Covid-19 coronavirus: Insolvency Moratorium is now optional in Russia
27 April 2020
At the request of the business community, the Russian State Duma has amended the new Article 9.1 of the Russian Federal Law "On Insolvency (Bankruptcy)" governing the insolvency moratorium regime (the Insolvency Moratorium) introduced on 6 April 2020 by the Russian Government in respect of companies operating in the industries that have suffered most from the Covid-19 pandemic, as well as systemically important and strategic enterprises.
The Insolvency Moratorium, which was imposed by the Russian Government primarily to protect the business sector during the pandemic, among other things prohibited (in relation to the companies falling under its regime) payment of dividends, buy back or purchase of any issued shares, set-off any similar mutual counterclaims, charging penalties on the companies' monetary obligations and enforcement of pledges over the companies' assets. Further, should a company falling under the Insolvency Moratorium regime go bankrupt within the first three months after the Insolvency Moratorium is terminated, all transactions made by that company in excess of certain prescribed limits were to be declared void.
These measures dramatically restricted the business of those solvent companies that fall within the application of the Insolvency Moratorium due to their status as systemically important and strategic enterprises, and placed any transactions entered into by the qualifying debtors during the period of the Insolvency Moratorium at risk of being later declared void.
Following negative feedback from the business community on the new measures, the legislator has introduced the following critical amendments:
- any person falling under the Insolvency Moratorium regime is now allowed to opt out of its application by publishing a refusal statement in the Unified Federal Register of Bankruptcy Data. Starting from the date of the publication, the moratorium limitations will not apply to the rights and obligations of the relevant company or its creditors. If the term of the Insolvency Moratorium is extended, a new refusal statement will have to be filed; and
- the measure described above whereby transactions entered by a qualifying debtor during the Insolvency Moratorium may be declared void no longer applies. The relevant provision of Article 9.1 of the Federal Law "On Insolvency (Bankruptcy)" has been revoked.
These amendments should make it easier for solvent companies to carry on their business as usual. We would welcome opportunities to discuss the consequences of the Insolvency Moratorium with our clients in more detail. Please do not hesitate to contact us.
- See Federal Law No. 149-FZ dated 24 April 2020 "On Amendments to Certain Russian Legislation", entering into force on 24 April 2020.
- See the Resolution of the Russian Government No. 428 dated 3 April 2020 "On Introduction of Moratorium on Initiation of Insolvency Proceedings upon Application of Creditors with regard to Certain Debtors".
- For further details see our Alert "Insolvency Moratorium in Russia" of 10 April 2020.