcy in the ASEO Practice Review No. 3-2022

30.11.2022

Arbitration Court of the Far Eastern District presented a review of practice N 3-2022. The selection included a bankruptcy dispute. The question was about the application of the consequences of the invalidity of the transaction for the seizure of the assets of a municipal unitary enterprise, which belonged to it by right of economic management. The district court explained: if it is impossible to return the asset to the bankruptcy estate, the acquirer shall compensate for its actual value. 


In 2009, the company received municipal property, including a solid waste landfill, on the right of economic management for use in economic activity. In 2019, the company was declared bankrupt. During the period of bankruptcy proceedings, the administration issued an order to withdraw the facility, which was the only facility in the city district for the disposal and burial of MSW, from the business. 

A creditor in bankruptcy began to challenge the transaction. The court of the first instance had agreed with him and ordered the administration to return the property to the debtor's economic management. 

The appellate court reversed this ruling as the disputed asset had left the municipal ownership and become the property of the constituent entity of Russia, and the property was assigned by right of economic management to a regional unitary enterprise. The court declared the transaction invalid and recovered the actual value of the structure from the administration to the bankruptcy estate.

The court of the region agreed with this approach. Thus, there was no equivalent counterclaim for the seizure of the asset and therefore it was proved that the creditors had been harmed. As for the consequences of the invalidity of the transaction, if the debtor did not have the status of a regional operator, which is required to work in the field of waste management, the claim to return the asset to the bankruptcy estate should not be satisfied. In this case, the administration is obliged to reimburse the actual value of the property at the time of its acquisition (ruling of the Far Eastern Federal District on case No. A51-23265/2016 of 18 April 2022).

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Bankruptcy services ads brought to the attention of antitrust regulators

28.11.2022

This month, antitrust regulators dealt with language that was said to mislead potential consumers. The calls to not pay the loan, as well as an offer to participate in a state program to write off debts, raised questions.

"Don't Pay Your Loan Legally"
This advertisement of bankruptcy services was discussed by the Kemerovo FAS of Russia during the meeting of the Expert Council. At that time the Council members concluded that the disputed advertisement did not contain the terms under which it was possible not to pay back the loan; it was not very specific, the consumers were misled and there was an appeal not to fulfill the loan obligations, even though the non-payment would have negative consequences for the citizens.

Such wording, the antimonopoly inspectors explained, leads to the idea of trouble-free relief from debts. At the same time it is not allowed advertising, which lacks some essential information about the promoted service, and consumers are misled. 

The actions of the law firm qualified under Part 1 of Art. 14.3 of the Administrative Code, issued a warning (decision on the case № 042-04/14.3-1170/2022 dated November 14, 2022). 

"It is possible to write off debts under the state program"
Another case involving advertising of bankruptcy services was scheduled for review. A citizen complained to antimonopoly officials about information posted on Vkontakte: "Residents of Omsk and the Omsk region can not pay debts and existing loans. The state gives the opportunity to get rid of loans, interest, arrears and arrears on housing and utilities, to citizens who can not pay. Applications are accepted until the end of the month [...] Residents of the Omsk region can have their debts written off under the state program." The applicant believed that the information in this advertisement was misleading for potential consumers of services. 

The Omsk FAS of Russia initiated proceedings for violation of p. 20 p. 3, part 7 and 11 of the law on advertising (decision on case № 055/05/5-894/2022 from 10 November 2022), the case will be considered on 6 December 2022.

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New initiative with changes for bankruptcy law registered

22.11.2022

A draft law amending Article 138 of the Law on Insolvency has been registered in the State Duma. The author of the initiative, the deputy V.M.Reznik, refers to the inconsistency in the judicial practice on the issue of priority payment of taxes during the sale of mortgaged property. The amendments are suggested to the law for the sake of more certainty.

Paragraph 6 of the Article 138 of the law on insolvency is supposed to include an exhaustive list of compulsory payments, which should be given priority in the budget. These include property taxes accrued on the subject of pledge for the period of bankruptcy. At the same time mandatory payments shall be transferred prior to the expenditure of proceeds in accordance with paragraphs 1 and 2 of article 138 of the law on insolvency.

We would like to remind you that previously the position on tax payments upon sale or lease of pledged property was presented by:
- The Supreme Court, in Decision No. 305-ES20-10152 of October 19, 2020, included in Practice Review No. 4-2020; in Decision No. 305-ES20-20287 of April 8, 2021; and in Decision No. 308-ES18-21050 (41) of July 8, 2021;
- National Union of Crisis Management Professionals, in clarification published on February 28, 2022.

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If there is no bankruptcy trustee in an organization's bankruptcy case: clarifications by the NCC at the District Court

21.11.2022

Arbitration court of North Caucasus region published recommendations worked out following the results of the meeting of Scientific and advisory council on June, 24 2022. Altogether, three blocks of questions were examined - application of the rules of arbitration proceedings, consideration of disputes according to the chapter 24 of the APC RF and questions of application of the law on bankruptcy. 


The third block provides clarification as to whether or not an organization's bankruptcy case is terminated if the candidate for bankruptcy trustee is not submitted within three months from the date when the trustee is to be approved.

The NCC answers that such a situation is not an unconditional basis for termination of the case. If the persons involved in the case are interested in the further conduct of the case, the court must create conditions for the exercise of their rights in the selection and presentation of a candidate of the administrator.

The rule of Clause 9 of Article 45 of the Law on Bankruptcy does not establish an imperative rule on termination of proceedings in the presence of a formal sign, but contains an organizational term, the expiration of which is named as one of the conditions for consideration of the completion of the case.

When the participants have an interest in the continuation of the case, the court must create conditions for the exercise of their rights. At the same time, the court should not replace the persons involved in the case, independently exercising their powers. If at the end of the three-month period for the measures to approve the manager there is no corresponding will, the bankruptcy case of the organization is terminated.

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State Duma passes amendments for bankruptcy law

15.11.2022

Bill No. 132289-8, introduced by the Russian government in May this year, was approved in third reading. The law has now been sent to the Federation Council. Initially, the amendments focused on the Constitutional Court ruling No. 49-P of November 16, 2021. But later there were norms concerning the amount of subsidiary responsibility of financial organizations being rehabilitated.

The first block of amendments is related to the rights of the debtor's controlling persons (CDL) to participate in disputes which may concern the bringing to responsibility and the amount of that responsibility. In particular, such persons will have the right to appeal against court acts. 

The mechanism will work in the following way: The CEO submits a petition, and the court will decide on its involvement in the case. It is separately stated that the filing of a petition is not equal to the admission of the CDL's guilt. If the KDL is a person brought to subsidiary responsibility, the filing of a petition is not required.

The second set of changes concerns financial institutions. For example, it is established that the order of satisfaction of claims of a credit institution, in respect of which the participation plan of the Central Bank or the Agency was approved, must not be lowered for reasons which occurred before the approval of the plan. 

It also includes amendments concerning the reduction of the amount of subsidiary liability of sanctioned non-state pension funds, insurance companies and credit organizations, more detailed information about this block of amendments can be found on Federal Resources.

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The Arbitration court of Ural district reminded how to get judicial acts

08.11.2022

On a site of Arbitration court of Ural appeared explanations about performance of judicial certificates and granting of the information on case movement. The court of district pays attention: participating in business should receive such information independently, all acts of arbitration courts are placed in "Cartography of arbitration cases".


Now the electronic form of judicial acts - in priority, and therefore, if technically possible, such documents are made. The act in electronic form must contain an enhanced qualified electronic signature, and if it is adopted collegially, all judges must sign. In this case a paper copy is prepared additionally, both documents are equal in legal effect.

Electronic documents shall be deemed to have been sent to the parties to the case through posting on the Internet, and received on the day following the publication of the documents in the "Arbitration Case Files". Those involved in the case may request a paper copy of the court act. Such document will be sent to them within five days.

If the judicial act was made only on paper, then the court is obliged to send copies to the participants in the case within five days from the date of adoption of the act.

The district court also reminds that the exceptions to the order of making electronic documents will be the acts containing state and other secrets protected by law.

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Credit debt collection claims may be sold from bankruptcy auctions to any person

01.11.2022

The Supreme Court has published a new compilation of practice - this time the review focuses on consumer protection. A total of 18 positions are presented. In the block of disputes between consumers and financial organizations the question is raised as to the possibility of transferring the right of claim to the company without a license for banking activity.


The company, which obtained the right of claim as a result of bankruptcy auctions, asked to recover the credit debts from a citizen. The court of the first instance partially granted the request. However, the court of appeal and the cassation explained that the claims of the bank to the citizen could pass only to such an organization which has a license to carry out banking activities. Besides, the agreement with the citizen does not provide for assignment to a third party without a license.

The Supreme Court pointed out that the lower courts had not taken into account the provisions of the law on bankruptcy. Anyone may participate in an open auction and the contract is concluded with the highest bidder. The appellate and cassation courts in this dispute applied clause 51 of the Plenum of the Supreme Court. 51 of the Resolution of the Plenum of the Supreme Court #17 of 28 June 2012 was declared illegal.

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It is proposed to introduce amendments to the law on joint-stock companies

27.10.2022

The Ministry of Economic Development has placed a new initiative on the federal portal of projects of statutory acts. It is an amendment to the law "On Joint Stock Companies". The aim of the offered amendments is optimization of companies' activities when participating in associations and other associations of commercial organizations.


According to the explanatory note to the draft law, the current corporate legislation requires that the issue of participation of companies in associations should be settled by the supreme governing body. However such regulation may be called excessive and associated with time and material costs. 

Large companies often need participation in associations to discuss specific issues that do not concern property interests of shareholders. Expenses only amount to payment of membership fees, which is incomparable with the scale of activities of a joint stock company.
 
Ministry of Economic Development proposes to introduce a dispositive norm, which will allow to regulate this problem by the charter of the company. According to the amendments the issue of participation in associations and other associations of commercial organizations can be referred to the competence of the board of directors or executive bodies.

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New initiative in State Duma with proposals to reform the bankruptcy of financial institutions

19.10.2022

The deputy of the State Duma V. Reznik has brought in the bill ¹ 214674-8 with amendments to the law on banks and banking activity, in the law on bankruptcy. The author of the initiative proposed to modernize the liquidation procedures in relation to credit and insurance organizations, as well as non-governmental pension funds.

According to the explanatory note, there are three main categories of novelties among the proposals.


1. Subordination of claims of controlling and interested persons. These claims are settled after settlements with other creditors. Such creditors do not vote at meetings, are not elected to the committee, and cannot be representatives of other creditors. If circumstances for subordination become known after the inclusion of creditor's claims in the register, the court decides.

2. Peculiarities of redemption of creditors' claims by participants of a financial organization or by a third party. 
The corresponding declaration of intention can be submitted after the closure of the register. The term of repayment must be specified in the application - not more than one year. 
If this term is longer than three months, then the court decides on the satisfaction of the application, the bankruptcy (liquidation) procedure itself is not suspended. If the court decides in favor, it establishes the order of execution, which provides for monthly payments in equal installments. Money is sent to creditors as it is received.
If an application on intention is sent by one participant, the rest have the right to join.

3. Repayment of creditor claims through compensation. The author of the initiative draws attention to the fact that in bankruptcy of financial institutions quite often there are not enough money to pay off the creditors of the first and second priority, but there is unsold property at the auction. The proposed norms provide that the bankruptcy trustee will be able to offer this property to creditors as a compensation - observing the order of priority and proportionality of satisfaction of claims.

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Bankruptcy in Supreme Court Practice Review № 2-2022

14.10.2022

The Supreme Court has published this year's second review of jurisprudence. The selection included a dispute concerning bankruptcy (paragraph 14). According to the position of the supreme court, the right to appeal against a judicial act, on the basis of which insolvency proceedings were initiated, is also available to the claimant in enforcement proceedings.


The claimant filed an appeal against the decision of the court on the basis of which the insolvency proceedings were initiated against the company. The plaintiff claimed the following: the parties were affiliated persons, the loan was non-monetary, the surety was forged. The plaintiff maintained that the scheme had been put in place in order to initiate bankruptcy proceedings and prevent the sale of the company's assets in enforcement proceedings.

The court left the complaint without consideration - in particular, it explained that the applicant's rights had not been violated, the bankruptcy proceedings had not been opened against the debtor, the applicant's claims were not included in the register. Before the debtor was declared bankrupt, it was assumed that the property was sufficient for the settlement of all the enforcement proceedings. The cassation court agreed with these conclusions.

The Supreme Court overturned these acts. It was reported there: it does not follow from the rules of the law on bankruptcy, from the explanations of the higher courts that the persons not participating in the bankruptcy case, but whose rights have been violated, have no right to challenge the contested judicial act.

Acceptance of the bankruptcy initiator's application made it impossible to execute the judicial act within the framework of previously initiated enforcement proceedings. Since the claimant is not a party to the bankruptcy case, he was not able to appeal the acts of the arbitration court. In addition, in a bankruptcy case, the court does not verify or review the decision of the court on which the claim against the debtor is based. 

Also, the Supreme Court added: entry into a bankruptcy case is a right, not an obligation, entailing an encumbrance of time and court costs. An appeal against the decision of the court in this case would require a new application for restoration of the deadline - while the appeal has already been filed by the applicant, the period for its filing has been restored by the court (Decision № 5-KG21-140-K2).

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THE EXPLANATIONS OF THE VOLGA DISTRICT COURT OF ARBITRATION WERE PUBLISHED

29.09.2022

The Volga District Arbitration Court presented the recommendations of the Scientific and advisory council on the application of substantive and procedural law. In particular, issues of corporate and tax law are considered. Several positions are devoted to disputes in insolvency cases.

What to do with the turn of execution
In the first paragraph the following question is raised: how the money is returned to the debtor's counterpart in case of reversal of the annulled ruling on the invalidation of the transaction. The NCC explains: in such situations we are talking about unjust enrichment. A person who transferred money to the debtor before the initiation of bankruptcy proceedings may request the inclusion of claims in the third turn of the register. If, however, the judicial act of recovery was executed after the initiation of bankruptcy proceedings, the debtor's obligations to return the unjust enrichment are current when it is cancelled and turned around. Such obligations shall be discharged taking into account the order of priority established by clause 2 of Article 134 of the Bankruptcy Law.

Imposition of costs on the Central Bank.
Further, in the second point, the NLC touches upon the question of the possibility of charging the expenses in the case of bankruptcy of financial institution to the Central Bank, being the applicant in the case. The NLC considers that such expenses may not be imposed on the Bank of Russia, as it performs the functions of the state body. Unlike the tax authorities, the Central Bank has no material interest, it has no possibility to choose the option of action, the legislation does not provide for payment of costs at the expense of the controlling body. 

Non-residential only dwelling
The third point raises the following question: may non-residential premises or object of unfinished construction be excluded from the bankruptcy estate - as the only residence of the debtor. The NCC answers that in exceptional cases it is possible to consider the issue of protecting apartments, summer cottage and other objects with immunity of execution. In this case the mentioned real estate should correspond to the criteria of Article 15 of the Housing Code as well as the Decree of the Government No 47 as of January 28, 2006.

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THE REVIEW OF THE PRACTICE OF APPEALING AGAINST ACTIONS (INACTION) OF BANKRUPTCY ADMINISTRATORS IN CASES OF BANKRUPTCY OF ORGANIZATIONS WAS PUBLISHED

15.09.2022

The Arbitration court of Volgograd region presented the review of practice of consideration of complaints on arbitration managers in bankruptcy cases of organizations. The court provided statistics and information on the legal regulation, described the procedural peculiarities (who has the right to appeal, what circumstances should be established and how the burden of proof is distributed).


There are 13 items in the presented selection.
1. Even if the losses have not yet been caused to the debtor, but based on the violations committed by the trustee there is a possibility, the court can dismiss him.
2. When considering complaints against managers, the relevant SRO, as well as the supervisory authority, are involved in the dispute.
3. If the manager was working in legal uncertainty, his actions cannot be declared illegal.
4. Before collecting the receivables, the administrator should compare the prospects of the event and the costs of the event.
5. The administrator must recover compensation for the exclusion from the bankruptcy estate of an asset returned to the public entity.
6. The manager's failure to perform a statutory audit affects creditors' rights to receive reliable information.
7. The claim for refund of unreasonably paid remuneration by the manager is considered in the bankruptcy case - according to the rules of Article 60 of the Insolvency Law.
8. In order to assess the validity of reservation of part of the proceeds from the sale of the subject of pledge (for the first and second priority creditors), it is necessary to establish the insufficiency of other property of the debtor.
9. When evaluating the actions on the sale of the debtor's property, one should take into account that bankruptcy proceedings last for 6 months, and during that period the insolvency manager should take all possible measures.
10. If the insolvency manager does not reflect the information on the current payments in his reports, the creditors are deprived of the opportunity to receive reliable information.
11. You cannot refuse to recognize the manager's failure to act as illegal just because there is still an opportunity to collect the receivables.
12. The manager's failure to enter into a supplemental liability insurance agreement violates the rights of creditors and may cause them to suffer losses.
13. Failure to take steps to challenge individual transactions is not an unconditional reason to recognize the manager's inaction as unlawful.

