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Yulia Shilova | A commentary for EZ-Lawyer No.20 (1670) 2021

The State Duma plans to consider a bill that proposes abandoning bankruptcy procedures such as supervision, financial rehabilitation and external management. Instead, there will be one rehabilitation procedure - debt restructuring. There will also be a special register of bankruptcy trustees. The trustees will be appointed on the basis of a point system. In addition, there will be a state information system of disclosure of information on the formation and implementation of the bankruptcy estate in bankruptcy proceedings. 

Most of the amendments to the Law on Bankruptcy concern the new bankruptcy procedure - debt restructuring - replacing the failed bankruptcy procedures such as observation, external management and financial rehabilitation, which, in the meaning of the bill, are to be excluded from the Law on Bankruptcy. 

In terms of statistics, in 2020 there were 7,775 observation procedures, 23 financial rehabilitation procedures, 150 external management procedures and 9,931 bankruptcy proceedings initiated. The number of observation procedures is a purely formal indicator, because without going through the observation procedure in most cases it is impossible to initiate bankruptcy proceedings against the debtor, so the indicator is high, although formally the tasks imposed by the legislator on the observation procedure in most cases are not implemented. 

The debt restructuring plan proposed in the bill is aimed at preserving the performance of the business entity and meeting the claims of creditors in accordance with the restructuring plan.

On the plus side, I would point out that the legislator has come to understand the necessity and importance of rehabilitation procedures, as well as the need to reform the bankruptcy law to the benefit of actual, rather than declarative, rehabilitation procedures. 

According to the bill, the debtor is obliged to provide a restructuring plan, while the creditors have the right to propose a debt restructuring plan. This is a positive moment, because in this way the debtor continues to be involved in the business. Moreover, he has more competence and understands how the business works, and in what terms and in what order it can be restored. Such a model suggests a possible dialogue between the debtor and the creditors and, as a consequence, the possibility of debt restructuring. The plan is considered and finally approved by the court, which is a reflection of the fact that there will be a balance between the interests of the debtor and the creditors, says Yulia Shilova, ART DE LEX Advocate, in a comment for EZ-Lawyer No.20 (1670) 2021. 

More details: https://www.eg-online.ru/article/436573/