The Russian government introduces a moratorium on bankruptcy
The Russian Federation continues to take measures aimed at reducing the negative impact of the coronavirus (COVID-19) outbreak on businesses. On 1 April 2020, Article 9.1 (“Moratorium on Initiation of Bankruptcy Proceedings”) was incorporated into the Federal Law “On Insolvency (Bankruptcy)” (the “Bankruptcy Law”), and on 3 April 2020 the Government of the Russian Federation introduced a moratorium on the initiation of bankruptcy proceedings against certain categories of debtors on the basis of the aforementioned Article.
The moratorium regime has been introduced for 6 months and applies to:
- Companies and individual entrepreneurs in the industries most affected by the coronavirus pandemic (the approved list of industries includes, among others, air and road transportation services, travel agencies, hotel industry and food service operators);
- Companies included in the list of enterprises of crucial importance for the economy;
- Companies included in the list of enterprises and joint stock companies of strategic importance.
The moratorium regime imposes, for example, the following restrictions:
- Newly submitted and not yet considered applications of creditors to declare a debtor bankrupt have to be returned;
- Foreclosure of pledged property, including through extrajudicial procedures, is not allowed;
- No penalties (fines, interest charges) or any other financial sanctions are to be imposed;
- Termination of the debtor’s monetary obligations by set-off is not allowed;
- Payment of dividends, income by shares (units), as well as distribution of profit among the founders (participants) of the debtor is not allowed;
- Enforcement proceedings upon property claims that have arisen before the moratorium are to be suspended.
In accordance with the government resolution, the Federal Tax Service of the Russian Federation has published a list of legal entities and individual entrepreneurs with respect to which the moratorium will apply. This list currently includes about 1.3 million entities. To check whether your company or counterparts are included in the abovementioned list, please visit the website of the Federal Tax Service of Russia.
We will keep you updated with any news regarding the application of the Bankruptcy Law in the context of the spread of the coronavirus.