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THE VOLGA-VYATKA DISTRICT ARBITRATION COURT PRESENTED RECOMMENDATIONS ON THE APPLICATION OF BANKRUPTCY LAW

05.09.2022

Yesterday the most recent guidelines of the Academic and advisory council of the Volga-Vyatka region Arbitration Court were published. The recommendations consist of three blocks: the first block deals with insolvency cases, the second - with arbitration procedural legislation, and the third - with civil legislation. The bankruptcy block contains 13 clauses; here are only some of them. 


Question: should land plots that were given to the debtor under the state program for supporting large families be excluded from the bankruptcy estate?
Answer: as a general rule, such immovable property is not included in the bankruptcy estate, since the support measure is not so much for the debtor, as for his children. However, this presumption can be rebutted by interested parties.

Question: can a creditor in a citizen's bankruptcy case obtain the necessary information from the debtor or state agencies outside of a separate dispute?
Answer: There is no direct legislative prohibition on that. If the financial manager evades his obligation to collect information, the court shall grant the creditor's request.

Question: can a bidder appeal the actions (inaction) of the trustee in insolvency?
Answer: the law does not provide for the right of such persons to file complaints. However, bidders can, as part of a bankruptcy case, challenge the results of the auction or the procedure for conducting them.

Question: how is the moment of objective bankruptcy determined?
Answer: it is determined by the court on a case-by-case basis. Sometimes the net worth indicator decreases, but a company continues to work, pays its employees' salaries and settles accounts with creditors. Measures are taken to stabilize the financial situation, an anti-crisis program is implemented, which means that the company can recover. But it happens that actual activity stops, employees are dismissed en masse, debts pile up before creditors - this is exactly where objective bankruptcy comes in.

Question: If the court could not find a candidate for financial manager, is it possible to terminate the bankruptcy case initiated by the debtor?
Answer: this can happen in exceptional cases - for example, when after all the rejections from all the SROs the court found a manager by random selection, and he did not give his consent for his approval. In this situation, the court releases the citizen from the obligations.

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A REVIEW OF THE PRACTICE OF CORPORATE DISPUTES RELATED TO THE RECLAMATION OF DOCUMENTS WAS PUBLISHED

18.08.2022

A summary of legal positions was prepared by the Seventeenth Arbitration Court of Appeals. The compilation includes six disputes. We are talking about the obligations of the former director; the need to reimburse the cost of making copies of documents and their forwarding; the situation in which the defendant is obliged to provide bank statements, etc.


The majority shareholder of the company, who keeps the documentation, must allow the person who became a member of the company as a result of the acceptance of the inheritance to familiarize himself with the documents (case No. A60-8189/2019).
The presence of the former director of the original contract does not speak of his failure to transfer documentation, because the defendant is a party to the disputed contract and must have a copy (case number A50-13129/2020).
Since there was no other way to trace the expenditure of money by the company in conditions of corporate conflict and since the defendant had previously handed over bank statements to the plaintiff, the court concluded that it was necessary to satisfy the plaintiff's claims. Despite the fact that bank statements are not primary accounting documents, the court ordered the defendant to provide them to the plaintiff (case number A60-53884/2020).
If the former director transferred decisions and minutes of general meetings of apartment building premises owners to the state housing supervisory authority, he is not obliged to provide these documents to a member of the company-managing organization (case № A60-20921/2019).
Prior reimbursement of the cost of making copies of documents and their mailing cannot be a reason for refusing to provide such documentation. This is true if the charter or other document approved by the general meeting of the company's participants does not establish other rules (case No. A60-51825/2018).
If a company's participant was not previously interested in documents for past periods (more than 3 years from the date of the request), there are no grounds to provide them (case No. A50-16303/2018).

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BANKRUPTCY DISPUTES IN THE REVIEW OF THE PRACTICE OF THE ARBITRATION COURT OF THE VOLGA DISTRICT NO. 1-2022

01.08.2022

The Arbitration Court of the Volga Region has published the overview of the practice Nr 1-2022. The selection includes a block of disputes in insolvency cases. They concern the imposition of liability on controlling persons (in particular, the calculation of the limitation period, the adoption of interim measures), as well as the choice of venue for a creditors' meeting.


If the controlling persons have been sued for "subsidiarity", it is inadmissible to recover damages from them for the same offence, because this is a repeated civil liability. As such, the recovery of losses in part not covered by the "subsidiary" is possible - but in those situations where the grounds of liability are different (point 3 of the overview, ruling of the AS PO of 17 January 2022 in case no. A12-35538/2017).
In a separate case, a debtor-in-possession sought damages from the controlling persons - until the court ruled that the matter could be dealt with exclusively in bankruptcy proceedings. Thereafter, the bankruptcy trustee filed an identical claim. The District Court held that the limitation period had not been tolled because the limitation period does not run while a debtor's participant's claim is being asserted in court (point 4 of the review, Judgment of the AS PO of 23 August 2021 in case no. A57-17295/2014).
If the adoption of interim measures (seizure of funds along with the seizure of property) is likely to lead to negative consequences not only for the liable controlling persons, but also for the creditors, the satisfaction of the application does not meet the requirements of procedural law, does not allow to balance the interests of the parties and implement the actual goals of interim measures (paragraph 5 of the review, ruling of the AC PO of 20 December 2021 in case No. A72-14914/2018).
If the meeting of creditors has voted by a majority in favour of holding the meeting in one city but the trustee argues that this is not an option, he should find out the position of the creditors regarding holding the meeting at the location of the debtor or the trustee in insolvency. The trustee, in turn, must provide evidence of the impossibility of holding the meeting in the city chosen by the creditors (paragraph 6 of this overview, Resolution No. A72-8389/2019 of 31 March 2022 in the case of A72-8389/2019).

Source: ACP Practice Paper No. 1-2021.

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THE EXPERT COUNCIL OF THE KEMEROVO UFAS EXPRESSED AN OPINION ON THE ADVERTISEMENT OF BANKRUPTCY LAWYERS

22.07.2022

The agency has published its rulings on initiation of proceedings for violation of advertising laws. The panel of experts has looked into two cases of promotion of bankrupt lawyers. Each of them was commented on the impression that advertising may create in terms of freeing a citizen from debts. 


In the first case, in connection with the pandemic, all residents of the region were promised free advice on the possibility of forgiving debts for loans, mandatory payments and taxes as part of a social project. Those who wished to do so were asked to fill in a questionnaire and receive a free guide on how to be relieved of debts of 300,000 roubles or more.

Members of the UFAS Expert Council were of the opinion that the advertisement was misleading:
is misleading: there is no concept of "social project" and the law does not provide ways not to pay the loan;
It is not credible as it does not contain information about the conditions under which it is possible not to pay the loan;
gives the impression that the loan does not need to be paid, etc. 
In the second case, the advertisement was more succinct - it contained the wording "don't pay the loan legally". Experts, having examined this case, gave a similar assessment of the promotion of services: it looks like misleading consumers by urging them not to make the necessary payments. Since non-payment leads to the deterioration of a citizen's financial situation - penalties can be charged, the lender has the right to collect money through the court, etc. - such advertising is not allowed. 

Thus, Kemerovo antimonopoly inspectors agreed with their colleagues from other regions in similar cases: advertising bankruptcy as a problem-free way to get out of debt is not good, and advertising without any essential information about the service is a violation of the law on advertising. 

Both cases were prosecuted for breach of Article 5(7) of the law on advertising. 

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BAIL AND SURETY IN BANKRUPTCY CASES: FRESH OVERVIEW OF THE DISTRICT COURT PRACTICE

12.07.2022

Arbitration court of the Far Eastern District presented a review of practice of bail and surety in bankruptcy cases. The selection includes seven positions elaborated by the court in insolvency cases both for individuals and legal entities. According to the district court, such isolated disputes are handled quite often, with a number of them causing difficulties in shaping legal approaches.

 

A secured creditor may apply for inclusion in the register to a pledgee who is not the principal debtor. If the deadline for performing the obligation has not yet arrived, it is possible to satisfy the pledge creditor's claims when the principal debtor has been asked to perform the obligation ahead of time, but no performance has been received (Judgment in case No. A73-16624/2020 of 19 August 2021).
In the bankruptcy case of a pledgee, the right of pledge over a movable thing not entered in the Register of Pledge Notices is not opposed to the rights of other creditors - unless they knew or should have known about the pledge ( Ruling in case No. A73-4601/2019 of 15 June 2020).
If the proceeds from the sale of the pledged property are insufficient to cover the costs of securing and selling that property, the pledgee is not obliged to pay such costs out of its own funds (Ruling on case No. A51-9929/2018, 20 July 2021).
In a situation where the pledge was granted by another person and the foreclosure occurred before the completion of the bankruptcy of the principal debtor, the creditor may request to be included in the register in the bankruptcy case of the pledgee ( Ruling No. A51-20773/2019 of 25 June 2021).
An affiliated guarantor of a borrower who has repaid a debt to a bank may request that the pledge nature of his claims against the debtor-borrower be recognised when there are no independent creditors in the case ( Ruling in Case No. A59-1019/2018, 10 November 2020).
If an affiliated guarantor has fulfilled obligations to a creditor after the initiation of bankruptcy proceedings against the debtor, this is not considered compensatory financing. Therefore, the guarantor's assignee's claim against the debtor cannot be downgraded in order of priority (Judgment in case No. A51-25884/2017, 18 November 2021).
If it is established by the surety agreement, the bank's rights under the security agreements are not transferred to the guarantor who partially fulfilled the borrower's obligations (Judgment in case No. A73-5/2019, 19 August 2021). 
The Far East Court also reminded that explanations on the application of the rules on pledge and surety can be found in:
Ruling of the Plenum of the SAC No. 58 of 23 July 2009 (pledge);
Resolution of the Plenum of the Supreme Court No. 45 dated December 24, 2020 (surety);
Resolution of the Plenum of the Supreme Court No. 42 of 12 July 2012 (surety).

Source: ACÁE Practice Review No. 9 of 27 May 2022.

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THE RIGHT TO INFORMATION ON COMPANY ACTIVITIES SHOULD BE ASSESSED IN TERMS OF THE STATUS OF THE PARTICIPANT AT THE TIME OF THE CASE

06.07.2022

The Supreme Court has once again* reminded the lower instances of the need to check the status of a participant in a limited liability company if it requests documentation from the company. The courts of three instances agreed with the applicant and additionally levied a court penalty on the company, but the Supreme Court quashed these acts and dismissed the former participant's claims. 


The applicant asked for the company's documentation and also for an award of liquidated damages.

In March 2021, the court of first instance granted the claim in part, reducing the amount of the requested penalty. It also refused to demand documents dated after the end of 2019 due to the citizen's withdrawal from the company in October 2020. The Court of Appeal and the District Court (September and December 2021) upheld this act.

The Supreme Court disagreed with the lower courts. Thus, on the date of the relevant application the citizen was a member of the company, but in November 2020 an entry was made in the Unified State Register of Legal Entities about the transfer of rights to her share to the company. After her withdrawal, the citizen lost her rights to request documents - with the exception of those needed to determine the value of her share.

In November 2021, the court recovered the actual value of the share in favour of the citizen - with a forensic examination being carried out as part of the proceedings. According to the company's representative, this court decision had been enforced.

The Supreme Court summarised: the courts had unreasonably granted the citizen's claims to obtain documentation as well as the recovery of a court penalty - without taking into account the change in the citizen's status.

The acts of the lower instances were reversed and the plaintiff's claims were dismissed (Supreme Court Ruling No. 305-ES22-1796 of 23 June 2022).

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THE DISTRICT COURT EXAMINED WHETHER IT IS POSSIBLE TO READ THE MATERIALS FOR THE MEETING OF CREDITORS AND TO HOLD THE MEETING IN DIFFERENT REGIONS

27.06.2022

The plaintiff requested that the determination of the place of familiarisation with the materials of the meeting of creditors be declared unlawful. The meeting had been held in Tver and Tambov had been designated as the place of inspection. The courts of two instances refused, explaining that the applicant himself had not secured the attendance of his representative to familiarise himself with the documents. However, the cassation court stated that it did not follow from the provisions of the bankruptcy law that the place of inspection could be significantly different from the place of the creditors' meeting. 

Bankruptcy case: No. А66-18345/2019, debtor - housing and construction cooperative "Ul. Maria Ulyanova 42

Case: Judgment of the Arbitration Court of the Northwest District of 24 June 2022

Dispute
A creditor sought the declaration that the bankruptcy trustee's definition of the place where the materials of the creditors' meeting should be examined was unlawful. According to the plaintiff, the insolvency representative had failed to take account of the location of the debtor and the geographical remoteness of the bankruptcy creditors. The meeting had been held in Tver and the place of inspection of the relevant materials had been in Tambov. 

The court of first instance dismissed the application because the creditor who lived in Orel had not provided a representative to review the materials for the meeting. In other words, he had not exercised his right himself.

The creditor's argument that inspection of documents should take place at the location of the debtor and at the place where the meeting of creditors had been scheduled was rejected. The court explained that the debtor had no premises in Tver for storing documents. Renting an office in Tver would have entailed additional expenditure from the bankruptcy estate.

These conclusions were upheld on appeal.

Position of district court
The cassation court pointed out that clause 3 of Article 13 of the Bankruptcy Law does not provide for possibility to determine the place for getting acquainted with the materials for the meeting that would be quite different from the place where the creditors' meeting is scheduled. In this case, it was a different region of Russia.

The lower courts had not ascertained on what conditions the debtor owned the room where the creditors' meeting was held; whether the trustee had had the opportunity to familiarise the creditors with the necessary documentation at a different room in the city of Tver. 

The dispute in this respect was remanded for consideration. 

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RECOMMENDATIONS OF THE ARBITRATION COURT OF THE WEST SIBERIAN DISTRICT ARE PUBLISHED

21.06.2022

Recommendations of the Round Table of 8 April 2022 are devoted to civil law disputes and include, amongst others, a package of clarifications on bankruptcy, liquidation and vicarious liability (points 4, 5, 6, 7, 9).


Paragraph 4 deals with the question whether liquidated damages may be recovered from a bankrupt entity if it fails to comply with a court order to enforce an obligation in kind (Article 308.3 of the Civil Code). The Court replies that the entry into bankruptcy is not in itself an obstacle to the award of legal penalties, but it must take into account the debtor's actual capacity to fulfil the in-kind obligation. 

Paragraph 5 explains how the burden of proof is allocated to prove that the debtor is subject to a bankruptcy moratorium as a circumstance that avoids financial penalties. The Court clarifies that the formal legal criteria for classifying the debtor as subject to the moratorium are sufficient - otherwise can be rebutted by the person concerned.

Paragraph 6 is a series of clarifications on the application of Article 64(2) of the Civil Code - on the distribution of the property of a liquidated legal entity. For example, it clarifies how to calculate limitation periods and limitation periods when the courts consider applications to appoint a property distribution procedure and applications to join it; who is entitled to declare the limitation period for such applications expired, etc.

Paragraph 7 explains what will happen if the authorised body applies the procedure stipulated by sub-paragraph 3.1 par. 3.1 p.2 Article 235, Article 239.1 of the Civil Code. In other words, it will decide to sell by tender an unfinished construction project located on a public land plot whose lease agreement has been terminated. The court considers that the presence of the property owner in bankruptcy does not prevent the application of the said procedure. 

In paragraph 9, the court gives explanations concerning the subsidiary liability of the persons referred to in Article 53.1 of the Civil Code for the obligations of the liquidated company.

Source: Recommendations of the West Siberian District Arbitration Court, published on the court's website on 14 June 2022.

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DISSOLUTION OF MARRIAGE CANNOT BE CONTESTED IN A BANKRUPTCY CASE

16.06.2022

The Arbitration Court of North Ossetia-Alania has included into its bankruptcy case law a position that divorce is not considered as a transaction within the meaning of Article 153 of the Civil Code and therefore cannot be qualified under Article 61.2 of the Insolvency Law.

The financial manager applied to the court to challenge the dissolution of the spouses' marriage under Articles 61.1 and 61.2 of the bankruptcy law (Case No. A61-1522/2020). The applicant argued that the right to divorce had not been used by the spouses as intended, but only to harm creditors.

The Court noted that in this case the provisions of civil law were not applicable: actions to conclude and dissolve the marriage were not a transaction within the meaning of Article 153 of the Civil Code and were not intended to give rise to civil legal relations. The dissolution of the marriage puts an end to the cohabitation and cohabitation and so on. Family law does not provide for rules allowing the annulment of a marriage to be declared invalid.

The court also drew attention to procedural provisions. Thus, disputes concerning the recognition of property acquired by spouses during the marriage as joint property and the allocation of a share shall be dealt with in accordance with the procedure established by law. The law does not provide for the restoration of property rights and obligations of spouses after a marriage dissolution deed has been declared null and void. 

