17.02.2021 — Reform of Bankruptcy Legislation in Russia

The Russian Ministry of Economic Development has submitted the bill introducing the reform of bankruptcy of legal entities to the Russian Government. The proposed amendments are aimed at increasing the use of rehabilitation procedures to restore debtors’ solvency, including by debt restructuring, which will be available not only to individuals but also to legal entities. 

The bill drafted by the Russian Ministry of Economic Development introduces the shift of the overall focus of bankruptcy legislation from the liquidation of a debtor to the restoration of its solvency. In particular, instead of financial rehabilitation and external administration, which are very seldom used in practice at the moment, it is proposed to introduce the debt restructuring procedure as the only out-of-liquidation bankruptcy procedure, aimed at the restoration of the debtor’s solvency and not connected with its liquidation.

Moreover, the bill implies the increase of the requirements for bankruptcy managers to combat the practice of appointing the affiliated managers, favorably disposed to debtors and interested creditors. For these purposes, the bill introduces the scoring of bankruptcy managers, the random choice of self-regulating organizations and the detailed regulation of training and examination of bankruptcy managers. According to the Ministry of Economic Development, upgrading the competence of bankruptcy managers will allow to extend their powers and reduce the legal costs of the parties to the bankruptcy proceedings. In this regard, the Ministry of Economic Development has proposed to delegate the authority to assess whether the creditors’ claims are justified and must be included in the register to bankruptcy managers instead of courts which now handle this process (see the Bill No. 433-ИТ/Д224 dated 15.01.2021).