Bankruptcy

 

On 22 June 2012 the Plenum of the Supreme Commercial Court approved Resolution No. 35 “On Certain Procedural Aspects Related to Consideration of Bankruptcy Cases.”

The Resolution clarifies a number of procedural issues related to considering an application on the debtor’s bankruptcy, some separate disputes within the bankruptcy case and the creditors’ claims, as well as to challenging court acts on the bankruptcy case, in particular:

  • the creditor’s application on the debtor’s bankruptcy shall be accompanied by a copy of the relevant court decision certified by the court or a copy of the decision printed out from the catalogue of commercial cases available on the Supreme Commercial Court’s website;
  • the publication of information on the commencement of the relevant bankruptcy procedure (certain terms for submission of creditors’ claims run depending on that date) stands for the publication in an official print media (currently Kommersant) rather than entering that information in the Unified State Register of Information on Bankruptcy;
  • the court considering a bankruptcy case shall set aside a claim which is already being considered in a contentious proceeding outside of bankruptcy (save for cases where the creditor has applied in such proceeding for its suspension or termination);
  • if necessary and with due regard for judges’ workload and specialization, creditors’ claims and claims to challenge transactions may be considered not only by the judges who consider the bankruptcy case, but also by any other judge of the same court; and
  • in exceptional cases, the term of receivership may be extended more than once, in particular, if this is necessary to realize the debtor’s assets, to complete settlements with the creditors or to consider an application for subsidiary liability of the debtor’s controlling persons (under the Bankruptcy Law, the term of receivership is six months and may be extended for no more than six months); the law does not require publication of information on extension of receivership.

Further, the Plenum introduced the concept of a separate dispute in a bankruptcy case and, accordingly, clarified the following:

  • the main parties to a bankruptcy dispute, namely (i) a debtor; (ii) a bankruptcy manager; (iii) a representative of the creditors’ committee; and (iv) a representative of the owner of a debtor’s property or a representative of the founders (participants) of the debtor, are also the direct parties to all separate disputes; also the Court clarified who else, depending on the circumstances, may be direct parties to a separate dispute;
  • all direct parties to a separate dispute are to be officially notified about the time and place of the court hearings and in other circumstances prescribed by the Commercial Court Procedural Code; and
  • the costs in a bankruptcy case are distributed among the parties subject to the results of the separate disputes.

In relation to the creditors’ demands, the Court, in particular, pointed out that the bankruptcy creditors and the bankruptcy manager may contest a court ruling that, in their opinion, infringes their rights and legitimate interests even if (i) this ruling has been issued irrespective of the bankruptcy case and (ii) they were not parties to that litigation.

Among other things, the Plenum clarified the reasons for the court to refuse to confirm the appointment of a bankruptcy manager or to remove him either on its own initiative or satisfying the request of the parties to the case. In particular, this is allowed if (i) a bankruptcy manager performs his obligations improperly (i.e., breaches the law when performing his obligations) and (ii) the court has substantial and well-founded doubts in such bankruptcy manager’s qualification, good faith or independence (e.g., repeated willful gross violations in bankruptcy cases). However, the Court clarified that a bankruptcy manager’s violations which were careless, not substantial, devoid of huge damages and occurred several years ago may not be grounds either to refuse the appointment of a bankruptcy manager or to remove him.

The Resolution is mandatory for lower commercial courts when considering similar issues.

For further information please contact Igor Ostapets or Irina Dmitrieva in the Moscow office of White & Case, tel + 7 495 787 3000 .

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