Similar conclusions were supported by the Arbitration Court of the Ural District in its ruling in case No. A60-46823/2016 of 27 July 2020. 

The review of the practice of the Arbitration Court of the Republic of North Ossetia-Alania (published 1 June 2022) also included positions
- on the inclusion of a claim in the register as secured by a pledge of the debtor's property;
- the determination of the statute of limitations for contesting transactions;
- The possibility of third parties fulfilling the debtor's obligations;
- subordination of the claims of a creditor affiliated with the debtor. 

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ROSPRIRODNADZOR INSPECTION TOOK PLACE DURING THE DEBTOR'S BANKRUPTCY: IS THE OBLIGATION TO REIMBURSE ENVIRONMENTAL DAMAGE A CURRENT PAYMENT?

09.06.2022

The Fourth Arbitration Court of Appeal has published a review of practice related to the application of environmental legislation. A total of eight positions are presented. The third position outlines the court's conclusions on attributing the obligation to compensate for damage caused by soil contamination to a debtor's current payments.


In the disputed case, the Rosprirodnadzor applied to the company to recover the damage caused to the soil. Earlier, in September 2019, an unscheduled inspection was conducted, during which samples were taken and the fact of pollution was established.

The defendant did not agree with the claims made. He pointed out that he had not been conducting business activities since 2015, the damage to the environment could have occurred before the suspension of activities and its entry into bankruptcy proceedings (before May 2016). The defendant also argued that Rosprirodnadzor's application should be considered in the bankruptcy case and that the disputed claims could not be current payments.

Rosprirodnadzor, on the other hand, argued that the fact of pollution had been established during the bankruptcy proceedings and that the payments were current.

The courts of two instances sided with Rosprirodnadzor. In particular, the Fourth Arbitration Court of Appeal referred to parts 1 and 2 of Article 5 of the law on bankruptcy and paragraph 10 of the decree of the Plenum of the Supreme Arbitration Court No 63 dated 23 July 2009. The court pointed out that the torts formed after the declaration of bankruptcy of the debtor belong to the current payments. This decision, the court stated, was in the best interests of the law and the requirements of increased protection of the environment (Case No. A19-6524/2020). 

Source: Practice Review of the Fourth Arbitration Court of Appeal No. 21 of 27 May 2022.

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GUIDELINES ON DISPUTES RELATING TO SHARES AND EQUITIES IN COMPANIES ARE PUBLISHED

30.05.2022

Methodical recommendations were provided by the Arbitration Court of Volgograd Region. The explanations are intended to assist in determining the subject matter of proof and comprise several sections: legal and regulatory framework, information on corporate disputes, and typical categories of such disputes. 


The third section, in particular, explains the issues of foreclosure of pledged shares/shares. The court recalls that pledges arise not only on the basis of an agreement, but also by operation of law (e.g. a pledge of a share may arise upon the sale thereof in accordance with Article 488.5 of the Russian Civil Code).
As regards the subject matter of proof in such disputes, it includes the following
whether there is an obligation secured by a pledge;
whether this obligation has not been fulfilled or has been improperly fulfilled;
whether there are circumstances related to the insignificance of the breach of an obligation and the disproportionality of the claim to the value of the pledged property
whether the assets of the LLC's member (other than the pledged assets) are not sufficient to cover the debt;
if the parties dispute the value of the pledged property - what is the market value of the pledged property.
For more details, please refer to the guidelines. 


We remind that the Arbitration court of Volgograd region regularly issues explanations on topical issues of judicial practice. We have written about some of them:
- On the recognition of transactions invalid under Art. 61.2 and 61.3 of the bankruptcy law;
- On lien claims in bankruptcy proceedings against legal entities;
- On the issues of recovering documents, property from the debtor's manager;
- on issues on the completion of bankruptcy proceedings of a citizen and release or not release from the obligations
- On matters of exclusion of property from the bankruptcy estate in bankruptcy cases
- on matters of including claims in the debtor-citizen register. 

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REVIEW OF THE PRACTICE OF THE 4TH AAS ON THE WORK OF INSOLVENCY ADMINISTRATORS PUBLISHED

23.05.2022

The review was presented by the Fourth Arbitration Court of Appeal. In a selection - five sections: procedural questions; omissions of managers as the basis for collecting from them of losses; causing harm to creditors by actions of managers; statement, release and dismissal of managers; remuneration of managers.

Procedural issues
This section summarizes the positions of the courts regarding the right to appeal against the receiver's actions. Such a right is available to: 
- the controlling person sought to be held vicariously liable (para 1);
- a majority shareholder of the debtor - and without a resolution of the general meeting of shareholders to elect a representative to participate in the bankruptcy case (clause 2); 
- a bidder whose rights have been affected by the actions of the trustee as the organiser of the auction (clause 3).  
At the same time, a person who has not confirmed the status of a creditor under current liabilities may not complain against the administrator (clause 4).
Another interesting position is that the law does not provide for an independent appeal against the decision to extend the powers of the bankruptcy trustee (Clause 6).

Inactivity of a receiver as a basis for recovery of damages, failure to perform his duties
Here are the positions according to which it is possible to recover damages from the bankruptcy trustee if he
- fails to contest the transactions and misses the limitation period for doing so (clause 1); 
- fails to analyse the debtor's obligations and terminates disadvantageous contracts (point 2); 
- fails to collect receivables in due time (item 3);
- fails to safeguard the debtor's property or takes inappropriate measures to do so (clause 4).
The debtor and his creditors may suffer losses as a result of failing to conclude a supplementary liability insurance policy (clause 6).
It is also noted that the failure of a receiver to report current liabilities incurred during bankruptcy proceedings violates the bankruptcy law and the rights of current creditors (Clause 5). And the violation of a citizen's right to a decent life and personal dignity is a consequence of the financial manager's failure to fulfil his obligation to pay the debtor a living wage (clause 7). 

Actions of a trustee causing harm to creditors
The courts have taken the position that harm to creditors can be caused by:
- The receiver's hiring of new employees and their untimely dismissal (para 1); 
- staffing up the debtor instead of employing specialists to support its operations (clause 2); 
- unreasonable conclusion of an office lease agreement (par. 3); 
- violation of the procedure for the sale of an asset in a bankruptcy auction (item 4);
- failure to act in relation to the reservation of funds for the settlement of the disputed claim (Clause 6).
At the same time, expenditure in excess of the established limits in the absence of evidence of the unreasonableness and unreasonableness of such expenditure is not a sufficient basis for the recovery of damages from the receiver (para. 5).

Approval, release and removal of the receiver
Part of the positions included in this section deal with conflicts of interest. For example, it is stated that the removal of an insolvency practitioner is based on substantial doubts as to his independence (clause 1). A debtor company and a creditor company may not be trustees in insolvency at the same time (clause 3). The court may appoint an insolvency representative by random selection in order to avoid potential conflicts of interest (para. 7).
It is noted, however, that it is against the law for the court to approve the receiver without his consent (Para. 6).

Remuneration of the insolvency practitioner
Some of the items in this section relate to the amount of remuneration depending on the amount of work done. For example, the conduct of a developer's bankruptcy does not in itself indicate that the work of the trustee is complex and voluminous (clause 1). The disproportionality of the amount of interest on the receiver's remuneration to the amount of work carried out personally may be grounds for reducing it (para. 3). 
It is also stated that if the initiator of the bankruptcy case has set a limit on expenses, the remuneration of the administrator shall be calculated only within these limits and the remaining costs shall be borne at the administrator's own risk (clause 5).

Source: practice overview of 4 AAS No 16, approved 15 April 2022, published on the court's website.

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THE SUPREME COURT EXPLAINS WHAT CIRCUMSTANCES DO NOT PREVENT THE DISTRIBUTION OF THE ASSETS OF A LIQUIDATED ORGANISATION 

17.05.2022

A dispute regarding the distribution of assets of a company which has been withdrawn from the Unified State Register of Legal Entities has been considered. The lower courts rejected the applicant on the grounds that he did not have a judicial act confirming the claims against the debtor. Furthermore, he had not filed an objection to the tax authorities' decision to liquidate the defunct company, nor had he challenged such a decision. The Supreme Court disagreed.


A citizen had leased equipment to a company, but the lessee did not return the property in full. The loss was assessed at 177,000 roubles. The company did not deny the loss of the property, but did not reimburse its value until it was removed from the Unified State Register of Legal Entities.

After the company was liquidated, a citizen discovered that there was money in the company's bank account. He then applied to the court for a property distribution procedure to be ordered.

The citizen was refused in three instances because he did not have a judicial act confirming the claims against the debtor. Moreover, the applicant did not object to the exclusion of the company from the Unified State Register of Legal Entities and did not contest this decision afterwards.

The Supreme Court quashed the judicial acts and sent the case for a new examination. It was recalled that the liquidation of the company did not prevent the protection of the violated right of the creditor. The mere introduction of the asset distribution procedure does not mean that the citizen's claims are justified.
 
In such cases it has to be established
- whether the applicant is indeed an interested party;
- whether the liquidated company has assets;
- whether the company has an unfulfilled obligation.

At the same time, said the Supreme Court, the law does not oblige the applicant to prove his claims by an enforceable court decision. In the particular case, the applicant submitted to the court a lease agreement, deeds, as well as documents confirming the company's acknowledgement of debt. 

The Supreme Court also disagreed that the termination of the bank account agreement with the liquidated company could be a ground for refusing the applicant's claim. The point is that in such a case the money unclaimed by the client is credited by the bank to a special account with the Central Bank, the procedure for repayment from which is set out in the rules of that institution.

The fact that the applicant did not object to the removal of the company from the register or subsequently challenged the decision of the tax authorities, does not indicate bad faith and also does not prevent the satisfaction of his claims, the Supreme Court added. 

Source: Supreme Court judgment No 305-ES21-20375 of 4 May 2022.
 

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THE ARBITRATION COURT OF THE URAL DISTRICT HAS PUBLISHED BANKRUPTCY GUIDELINES

10.05.2022

The Arbitration Court of the Ural district presented the recommendations of the Scientific and Advisory Council (SAC) on the application of bankruptcy law. The compilation has two sections: the first deals with bankruptcy of citizens (paragraphs 1-14), the second compiles the rest of the issues (paragraphs 15-20).


1. If, in a bankruptcy case, the joint property of spouses who do not have common obligations is realised, the interest for the financial manager is calculated only on the part of the proceeds due to the debtor.
2. The debtor's spouse may exercise the pre-emptive right to purchase the housing that was in common ownership. The price is determined at auction, after which the spouse must contribute to the bankruptcy estate an amount proportionate to the debtor's share.
3 The debtor's spouse's claim for compensation at the sale of the common property is not monetary in the sense of Article 2 of the Bankruptcy Law. The amount is paid out of the proceeds of the property sold. If, however, compensation has been awarded because the debtor has not disposed of the assets in the best interests of the family, the spouse's claim is a pecuniary claim. In order to understand whether it is registrable or current, it is necessary to determine when the joint ownership of the disputed property ceases.
4. The granting of execution immunity for the housing interest of the debtor's new family is not an unconditional basis for refusing to grant execution immunity for a share in the housing interest that is unique to his former family. The former spouse has the right to ask the court to impose an obligation on the debtor to provide housing for members of the former family. 
5. In the case of bankruptcy of a serviceman-participant of the savings and mortgage system, the court shall bring before the debtor, the credit organisation and Rosvoenipoteka the issue of concluding an amicable agreement, under which the disputed real estate is not included in the bankruptcy estate, and the loan and pledge obligations will not be written off as a result of bankruptcy until they have been fully repaid.
6. If the debtor has no housing other than a house under construction on a plot of land for large families, the court may exclude this property from the bankruptcy estate.
7. The court may exclude the incentive payments for the work of medics during the coronavirus period from the bankruptcy estate upon a motivated motion of the debtor - if it decides that this is necessary to meet the vital needs of a citizen helping to fight the covid.
8. The housing costs found to be necessary shall be repaid as current payments in the third instance. Since housing is a necessary means of livelihood for the debtor, the court may allow the payment of rent as a priority if there are no funds to cover all current expenses. 
9. When shares or stakes in business companies belonging to a debtor citizen are sold, the regulation on the procedure for their sale shall be approved by the court examining the bankruptcy case.
10. In a citizen's bankruptcy case the costs of securing the subject of pledge shall be repaid according to the rules of clause 6 of Article 138 of the Law on Bankruptcy. Article 138, Paragraph 6 of the Bankruptcy Law - in the priority order - at the expense of the proceeds from the sale of the subject of pledge.
11. Court costs in disputes which the trustee was obliged to initiate, as a general rule, are borne by the persons who incurred them. If there was a dispute, the legal costs of the successful litigant will be recovered from the bankruptcy estate of the debtor. In the case of bad faith, the costs may be borne by the administrator. 
If the debtor-entrepreneur is the head of a peasant (farm) enterprise, it is possible to initiate and consider both one and two bankruptcy cases simultaneously as well as to combine them. 
13. If the bankrupt's property is seized to secure a criminal conviction, the financial manager has the right to initiate the question of lifting the seizure - before a court of general jurisdiction or a court bailiff. If the trustee is refused and the debtor has no other assets, the court may suspend the bankruptcy proceedings.
14. The debtor's substitute accommodation must be adequate for the particular locality and must meet sanitary and technical requirements. It is forbidden to occupy rooms with people of different sexes - except spouses. The health status of the debtor and his family members must be taken into account.

15. Accounts receivable for work performed under the state defence order shall not be realised in bankruptcy proceedings. An assignment agreement concluded as a result of a bankruptcy auction is null and void. 
16. If the pledgee has not published a lien on a movable thing, it is not opposable in a bankruptcy case to third parties. However, the fact that the creditor is in possession of the disputed asset creates a presumption that the creditors' community is aware of the existence of the pledge.
17. The legal regime of para. Article 138(6) of the Bankruptcy Law extends to the debtor's obligation to pay current property taxes accrued on the pledged assets from the moment the bankruptcy proceedings are initiated. However, if the pledged creditor prevented the initiation of bankruptcy proceedings, taxes for the preceding period may also be discharged in this way.
18. In case of termination of bankruptcy proceedings (completion of bankruptcy proceedings), the bankruptcy trustee is not deprived of the right to initiate a dispute for recovery of damages from the debtor's controlling persons, from the former trustee. The court needs to obtain the consent of the creditors, the authorised body regarding the continuation of the proceedings - and then to replace the claimant. If at least one person agrees, the application shall be deemed to have been made in the interests of all creditors and shall be considered in accordance with the general procedure under the rules of Chapter 28.2 of the Code of Arbitration Procedure. 
19. If during the examination of a dispute on the distribution of court costs (including for the payment of the remuneration to the receiver) no claim is made for the recovery of the costs of the representative's services, the right to assert such claims is subsequently lost - due to the inadmissibility of a repeated application.
20. Since the relations between the debtor and the persons engaged by the insolvency practitioner to perform their duties are civil law relations, such persons are entitled to claim interest under Article 395 of the Civil Code in the event of delay.

Source: Recommendations of the NCC of the Arbitration Court of the Urals District, published 6 May 2022. 

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TAX OFFICIALS REMINDED WHEN VICARIOUS LIABILITY MAY BE REDUCED

05.05.2022

The Administration of the Federal Tax Service of Russia in the Ulyanovsk region has explained how the amount of subsidiary liability of a nominee director can be reduced. The law on bankruptcy contains a special provision according to which the disclosure by the defendant of the name of the actual controlling person or information on the debtor's property allows reducing the amount payable.


However, the information disclosed must not be available to other, independent parties to the case. When the court considers whether to reduce the amount of vicarious liability, it considers whether the information provided has helped restore the violated rights of creditors and compensate them for their losses (Article 61.11.9 of the Bankruptcy Law). 

The very mechanism of bringing to "vicarious liability" is actively used by the tax authorities - to collect obligatory payment arrears. In particular, the Administration of the Federal Tax Service of Russia in the Ulyanovsk region cites the following cases: № A72-9437/2020, № A72-19497/2019 and № A72-582/2021.

The tax authorities also remind that an interested party has the right to apply for a "subsidiary" from controlling persons also outside the bankruptcy case (clause 1 of Article 61.19 of the insolvency law). In this case, the interested party must have the right to file a relevant application and its claims must not be discharged in full.

In addition, the administration of the Federal Tax Service notes: the involvement of "subsidiary" is an exceptional measure, which should be resorted to, if other ways to replenish the bankrupt estate do not work.


Source: information from the FTS website dated 29 April 2022.

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THE REGULATION ON THE SUB-OFFICE OF A BAR ASSOCIATION WAS PUBLISHED

25.04.2022

The Federal Chambers of Lawyers of Russia has published a provision regulating the creation of lawyers' associations of attorneys' offices. The document envisages that the lawyers may carry out their activity not only at the lawyers' associations' offices but also in other premises, including residential premises.

The right to set up sub-offices is granted both to advocates' associations and to their individual units. Information about them will be entered into the register of the constituent entities. However, the establishment of sub-offices in regions where there is no information about a particular bar association or its individual unit is not permitted.

The name of the sub-office must refer to the person who set it up. An adjoining office cannot have a bank account, stamps or seals and no warrant may be issued in its name to execute instructions.

The branch is deemed to have been set up as soon as it is entered into the register. From that date, it is possible to practise law here.

It is also indicated that when setting up sub-offices in the premises of the Principal, it is necessary to separate those premises which will be used for advocacy. 

The activity of the sub-office shall be terminated by a decision of its founder and this is a ground for excluding the information on the sub-office from the register.

The new rules will not affect the previously organised sub-offices and structures without the status of a separate unit.

Source: Regulation of the FPA of Russia of 11 April 2022.

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MINISTRY OF ECONOMIC DEVELOPMENT: WHAT SHOULD BE DONE IF THE MORATORIUM ON INSPECTIONS IS NOT OBSERVED? 

18.04.2022

The Ministry of Economic Development has spoken about monitoring of the compliance with the inspection moratorium. The moratorium, which has been in place for more than a month, has become a serious support measure for businesses in the current situation. It cancelled 216 thousand inspections, of which 156 thousand are planned and 59 thousand are unscheduled.

However, as noted in the department, not all government agencies comply with the provisions of the Government of Russia № 336 of March 10, 2022 (which until the end of the year introduced a moratorium on inspections).

For example, the Ministry of Economic Development has already received a complaint of non-compliance with the new rules. Such appeals can result in the cancellation of a breach protocol.

The ministry says that if an entrepreneur encounters non-compliance with the moratorium by the control (supervisory) authorities, he should
contact the Ministry of Economic Development by e-mail at proverki.net@economy.gov.ru;
or file an appeal via the pre-trial appeal system. It is reported that the complaint will be considered by the control (supervisory) body within one business day. 

Source: Ministry of Economic Development information dated 16 April 2022.

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DRAFT LAW ON INTERACTION WITH "LOST" SHAREHOLDERS IS INTRODUCED IN THE STATE DUMA

11.04.2022

The Russian government has submitted a draft law amending corporate legislation to the State Duma. The purpose of the projected amendments is to establish a mechanism regulating interaction with "lost" shareholders (about whom there is no information and who do not exercise their corporate rights).

As the authors of the initiative explain, joint-stock companies (JSCs) incur substantial costs to notify shareholders and pay dividends by mail order. There are about 6 million individual "lost" shareholders in Russia now.

The new rules set out rules for suspending the sending of notices, ballots, etc., and for suspending the transfer of dividends. The draft norms will affect public JSCs as well as non-public ones with the number of 50+ shareholders. The point is that in non-public JSCs with small number of shareholders expenses on "lost" persons are insignificant and, therefore, they cannot be the reason for deprivation of such shareholders' rights.

However, the law gives non-public JSCs the right to adjust this problem in the charter - i.e. it is allowed to determine that suspension of notices to "lost" shareholders is possible (or impossible) irrespective of the number of shareholders.

In addition, it is proposed that the payment of dividends by mail should be discontinued in favour of a bank transfer. However, if information on bank details is not available, or if a shareholder has separately expressed a wish to do so, the obligation to send dividends by postal transfer is retained.

The authors of the initiative pay special attention to the fact that the projected rules refer to situations when a shareholder does not exercise its rights for at least two consecutive years.

It is envisaged that the law will come into force after 180 days from the date of its official publication (subject to certain exceptions).

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THE ARBITRATION COURT OF THE VOLGA DISTRICT SPOKE ABOUT INTERIM MEASURES IN BANKRUPTCY CASES

04.04.2022

In the middle of March 2022 the Arbitration Court of Volga Region published a summary of the court practice on using interim measures. There are 12 items in the collection, most of them are related to insolvency cases. They concern the seizure of a debtor's money, prohibition to leave Russia, imposition of restrictions on the disposal of property, etc.


When seizing the debtor's money, the statutory guarantees apply - such as ensuring a minimum level of income for the life of the debtor and those who depend on him (clause 1, ruling of AS Po in case no. A65-37253/2019 of 22 June 2020).
The imposition of a ban on a debtor leaving Russia is intended to help achieve the bankruptcy objectives of settling debts to creditors at the expense of the debtor's property. It must be clear that without such a restriction it will be difficult or impossible to achieve those objectives (paragraph 2, Judgment of the AS Po in Case No A55-25918/2015, 18 February 2021).
After the court has ruled on the validity of the debtor's bankruptcy petition, the creditor pledgee may be prohibited from retaining the collateral as part of the enforcement proceedings (Clause 3, Decision of the PA Court in Case No. A47-19107/2019, 18 January 2021).
Restrictions on the disposal of property may only be imposed by order of the court in a bankruptcy case (Clause 5, Decision of the Court of Appeal in case No. A55-8849/2017, 22 December 2020).
It is contrary to the insolvency law to maintain interim measures from the date of the debtor's declaration of bankruptcy in respect of property not awarded to the plaintiff (Clause 7, ruling of the AC PO in case No. A57-18510/2017, 13 February 2020).
To ensure the preservation of the property complex belonging to the debtor, it is possible to impose a ban on the resource supplying organisation to introduce the regime of energy consumption restrictions (Clause 8, Resolution of the AC PO in case No. A65-1813/2017 dated 3 June 2021).
When considering the issue of succession in a dispute over the demolition of an unauthorized construction, the court may not apply interim measures in the form of a ban on the debtor's execution of a judicial act (Clause 12, Resolution of the AS PO No. A49-5106/2017, November 9, 2020).


Source: AC P brief on the generalisation of court practice, published on 14 March 2022.

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THE LAW DOES NOT OBLIGE A CREDITOR TO APPLY THE ONLY REMEDY FOR A DISPUTE WITH A LEGAL PERSON'S LIQUIDATOR

28.03.2022

Recently, the Arbitration Court of the Moscow District considered a dispute to compel the liquidator to include claims in the liquidation balance sheet. Although the lower courts considered the chosen means of defence to be inappropriate, the District Court did not find any conflict with the applicable law.

A citizen sued the court to compel the liquidator to include the claims in the liquidation balance sheet. The creditor's claims had been supported by an enforceable court decision.

The courts of two instances refused to satisfy the claims, because the plaintiff had not applied for the recovery of debts under Article 64.1 of the Civil Code. And the applicant's chosen method of protecting his right (obliging the defendant to perform certain acts) was not in accordance with the procedure prescribed by law.

The Arbitration Court of the Moscow Area disagreed. It explained that the law provides that a creditor must make claims to the liquidation commission of the company being wound up, and if the commission does not consider the claims, the creditor must challenge such an evasion in court. However, the courts did not examine whether the plaintiff had applied to the liquidation commission or whether the commission had avoided including the claims in the liquidation balance sheet. 

The district court also noted that the remedy provided by Article 64.1 of the Civil Code is not the only possible remedy for a dispute between a creditor and a liquidator. Other mechanisms may also be applied - if the claims against the liquidator which avoided consideration of the claims or their inclusion in the interim liquidation balance sheet are confirmed.

The lower instances did not take into account that making claims against the legal entity itself by way of action proceedings is one of the ways of declaring the existence of a debt. This method is in accordance with Article 64.1 of the Civil Code.

The courts did not assess the plaintiff's argument that its claims were supported by a judicial act. However, the law does not impose an obligation on a creditor of a company in liquidation who has applied for inclusion of a claim confirmed by the court to reapply to the liquidation commission.

In addition, the cassation drew attention to the fact that the reference in the claim to inappropriate rules of law should not result in the rejection of the claims on the grounds that the plaintiff had chosen an inappropriate method of defence. Nor was a person's use of alternative methods to assert their rights a sufficient ground for dismissal. 

Source: Decision of the Moscow Area Arbitration Court in Case No. A40-134635/2021 of 17 March 2022. 

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CRIMINAL LIABILITY FOR ILLEGAL STATE REGISTRATION OF BUSINESSES AND TAX CRIMES: WHAT COULD CHANGE? 

21.03.2022

Some days ago, deputies have submitted to the State Duma a draft law with amendments to the Criminal Code. The question is about the liberalization concerning illegal state registration of companies, as well as about the introduction of new types of crimes related to tax abuses. The initiative is also intended to eliminate loopholes in the legislation.

Liberalization is connected to the application of article 173.1 of the Criminal Code, which provides for liability for illegal company registration. The initiators explain that the practice is that those charged under this article are often asocial citizens or those with low legal literacy. Such individuals usually do not benefit from the crime - they are simply deceived. Nor do they have the benefit of cooperation with the investigating authorities today. 

Therefore, it is suggested that first-time offenders should be exempt from criminal responsibility - if they voluntarily reported unlawful actions and assisted in the investigation. This provision would apply when there was no other corpus delicti in the accused's actions.

Another change concerns the introduction of norms establishing a ban on illegal registration of an entrepreneur. The authors of the draft point out that today entrepreneurs' details are often used for illegal transactions.

Also, a new Article 173.3 may appear in the Criminal Code, under which separate offences will be falsification of accounting/tax accounting and reporting documents.

Another new article - 159.7 - is being drafted on tax fraud (illegal reimbursement of obligatory payments). The authors point out that such amendments are merely intended to separate tax fraud from Article 159 into a separate provision.

Additionally, it is proposed to exempt perpetrators of tax fraud from criminal liability if they reimbursed triple the amount of damage.

For more details, see the materials of Bill No. 89802-8. 

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TAX SERVICE ANNOUNCES NEW MEASURES TO SUPPORT TAXPAYERS

14.03.2022

As businesses may find themselves in a difficult situation due to sanctions, the Federal Tax Service has proposed a number of support measures. Earlier it was announced that bankruptcy filings for taxpayers would be suspended. The other day there was news about the suspension of blocking operations on accounts, as well as - inspections in relation to currency legislation.

As for suspending the blocking of accounts when recovering funds, the measure has been introduced until 1 June 2022. The decision was taken by Daniil Egorov, head of the Federal Tax Service, to reduce the negative impact on Russian businesses. It is also reported that businessmen who have suffered damage because of sanctions have the right to apply to tax officials for a postponement of recovery measures. 

The second indulgence concerning the suspension of inspections in terms of currency regulation is intended to reduce the administrative burden on business. In addition, the Federal Tax Service informs: the recent presidential decrees will be monitored. However, offences committed under the sanctions regime may be considered mitigating circumstances or exclude liability altogether. 

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FAILURE TO COMPLY WITH A COURT ORDER TO "SUBSIDISE" MAY LEAD TO DISQUALIFICATION FOR UP TO THREE YEARS

10.03.2022

The Administration of FTS for Ulyanovsk region reminded that subsidiary liability does not only imply recovery of money. In the event of non-compliance with the court act on bringing to responsibility, the controlling person may be disqualified - in accordance with the provisions of the Code of Administrative Offences of the Russian Federation (CAO RF).

Indeed, bringing to vicarious liability threatens not only the debt, which will have to be paid even after personal bankruptcy. Failure to pay the debtor's obligations to creditors can also lead to administrative liability of the controlling persons.

According to part 8 of article 14.13 of the Code of Administrative Offences of the Russian Federation, failure to comply with a court order to bring to "subsidiary" liability is normally punished by disqualification for the period from six months to three years. The said norm is intended to prevent or minimise cases where initiation of bankruptcy proceedings is used as a way to evade obligations.

The Ulyanovsk Region Department of the Federal Tax Service informs that tax authorities have the power to draw up protocols on offences, and the arbitration court brings to responsibility. Last year in the region under part 8 of article 14.13 of the CAO RF 37 reports on bringing to administrative responsibility were drawn up, in respect of 24 of them the decisions on disqualification of the controlling persons for six months were issued.

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FEDERAL TAX SERVICE HAS PUBLISHED A SELECTION OF SERVICES FOR OBTAINING INFORMATION ABOUT INSOLVENCY AND BANKRUPTCY RISKS

02.03.2022

Possible rapid growth of company bankruptcies has become a hot topic again, with the legal community debating whether a bankruptcy moratorium should be imposed. In such circumstances counterparties would have to assess each other's solvency more carefully, and their own capacity to meet their obligations. The Federal Tax Service has suggested using a number of electronic services for obtaining information on bankruptcy and insolvency risks.
The authority has published a summary of the tools which are available on its website. 

The first is the "Register of Provisional Measures" service. Its use will assist in analysing the financial position of counterparties and in assessing the proposed security for the performance of obligations. The tax authorities report that they now have over 32,000 properties in pledge.

Another tool - ratings - is designed to help assess the effectiveness of insolvency administrators and self-regulatory organisations. The ratings are based on the following indicators: the size of repaid creditor claims, the effectiveness of property sales, the length of bankruptcy proceedings and violations in the work of trustees. The most up-to-date figures today are for the years 2018-2020.

When in bankruptcy cases the issue of approving an insolvency practitioner arises, it is not unreasonable to look at whether and what kind of irregularities he has committed. A service called Check the insolvency practitioner is available for this purpose. It is sufficient to enter the name and surname of the trustee and a table will appear with the numbers of court cases and the dates of the acts of violations. Also, according to the Federal Tax Service, the information is structured by type of breach.

Another useful service will come in handy for those taxpayers who have encountered serious financial difficulties and cannot remit mandatory payments to the budget. This is the 'Interactive Tax Instalment Assistant'. Thanks to this tool you can see a checklist of steps for concluding an amicable agreement. The tax authorities also remind you that there are model draft documents on their website which are needed to provide security for the terms of an amicable settlement agreement.


Source: information from the Federal Tax Service dated 25 February 2022

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CAN A RECOVERER BE REPLACED IF THE DEFENDANT HAS BEEN REMOVED FROM THE UNIFIED STATE REGISTER OF LEGAL ENTITIES AS AN INACTIVE LEGAL ENTITY? 

22.02.2022

The Scientific and Advisory Council (SAC) of the Volga-Vyatka District Arbitration Court presented the recommendations developed following the November meeting. They addressed challenges in the application of procedural rules as well as ambiguous issues arising in disputes involving public authorities. The first section deals with a case involving the exclusion of a defendant from the Unified State Register of Legal Entities.

It answers the question about the possibility of a procedural replacement of the claimant on the basis of an agreement on the assignment of the right of claim. The peculiarity of the situation is that the defendant was excluded from the Unified State Register of Legal Entities as a non-operative entity after the entry into force of the judicial act on the collection of money. 

NCC draws attention to the fact that the termination of a legal entity does not always lead to the termination of an obligation to which this person is a party.

After the exclusion of the defendant from the Unified State Register of Legal Entities, the recoverer has the right to:

to ask for subsidiary liability of the controlling persons;

Demand the distribution of the debtor's discovered property;

to challenge the exclusion of the defendant from the Unified State Register of Legal Entities.

Termination of proceedings on a procedural succession application, the NCC noted, may deprive the applicant of the opportunity to enforce his or her rights.

Source: Recommendations published on the court's website on 18 February 2022.

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THE COMPANY CANNOT ASSIGN SENIORITY TO EMPLOYEES ACCOMPANYING BANKRUPTCY

14.02.2022

An interesting case was considered by the Kemerovo anti-monopoly service. The case concerned advertising of bankruptcy services on television. In their announcement they stated that "for 6 years they have been writing off loans". The antimonopoly service investigated how many years the firm had been on the market and concluded that the advertisement was unreliable.

To support its position, the firm submitted copies of the employment records of the CEO and the lawyer. According to these documents, the CEO had worked in personal bankruptcy since 2017 and the lawyer since 2016 (he had been employed in the legal field since 2013).

The antitrust authorities explained that copies of employment records cannot prove that the debt forgiveness firm has been active for 6 years, because the persons in question were only employed there in 2020. According to the Unified State Register of Legal Entities, the firm itself was registered in March 2020.

As the advertisement disseminated on TV contained inaccurate information on the period of rendering services, the antimonopoly body established an offence under part 1 Article 14.3 of the RF Code of Administrative Offences. 

Since the firm belonged to a microenterprise, and the violation was committed for the first time, only a warning was issued under Article 4.1.1 of the Code of Administrative Offences of the Russian Federation.

Source: Judgment of Kemerovo FAS of Russia in case № 042/04/14.3-71/2022 dated 10 February 2022. 

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DEBT COLLECTION ORDER IS NOT REQUIRED TO DISTRIBUTE THE ASSETS OF A LIQUIDATED COMPANY

07.02.2022

Consideration was given to the appointment of a procedure for distribution of found property of a liquidated company in a situation where claims against such a company were not supported by a judicial act. The lower courts held that this was not possible, but the Supreme Court reached different conclusions.


In January 2019, Monument Development was declared bankrupt, and in July of the same year its counterparty, Pride-M, was excluded from the Unified State Register of Legal Entities by decision of the tax authorities. Several years earlier, the company Pride-M had received 6.5 million rubles in loans from Monument Development. 

In view of the indebtedness of Pride-M, the bankruptcy trustee of Monument Development requested that the procedure for distribution of the discovered property be appointed. The applicant referred to the fact that the liquidated company owned land plots with a cadastral value of 241 million roubles.

The courts of three instances refused to satisfy the claims, believing that the agreement and the confirmation of the transfer of funds only spoke of the possible emergence of legal relations but did not prove that the company Pride-M had failed to fulfil its obligations. This circumstance could have been established in a separate trial. The courts also drew attention to the fact that the rights of claim were not indisputable and the procedure requested by the applicant did not provide for any action other than the distribution of the property.
 
The Supreme Court disagreed. Here, they referred to Article 64(5)(2) of the Civil Code. 5.2 of Article 64 of the Civil Code, according to which the applicant had to prove his interest in the procedure but was not obliged to submit a judicial act to collect the debt. 

The Supreme Court added that the mere appointment of a procedure for distributing the found property of a liquidated company did not in itself indicate that the applicant's claims were found to be justified. The existence or absence of a debt could be established when the application for distribution of the debtor's assets was examined.

Since the entry on the liquidation of Pride-M had been entered in the register without the liquidation procedure provided for in Article 63 of the Civil Code. 63 of the Civil Code, the bankruptcy trustee could apply for the appointment of the requested procedure under the rules of Art. 5.2 of Article 64 of the Civil Code.  

Source: Supreme Court judgment No 305-ES21-19154 of 3 February 2022.

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VAT VIOLATORS SHOULD NOT BE RELIED UPON IN PERSONAL BANKRUPTCY

01.02.2022

The Office of the Federal Tax Service for the Ulyanovsk region reminded that the extraordinary method of exempting citizens from debts provides for a number of exceptions. For example, the law on bankruptcy does not give a fresh start to unscrupulous people - those who have misled the court or trustee or acted illegally in the emergence, performance of obligations.


It is up to the court to decide whether or not there are grounds for not releasing the debtor from discharge. The tax authorities cite two examples in which bankruptcy trustees were obliged to repay debts to the budget. The reasons were violations of the VAT legislation:

The tax inspectors claimed that the rules on exemption of debts should not be applied to the debtor. Earlier in the course of a desk audit the tax inspectors had discovered that the debtor (at that time an individual entrepreneur) had applied tax deductions on transactions for which the counterparties had not accrued or paid VAT. One counterparty had been removed from the Unified State Register of Legal Entities at the time of the transactions as an inactive person, and the debtor had fictitious legal relations with the other. The unjustified deduction of VAT had caused harm to the budget. The court considered the arguments put forward by the tax authorities to be justified and granted the application (case no. A72-14523/2018).
The second case concerned an offence under Article 159(4) of the Criminal Code. In that case, the court found that the debtor had embezzled over 4.5 million roubles in VAT refunds from the budget. For example, fictitious primary accounting documents with counterparties' forged signatures were prepared and transactions were shown in the company's accounting and tax reports. The debtor was charged with the appropriate amount of damage in a civil suit. In his bankruptcy case, the court went along with the tax authorities and did not release the citizen from his obligations (case no. A72-7883/2019). 
In other words, recognition of the debtor's conduct as bad faith, the tax authorities remind, excludes the application of the rules for exemption from debts.

Source: information from the website of the Federal Tax Service dated 27 January 2022.

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THE SUPREME COURT HEARD THE CONSEQUENCES OF INVALIDITY OF TRANSACTIONS IN A CORPORATE DISPUTE

25.01.2022

The Supreme Court considered a dispute initiated by a member of a company. The plaintiff believed that the courts had incorrectly applied the consequences of invalidity of transactions. For example, the persons who bought real estate from the company paid with promissory notes, which could not be an object of civil turnover (the company did not receive a counter-payment). However, the courts ordered the buyers to return the real estate and the seller to return the sum of money to them. The Supreme Court heeded the applicant's arguments.


OKBM had two shareholders - Volga-City Management Company (75% of the share capital) and a citizen who was also the head of the company from 2009 to 2017. 

In 2017, OKBM sold the properties to two individuals who paid with promissory notes. Volga-City Management Company asked to invalidate the transactions on alienation of real estate, as well as to apply the consequences of invalidity of the transactions. 

At a new hearing, the applicant's claims were satisfied. The transactions were declared null and void, the buyers were ordered to return the properties and the company was charged 42.5 million rubles in favour of one buyer and 32.5 million rubles in favour of the other buyer.

Volga-City Management Company disagreed with the consequences of the invalidity of the transactions and the Supreme Court upheld it. Thus, a court decision in another case had previously ruled that the disputed bills of exchange could not be an object of civil circulation and were therefore not issued. However, the securities had given rise to an obligation on the company to make payment to the purchasers. 

Nor were the other arguments put forward by the plaintiff, who explained that the defendants were affiliated persons who had abused their rights and caused damage to OKBM. The promissory notes had been received by them from the second participant of OKBM free of charge (although the contracts were called contracts of sale). There were no endorsement notations on the promissory notes which rendered them invalid as promissory notes. 

The dispute was remitted for reconsideration.

Source: Supreme Court judgment no. 310-ES21-17141 of 20 January 2022.  

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WHAT BILLS WILL BE PROPOSED IN 2022? 

17.01.2022

The Russian government has revealed what bills will appear this year. Topics for 127 initiatives in several areas have been presented: economic growth, digitalisation, development of economic sectors, development of the social sphere and improvement of the quality of life, regional development, improvement of the quality of state administration. Here are some interesting positions. 


We are planning amendments to form a register of enforcement documents. Corresponding amendments might be made to the Labor, Tax and Criminal Procedure Codes, the Code of the Russian Federation on Administrative Offences, and other legislative acts.
Amendments are also expected to be introduced into investment legislation: the procedures for reviewing foreign investors' deals in relation to Russian companies will be detailed.
There could be innovations on securing the status of industrial consortia. 
Changes are planned in a number of laws, related to the rules of consideration of consumers' applications by financial organisations. 
Amendments could affect the law on arbitration. They concern the creation of a register in the field of arbitration and the clarification of the competence of the authorities.
As regards the Tax Code, many novelties are traditionally proposed for it. These include application of the reduced insurance contributions rates for certain categories of taxpayers, and amendments related to the creation of the Territorial Development Fund, and innovations concerning the transition to the real estate taxation based on the cadastral value, and provision of the opportunity to apply the "simplified taxation" by investment advisers, and clarification of the list of expenditures accounted for when determining the tax base for corporate profit tax, etc.

Source: Russian Government Resolution No. 3994-r of 30 December 2021.

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CHANGES REGARDING BANKRUPTCY IN NEW FEDERAL LAWS

10.01.2022

Before the New Year vacations, dozens of fresh federal laws were officially published. Among them are the ones that provide for amendments in the bankruptcy sphere. First, these are the amendments to the law on insolvency to replace the LIBOR rate with the Central Bank rate. Secondly, these are the amendments related to creation of the public-law company "Territorial Development Fund".


A draft law to replace the LIBOR (London Interbank Offered Rate) rate with an alternative indicator was submitted by the Ministry of Economic Development in July last year. According to the adopted law № 484-FZ of December 30, 2021, the LIBOR rate was replaced by the arithmetic average interest rate, which is calculated by the Central Bank (Clause 3 of Article 184.3-2, Clause 3 of Article 186.1-4, Clause 3 of Article 189.38 of the Bankruptcy Law). The second amendment is related to the possibility of the sale of shares or equity interests in banks acquired by the Central Bank during bankruptcy preventive action. Read more here.

Another new federal law № 436-FZ amends the law № 218-FZ of July 29, 2017 "On a public-law company to protect the rights of citizens participating in shared construction in the insolvency (bankruptcy) of developers ... The amendments are related to the fact that the legal successor of the Fund for the Protection of the Rights of Shareholders and the Housing Development Fund became the Territory Development Fund. Since its powers to protect the interests of shareholders, the new fund carries out on the basis of the law № 218-FZ of July 29, 2017, there were relevant innovations in this law. Read more here.

Other federal laws passed on December 30 are available at pravo.gov.ru.

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CLARIFICATIONS OF THE SUPREME COURT ON BANKRUPTCY

27.12.2021

Last week, the Supreme Court presented two Plenum rulings. The first (No. 45 of December 23, 2021) deals with cases of administrative violations of labor law, and the second (No. 46 of December 23, 2021) deals with the application of the Arbitration Procedural Code in first instance disputes.

Who is responsible for violations of labor legislation in bankruptcy?
Resolution of the Plenum №45 (paragraph 6) gives explanations about the subject of offenses in the case when bankruptcy is initiated against the employer. So, if introduced external management or bankruptcy proceedings, the subject of offence under Articles 5.27, 5.27.1 of the CAO of Russia will be the trustee in bankruptcy. A similar situation will occur in the case of bankruptcy of an employer-entrepreneur, if he is declared bankrupt and the realization of property is introduced.

Professional representation requirements: how do they work in bankruptcy?
The Supreme Court answers this question in paragraph 21 of Plenum Resolution No. 46. Thus, professional representation requirements in bankruptcy do not apply to:
bankruptcy trustees in the performance of their assigned duties;
prosecutors who act as representatives in bankruptcy cases;
A bankruptcy trustee who acts in bankruptcy as the sole governing body of the organization. The authority here can be confirmed by a judicial act approving the manager, a power of attorney is not necessary.
Paragraph 22 deals with the form in which copies of documents certifying the status of a bankruptcy trustee should be submitted. Thus, in view of the fact that the court may ask to see the original document, a certified copy need not be submitted.

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THE MINISTRY OF ECONOMIC DEVELOPMENT ESTABLISHES WHICH INFORMATION AND WHEN AN INSOLVENCY PRACTITIONER MUST SUBMIT TO AN SRO

20.12.2021

The SRO standard for information about insolvency practitioners has been published. The document contains three sections: the first contains general provisions, the second specifies the information provided by trustees and the timing of their submission, the third regulates the processing and storage of information.


The general provisions state that violations in the field of information submission may result in the application of disciplinary measures. The managers have to send information to an e-mail address of self-regulating organizations or, if it is defined in internal documents, to an e-mail address of self-regulating organizations departments.
The second section specifies the information to be submitted by the manager to the SRO:
judicial acts on the manager's status in bankruptcy cases (e.g., confirmation, recovery of damages, etc.);
contracts of obligatory insurance;
Documents on the book value of the debtor-organization's assets;
minutes of the meeting (committee) of creditors, which dealt with the selection of a candidate manager, the selection of an SRO, the filing of a petition for the removal of the manager;
Report on the results of the procedure;
Documents on initiation of administrative offence proceedings, criminal proceedings related to the professional activities of the manager;
judicial acts relating to bringing to administrative, criminal responsibility (refusal to bring to responsibility), if related to the professional activities of a manager. The court acts on introducing bankruptcy proceedings against the manager should also be sent.
The deadline for submission of this information to SRO is five working days from the date when the manager became aware of such fact, from the date of signing a particular document. 
The form of submission of the information will be established by the SRO's internal acts. Self-regulating organizations will also have right to oblige their members to send any other information, except for confidential ones.
The third section of the standard will be devoted to information processing and storage by selfregulating organizations.

Source: Order of the Ministry of Economic Development № 743 of December 8, 2021.

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BANKRUPTCY IN THE REVIEW OF THE PRACTICE OF THE ARBITRATION COURT OF THE VOLGA DISTRICT № 3-2021

13.12.2021

The Arbitration Court of the Volga District presented Practice Review #3-2021. Among other things, the selection includes disputes in bankruptcy cases. The issues considered are the resolution of disputes between the parties involved in the case and the arbitration manager's obligation to assess the claims brought against the debtor for reasonableness (paragraphs 3 and 4 of the review).

 

In the first case, the court cited a dispute in which the Federal Tax Service had requested the resolution of a disagreement with the bankruptcy trustee on the draft lease agreement for the debtor's property.
The tax inspectors believed that the draft violated the law: it did not include a deadline for paying the rent, and allowed for payment by means other than transferring money to the debtor's account. In addition, the tax authorities proposed to include new provisions in the agreement (for example, the obligation of the lessee to carry out current repairs), to change a number of provisions (for example, to increase the amount of the penalty).
The courts of two instances refused the tax authorities, since the draft agreement had been approved by the majority at the creditors' meeting. There was no judicial act to invalidate this decision.
However, the court of the district did not agree with such approach. They explained: as a result of resolving the differences must be a judicial act, the operative part of which will indicate on whose side the court (decision of the ACP on case # A57-6459/2019 of August 19, 2021).


In the dispute, where the complaint against the inaction of the manager was considered, there was a question of the proper performance of his duties.
The courts of two instances held that the complaint should not be satisfied. Thus, although the manager did not claim that he had missed the statute of limitations when considering the creditor's claims, the applicant did not use this opportunity either.
However, the district court explained: the fact that the interested parties did not object, does not relieve the trustee of the obligation to assess the claims made for their validity and, if necessary - to declare about missing the limitation period (ruling of the AS PA in case No. А06-921/2018 of August 18, 2021).


Source: review of the practice of the Arbitration Court of the Volga District, published on December 10, 2021.

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CLARIFICATIONS ON REQUESTING DOCUMENTATION FROM DEBTOR'S CEO

07.12.2021

The Arbitration court of Volgograd region has provided methodological recommendations for disputes on demanding documents and property from the debtor's manager. The guidelines consist of four sections: general provisions, peculiarities of demanding documents and property in different bankruptcy procedures, ways of protecting the right to demand documents and bankrupt's property, as well as application of the bankrupt's claim.


When will a trustee be rejected?
The following grounds are given for denying a request to reclaim documents, property, etc:
The manager has proven that the obligation to provide the manager with the requested documents, valuables has been fulfilled;
The manager has proved that it is objectively impossible to fulfill the obligation to hand over the documents. For example, in the case of its seizure by law enforcement authorities, the transfer of its law enforcement to the responsible storage of the founder or manager, the absence of documentation as a result of fire, theft, etc.;
the situation when the head was obliged to conduct and keep accounting documents, but in fact did not do so;
Wrong way of protection by the insolvency practitioner in appealing to the court.
What way of protection to choose?
The court identifies several situations in which different means of protection may be used:
1. the property is in the possession of the debtor, but the manager prevents access to it. Here, it is recommended to use the court to demand the execution of the obligation to hand over the documents, property in kind;
2. the debtor does not actually have the property, it has been transferred to the director. If this happened without an agreement with the owner, a vindication claim is used. If the property was transferred under the transaction, an application for the recognition of this transaction as invalid is filed;
3. if the property was transferred to third parties due to unlawful conduct of the manager, there are two ways of protection: to sue the manager for damages or to bring him to subsidiary liability (if it was the cause of bankruptcy).

Source: methodological recommendations of the Arbitration Court of the Volgograd region, published on December 2, 2021.

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NEW VIOLATIONS AT BANKRUPTCY AUCTIONS

29.11.2021

The antimonopoly inspectors have considered the next complaints to the organizers of the bankruptcy auctions. They revealed such violations as failure to introduce the property on sale, unlawful rejection of the bid of the potential bidder and communication of untruthful information about the bidding.


The claimant in his appeals to the bankruptcy trustee asked to get acquainted with the debtor's property on sale. The manager twice answered that it was impossible: the property was in a lease, the tenant did not get in touch. The antimonopoly inspectors found the behavior of the trustee in violation of parts 9 and 10 of article 110 of the bankruptcy law, believing that the failure to provide the opportunity to view the property and the lack of a procedure for reviewing the property in the notice of the auction (decision of the Penza FAS of Russia № 4066-3 of November 18, 2021).
The applicant complained about the unlawful rejection of the application by the organizer of the auction. The application was submitted by a representative of the applicant. The organizer pointed out that the violation consisted in the fact that a copy of the applicant's passport, as well as the document confirming the representative's authority, were signed by the representative's electronic signature. Antitrust officials found that the organizer of the bidding and the operator of the electronic platform - one person. For registration on the electronic platform, the applicant submits documents signed with his personal electronic signature. Since he participated in the bidding on the electronic platform, the submitted documents met the stated requirements. In the actions of the organizer of the auction was found in violation of paragraph 12 of Art. 110 of the law on bankruptcy (decision of the St. Petersburg FAS № 78/32893/21 of November 22, 2021). 
The applicant pointed out that he had been unable to participate in the auction due to unreliable information. The auction was to take place at 15:00 on October 20, 2021. Due to the failure to conduct the bidding at the appointed time, the applicant called the operator of the electronic platform at 3:3 p.m. The applicant was informed that the bidding did not take place due to the admission of one bidder. After another 3 minutes, protocols on the definition of bidders were published, according to which three bids were received. Notifications on admission to the auction were sent to the applicant afterwards. The auction began at 15 hours and 12 minutes. Antimonopoly inspectors saw a violation of paragraph 6.1 of the bidding procedure, approved by Order of the Ministry of Economic Development of Russia № 495 of July 23, 2015 (decision of the Krasnodar FAS of Russia № 023/10/18.1-5134/2021 of November 23, 2021).

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THE CLAIM FOR DAMAGES MAY BE DISPOSED OF IN THE SAME WAY AS A CLAIM FOR SUBSIDIARY

22.11.2021

The other day Ulyanovsk Region taxmen have informed that the creditors may use the assignment mechanism for recovery of losses similar to the assignment of the claim for subsidiary liability. Courts apply Art. 61.17 of the bankruptcy law to the right of claim to recover losses by analogy. This practice is formed not only in the Ulyanovsk region, but sometimes courts express other opinions.


The FTSA of the Ulyanovsk region told about three cases, in which the court allowed to dispose of the right of claim for losses through assignment:
The authorized body and the creditors wanted to dispose of the right to recover losses through retention of a part of the claim against the controlling person. The objectors argued that the provisions of Article 61.17 of the Bankruptcy Law applied only to claims for subsidiary liability, so the recovered losses should be sold at the auction as receivables. The court sided with the Authorized Body and the creditors, pointing out that the legal mechanism of Article 61.17 of the Bankruptcy Law also applies to the requirements for recovery of damages. The appeal supported these conclusions (ruling of the Eleventh Arbitration Court of Appeal (11 AAS) in case No. A72-10975/2014 of May 13, 2021);
the manager asked to refuse the authorized body's assignment of the claim for recovery of losses. The court of the first instance found that the application of the rules of Chapter III.1 of the bankruptcy law with regard to the choice of disposal of the claim for recovery of losses was lawful. The appeal left this act unchanged (ruling of the 11th AAS in case #A72-454/2019 of March 30, 2021);
the manager asked to replace the recoverer from the debtor with an authorized body - based on the results of the lenders' choice of the method of disposing of the right to claim for the recovery of losses. The court, pointing out that the creditors can dispose of the debt based on the right to claim losses similar to the ways from Article 61.17 of the bankruptcy law, the manager's request was granted (determination of the Arbitration Court of the Ulyanovsk region in case No. A72-19547-11/2018 of May 18, 2021).
Other arbitration courts also apply the provisions of Article 61.17 of the bankruptcy law to the disposal of the right of claim for recovery of losses. For example, petitioner challenged the application of Section 61.17 in a situation where the IRS chose to assign a portion of the loss recovery claim. However, the courts of three instances decided that this procedure is legitimate, the rights and interests of the objector are not violated (ruling of the Arbitration Court of the West Siberian District in case No. A27-8463/2015 of September 9, 2021).

There are also other opinions. For example, creditors chose the assignment of the right of claim for the recovery of losses. In this case, the controlling person believed that the only available way to dispose of the right is its implementation, and Article 61.17 of the law on bankruptcy is not applicable here. The courts of the first and appellate instances indicated that the application of this norm to the disputed relations is possible, but the district court explained: the legislator does not extend the rules of art. 61.17 of the law on bankruptcy to the claim for recovery of damages. The amount of losses is not related to the amount of the debtor's obligations to creditors (ruling of the Arbitration Court of the Ural District in case No. A60-72414/2017 of September 21, 2021).

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THE MECHANISM FOR PAYMENT FOR EXPERT EXAMINATIONS IN CIVIL PROCEEDINGS MAY CHANGE: LEGISLATORY PROJECT

15.11.2021

The Ministry of Justice at regulation.gov.ru published a bill with amendments to the Code of Civil Procedure (CPC). The initiative provides amendments which clarify the right of state forensic expert institutions to receive remuneration for expert examinations.

The explanatory note notes that the payment for expertise in civil cases from the budget is possible, if it is initiated by the court. If the petition for expertise is filed by a party, but the party has not paid the necessary amount of money to the deposit account of the court, the forensic expert institution has no right to refuse to conduct the expertise and must subsequently collect the fee independently, which leads to additional costs.
The amendments stipulate that if the parties fail to fulfill their obligation to pay the fee and costs associated with the expertise are recovered from one or both parties and distributed in accordance with the rules of the Civil Procedural Code.
Other changes and additions to the Article 85 and 95 of the Civil Procedural Code are also envisaged.
The public discussion on the initiative will last till November 25, 2021, you can join it by clicking here. The text of the bill - here, the explanatory note - here.

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EXCESSIVE REQUIREMENTS FOR APPLICANTS LIMIT ACCESS TO PARTICIPATION IN BANKRUPTCY AUCTIONS 

08.11.2021

Antitrust authorities have found new violations in bankruptcy auctions. In the first case, the financial manager incorrectly identified the time of deposit payment with the time of its receipt in the account, and refused to accept the application. In two other cases, the organizers of the bidding imposed on the participants requirements not stipulated by law.


The time of payment and the time of receipt of the deposit are not one and the same
As it follows from the announcement of the bidding, the deposit was to be paid not later than 10 o'clock on October 7, 2021.
The applicant paid the deposit at 9:35 a.m. and sent a bid at 9:48 a.m. on October 7, 2021. 
At 10:47 a.m. of the same day the applicant received a message that his application was rejected because on the date of the protocol on the determination of bidders it is not confirmed that the deposit has been received on the account.
According to a certificate issued by the bank, the deposit was credited to the account of the debtor on October 7, 2021 at 10 o'clock 1 minute.
Minutes on the determination of participants was signed on October 7 at 10 hours 47 minutes. The next day the auction was declared void due to the lack of bids.
The applicant believed that his rights had been violated. The antimonopoly officials agreed: the requirement of the receipt of the deposit at 10 o'clock on October 7, 2021 was not contained in the notice. Since the deposit was received on the account, moreover - before the protocol on the definition of bidders, in the actions of the financial manager were found violations. An injunction was issued according to which the manager was to consider the submitted bid. 
Source: Decision of the Novosibirsk FAS of Russia in case № 054/10/18.1-2084/2021 on October 22, 2021.

The requirement of documents not stipulated by law limits access to bidding
In two complaints Voronezh FAS faced with the fact that the organizers of an electronic auction demanded excessive documentation from the applicants.
The antimonopoly inspectors explained: to register at an electronic trading platform, applicants submit to the operator a list of documents and information according to the established list. Therefore, it is not necessary to duplicate them as part of the application.
In addition Voronezh FAS cited the position of the FAS, expressed in decision № 04/10/18.1-15/2021 on January 11, 2021.
Sources:
Decision of the Voronezh FAS of Russia on case No. 036/10/18.1-1115/2021 of October 29, 2021;
Decision of the Voronezh FAS of Russia in case №036/10/18.1-1098/2021, October 20, 2021.

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THE CONSTITUTIONAL COURT PRESENTED THE REVIEW OF PRACTICE NO. 3-2021

01.11.2021

The review of practice for the third quarter of the current year was published on the website of the court. Traditionally, the selection includes positions on the constitutional foundations of public law, private law and criminal justice. Among them is the opinion of the Constitutional Court on the possibility for a citizen-bankrupt to collect his wages arrears on his own (point 8).

The appeal of a bankrupt citizen who believed that his employer owed him a substantial sum of money was considered. The applicant tried to collect these funds in court, but his financial manager asked to leave the application without consideration.
The Supreme Court confirmed the conclusions of the inferior courts: after a citizen is declared bankrupt only the financial manager can collect debts on wages.
The Constitutional Court expressed a different opinion. Here it was suggested to determine what significance the disputed debt will have in bankruptcy. 
If it is not included in the bankruptcy estate, the bankrupt is not deprived of the possibility to collect this money on his own. But it is up to the citizen to prove that he will claim funds not intended for creditors.
If the disputed debt can add to the bankruptcy estate, the administrator has the power to collect it. If an administrator fails to act, a citizen may ask for such failure to act to be declared unlawful and for recovery of damages (Decree of the Constitutional Court No. 36-P of July 14, 2021). 

Source: review of the practice of the Constitutional Court №3-2021

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THE DEPOSIT INSURANCE AGENCY IS CONSIDERING THE POSSIBILITY OF REFUSING TO TAKE ACCOUNT OF COUNTERCLAIMS OF LIQUIDATED BANKS AGAINST DEPOSITORS

25.10.2021

The Deposit Insurance Agency (DIA) has provided a concept for renunciation of counterclaims in determining the amount of compensation on deposits. It outlines the difficulties of the current law enforcement, analyzes international experience, and proposes four options to solve the problem.

As a general rule, the amount of deposit compensation depends on the amount of the bank's liabilities minus counterclaims against the depositor, which appeared before the insured event. Often these counterclaims are obligations under credit agreements, and the maturity of these obligations does not play a role.

DIA points out that the application of these provisions of the legislation revealed a number of negative points:

additional time is needed to verify the data on counterclaims, so the period of preparation of insurance payments is lengthened;

depositors perceive such legal regulation as unfair: they are demanded to pay debts ahead of schedule, although they could have borrowed funds for a long time and expect repayment according to the schedule. In some cases, depositors believe that a set-off has occurred, which leads to a legal conflict;

The process of working with counterclaims increases the burden on both DIA and credit institutions. This is not always justified, as the mechanism has not become a good incentive for the repayment of loans to banks in liquidation;

More complicated accounting of counterclaims in the recent period makes insurance rules less understandable for ordinary depositors.

After analyzing the international experience, DIA found out that there is a tendency to abandon consideration of counterclaims - in part or in full.

For the Russian deposit insurance system, according to DIA, four options for changing the current legal regulation could be considered:

deduction without set-off of counterclaims, the maturity of which has occurred;

subtraction with set-off of maturing counterclaims;

full waiver of consideration of counterclaims in the calculation of insurance compensation;

refusal to consider counterclaims for individuals.

The Concept contains positive and negative sides of such regulatory options.

The DIA notes that the Concept is only proposals for discussion. Comments on them will be accepted until November 15, 2021. 

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THE ORDER OF LIQUIDATION OF THE COMPANY WAS NOT RESPECTED, WHEN THE LIQUIDATOR KNEW ABOUT THE DEBT, BUT IGNORED IT

19.10.2021

Considered a dispute over recovery of damages from a liquidator who allowed the company to cease operations when there was a court-approved debt.  The Supreme Court agreed with the district court: when liquidating a reorganized company, it is necessary to check debts not only on the details of the newly registered company, but also on the details of its legal predecessor.

In 2013, a contract was concluded, according to which Montazhnik LLC performed the work, and Santekhmontazh CJSC undertook to pay for it.

In November 2016, Montazhnik LLC went to court to recover payment.

During the consideration of the dispute, it became known that CJSC "Santekhmontazh" was reorganized by transforming into LLC "Santekhmontazh", a director was elected. In early June 2017, a decision on liquidation was made, the sole participant was appointed liquidator of LLC "Santekhmontazh". A corresponding publication appeared in the State Registration Bulletin.

At the end of June, a procedural succession (from CJSC to LLC) was made in a dispute over the recovery of funds, and the claims of "Montazhnik" LLC were satisfied.

In July, OOO "Santekhmontazh" filed an appeal against the court decision to recover money from it (later the decision was left unchanged).

In August, the sole participant of Santekhmontazh LLC approved the liquidation balance sheet, and in September 2017 the activity of this company was terminated.

Montazhnik LLC asked to recover damages from the liquidator. The petitioner believed that at the time of liquidation, the respondent was aware of the debts of Santekhmontazh LLC and should have taken actions to settle with the creditor.

The courts of two instances rejected the claimant, because the liquidator acted reasonably and in good faith. When deciding on the liquidation he checked the existence of disputes in which LLC "Santekhmontazh" acts as a defendant - and did not find any. The appeal added that the liquidator had never been the head of CJSC "Santekhmontazh", LLC "Santekhmontazh", in court hearings on the side of these companies representatives participated. This means that the defendant was not and could not know about the dispute and the existing debt.

The District Court recalled the position of the Supreme Arbitration Court (resolutions № 7075/11 of October 13, 2011 and № 17044/12 of June 18, 2013) and the Supreme Court (Determination № 310-ES14-8980 of May 27, 2015), according to which in deciding whether to impose liability on the liquidator must assess compliance with the order of liquidation.

According to the provisions of the Civil Code, the termination of one person must not be aimed at causing harm to another. It is the liquidator who deals with the creditors. If he was aware of the debts, but the balance sheets were drawn up without taking them into account, and no settlements with creditors were made, the liquidation procedure cannot be considered to have been followed.

In the specific dispute, the liquidator was the controlling person (the sole shareholder, participant) of both CJSC "Santekhmontazh" and LLC "Santekhmontazh". While he exercised the powers of a liquidator, a dispute was pending for the recovery of funds in favor of OOO Montazhnik.

Therefore, it was the liquidator who had the burden of proving that the information about the arisen debt and the claim of OOO Montazhnik had been concealed from him. The lower courts did not take into account that, considering the circumstances of the case, the verification of debts should have been carried out not only according to the details of the newly registered company, but also according to the details of CJSC "Santekhmontazh", which had been carrying out economic activity for a long time.

The dispute was sent for reconsideration to ascertain whether the liquidator was aware of the disputed debts. The Supreme Court upheld the conclusions of the district court.

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ARBITRATION COURTS TOLD ABOUT THE PRACTICE OF DISTRIBUTION OF COURT EXPENSES

11.10.2021

Arbitration courts presented materials on questions of application of the provisions of the procedural legislation on court expenses. The Arbitration court of Republic Kalmykia published a review of practice, the Arbitration court of Volgograd region published methodical recommendations.

Here are some conclusions from the collection of the Arbitration Court of the Republic of Kalmykia:

the amount of court costs is in conditional proportional dependence on the volume of satisfied claims;

insurance premiums, which are calculated on the amount of remuneration of a representative under a civil law contract, do not relate to court costs. There are no grounds for their collection by the court;

If the judgment is not in favor of the joint debtors or creditors, the court costs are charged to them jointly;

The claim for reimbursement of court costs may be satisfied only if these costs are real and confirmed by the relevant documents. Also, it must be proved that payment was made to the person who rendered the services.

In the conclusion of the review it is noted that the absence in the law of the criterion of reasonableness of court expenses allows the courts to reduce their size arbitrarily. Therefore it is recommended in each case to proceed from the complexity of the dispute and the volume of services rendered.

In assessing the complexity of the dispute, one may take into account:

- lack of judicial practice on consideration of a disputable situation, or a variety of approaches in practice;

- different interpretation of the applicable rules;

- the volume of investigated legal issues;

- the amount of evidence submitted;

- appointment of expert examinations;

- the number of specialists involved.

In evaluating the work performed by the representative, it is necessary to:

- to specify the legal assistance provided;

- pay attention to the amount of time for the preparation of documents;

- analyze how many times the representative participated in court hearings, how long they were.

In the Guidelines of the Arbitration Court of the Volgograd region are considered the general issues of court costs, as well as - some features of the distribution, the recovery of court costs. For example, when terminating the proceedings in connection with the approval of an amicable agreement, after the procedural succession, with the participation of the tax authorities in the dispute.

 

Sources:

1. review of the Arbitration Court of the Republic of Kalmykia;

2. methodical recommendations of the Arbitration Court of Volgograd Region.

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THE SUPREME COURT EXPLAINED HOW TO SEND A NOTICE OF INTENT TO SELL A SHARE IN A LIMITED LIABILITY COMPANY TO A THIRD PARTY

04.10.2021

The issue of the proper notification of the second member of the company regarding the intention to sell the share to a third party has been resolved. The lower courts indicated that it was not proved that such notification was sent. However, the Supreme Court reminded: the offer is considered to be received by all participants of the company upon its receipt by the company. In a particular dispute there was a corresponding mark of the general director of the company on the document.
A citizen and Limited Liability Company (LLC) GNR GROUP entered into a preliminary contract for sale of a participatory interest in the charter capital of LLC E-Steel ISP (70%).
One of the conditions for the conclusion of the main contract was that the citizen received a waiver of the pre-emptive right to buy the share by another member of the company or the expiration of the period for exercising his pre-emptive right.
Citing the fulfillment of the conditions stipulated by the parties and the citizen's evasion of the conclusion of the main contract, GNR GROUP LLC appealed to the court. The citizen filed a counterclaim in which he requested the invalidation of the preliminary contract.
The courts of three instances refused to satisfy the initial and counterclaims. They explained that there was no evidence of the citizen's notification of the second participant of LLC "E-Steil ISP" of the sale of his share. This is why the term for the second participant to use his right of first refusal did not begin to run.
The Supreme Court did not agree with this and pointed out that the citizen had sent a notarized offer to the company and the second participant. This offer was received by the general director of the company (the sole executive body), as evidenced by a mark on the document.
According to p. 5, art. 21 of the Law on LLC, an offer is deemed to be received by all shareholders upon its receipt by the company (in this particular case by the director general).
If within 30 days (or other period specified in the charter) from the date of receipt of the offer by the company the pre-emptive right of purchase is not used, the share may be sold to a third party.
Thus, after the citizen complies with the notification procedure, after LLC "GNR GROUP" has performed all the obligations assumed under the preliminary agreement and the citizen has accepted this performance, the main sale and purchase agreement must be concluded.
The acts of the lower instances in terms of denial of the claim of OOO "GNR GROUP" were reversed, the dispute - sent for a new consideration.

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BANKRUPTCY LAW MAY INCLUDE A MECHANISM TO CHALLENGE A SET OF INTERRELATED TRANSACTIONS

27.09.2021

The Ministry of Economic Development has submitted a draft of amendments to the law on bankruptcy. The initiative is posted on regulation.gov.ru and will be discussed by the public until 14 October 2021. It is proposed to describe the mechanism for challenging a set of interrelated transactions. The new provisions are to be applied irrespective of the date of the transaction or the initiation of bankruptcy proceedings.

The Ministry of Economic Development notes that the current legal regulation does not exclude the possibility of challenging several interrelated transactions, but there are difficulties in practice. In order to prevent the reduction of the bankruptcy estate and the percentage of creditors' claims, it is proposed to solve the problem legislatively.

Chapter III.1 of the law on bankruptcy will be supplemented by the article 61.3-1 that stipulates the peculiarities of contestation of several transactions (the totality of sham and (or) sham transactions) of the debtor.

It is reported that the unlawful purposes of a set of transactions may be evidenced by the following circumstances (clause 2 of the draft article)

The execution of transactions within a short period of time;

The absence of a convincing economic rationale;

Significant difference of transactions from those which were made between the parties earlier;

absence of other transactions, other economic activities of the parties;

affiliation of the parties;

the price of a subsequent transaction did not differ from the previous one by more than 5%;

assets disposed of under transactions were consolidated mainly in one person;

the same person was a party to certain transactions, which made up the aggregate of transactions.

It is also provided that each person who is a party to one of the transactions is recognized as a party to a set of transactions. A claim for return of property or funds may be brought against any of the parties, including the last recipient.

However, the consequences of invalidity of a set of transactions do not apply to a person who did not know and should not have known about the acquisition of property as a result of participation in such a scheme.

An application for invalidation of a set of transactions will need to specify the circumstances on which it is based (from clause 2 of the Draft Article). The application may be filed by a person authorized to do so by the law on bankruptcy.

All parties to a set of transactions shall be involved in the consideration of the application.

On the basis of a petition of a bankruptcy trustee the court may request information on the property (and account transactions) of persons involved in the transactions.

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TAX NEWS FOR SEPTEMBER 15-21, 2021

23.09.2021

The Federal Tax Service gave explanations on issues arising in practice, reported on ready model scenarios for the implementation of electronic document management. Offices of the Federal Tax Service have informed about how the work within the bankruptcy of taxpayers, reported on an update in the service for the preparation of documents for state registration. A package of fresh orders of the Tax Service was published.

Information of the Federal Tax Service
Model scenarios for the introduction of electronic document management are posted on the portal of the Federal Tax Service, which allow companies to move to its use in the most comfortable way, taking into account the peculiarities of the company. The scenarios contain the necessary document templates. Read more at

The list of physical and health services for payment of which starting next year, citizens will be able to receive a social deduction for personal income tax is approved. Read more

The circle of participants of tax monitoring has expanded: representatives of medium business has been added. Read more

The Federal Tax Service said when the budget subsidy is not excluded from the tax base of VAT. The decision on this issue was made due to the complaint of the taxpayer. Read more

UFNS Ulyanovsk region reminded how the procedure of extrajudicial bankruptcy of citizens. Read more

The Federal Tax Service Administration of Samara region recounted its experience in contesting transactions in bankruptcy of taxpayers. Read more

The FTSA in Nizhny Novgorod region announced: Due to the update of the "Preparing Documents for State Registration" program, corrected documents may now be sent electronically. Read more

Events of the Federal Tax Service

On September 24 at 10 o'clock the editorial office of the journal "Tax Policy and Practice" will hold a webinar on "Topical Questions on bankruptcy proceedings. The speaker will be the Deputy Head of the Department of bankruptcy proceedings of the Federal Tax Service. Pre-registration is required. Read more at
Letters from the Federal Tax Service
Letter № SD-4-11/10992 on August 4, 2021, the Federal Tax Service sends the position of the Ministry of Finance on the definition of the minimum limit of ownership of real estate for exemption from personal income tax on its sale.

In Letter No. 3-1-11/0116@ of August 23, 2021, the Federal Tax Service answers the question of how to deduct VAT on the basis of an invoice with lines 1-8 in two columns.

In Letter No. BS-4-11/12938@ of September 13, 2021, the Federal Tax Service informs of the completion of a calculation of personal income tax, calculated and withheld by the tax agent (6-NDFL).

In Letter No. BS-4-21/13121@ of September 15, 2021, the Federal Tax Service provides clarification regarding the tax rate for a bank-owned land plot intended for individual housing construction.

In Letter No. BS-4-21/13025@ of September 14, 2021, the Federal Tax Service informs of the calculation of corporate property tax in connection with the correction of errors made in determining the tax base (cadastral value).

Draft Regulatory Acts

On regulation.gov.ru posted:


A draft order of the Federal Tax Service approving the form and format for banks to provide information on the amounts of interest paid to individuals on deposits, account balances (ID - 01/02/09-21/00120403). Public discussions will continue until 30 September 2021;

Draft Order of the Federal Tax Service approving the form of notification on maximum retail prices for tobacco products produced in Russia (ID - 01/02/09-21/00120587). Public discussions will continue until October 5, 2021.

Regulatory legal acts

Orders of the Federal Tax Service have been published on pravo.gov.ru:


Order No. ED-7-26/546@ of June 8, 2021, which approves the requirements for an electronic document management operator;

Order №ЕД-7-11/755@ of August 17, 2021, approving the forms of documents that apply when confirming a taxpayer's right to receive a number of social and property tax deductions;

Order №ЕД-7-20/696@ of July 28, 2021, approving the standard additional professional program in the field of evaluation of the compliance of cash register equipment and technical means of the operator of fiscal data to the requirements imposed on them;

Order No. ED-7-15/419@ of April 26, 2021, approving the forms of documents required by par. 19 and 29 of Art. 201 of the Tax Code (tax deductions);

Order № ED-7-8/749@ of August 16, 2021, amending order № ED-7-8/583@ of August 14, 2020, approved the form of the document to identify arrears, tax claims.

Orders No. AB-7-20/810@ and No. AB-7-20/811@ of September 15, 2021 on the inclusion of information on models of cash register equipment are posted on the Federal Tax Service website.

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IF THE MANAGER DOES NOT ACT AS THE ORGANIZER OF THE AUCTION, THE ASSESSMENT OF HIS ACTIVITIES IS NOT WITHIN THE COMPETENCE OF THE ANTIMONOPOLY AUTHORITIES

13.09.2021

The Federal Antimonopoly Service expressed this position back in 2016. Applying it when considering a complaint against the actions of a bankruptcy trustee, the Moscow FAS Office pointed out: the issue of improper performance of duties in such a case is subject to judicial appeal at the request of persons involved in the bankruptcy case.

The applicant (a potential bidder) complained to the antimonopoly authorities about the actions of the organizer of the auction and the bankruptcy manager.

The subject of the auction was fodder wheat (1793 tons) stored in the warehouse. Since the organizer of the auction is obliged to give an opportunity to get acquainted with the sold property, the applicant sent a corresponding request and subsequently appeared at the inspection of the wheat. The applicant was presented with samples, but was not allowed into the elevator. That is - did not demonstrate the grain in the amount that was sold from the auction.

After the wheat was analyzed, an analysis card with the characteristics of the goods and a video file of wheat sampling were sent to the applicant. However, he insisted that the participation of persons with access to the elevator in the bidding put them in an unequal position with the other bidders.

In response, the bankruptcy manager said that the wheat storage place (bunker granary) is a particularly hazardous production facility. The admission and presence of unauthorized persons there is prohibited.

The antimonopoly officials agreed that there was no evidence of violations in the actions of the organizer of the auction, there was only a subjective assessment of what was happening on the part of the applicant.

It was also noted that, according to the position of the FAS set out in letter No. RP-44252/16 of June 30, 2016, the antimonopoly authority may consider complaints against the actions of the bankruptcy trustee under Article 18.1 of the law on protection of competition when this trustee acts as the organizer of the auction or concludes a sale agreement on the outcome of the auction.

Improper performance of obligations by the bankruptcy trustee in other cases is not within the competence of antitrust authorities and is subject to judicial appeal at the request of persons participating in the bankruptcy proceedings.

In the part of contesting the manager's actions the complaint was left without consideration, in the part of contesting the actions of the organizer of the auction the complaint was found unfounded.

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PARTICIPANTS OF A LIQUIDATED COMPANY ARE NOT AUTOMATICALLY VESTED WITH ITS PROPERTY

07.09.2021

The Supreme Court agreed with the court of the district that the civil legislation does not provide such a basis for the right of ownership as the fact of exclusion of a company from the Unified State Register of Legal Entities. In this situation, participants do not automatically receive the right to the property that belonged to a liquidated legal entity; it is necessary to conduct the procedure of distribution of discovered assets.

The company has been excluded from the register in connection with its voluntary liquidation. At the time of the deletion there were 203 thousand rubles on the bank account of the company.

The shareholders of the liquidated company asked the bank to transfer this money to the bank details specified in the application, but the bank did not comply with their request.

Then the shareholders turned to court and asked the bank to recover the unjust enrichment.

The courts of two instances agreed with the plaintiffs. They explained that since the company's liquidation and exclusion from the Unified State Register of Legal Entities all of its monetary resources belong to the participants. It was noted that the procedure for distribution of newly discovered property can be bypassed, because it is aimed at satisfying the interests of creditors and does not apply to relations where the existence of creditors is not proved.

The district court disagreed, pointing out that the plaintiffs had chosen an improper way to protect their violated rights. The claims they have made should still be considered in the procedure for distribution of the found property of a liquidated company.

The very fact of exclusion of the company from the Unified State Register of Legal Entities is not the basis for the participants to have the right of ownership to the property belonging to the excluded company. It is not provided for by the Civil Code or other laws. The provisions of Article 63 of the Civil Code do not automatically vest the participants with the property of a liquidated legal entity.

The District Court also explained that the parties' obligations under the bank account agreement terminated due to the liquidation of the company. Therefore, there were no grounds for the bank to transfer funds to the members of the company. The plaintiffs had not proved that the bank had been unjustly enriched at their expense.

The Supreme Court agreed with the district court.

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IT WAS PROPOSED TO RAISE THE INCOME LIMITS OF SMES

23.08.2021

The Council of the Federation believes that it is time to revise the parameters for classifying small and medium-sized enterprises (SMEs). The criteria were formed in 2016. Since then, the price of goods, works and services has increased significantly - and the figures of the maximum income remained at the same level.

MP Andrei Kutepov spoke in favor of the changes. He proposed raising the income figures:

- for microenterprises - up to 170 million rubles (now it is 120 million rubles);

- for small - up to 870 million rubles (now - 800 million rubles);

- medium - up to Br3.5 billion (now - Br2 billion).

It is also proposed that the list of information on SMEs should include information on participating organizations, updating it on a monthly basis.

The senator believes that entrepreneurs participating in the purchases should be excluded from the register more cautiously.

The relevant initiative was sent to Assistant to the President of Russia Maksim Oreshkin and First Deputy Prime Minister of Russia Andrey Belousov.

Source: Information of the Council of Federation of August 19, 2021

 

Earlier, the Federal Tax Service reported: the SME registry is now updated monthly - so that entrepreneurs can return to it at short notice (after being excluded by their mistake). This year, the registry was completely re-formed on July 10, previously it was on August 10. The registry was created to support small and medium-sized businesses, and it can also serve to select counterparties.

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CLARIFICATIONS WERE GIVEN WITH REGARD TO PROVIDING SHAREHOLDERS WITH ACCESS TO GENERAL MEETING MATERIALS

16.08.2021

The Central Bank believes that a joint stock company is not obliged to provide access to information on the date of the general meeting in the form of absentee voting. At that time the deadline for filling out ballots and accepting them has already expired, and the information for the meeting is needed precisely for making decisions.

The megaregulator reminds: in this case, the last day for filling in and accepting ballots is the day before the end of their acceptance (before the date of the meeting in the form of absentee voting).

The Central Bank gives relevant explanations in its letter #IN-06-28/62 of 5 August 2021 addressed to the participants of the securities market. The letter appeared as a response to numerous requests to provide access to the information stipulated by clause. 3 of Article 52 of the law "On Joint-Stock Companies".

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ANTIMONOPOLY INSPECTORS AGAINST THE IMPOSSIBILITY TO INSPECT THE DEBTOR'S REALIZABLE ASSETS

30.08.2021

The antimonopoly authorities have considered the claims against the organizer of the bankruptcy auction. The potential bidders complained that they were not introduced to the property on sale. It is well known that such situation does not allow taking a sensible decision on participation in the auction and can have an adverse effect on the competition.

Incomplete provision of information can be considered as a failure to provide the opportunity to become acquainted with the property.

St. Petersburg UFAS considered the complaint of an individual who wanted to participate in the bankruptcy auction for sale of land plots.

The complainant reported that the organizer of the auction did not provide an opportunity to become acquainted with the property being sold. The applicant requested to provide:

certificate of ownership, extract from the Unified State Register of Natural Resources, cadastral passport, information on encumbrances and arrests;

report on an estimation;

photos, which reflect the condition of the object;

information when it is possible to examine the object, with whom to contact.

However, the organizer of the auction only provided extracts from the Unified State Register of Legal Entities and the inspection report.

The antimonopoly inspectors explained that such organizer's behavior makes it impossible for the applicant to decide whether it is advisable or not to participate in the auction. They recognized a violation of p. 9, article 110 of the law on bankruptcy in the actions of the organizer.

Source: The decision of the Saint-Petersburg UFAS of Russia in case #A78/24218/21 of August 24, 2021

 

The inability to inspect the realizable assets was confirmed by the notary

In the second case the applicant had made a more complicated journey to get acquainted with the condition of the land plots (the subject of the auction). At first the applicant sent inquiries to the organizer of the auction - but to no avail.

Then he turned to a notary and asked to certify the fact of non-admission to the land plots.

Despite the fact that the organizer of the auction assured the antitrust inspectors of the possibility of the unimpeded access to the plots, their review and study, the evidence indicated otherwise.

According to the information from the letters sent to the organizer of the auction, the applicant notified about the impossibility to get to the disputable plots, surrounded by a fence. He asked to be shown the property and later informed when he was going to come.

According to the protocol of inspection drawn up by the notary, it was not possible to make an inspection of the borders of the plots, because the people on the disputed territory refused to provide access.

In the actions of the organizer of the auction was found in violation of paragraph 3 of paragraph 9 of Art. 110 of the Law on Bankruptcy. The arguments of the applicant were found to be justified.

Furthermore, another violation was discovered at the same auction. The antimonopoly inspectors pointed out that it is not enough to publish information about the auction suspension on the operator's web-site - the same information shall be published in the "Kommersant" newspaper and on the web-site of the Federal Agency for State Property Management (clause 7 p. 6 Article 28 of the law on bankruptcy). The information on the suspension, the FAS noted, is the information that changes the information on the bidding. Absence of relevant information may lead to limitation of the number of participants in the auction.

Source: FAS decision #04/71617/21 of case #04/10/18.1-342/2021 of August 25, 2021

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THE MINISTRY OF ECONOMIC DEVELOPMENT HAS DRAFTED AMENDMENTS CONCERNING EXTRAJUDICIAL BANKRUPTCY

10.08.2021

A draft law containing amendments to the law on insolvency has been posted at regulation.gov.ru. It is a correction of some aspects related to out-of-court bankruptcy of individuals. It increases the maximum amount for initiation of a case, the opportunity for citizens to receive the official information on debts of compulsory payments through the MFC, the terms of resolving disputes, etc. are established.

The following amendments may appear in the law on insolvency:

changes the aggregate amount of liabilities, which allows initiating out-of-court bankruptcy. The upper limit is going to be raised to 1 million rubles (this amount shall not include the amount of penalties pursuant to para 4 clause 2 art. 4 of the law on insolvency), but with the following conditions. First, the amount of monetary liabilities should be within 50-500 thousand rubles. Secondly, the amount of debts on payment of obligatory payments should not exceed 500 thousand rubles.

it is added the condition according to which the out-of-court bankruptcy is possible if the citizen did not resort to bankruptcy earlier, if it passed not less than 5 years from the date of finishing the sale of property or termination of bankruptcy proceedings, if it passed not less than 10 years after the termination or termination of the out-of-court bankruptcy procedure;

it is established that when an application is filed by a citizen's representative, his/her power of attorney shall be notarized;

Citizens have the opportunity to optimize the calculation of debt in respect of obligatory payments. If the debtor indicates that he agrees to the automatic inclusion of such information in the list of creditors, the MFC will receive it from the state information system. If the citizen does not consent, he/she will have to enter such information on his/her own;

Debtors also have the opportunity to submit to the MFC a revised application for bankruptcy - including changes in the list of creditors. This can be done once and no later than one month from the date of inclusion of information in the UFRSB;

it is determined that a creditor can file a claim for non-application of the rules of relief against the debtor no later than a year when the creditor should have learned or became aware of such circumstances. But in any case - no later than 3 years from the date of inclusion of information on the completion of the out-of-court bankruptcy procedure in the UFRSB. Within the same timeframe, disagreements about the exact details of the creditor and its claims are resolved.
 

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THE MINISTRY OF ECONOMIC DEVELOPMENT PROPOSED AMENDMENTS TO THE LAW ON BANKRUPTCY

03.08.2021

A draft amendment initiative to the law on bankruptcy was published at regulation.gov.ru. The question is about stopping the usage of LIBOR (London Interbank Offered Rate) for the purpose of moratorium interest calculation. It is planned to make changes to the articles concerning the moratorium on satisfaction of creditors' claims of an insurance organization, non-state pension fund, and credit organization.


The work on replacing the LIBOR rate is conducted by the Central Bank. For example, the mega-regulator issued the information letter #IN-015-52/121 of August 12, 2020, which gave alternative indicators.

Also in February 2021 the Central Bank announced an initiative being prepared to replace the LIBOR rate in the calculation of moratorium interest accrued on the amount of creditors' claims on liabilities which arose before the moratorium was introduced, falling under the moratorium and denominated in foreign currency.

The corresponding draft law was published by the Ministry of Economic Development on July 28, 2021 at regulation.gov.ru (ID - 02/04/07-21/00118545).

The summary report notes that one of the trends in the development of regulation in the financial markets is the cessation of the use of LIBOR as a base rate until 2022.

According to the proposed amendments to p. 3. of Art. 184.3-2, para. 3. of Art. 186.1-4, item 3 of article 189.38 of the law on bankruptcy, on creditors' claims that arose before the introduction of the moratorium, falling within the moratorium and expressed in foreign currency, the interest shall be accrued on the basis of two thirds of the arithmetic average interest rate, calculated from the weighted average interest rates on deposits attracted by Russian credit institutions in the relevant foreign currency.

The most recent rate as of the date of the moratorium, published on the website of the Central Bank, is used. If there is no information about such rate on the website, it is considered to be equal to zero.

The current version of these norms applies the LIBOR rate effective on the date of the moratorium.

According to materials of the bill, it is planned to come to the goals of the proposed regulation in the 4th quarter of the current year.

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ANTIMONOPOLY INSPECTORS EXPLAINED HOW TO ORGANIZE BANKRUPTCY AUCTIONS FOR THE SALE OF PROPERTY OF ENTREPRENEURS AND CITIZENS 

26.07.2021

The Federal Antimonopoly Service considered the complaints of the applicants on the actions of financial managers in bankruptcy auctions. They revealed violations in informing about the bidding, failure to comply with the law requirements on the accuracy of published data, as well as failure to establish a special account to transfer the deposits.


The information about the bidding on the property of the entrepreneur is published in the official publication
The plaintiff argued that the financial manager had violated the procedure of bankruptcy auctions.

Thus, the debtor was registered as an individual entrepreneur and lost this status in connection with the court's decision to recognize him bankrupt. The property that was sold at the auction (the land plot, the repair-mechanical workshop and the passing area) was used in entrepreneurial activities.

However, the financial manager only posted information about the auction in the UFRSB. The manager believed that paragraph. 1 of Article 213.7 of the bankruptcy law applied. In addition, the Regulation on the Procedure for the Sale of Property indicated that informing potential buyers was sufficient.

The antitrust officers sided with the plaintiff. The following explanations were given: when selling the property which had been used by the debtor in entrepreneurial activities, one should be guided by p. 4 of Article 213.1, p. 1 and 6 of Article 28 of the law on bankruptcy. Thus, it was necessary to publish information about the bidding in an official publication.

The fact that there was no such provision in the Regulation on the Procedure of property sale does not mean that the law requirements were met, the FAS noted.

In addition, it was pointed out that the notice published in the UFRSB had flaws: it did not contain the email address and phone number of the organizer of the auction.

The actions of financial manager were found in violation of p. 1 and 6 of Article 28, Paragraph 15, Item 10 of Article 110 of the law on bankruptcy. A precept was issued and case papers submitted for consideration of bringing the manager to administrative liability.

Sources: Decision and order of the Khabarovsk FAS of Russia in case # 027/10/18.1-873/2021 of July 19, 2021

 

A special account is used to transfer deposits in a citizen's bankruptcy case
The plaintiff pointed out that, according to the notice of bankruptcy bidding, the deposits were to be transferred to the account of the financial manager. Thus, the special bank account was not used.

The antitrust officials agreed that this was a violation of the law. According to clause 40.2 of the Resolution of the Plenum of the Supreme Arbitration Court № 60 dated 23 July 2009, in order to secure the obligations on returning the earnest money the debtor's manager (a citizen as well) should open a special account of the debtor by analogy with clause 3 of Article 138 of the Law on Bankruptcy.

The second argument of the plaintiff concerned the unreliability of the data posted by the trustee. The notification indicated that the subject of the auction (the apartment) was in the common joint ownership of the spouses. However, since the registry statement indicated that the title holder was another person, the antitrust officers pointed out that the law had not been complied with.

The actions of the financial manager were found in violation of Clause 3 Article 138, Clause 10 Article 110 of the Law on Bankruptcy. The precept was not issued due to the sales agreement.

Source: Decision of St. Petersburg FAS № 78/20702/21 of July 16, 2021

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FAS TOLD HOW TO APPLY ANTIMONOPOLY COMPLIANCE RULES 

19.07.2021

Federal Antimonopoly Service (FAS) has issued a clarification on implementation of antimonopoly compliance - for the uniform application of the new rules, introduced by the law № 33-FZ of March 1, 2020. It is reported that organizations such as the Russian Union of Industrialists and Entrepreneurs, Business Russia, etc., took part in the discussion of the clarifications. The document sets out the procedure for coordinating internal compliance acts with the FAS, the requirements for such acts, recommendations for introducing the system into the practice of organizations, and also some clarifications on the control activity of the FAS.


In the explanations (section VI) the antimonopoly service touches upon the issue of issuing instructions. It is noted: since the implementation of compliance is a voluntary matter, it should not be obligatory in accordance with an instruction. But, if an organization has undertaken obligations to ensure internal compliance with the law, the fulfillment of these obligations may become part of the FAS's prescription.

 

The second point concerns the provision of documents, explanations and information. Here it is reported that compliance is not an independent object of state control and inspections by the FAS. Information concerning compliance may be provided to the antimonopoly service during the consideration of a case concerning a violation of antimonopoly legislation or an administrative offence case. The antimonopoly service will reflect the information on the assessment of the information in the relevant acts.

However, if this information is of an evaluative nature (for example, it expresses the opinion of the organization's employees), it will not be used alone to conclude whether or not there is evidence of violation of antimonopoly legislation.

 

FAS also raises the question of how compliance will affect the consideration of issues of violation of the law by an organization. If the antimonopoly inspectors have agreed on the internal compliance acts and the organization adheres to those rules, it will not be considered to have violated the antimonopoly legislation.

However, the absence of internal compliance acts and FAS approval does not prevent an organization from proving that it has taken all possible measures to comply with the law.

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THE REVIEW OF THE PRACTICE OF THE ARBITRATION COURT OF THE VOLGA DISTRICT INCLUDED A NUMBER OF POSITIONS ON BANKRUPTCY

12.07.2021

The Arbitration court of the Volga Region published on its web-site the review of the court practice Nr. 1-2021. In particular, it included the block of disputes concerning the application of bankruptcy legislation (p. 7-11). The matter will concern the inclusion of the claims into the register, the contestation of the deals, the reclamation of documents from the former manager and the issuing of writs of execution.

The debtor's controlling or affiliated persons, whose claims arise from civil law transactions, may initiate bankruptcy proceedings regardless of whether the order of priority for the satisfaction of their claims is lowered. This position of the Supreme Court (paragraph 14 of the review of January 29, 2020) the district court applied in the decision on the case No. A65-15009/2020 of February 4, 2021.
Considering the dispute on the recovery by the bankruptcy trustee of documents from the ex-manager, it is necessary to take into account the position of the Supreme Court set out in the definition № 306-ES19-2986. Namely: to apply para. 2 Art. 126 of the bankruptcy law may be applied when the debtor did not lose possession of the documentation, but the ex-manager does not want to participate in its transfer. If the former director illegally obtained the documents, they resort to the general means of protection (for example, to the vindication action). If the documentation illegally left the possession of the debtor and was transferred to a third party, there may be claims for damages or bringing them to subsidiary liability (ruling on case no. A65-14835/2019, February 16, 2021).
The claims of both the beneficiary and the insured may be included in the register of creditors of the debtor-insurer. Different assessment of similar circumstances in the same case is inadmissible - when similar claims of other persons are included in the register, and the applicant is denied (ruling on case No. A65-20872/2019 of March 2, 2021).
In determining the period of suspicious transaction should take into account the explanations from paragraph 9 of the Resolution of the Plenum of the Supreme Arbitration Court № 63 of 23 December 2010. In the disputed situation, the lower courts incorrectly qualified the transaction made on March 27, 2018 under clause 1 of Article 61.2 of the bankruptcy law: the insolvency case was initiated on April 5, 2019 (ruling on case No. A55-6474/2019 of March 17, 2021).
In paragraph 21 of the review of the practice of the Supreme Court No. 4-2019, it was explained that there is no prohibition on the issuance of writs of execution in bankruptcy of a citizen. However, this approach is not universal: in the disputed situation, the claim for inclusion in the register was based on a judicial act that had entered into force. The courts did not take into account the fact that earlier in the case of the debtor's recovery the writ of execution had already been issued (ruling on case No. A72-7868/2016 of March 4, 2021).

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ANTIMONOPOLY INSPECTORS FOUND VIOLATIONS AT BANKRUPTCY AUCTIONS, BUT DID NOT ISSUE ORDERS

07.07.2021

Another one of the complainants on the actions of bankruptcy auction organizers has been considered. The question is about inadequate fulfillment of the obligation to provide information about the property, about cancellation of the auction, as well as about setting an extra period at the auction in the form of a public offer.


Getting into spam does not exempt from the obligation to familiarize the potential bidder with the information about the property
The applicant complained about the fact that the organizer of the auction didn't submit the requested documents on time. The representative of the organizer explained that the appeal of the applicant sent on June 2 fell into the spam folder and that's why the answer was given on June 11, 2021.

Since the response was sent to the applicant only after the bidding results were summed up, the complaint in this part was found justified. The actions of the organizer were found in violation of part 8 Article 110 of the law on bankruptcy.

As the results of the bidding had led to the conclusion of a contract, they did not issue an injunction.

Source: Decision of the Moscow FAS of Russia in case № 077/07/00-10520/2021, of June 24, 2021

 

Cancellation of the bidding should take into account the provisions of the Civil Code
The organizer cancelled the auction approximately one hour before it was held. A representative of the organizer explained that the cancellation of the auction was requested by the bankruptcy creditor, and since there was no possibility to suspend or extend it, it was decided to do so.

The antimonopoly inspectors found the claimant's complaint justified, pointing out that the established clause of Art. 4 of Article 448 of the Civil Code was violated.

They had not given an instruction to the organizer of the bidding, believing that he had grounds to cancel the auction.

Source: Decision of the Moscow FAS Administration on case №077/07/00-10515/2021, of June 23, 2021.

 

Regulations on the sale of property of the debtor should also be observed
The organizer of the auction in the form of public offering had established a period of initial price decrease, at which the price was 1 ruble.

The antimonopoly inspectors considered the claimant's complaint in this part justified, because the 11th period did not comply with the Regulation on the Procedure of Sale of the Debtor's Property.

However, since all of the eligible bids were submitted at the 9th stage of lowering the starting price, they did not issue an injunction.

Source: Decision of the Kemerovo FAS of Russia in case № 042/10/18.1-920/2021 on June 9, 2021

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ANTIMONOPOLY INSPECTORS FOUND VIOLATIONS AT BANKRUPTCY AUCTIONS, BUT DID NOT ISSUE ORDERS

07.07.2021

Another one of the complainants on the actions of bankruptcy auction organizers has been considered. The question is about inadequate fulfillment of the obligation to provide information about the property, about cancellation of the auction, as well as about setting an extra period at the auction in the form of a public offer.


Getting into spam does not exempt from the obligation to familiarize the potential bidder with the information about the property
The applicant complained about the fact that the organizer of the auction didn't submit the requested documents on time. The representative of the organizer explained that the appeal of the applicant sent on June 2 fell into the spam folder and that's why the answer was given on June 11, 2021.

Since the response was sent to the applicant only after the bidding results were summed up, the complaint in this part was found justified. The actions of the organizer were found in violation of part 8 Article 110 of the law on bankruptcy.

As the results of the bidding had led to the conclusion of a contract, they did not issue an injunction.

Source: Decision of the Moscow FAS of Russia in case № 077/07/00-10520/2021, of June 24, 2021

 

Cancellation of the bidding should take into account the provisions of the Civil Code
The organizer cancelled the auction approximately one hour before it was held. A representative of the organizer explained that the cancellation of the auction was requested by the bankruptcy creditor, and since there was no possibility to suspend or extend it, it was decided to do so.

The antimonopoly inspectors found the claimant's complaint justified, pointing out that the established clause of Art. 4 of Article 448 of the Civil Code was violated.

They had not given an instruction to the organizer of the bidding, believing that he had grounds to cancel the auction.

Source: Decision of the Moscow FAS Administration on case №077/07/00-10515/2021, of June 23, 2021.

 

Regulations on the sale of property of the debtor should also be observed
The organizer of the auction in the form of public offering had established a period of initial price decrease, at which the price was 1 ruble.

The antimonopoly inspectors considered the claimant's complaint in this part justified, because the 11th period did not comply with the Regulation on the Procedure of Sale of the Debtor's Property.

However, since all of the eligible bids were submitted at the 9th stage of lowering the starting price, they did not issue an injunction.

Source: Decision of the Kemerovo FAS of Russia in case № 042/10/18.1-920/2021 on June 9, 2021

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A NEW REVIEW OF PRACTICE FROM THE TWELFTH ARBITRATION COURT OF APPEAL IS PUBLISHED

29.06.2021

Briefly. The Twelfth Arbitration Court of Appeals (12th AAC) has published a review of practice related to enforcement proceedings. Among the 10 positions presented is a dispute heard in a bankruptcy case.

Source: policy brief (published June 24, 2021)

 

The policy brief on the application of the law on enforcement proceedings - statistics for the period 2019-2021, as well as - 10 disputes considered by the court. Paragraph 5 deals with a dispute from a bankruptcy case.

The individual entrepreneur, the head of a peasant (farm) enterprise, was placed under supervision, and the bank's claims were included in the register of creditors' claims as secured by collateral.

The debtor declared his disagreement with the introduction of the supervision and the inclusion of the bank's claims into the register. In particular, he claimed that the creditor had missed the three-year term for filing a writ of execution.

The appeals court rejected the debtor's arguments, assessing them critically.

According to the case materials, a settlement agreement had been concluded between the debtor and the bank (approved by the court in March 2015). Since the agreement had not been executed, the bank received writs of execution in February 2016 and submitted them for forced collection. After the first foreclosure auction failed in June 2017, the bank filed an application to return the writ of execution.

In August 2017, the court changed the method and order of execution of the court ruling, which approved the settlement agreement.

The terms of the agreement were not enforced. The bank resubmitted the writs of execution for enforcement. Enforcement proceedings were initiated in February 2018. Since the debt was not repaid, in October 2018 the bank initiated bankruptcy proceedings against the debtor.

In the 12th AAS pointed out that in such a situation, the three-year limitation period for filing a writ of execution was not missed.

The court also reminded that pursuant to the decision of the Constitutional Court, amendments were made to Article 321 of the Arbitration Procedural Code, which have been relevant since June 2017 (case No. A57-23460/2018).

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DEBTORS WILL BE ABLE TO COUNT ON A MONTHLY LIVING WAGE

21.06.2021

The State Duma passed in the third reading a law that would allow at the request of a debtor to leave him in a bank account the amount of a living wage. The initiative came from a number of deputies and senators, and the bill itself, introduced in February this year, has come a relatively short way before its adoption. And if the amendments are approved by the Federation Council and the President of Russia, the law will come into force in February 2022.

Changes are provided for art. 446 of the Civil procedural code and for the federal law "About Enforcement Proceedings". According to the innovations, a bailiff shall explain to a debtor-citizen the right to preserve his income in the amount of subsistence minimum. The debtor has the right to apply to the bailiffs with a corresponding application. It is required to document the information on monthly income, as well as to specify the details of the bank account, in which it is necessary to save the specified funds.

If the debtor has dependents, which requires the preservation of income in a larger amount, then the application should go to court.

At the same time, there are some restrictions on the application of the new regulation. So, the mechanism is not used if it is:

about the recovery of alimony;
The compensation for damages caused by a crime;
about compensation for damage in connection with the death of a breadwinner or damage caused to health.